Air Ambulance: Data Collection and Transparency Needed to Enhance DOT Oversight
Published: 2017-07-27T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Helicopter air ambulances reduce transport times for critically ill patients during life-threatening emergencies. Although patients typically have little to no choice over the service or provider given the often emergency nature of the transports, they might be billed for charges that have potentially devastating financial impacts. GAO was asked to review air ambulance pricing. This report examines: (1) the prices charged for air ambulance service, (2) the factors that affect prices, and (3) stakeholders' views on any actions the federal government could take to address air ambulance pricing. To answer these questions GAO analyzed 2 years of data (2010 and 2014—the latest available) on prices from CMS and a private health insurance database; interviewed 26 stakeholders, such as 8 air ambulance providers chosen to represent a range of types (hospital-affiliated and independent) and sizes; and interviewed DOT and CMS officials.
section_title: What GAO Found
paragraphs: Between 2010 and 2014, the median prices providers charged for helicopter air ambulance service approximately doubled, from around $15,000 to about $30,000 per transport, according to Medicare data from the Centers for Medicare & Medicaid Services (CMS) and private health insurance data. Air ambulance providers do not turn away patients based on their ability to pay and receive payments from many sources depending on the patient's coverage, often at rates lower than the price charged. For example, the Medicare median payment was $6,502 per transport in 2014. Air ambulance providers might bill a privately-insured patient for the difference between the price charged and the insurance payment—a practice called balance billing—when the provider lacks an in-network contract with the insurer. However, due to a lack of information it is unclear to what extent patients are balance billed.
Factors such as a provider's proportion of transports provided by payer and competition may play a role in air ambulance prices charged, but data to assess these factors are not available. For example, selected providers reported that they adjust prices to receive sufficient revenue from private health insurance to account for certain lower-paid transports, such as those covered by Medicare. Price increases may also be tied to the industry's characteristics such as apparent market concentration—the three large independent providers reported operating 73 percent of the industry's total helicopters in 2016. An analysis of these factors is not possible due to a lack of currently available data such as the number of transports or the industry's composition by provider.
Selected stakeholders we spoke to proposed actions to address air ambulance pricing issues, including (1) raising Medicare rates, (2) allowing state-level regulation of air ambulance prices, and (3) improving data collection for the purposes of investigations and transparency regarding prices. Stakeholders expressed mixed views on the first two proposals but none disagreed with the third. Federal internal control standards state that management should identify and communicate information needed to achieve objectives and address risks. The Department of Transportation (DOT) has discretionary authority to investigate potentially unfair practices in air transportation or the sale of air transportation, but has not exercised this authority in regards to helicopter air ambulances. DOT officials said they need additional information about the air ambulance industry. For example, DOT officials note that they have received few air ambulance complaints since 2006 and report that consumers may not think of DOT as the place to complain. Although DOT recently modified its online form to include air ambulance complaints, it has not communicated how to file complaints. Without doing so and obtaining more industry data, DOT is missing important information needed to put complaints into the context of the overall industry that could affect its assessment on whether to pursue investigations. Further, stakeholders such as hospital staff could benefit from greater transparency as they currently have limited ability to make air ambulance decisions that serve both the financial interests and medical needs of the patient.
section_title: What GAO Recommends
paragraphs: The Secretary of Transportation should: (1) communicate a method to receive air ambulance, including balance billing, complaints; (2) take steps to make complaint information publicly available; (3) assess available data and determine what information could assist in the evaluation of future complaints; and (4) consider air ambulance consumer disclosure requirements. DOT concurred with all but the third recommendation, stating additional information is not needed for such purposes. GAO stands by the recommendation, as discussed in this report. DOT and CMS also provided technical comments which were incorporated as appropriate.

section_title: Letter
paragraphs: Air ambulances provide emergency services for critically ill patients,  transporting them from the scene of an accident or from a medical facility  to a hospital with a higher level of care. Air ambulance transportation is  widely regarded as having a beneficial impact on improving the chances  of survival and recovery for trauma victims and other critical patients,  particularly in rural areas that lack readily accessible advanced-care  facilities such as trauma or burn centers. Medical theory and practice hold  that providing critically injured patients with medical intervention within the  first hour after injury occurs—the so-called “golden hour”—can  significantly improve chances for survival and recovery. Air ambulance  helicopters, with their ability to land at accident sites and quickly shuttle to  landing areas at or near hospitals, can reduce transport times for many  patients.
Since enactment of the Airline Deregulation Act of 1978 (ADA), which  deregulated the domestic air carrier industry, including air ambulance  providers, the number of air ambulance helicopters has grown steadily— from an estimated fewer than 100 helicopter air ambulances in the early  1980s to 1,045 in 2016. In the past few years, instances of “balance  billing”—when patients with private health insurance are billed by  providers for the difference between the air ambulance price charged and  the insurer’s payment—have received attention in the news media. For  example, on December 4, 2015, a helicopter air ambulance patient was  transported 66 miles from Tawas, Michigan, to Saginaw, Michigan. The  provider, which was not contracted with the patient’s insurance, charged  $35,000 for the transport. The patient’s insurance paid $6,320, leaving a  balance of almost $29,000 for which the patient was billed. The patient’s  family later unsuccessfully petitioned both the insurer and the state of  Michigan on this bill, noting that during the emergency, which involved a  gunshot wound to the leg from a hunting accident, no alternative transport  options were offered. Although most patients have little to no choice over  the service or provider during air ambulance transports, they might be  billed for charges that can have potentially devastating financial impacts.  For example, media reports of balance billing have included a provider  placing a lien on a patient’s home as well as patients having their credit  negatively affected or filing for bankruptcy.
