For emergency air medical providers, maintaining a level of 24/7/365-readiness is expensive. At all times, crews must be ready to respond within a moment’s notice. Air medical crews include highly-trained pilots, paramedics, nurses, and other medical professionals, as well as state-of-the-art medical, aviation, and safety equipment.
The cost of this around-the-clock readiness averages nearly $3 million per year for each air base maintained by emergency air medical providers, according to an independent air medical provider cost study, conducted and published last year by Xcenda and prepared for trade group the Association of Air Medical Services (AAMS). Further, 77 percent of air medical providers’ costs are fixed costs associated with operating an air base, giving these companies little leeway in reducing costs on their own.
Low reimbursement leads to cost-shifting
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Despite the significant operating costs, emergency air medical transport services account for a minuscule amount of the CMS annual budget — less than 0.1 percent — due to the agency’s low reimbursement rates, which exert a trickle-down economic effect on air medical service rates for private payers and patients.
Medicare, which covers air medical services in emergency cases only, not transfers, established the current air medical service payment rates in 2002 based on an estimated 1998 cost pool. Since then, however, Medicare has increased the payment rates solely by an inflationary factor and has not revalued the payment system to reflect significant market changes. Every year since 2002, yearly healthcare cost growth has been greater, often doubling or more, consumer price growth.
That inequity is part of the reason why the average Medicare per-transport reimbursement of $5,998 covers just 59 percent of the median $10,199 cost per transport, according to the AAMS study. Payments from Medicaid are even lower, averaging $3,463 per transport, while payments from uninsured patients average just $354.
For the air medical providers and the patients who rely on their critical services, the consequences of this imbalance are dramatic. Reimbursement for seven out of every 10 air medical transports does not cover the cost per transport, as five out of every 10 patients are insured through Medicare or Medicaid, and two out of each 10 are uninsured, according to the AAMS. The result is cost-shifting onto the three out of 10 patients who are commercially insured to offset the low reimbursements for Medicare, Medicaid and uninsured patients.