See HCCI, Data Brief: Non-Shoppable Health Care Services: Inpatient Hospitalizations  (February 2017), 9-10. documentation and comparing our results across both data sets and to  published sources, among other things, and determined both sources  were sufficiently reliable for the purposes of this report. To gauge the  scope of the air ambulance industry, we analyzed available information  from the Atlas & Database of Air Medical Services, 2010-2016. To  describe what is known about factors affecting prices and selected  stakeholders’ views on actions the federal government could take to  address pricing, we selected and interviewed 26 stakeholders, including  representatives from: 8 air ambulance providers (3 large independent  providers and 5 hospital-affiliated providers) chosen to represent a range  of business model types (independent and hospital-affiliated), sizes, and  known perspectives in the industry; 2 associations representing air  ambulance providers; 6 groups familiar with air ambulance business and  billing, such as industry analysts and consultants; 4 states active in  assessing air ambulance costs and prices charged; 2 associations of  state officials; 2 associations representing health insurers; and 2 groups  involved with consumer policy or research. Although the views of these  selected stakeholders are not generalizable to those of all air ambulance  stakeholders, they represent a range of perspectives. We compared the  U.S. Department of Transportation’s (DOT) practices and procedures for  aspects of its air ambulance oversight to federal internal control standards  related to information collection and external communication. We  reviewed documentation—including pertinent laws, regulations, guidance,  enforcement actions, and legal opinions—and interviewed officials from  DOT and the Department of Health & Human Services’ Centers for  Medicare & Medicaid Services (CMS). For more detailed information on  our scope and methodology, see appendix I.
We conducted this performance audit from July 2016 to July 2017 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Air ambulance providers inhabit a unique position at the intersection of  aviation and medical services. Providing air ambulance service is capital  intensive and requires both aviation and medical investments (see fig. 1).  Air ambulances must be ready to deploy at a moment’s notice in  response to emergencies. Air ambulances are of two main types—rotor  wing (helicopter) and fixed-wing aircraft. These two types of aircraft are  generally used on different types of missions, with helicopters providing  on-scene responses and shorter distance hospital-to-hospital transports  and fixed-wing aircraft providing longer transports between airports.  Because helicopter air ambulances make up approximately 74 percent of  all air ambulances, this report focuses on helicopter air ambulance  service. This report also focuses on air ambulance providers that are  direct air carriers. Although most people may associate helicopter air  ambulance with on-scene response to an accident such as a car  accident, the majority of transports are interfacility, or from hospital to  hospital. For example, Air Methods, the largest air ambulance provider,  reported in June 2016 that of its total flights in the first quarter of 2016,  approximately 70 percent were interfacility and 30 percent were on-scene  response.
Unlike other aviation services that are scheduled ahead of time, air  ambulance transports are initiated only in response to time-sensitive  medical-related events. In the case of on-scene response transports, first  responders decide when air ambulance service is needed, while hospital  staff make decisions regarding when to initiate interfacility transports.  Because air ambulance providers transport critically sick or injured  patients facing time-sensitive emergencies, patients typically have little to  no ability to make cost-saving decisions, such as selecting a provider that  participates in the patient’s insurance or electing to be transported by  ground ambulance. On the other hand, air ambulance providers respond  to emergencies without regard for a patient’s ability to pay and provide  the same service regardless of the amount the provider will ultimately be  compensated for the transport.
Air ambulance providers fall under three main types of business models,  which vary on which entity makes business decisions, including setting  prices and determining in-network agreements with private insurance.  These business models are:
Hospital-affiliated—may be a department of a hospital or owned by  a consortium of hospitals, is typically non-profit, makes business  decisions, and provides the medical crew. These providers may  operate their own aviation services or contract for the services, often  from companies that operate their own air ambulance service as  independent providers.
Independent—a company, typically for-profit, that handles both  medical and aviation aspects and makes business decisions.
Hybrid—joint venture between a hospital and an independent provider  where the hospital typically provides the medical crew but (unlike the  hospital-affiliated model) does not make business decisions, although  the hospital name may be branded on the helicopter. Instead, the  independent provider makes business decisions such as setting  prices.
In 2007, we reported that a few large providers dominated the air  ambulance industry, and in 2010, we reported that the industry had  shifted since 1999 from mostly hospital-affiliated providers toward  independent providers. These trends appear to have continued. For  example, in 2015 three for-profit, independent providers together reported  operating 692 helicopters, or about 66 percent of the total 1,045  helicopters in the industry that year. These three providers operate  helicopters that span all three business model types across multiple  states. As a result, some of these 692 helicopters may be under contract  for aviation services to hospital-affiliated providers, in which case the  hospital pays the independent provider a fixed rate and sets the prices  charged for the service rather than the independent provider.
Air ambulance providers, like other medical service providers, charge  standard rates for all transports but receive payments from many sources,  often at varying rates. Air ambulance providers charge patients based on  a pre-established lift-off fee and per mile fee, regardless of medical  services provided in route. Providers then receive payments from a mix of  sources, depending on the transported patient’s insurance coverage.  The amount paid by private health insurance also depends on whether  the provider has a contract in place with the insurer. Key payers of air  ambulance service charges include:
Medicare—a federal program for people who are 65 or older and  certain younger people with disabilities, regardless of income level.
Medicaid—a joint federal and state program for some people with  limited income and resources.
Private health insurance companies—may have a contractual in- network agreement with an air ambulance provider for a payment rate  negotiated ahead of time. Without such a contract, air ambulance  providers are considered out of network, and the insurance  company’s policies set its payment rates.
Self-pay—patients not covered by insurance.
Whether or not an air ambulance provider may bill a patient for amounts  in excess of the amount covered by insurance, as well as any  deductibles, coinsurance, or copayment—called balance billing—varies  based on the patient’s insurance coverage. Under Medicare rules, for  example, air ambulance providers are not permitted to balance bill  Medicare patients for ambulance services beyond deductibles and  coinsurance requirements. With respect to Medicaid, providers  participating in a state’s Medicaid program are required to accept  Medicaid payment as payment in full and are prohibited from collecting  any additional amounts from Medicaid patients, other than authorized  cost sharing amounts. Patients with private health insurance might only  be balance billed when the insurer and provider lack an in-network  agreement, while uninsured patients might be held responsible by the  provider for the entire price charged (see table 1).
CMS sets rates and pays claims for Medicare. Medicare payments,  including beneficiary co-payments, for helicopter air ambulance service  totaled approximately $460 million in 2014. Although CMS typically sets  Medicare payment rates by considering whether payments are adequate  for a relatively efficient provider, Medicare rates for air ambulance  service were last updated in 2002 as part of a negotiated rulemaking  that involved public and industry stakeholders. Beginning with the  negotiated rulemaking in 2002 through 2006, CMS phased in an air  ambulance fee schedule as part of a series of Medicare reforms that  were enacted into law in 1997. The fee schedule redistributed payments among various types of ambulance services and effectively raised the  payment amounts for air ambulance service. Medicare air ambulance  payments include three components: a base payment, a separate  payment for mileage to the nearest appropriate facility, and a geographic  adjustment factor. In addition, there is a permanent add-on payment that  includes a 50 percent increase to both the base and mileage rate for rural  air ambulance transports. Since 2006, CMS has adjusted rates annually,  primarily based on inflation.
Although the prices, routes, and services of the air ambulance industry  are largely deregulated, DOT oversees certain aspects of the industry. As  air carriers, air ambulance providers fall under the ADA, which was  designed to promote “maximum reliance on competitive market forces” as  the means to best further “efficiency, innovation, and low prices” as well  as “variety  quality… of air transportation.” The ADA also contains  a provision that explicitly precludes state-level regulation of matters  related to air carrier rates, routes, and services. Beyond aviation safety,  which DOT’s Federal Aviation Administration (FAA) oversees in a variety  of ways, DOT oversees certain aspects of the industry. DOT’s  involvement with the air ambulance industry falls within the Office of the  Secretary of Transportation (OST). For example, as an air carrier, an air  ambulance provider must obtain economic authority from DOT before  offering service. In addition, OST’s Office of the General Counsel issues  guidance and opinion letters regarding the ADA provision that precludes  state level regulation of air ambulance prices, routes, and services.  Furthermore, the Office of the Assistant General Counsel for Aviation  Enforcement and Proceedings (Enforcement Office), within OST’s Office of the General Counsel, has discretionary authority to investigate whether  an air carrier, including an air ambulance provider, has been or is  engaged in an unfair method of competition or an unfair or deceptive  practice in air transportation or the sale of air transportation.
States are involved with air ambulances in several ways and some have  taken action to bring awareness to air ambulance pricing. State  emergency medical services offices are responsible for licensing medical  services such as emergency medical technicians and ground and air  ambulances. In addition, states have the authority to regulate the  business of insurance and, as a part of this function, may review insurers’  health insurance plans and premium rates. Furthermore, each state  administers and operates its Medicaid program, including setting payment  rates, within broad federal requirements. States across the country have  attempted to gather information or raise awareness regarding air  ambulance pricing. For example, state governments have held hearings,  including Maryland (2015) and Pennsylvania (2017); New Mexico recently  completed a study, and Florida has convened a working group to  examine air ambulance pricing issues. Meanwhile Montana developed a  public website that features “frequently asked questions” about air  ambulance service and provides information on pricing and the extent of  contracting with insurance by provider.
section_title: Median Prices Charged Approximately Doubled from 2010 to 2014, and Extent of Balance Billing Is Unknown
subsections: section_title: Median Prices Charged by Air Ambulance Providers Increased 76 to 113 Percent from 2010 to 2014
paragraphs: Between 2010 and 2014, the median prices charged for helicopter air  ambulance service by providers approximately doubled. Specifically,  according to Medicare data we analyzed, the median price providers  charged for helicopter air ambulance transports increased 113 percent  between 2010 and 2014. According to private health insurance data we  analyzed, the median price charged increased 76 percent between 2010  and 2014 (see fig. 2). For comparison, the consumer price index  increased by about 8.5 percent between 2010 and 2014. In 2010, a  transport priced at approximately $30,000 was at the 95th percentile— meaning 95 percent of all prices charged were below that amount— according to both Medicare and private health insurance data. In 2014, a  transport priced at the same amount—about $30,000—was the median,  or 50th percentile, of all prices charged according to these data, while a  transport of approximately $50,000 was at the 95th percentile. The  increase in median prices charged from 2010 to 2014 may be part of a  longer-term trend. For example, representatives from Air Methods, the  largest air ambulance provider, reported that they have increased the  average price charged per transport from $13,000 in 2007 to $49,800 in  2016—an increase of 283 percent over the past decade.
section_title: Air Ambulance Providers Told Us Payments for Transports Are Often Lower than Prices Charged
paragraphs: Air ambulance transports, like many medical services, are generally paid  at rates lower than the prices charged. Representatives from the eight  providers we spoke to reported that transports of Medicare, Medicaid, and  self-pay patients made up approximately 46 to 71 percent of their  transports and were paid at particularly low rates. For example, according  to Medicare data, median payments per transport increased only slightly  between 2010 and 2014—from $6,267 in 2010 to $6,502 in 2014.  According to provider representatives, Medicaid and self-pay payments  are often lower than Medicare payments. See figure 3 for information on  the proportion of provider transports and range of average payment  amounts by key payer as reported to us by the eight selected providers in  2016. In contrast to the payment received, these selected providers  reported average prices charged ranging from $13,200 to $49,800 per  transport in 2016.
Representatives of the providers we spoke to said that privately insured  patients account for the highest percentage of their revenue. For  example, seven of the eight providers indicated that the majority of their  transport revenue comes from privately insured patients, which accounted  for a minority (22 to 41 percent) of their overall transports in 2016.  According to an HCCI report, which includes data from three large,  national private health insurers, the median payment these insurers paid  per transport increased by 70 percent from 2010 to 2014, from about  $15,600 to $26,600. As with prices charged, payment amounts increased  in range between these years, with the upper end payment increasing  more substantially than the lower end payment. Although HCCI data  includes approximately 40 million individuals with employer-sponsored  insurance, according to an HCCI representative, patients in rural areas  may be underrepresented in the data. Even though the HCCI data show  private insurance payments increasing largely in parallel to price  increases from 2010 to 2014, representatives from five of the eight  providers we spoke to noted that payment rates from private insurance  have been declining. Representatives from one provider noted that low  payments from insurers occur in certain geographical areas, particularly  rural areas, where one insurer covers a large proportion of the population  and has a large share of the insurance market.
section_title: Extent to Which Air Ambulance Providers Balance Bill Patients Is Unknown Due to Lack of Data
paragraphs: National data on balance billing and on the extent to which providers are  contracted with insurers are unavailable. Due to a lack of such  information, it is unclear to what extent patients with private health  insurance are billed by providers for the difference between the air  ambulance price charged and the insurer’s payment (balance billing).  Some states have attempted to collect balance billing information from  patients. For example, Montana collected information on 39 instances of  balance billing in 2015 and 2016. Likewise, Michigan reviewed 19 air  ambulance balance billing cases between 2013 and 2016 which had an  average balance bill of about $31,000.
section_title: Various Factors May Play a Role in Air Ambulance Prices, but Data Are Limited
subsections: section_title: According to Selected Providers, Transport Costs and Volume, Payer Mix, and Competition May Play a Role in Increased Prices Charged
paragraphs: Selected providers reported that factors such as transport costs and  volume, payer mix, and competition play a role in prices charged.
subsections: section_title: Transport Costs and Volume
paragraphs: Costs to provide air ambulance transports are high and relatively fixed.  For example, according to Air Methods representatives, to operate one air  ambulance helicopter requires a staff of 13—4 pilots, 4 nurses, 4  paramedics, and a mechanic—in order to maintain around-the-clock  readiness and be ready to deploy at any time. In contrast, helicopter tour  operators would generally only need to employ a pilot for times when  flights are arranged. Air ambulance providers’ costs for air ambulance  service are relatively fixed—meaning they do not increase significantly  when they complete more transports. For example, personnel and the  costs of helicopter ownership are the same regardless of how often the  helicopter is used. Providers we spoke to noted that a small portion of  their costs—such as fuel—are variable, meaning they increase with the  number of transports completed. To be profitable, and thus be in business  and provide service, providers must earn sufficient revenues to cover  their costs, including their fixed costs. To increase revenue, a provider  must increase its number of transports and/or its prices charged. When a  provider has a lower transport volume, then that provider must earn  higher prices on average across transports in order to be profitable.  Representatives from the eight selected providers we spoke to reported  average costs per transport, given current transport volumes, of $6,000 to  $13,000 in 2016.
Representatives from the providers we spoke to agreed that average  transport volume per helicopter has decreased but offered different  perspectives on this change. According to the Atlas & Database of Air  Medical Services, from 2010 to 2014, the number of air medical  helicopters nationwide increased by more than 10 percent, from 900 to  1,020. Meanwhile, over the same time period, Medicare and HCCI data  do not show a proportionate increase in the number of transports per  Medicare or private health insurance beneficiary. Specifically, from 2010  to 2014, the number of air ambulance transports per 1,000 patients was  flat for Medicare and decreased slightly among privately insured patients  represented in the HCCI data. Representatives from three providers  stated that there is an issue with overcapacity or oversaturation in the  industry and that the helicopters being added to the industry are in areas  with existing coverage and not serving additional demand, thereby  reducing the average number of transports per helicopter rather than  increasing access to patients previously not covered by the service. On  the other hand, representatives from four other providers told us that the  decrease in transports per helicopter is due to helicopters increasingly  being located in rural areas where there is greater need, but less  population density, leading to fewer transports per helicopter. As noted  earlier, air ambulance providers are dispatched only in response to time- sensitive medical events so have limited control over transport volume  once providing service to an area.
section_title: Payer Mix
paragraphs: Providers we spoke to said their mix of payers also affects prices  charged. As noted earlier, providers reported that the majority of their  revenue comes from private insurance. In order to increase this revenue  from private insurance, providers must increase their prices charged.  Representatives from six of the eight providers we spoke to said that they  adjust prices charged to receive sufficient revenue from private health  insurance to account for lower-reimbursed transports. Providers have  limited ability to control the payer mix—the proportion of transports  reimbursed by, for example, Medicare or private health insurance—as  they do not turn away patients based on insurance coverage.  Representatives from three providers report that the payer mix has shifted  over time from private insurance to Medicare as the population ages. For  example, one large independent provider reported a 13 percent shift in  transport mix from private insurance to Medicare over a 10 year period,  while a hospital-affiliated provider reported that since 2013, the  percentage of its transports covered by Medicare has increased from 30  to 35 percent, while the percentage of privately insured patients has  decreased from 39 to 33 percent. Price increases do not proportionately result in higher revenues when the majority of transports are paid at lower  fixed reimbursement levels. For example, representatives from one  provider explained that to increase revenue 3 percent, they have to  increase prices charged by 15 percent.
section_title: Competition
paragraphs: The overall competitive environment of the air ambulance industry may  also play a role in air ambulance prices. As noted previously, patients do  not have control over decisions allocating the use of emergency air  ambulance service, such as the choice of air versus ground service or  between providers. As a result, patients cannot avoid out-of-network air  ambulance providers. In such an environment, providers may not lose  transport volume as a result of raising prices or being out-of-network with  private health insurance. Consequently, air ambulance providers are not  subject to the price competition that typically occurs in competitive  markets, where if prices are too high, consumers will find alternatives  such as a lower-priced service or provider. Furthermore, the ADA  preempts state-level regulation of prices, routes, and services of air  carriers, including air ambulance providers. DOT’s guidance notes that  once DOT has granted economic authority to an air ambulance provider,  “the competitive marketplace, rather than state regulations” controls the  provider’s prices, routes, and services.
Based on the eight selected providers we spoke to, the large independent  providers may have higher prices and be less likely to contract with  insurers than hospital-affiliated providers. Representatives from the three  large independent providers we spoke to reported average prices  charged per transport of over $40,000 in 2016, while representatives from  the five hospital-affiliated providers reported average prices that ranged  from about $13,000 to about $31,000. In addition, representatives from  the three large independent providers we spoke to noted they generally  do not have contracts with insurers, which, as noted earlier, leaves  patients vulnerable to balance billing. For example, representatives from  one large independent provider noted that they have contracts in place  with fewer than 10 of the approximately 1,000 private insurance payers  they work with per year—in other words, around one percent. A  representative from a large independent provider noted that being out of  network with insurance is advantageous to the provider because a patient  receiving a balance bill will ask for a higher payment from the insurance  company, which often results in higher payment to the air ambulance  provider than having a pre-negotiated payment rate with the insurer. On  the other hand, a representative from a small hospital-affiliated provider  told us that as a non-profit, they feel obligated to contract with the largest  insurer in their service area, in part because one of the hospitals the  provider is affiliated with contracts with the insurer.
The nature of competition in the air ambulance industry may also be  affected by the proportion of air ambulance helicopters operated by the  three large independent providers, which is growing and may indicate  increasing market concentration. Specifically, the three large independent  providers reported operating 692 air ambulance helicopters in 2015 and  763 in 2016—an increase from about 66 to 73 percent of all helicopters in  the industry. This growth may be due to mergers and acquisitions. For  example, in January 2016, Air Methods acquired Tri-State Care Flight,  which had a fleet of 22 helicopters. In April 2017, the second largest air  ambulance provider, Air Medical Group Holdings (AMGH) announced that  it had agreed to acquire Air Medical Resource Group, adding 62 bases  across 15 states to its business. In addition, the three large independent  air ambulance providers are for-profit and increasingly owned by private  equity firms. For example, the largest provider in the industry, Air  Methods, a publicly traded company, announced in March 2017 that it  had entered into an agreement to be acquired by a private equity firm for  a total transaction value of approximately $2.5 billion. Meanwhile AMGH  is also held by a private equity firm and was purchased in 2015 for a  reported $2 billion. The presence of private equity in the air ambulance  industry indicates that investors see profit opportunities in the industry.
section_title: Lack of Data Limits Assessment of Factors Affecting Prices
paragraphs: Despite the above indications of factors that affect prices, an in-depth  analysis of these factors is not possible due to lack of the following types  of data.
Costs to provide service: Data on providers’ costs to provide service is  not readily available. The Department of Health & Human Services  has reported there is no national comprehensive database of  ambulance service costs available. Additionally, although the  Centers for Medicare & Medicaid Services (CMS) has cost data for a  portion of ambulance providers—those owned by hospitals—CMS  found that these data had limitations, such as not distinguishing  between air and ground ambulance transports. Recently, a study on  the costs to provide air ambulance service was prepared by Xcenda,  a health care consulting firm, on behalf of the Association of Air  Medical Services, an association of air ambulance providers, but this  study has limitations. The study notes its findings represent 51  percent of all air ambulance bases nationwide and therefore may not  be generalizable to the whole industry. Representatives from four  hospital-affiliated providers we spoke to noted they had declined to  participate due to concerns over the study’s independence and data  security. Furthermore, according to Xcenda representatives, the study  was designed to assess the adequacy of Medicare’s air ambulance  payment rates, which may give respondents an incentive to report  high costs to justify higher Medicare payments.
Number of transports: As noted above, transport volume is a key  factor in determining the total revenues earned and costs incurred to  provide service. The FAA Modernization and Reform Act of 2012  required that that the FAA collect certain specified operations data for  the air ambulance industry, including the number of annual transports,  and report this information to Congress by 2014 and annually  thereafter. In May 2017, FAA provided its first submission under the  act to Congress. The submission contains a summary of data  collected from helicopter air ambulance operators from April 1, 2015,  to December 31, 2015.
Provider information, including business model type and established  prices charged: As noted above, the air ambulance industry may be  increasingly concentrated, which could indicate a lack of competition  in the industry such as relatively few providers setting prices for a  large portion of the total market. However, industry-wide data are not  available, such as prices charged by provider or providers’ business  model types (hospital-affiliated, independent, or hybrid). Industry  information may become more difficult to obtain as private equity firms  increasingly own air ambulance providers. For example, upon  completion of the acquisition noted above, Air Methods—the largest  provider in the industry—will no longer be required to submit periodic  reports to the U.S. Securities and Exchange Commission as is  required of publicly held corporations, thereby eliminating a key  source of publicly available information on the industry. As a result of  the lack of industry wide data, it is unknown how the approximately 73  percent of helicopters operated by the three large providers translates  into market share. Likewise, it is difficult to assess the nature of  competition in the industry or even determine relationships between  providers, such as what entity sets pricing for a particular provider. As  noted earlier, the helicopters operated by the large independent  providers include those contracted to hospital-affiliated providers that  set their own prices, as well as hybrid programs where the helicopter  is branded as part of the hospital system, but where the independent  provider sets the prices. For example, representatives from AMGH  note that one of their subsidiaries—Air Evac Lifeteam—is not  generally contracted with hospitals, but another AMGH subsidiary— Med-Trans—operates mostly hospital-affiliated bases. However,  according to these representatives, AMGH handles its own pricing,  billing, and collections across 97 percent of all of its bases.
section_title: Selected Stakeholders Proposed Actions Regarding Air Ambulance Pricing, Including Improved Data Collection and Transparency
paragraphs: The 26 stakeholders we interviewed identified three types of potential  actions to address air ambulance pricing, as shown in table 2.  Stakeholders expressed mixed views on two of these actions—modifying  the ADA and raising Medicare rates. None disagreed with the third action  of increased data collection for the purposes of investigations—such as  unfair or deceptive practices—or increased transparency regarding  prices.
subsections: section_title: Stakeholders Expressed Mixed Views on Proposed Solutions of Modifying the ADA or Medicare Payment Rates
paragraphs: Half of the 26 stakeholders we interviewed supported modifying or  reevaluating the ADA as it pertains to the air ambulance industry in order  to allow states to have more of an oversight role. Some stakeholders  said that when the ADA was enacted in 1978, the air ambulance industry  was in its infancy, and so the ADA was not formulated with the unique  aspects of the air ambulance industry in mind. In addition, some  stakeholders told us states are best suited to regulate air ambulance  service, noting that states have an incentive to protect patients from large  balance bills while also ensuring access to the service. Some states, such  as North Dakota, have passed legislation designed to address air  ambulance billing, legislation that has subsequently been struck down in  court. In particular, in 2015, the North Dakota legislature passed a statute  intended to protect patients from large balance bills. It required, among  other things, that air ambulance providers submit documentation  indicating that they are participating providers with health insurers in the  state that cover a certain proportion of the state’s population in order to  be listed on a “primary call list” for dispatching. The state statute also  required that air ambulance providers make their fee schedules available  to certain requesters, including potential patients, upon request. However,  the state statute was challenged in federal district court and in March  2016, the U.S. District Court for the District of North Dakota struck it down  as being preempted, ruling that the call list requirement was “precisely the  type of state regulation Congress sought to prevent…in the ADA.” North  Dakota officials said they would like to see the ADA modified so they  could implement such legislation. Subsequent to the ruling, North Dakota  enacted a new statute in 2017 which is designed to increase  transparency regarding an air ambulance provider’s health insurance  network status in non-emergency situations. North Dakota officials we  spoke to noted that the most recent legislation, which was signed by the  governor in April 2017, will likely be challenged in court.
Eight stakeholders opposed modifying the ADA and seven instead  suggested raising Medicare rates as an approach to addressing high air  ambulance prices. An air ambulance provider association noted that  modifying the ADA could create a “patchwork” of regulations nationwide,  disrupting the regulatory certainty the industry has been built upon. This  association also noted that since air ambulance providers do not turn  away patients based on their ability to pay, providers have limited options  to cover their costs. Two stakeholders noted that increased Medicare  rates would reduce the need for air ambulance providers to increase  prices, thereby alleviating pressure on patients with private health  insurance.
Although raising Medicare rates across the board for air ambulance  service is being promoted by some stakeholders, particularly the large  independent providers, 10 other stakeholders we spoke with disagreed  with this approach as a solution to addressing air ambulance pricing  issues. Raising air ambulance Medicare rates is being promoted through  a national campaign sponsored by several providers and a key industry  association which supports legislation to raise air ambulance Medicare  rates. Meanwhile, 10 stakeholders we spoke with—2 providers, 1  association representing providers, 4 groups familiar with air ambulance  business and billing, 1 selected state, 1 association of state officials, and  1 insurance association—disagreed with raising Medicare rates as a way  to address balance billing. Some of these stakeholders noted that  increasing Medicare rates could incentivize further growth in the industry,  which could reduce the average number of transports per helicopter,  putting pressure on providers to increase prices charged—thereby  exacerbating the problem. Further, industry growth may be an indication  that Medicare rates are not too low. We have previously reported that  when rates are set too low, access to appropriate care for patients  covered by Medicare may be adversely affected. However, the growth  in the number of air ambulance helicopters indicates that providers are  still deciding to provide service under existing Medicare rates.
section_title: Some Stakeholders Suggest Data Collection and Price Transparency Could Better Inform DOT and Stakeholder Actions
paragraphs: Five of the 26 stakeholders we spoke to—including three groups familiar  with air ambulance business and billing and two providers—told us that  DOT should collect information to better understand the air ambulance  industry. In addition, the federal standards for internal control state that  management should identify information needed to achieve objectives  and address risks. Such risks in the air ambulance industry could include:
Matters related to industry concentration: The ADA provides that in  carrying out its economic regulation authorities, DOT should consider,  among other things “avoiding unreasonable industry concentration,”  when determining what is in the public interest and consistent with  public convenience and necessity. As noted earlier, three large air  ambulance providers operate 73 percent of the total helicopters in the  industry in 2016, although the extent to which this translates into  market share is unknown.
Unfair or deceptive practices: DOT could potentially use such  information to investigate concerns or complaints of unfair or  deceptive practices, which, as noted previously, DOT through its  Enforcement Office has discretionary authority to investigate.
An official from DOT’s Enforcement Office noted that DOT has not  exercised its discretionary authority to investigate air ambulance  providers. DOT officials noted that DOT needs additional information  about the overall industry and that there is a dearth of information about  the industry generally. For example, the officials told us DOT has  received very few air ambulance complaints. In particular, the officials  said they searched their database and found a small number of  complaints since 2006. DOT officials noted they believe the small number  of complaints may be due to consumers not thinking of DOT when  encountering issues with air ambulance pricing, and instead filing  complaints with other entities such as their health insurance or state  department of insurance. As noted earlier, some states have collected  such information—for example together Michigan and Montana collected  58 instances of balance billing since 2013. For the commercial airline  industry, which is also subject to the ADA, DOT’s Enforcement Office  gives consumers multiple options for filing airline service complaints,  including through an online form that allows users to select from an  extensive drop-down menu of U.S. and foreign air carriers. In May 2017,  DOT added “air ambulance (all)” as an option on the online complaint  form, with a field to manually enter an air ambulance provider’s name.  However, the DOT website does not have online instructions on how to  file air ambulance complaints. DOT’s Enforcement Office has a website  with information such as how to file a complaint (by phone, mail, or  online), what types of complaints to file (those about service other than  safety or security issues), and how DOT uses the submitted information.  It is unclear how, if at all, such information applies to air ambulance  complaints. For example, DOT officials noted they would like consumers  to know the boundaries of DOT’s jurisdiction regarding air ambulance  service. Without communicating this and other aspects such as how to file  an air ambulance complaint, DOT has limited ability to understand the  industry including the nature of competition that could affect its decisions  on whether to pursue investigations into potential unfair or deceptive  practices.
Some selected stakeholders suggested increased price transparency as  a solution to address air ambulance pricing issues. In particular, nine  stakeholders we spoke to—two providers, two groups familiar with air  ambulance business and billing, two insurance associations, two selected  states, and one group involved with consumer policy or research—noted  that price transparency could provide benefits to providers and the  industry, patients, insurance companies and other payers, hospitals, and  first responders. Furthermore, the federal standards for internal control  state that management should externally communicate information  needed to achieve objectives and address risks. According to a DOT  official, DOT enforces disclosure requirements due to the ADA’s focus on  competitive market forces, which relies on consumers having accurate  and timely information on which they can make decisions. For example,  for commercial airlines, DOT’s Enforcement Office compiles a monthly Air  Travel Consumer Report that includes consumer complaints submitted to  DOT and is made available to the general public so consumers and  others can compare the complaint records of individual airlines. Such  consumer disclosure requirements are intended to enable consumers to  make informed decisions on tradeoffs when selecting flights, considering  such factors as provider, service quality, and price. DOT officials noted  that air ambulance providers have not yet been included in the Air Travel  Consumer Report but may be included if a provider reaches a certain  threshold such as five complaints received in a month. However, as  mentioned above, air ambulance patients may be unaware that they can  file complaints with DOT. Furthermore, DOT lacks industry information to  group complaints together and to identify patterns, particularly for large  nation-wide providers which, as mentioned previously, operate across  many states and may set prices for hybrid programs where the helicopter  may be branded with a hospital’s name rather than the large provider’s  name. Without more industry information, DOT is unable to put any such  complaints into the context of the overall industry, both for the purposes  of potentially investigating unfair and deceptive practices and for  accurately compiling complaints for public reporting.
Although DOT has required consumer disclosures for the commercial  airline industry, it has not done so for the air ambulance industry, such as  disclosing to patients the prices charged for services. For example, DOT  has recently issued a final rule that, among other things, requires air  carriers to disclose when flights involve any code-sharing arrangements  and a supplemental notice of proposed rulemaking regarding the  disclosure of baggage fees wherever fare and schedule information is  provided to consumers. DOT officials note they have not made such  requirements for the air ambulance industry due in part to the emergency  nature of air ambulance transports. In particular, DOT officials questioned  the value of consumer disclosure requirements for the air ambulance  industry given that patients have little to no choice or ability to “shop.”  However, a representative from a group involved with consumer policy or  research noted that it is important that the public understands the price  variation that exists among air ambulance providers, along with any potential limits of their insurance coverage. Furthermore, patients are not  the only “consumers” of air ambulance service. Other stakeholders make  decisions regarding air ambulance service such as insurance companies  that pay for transports or hospitals and first responders that initiate  transports. According to a representative from an association of insurers,  transparency is the first step toward a rational approach to air ambulance  costs—all stakeholders need to know such fundamental aspects as  average prices charged, transport frequency, and the amount insurance  and patients may pay. Without such information, stakeholders may not be  able to make decisions that serve the patients’ best interest. For example,  if hospital staff had information on the extent to which providers in the  area were contracted with insurance, such staff may make more informed  decisions in selecting providers that best serve the financial interests of  the patient while still maintaining the same level of care.
section_title: Conclusions
paragraphs: The ADA largely deregulated the domestic air carrier industry, including  the air ambulance industry, and was intended to promote reliance on  competitive market forces in order to best further quality service at low  prices, among other things. Despite growth in the number of helicopters  offering air ambulance service in recent years, lower air ambulance prices  have not materialized. In fact, air ambulance prices have increased— approximately doubling between 2010 and 2014—and large providers  report average prices charged of over $40,000 per transport in 2016.  These increases pose risks to privately insured patients who may be held  responsible by the provider for a portion of these charges (balance  billing). Despite media reports of balance billing, DOT officials note they  have received very few air ambulance complaints since 2006, possibly  because consumers do not think of DOT as a place to file such  complaints. DOT recently modified its online form to include air  ambulance complaints, but the website does not have instructions on how  to file such a complaint. Without taking such steps, DOT is missing  potential information both for its understanding of the industry and for  public disclosure to enable informed decision making. Furthermore, DOT  lacks data needed to assess several key aspects of the industry, ranging  from basic aspects—such as the composition of the industry by provider  type, prices charged by provider, or number of overall air ambulance  transports—to the more complex, such as the extent of contracting  between providers and insurers or extent of balance billing to patients.  However, information from the eight selected providers we interviewed  indicate concerning trends about the nature of competition in the industry,  such as increasing prices and growing concentration of the market among  three large providers. Further, the increasing role of private equity in the  industry could further exacerbate these trends while also reducing  transparency. Without better information, DOT has limited ability to  understand the industry including the nature of competition that could  affect its decisions on whether to take investigative or enforcement  actions. Likewise, without information on the industry and pricing,  stakeholders such as hospital staff have limited ability to make air  ambulance decisions, such as selecting a provider that best serves the  patient’s financial interests without compromising the medical benefits air  ambulance transports provide.
section_title: Recommendations for Executive Action
paragraphs: To increase transparency and obtain information to better inform  decisions on whether to investigate potentially unfair or deceptive  practices in the air ambulance industry, we recommend the Secretary of  Transportation take the following four actions:
Communicate a method to receive air ambulance-related complaints,  including those regarding balance billing, such as through a dedicated  web page that contains instructions on how to submit air ambulance  complaints and includes information on how DOT uses the  complaints.
Take steps, once complaints are collected, to make pertinent  aggregated complaint information publicly available for stakeholders,  such as the number of complaints received by provider, on a monthly  basis.
Assess available federal and industry data and determine what further  information could assist in the evaluation of future complaints or  concerns regarding unfair or deceptive practices.
Consider consumer disclosure requirements for air ambulance  providers, which could include information such as established prices  charged, business model and entity that establishes prices, and  extent of contracting with insurance.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to DOT and CMS for review and  comment. CMS and DOT provided technical comments which we  incorporated as appropriate. In written comments provided by DOT (see  app. II), DOT agreed with three of our recommendations but did not  concur with our recommendation that DOT assess available federal and  industry data and determine what information could assist in the  evaluation of future complaints or concerns regarding unfair or deceptive  practices. DOT noted that its analysis of a given complaint is based on  the unique facts of each individual case, rather than on aggregate data.  Therefore, DOT noted it does not believe an assessment of federal or  industry data would yield information relevant to its determinations in  future cases. We appreciate DOT’s comments; however, we believe that  this recommendation is justified. As we note in the report, the federal  standards for internal control state that management should identify  information needed to achieve objectives and address risks. DOT has  discretionary authority to investigate air ambulance providers but to date  has not done so. Although collecting consumer complaints will help DOT  identify areas for further investigation, further information will help put  complaints into the context of the larger industry. DOT is currently limited  in its ability to conduct such an analysis for the air ambulance industry  due to data limitations noted in our report, involving such basic elements  as relationships between providers including what entity sets prices or the  given market share or number of transports per provider. As we noted in  the report there has been some efforts to collect data, such as FAA’s  efforts regarding the number of transports. These and other data are  potential sources for DOT to better understand the helicopter air  ambulance industry and evaluate whether consumer complaints indicate  larger patterns of unfair and deceptive practices.
We are sending copies of this report to the Secretary of the Department  of Transportation, the CMS Administrator, and other interested parties. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or dillinghamg@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made major contributions to  this report are listed in appendix III.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: For this work we examined: (1) what is known about the prices charged  for air ambulance service, (2) what is known about the factors that affect  the prices charged for air ambulance service, and (3) what actions, if any,  selected stakeholders believe the federal government should take  regarding air ambulance pricing.
To describe what is known about air ambulance prices charged, we  analyzed and assessed the reliability of information on prices charged  and amount paid for 2010 and 2014 from Medicare claims data from the  Centers for Medicare & Medicaid Services (CMS) and private health  insurance data published by the Health Care Cost Institute (HCCI).  Although HCCI data include data from three large national insurers and  includes approximately 40 million individuals with employer-sponsored  insurance, the data may not be generalizable to all privately insured  patients. The years 2010 and 2014 were selected as they were the  furthest back year and the most recently available year from HCCI, could  be compared across both data sets, and allowed us to analyze changes  over time. The price charged is the amount providers claim for two  components: (1) the transport and (2) each mile that the patient is  transported. The amount paid is the total amount allowed by the payer  (i.e., the private insurer or Medicare); the patient may be responsible for a  portion of that total amount through copays or deductibles. For Medicare,  we excluded claims without both the transport and mileage components  and excluded claims with mileage amounts over the 99th percentile.
To address possible issues with payments by secondary payers, we  excluded claims where the payment amount was less than 10 percent of  the price charged and claims that otherwise may have indicated a  secondary payer. We also excluded any claims for transports with  multiple patients or where an ambulance was dispatched but the patient  died before being transported; these types of transports are paid at  reduced rates. We also excluded outliers based on the price charged— excluding claims that were above the 99th percentile or below the 1st  percentile for that year. We assessed the reliability of the data published  by HCCI by reviewing related documentation, discussing the methods  used with knowledgeable officials, performing data reliability checks, and  comparing the findings to published information, and we determined the  data were sufficiently reliable for the purposes of this report. Medicare  claims data, which are used by the Medicare programs as a record of  payments made to health care providers, are closely monitored by both  CMS and contractors that process, review, and pay claims for Medicare- covered services. The data are subject to various internal controls,  including checks and edits performed by the contractors before claims are  submitted to CMS for payment approval. Although we did not review  these internal controls, we assessed the reliability of Medicare claims and  enrollment data by reviewing related CMS documentation and comparing  our results to published sources. We determined that the Medicare claims  and enrollment data were sufficiently reliable for the purposes of our  reporting objectives.
To describe what is known about the factors affecting prices of air  ambulance service, we also reviewed previous reports on costs to provide  air ambulance service from the Department of Health and Human  Services and by the contractor Xcenda as commissioned by the  Association of Air Medical Services. We also interviewed eight selected  providers and other stakeholders (as described below) regarding the  prices and costs associated with their service and factors affecting prices  and costs. To gauge the scope of the air ambulance industry, we also  analyzed available information from the Atlas & Database of Air Medical  Services, 2010—2016. Lastly, we interviewed representatives from  associations regarding the costs to operate air ambulance and other on- demand air services, including the Helicopter Association International,  Air and Surface Transport Nurses Association, National EMS Pilots  Association, and International Association of Flight & Critical Care  Paramedics. These associations were selected because they represent  major cost categories of providing air ambulance service, including the  aircraft and personnel.
To describe potential federal government actions to address the issue of  air ambulance pricing, we reviewed documentation and interviewed  officials from U.S. Department of Transportation (DOT) and the  Department of Health & Human Services’ Centers for Medicare &  Medicaid Services (CMS). In particular, we reviewed CMS documents  regarding Medicare payments for air ambulance transports. We reviewed  pertinent laws and regulations and DOT guidance, enforcement actions,  and legal opinions, such as the Airline Deregulation Act of 1978, the  federal statute (49 U.S.C. § 41712(a)) providing DOT the authority to  investigate unfair and deceptive practices, and whether there were any  actions by the DOT Enforcement Office regarding air ambulances. We  also reviewed DOT Enforcement Office activities regarding commercial  airlines, such as the consumer complaint online web form. We compared  DOT’s practices and procedures for aspects of its air ambulance  oversight to federal internal control standards related to information  collection and external communication.
To describe stakeholder views on potential federal actions, we selected  and interviewed 26 stakeholders, including representatives from: 8 air  ambulance providers (3 large independent providers and 5 hospital- affiliated providers); 2 associations representing air ambulance providers;  6 groups familiar with air ambulance business and billing such as analysts  and consultants; 4 states active in assessing air ambulance costs and  prices charged; 2 associations of state officials; 2 associations  representing health insurers; and 2 groups involved with consumer policy  or research. Although these selected stakeholders are not generalizable  to all air ambulance stakeholders, they were selected to represent a  range of perspectives. For example, we selected air ambulance providers  that represented a range in business model types (hospital-affiliated and  independent), a range of sizes (large and small), a range of known  perspectives in the industry, and geographical dispersion. There are no  available data on all providers that indicates industry-wide characteristics,  such as a breakdown of providers by business model type or size. In  addition, we selected stakeholders familiar with air ambulance business  billing to capture expertise on business aspects and also a range of  views; and selected states active in assessing air ambulance prices and  costs and, to the extent possible, geographically dispersed.
section_title: Appendix II: Comments from the Department of Transportation
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgements
paragraphs: In addition to the contact named above, Heather MacLeod (Assistant  Director), Melissa Bodeau, Stephen Brown, Christine Brudevold, James  Cosgrove, Danielle Ellingston, Geoff Hamilton, Corissa Kiyan-Fukumoto,  Emily Larson, Malika Rice, Oliver Richard, Daniel Ries, Daniela Rudstein,  and Monica Savoy made key contributions to this report.