by Marty Makary
John had read a recent news story about a Johns Hopkins study I led on hospital markups and called to tell me about his dire situation. “What did I do wrong?” he asked. I looked over John’s bills and was able to quickly discern that he hadn’t needed half of the stuff listed on his bills. Also, his helicopter ride should have cost 10% of what he was billed. I told him about “the game.” Sadly, the collectors had called and threatened him often enough that he had decided to dip into his retirement savings to pay the bill.
Medical centers and air ambulance companies price-gouge in hopes that naïve and frightened patients, employers, or payers will fork over the entire bill’s charge in a moment of weakness. You may think it’s good for insurance companies to just pay the inflated bills outright. But that money has to come from somewhere. Insurers pass inflated air ambulance prices on to everyone else in the form of higher premiums.
It seemed that health care was simultaneously saving and destroying lives.
John is just one of many patients and families who have had their lives wrecked by an air ambulance bill. Take the case of Hugh Sparks of Plano, Texas. Hugh and his son stopped by the side of the road to take photographs, but Hugh got too close to a rattler that dug its fangs into his wrist. They drove to the nearest hospital, where he was treated with antivenom.2 But the doctor there recommended transferring him to a larger hospital in Abilene, Texas, about 50 miles away.
Hugh was worried that an air ambulance would be expensive, but the medical workers insisted he take it. They didn’t offer a ground ambulance option and wouldn’t let his son drive him. A helicopter whisked him to the bigger facility, where he spent three days wondering if he might die.
Hugh survived the bite, but months later, he felt he might die again when he got a bill for $43,514 from the air ambulance company. His Blue Cross Blue Shield insurance paid $13,827. The air ambulance company turned around and billed him for the $29,687 balance. He said he felt a “slow, boiling anger” when he opened the bill. “That was actually more traumatic than when I realized I was bitten by a rattlesnake,” he said.
Out-of-network price gouging has become so lucrative that air ambulance companies hustle to grow their business. Pilots can’t just listen to police scanners and dispatch themselves. Instead, they rely on medical professionals to summon them. As a result, for-profit air ambulance programs have become aggressive in their quest to win referrals from EMTs, paramedics, nurses, and emergency physicians.
Talking to people on the ground, I discovered air ambulance companies have flown in pizzas to please emergency room staffers. That’s what you call a special delivery for your pepperoni pie. And they give away cool flight helmets. As a teenage EMT, I could only dream of having my own life flight helmet. Some companies have built helipads for hospitals and installed activation buttons so doctors or nurses can rapidly summon a helicopter for a hospital-to-hospital transport. As for-profit air ambulance companies expanded, they started paying paramedics, nurses, and doctors to become advisers, with informal agreements to promote the company to first responders and other medical professionals.
A Glimmer of Hope
In talking to a lot of experts about air ambulance price gouging, I heard from a few of them how Dirk Sisser and a few doctors are shaking up the industry for the good. I met up with Sisser in his office in Missoula, Montana. A pleasant Montana gentleman, he was low-key but confident. He explained how people in rural areas are hit the hardest by hyperinflated air ambulance bills.
Dirk runs a large third party administrator—that’s a company that manages employee benefits for companies that self-fund their medical care. In other words, he’s on the receiving end of a lot of these helicopter bills, processing them for the plans his company administers. He’s seen it all. Dirk told me of one patient who was flown from Montana to a rehab facility in Florida by one air transport company. They flew him on a 1978 Lear 7 jet and charged $630,000. “The plane itself only sells for $350,000!” Dirk told me. As we talked, he kept one-upping himself with the egregious price gouging stories.
Dirk had seen so many abuses he decided to do something about it. He and his colleague Jeff Frazier founded a company called Sentinel Air Medical Alliance. The company is committed to price transparency and to putting a stop to the air ambulance rip-offs. They use the power of the free market to give patients a fair price, up front, with no games.
“Marty, you can let people know that we’ll transport any patient from any point A to any point B within the continental U.S. for under $20,000,” Sisser told me.
A fair price never to exceed $20,000? Sounds reasonable. Wow, talk about a market force!
I then spent some time with his colleague Jeff Frazier, who runs the day-to-day operations of Sentinel Air. Jeff has the perfect combination of skills and experience to disrupt the air ambulance industry. He spent more than two decades flying helicopters for the United States Coast Guard and worked as a commercial pilot for TWA. He’s also a finance expert. But maybe his greatest advantage is that he spent several years running his own air ambulance company. He knows the business cold, so he can see through the schemes and loopholes companies use to take advantage of patients.
Frazier first got an inkling that the industry was ripe for disruption when he flew medical helicopters as a pilot. It seemed that, well, not every flight was a true emergency. During one patient transport, the patient asked if someone had a camera so he could take pictures. Another asked if Frazier could hover over his house so he see what it looked like from the air. One “patient” asked if Jeff could find a herd of elk because he and a buddy were going hunting the following week. “I got the sense we were not snatching people from the jaws of death,” Frazier told me.
Frazier was on to something. Most people see air ambulances only when they arrive at the scene of an accident. We get the impression that these flights are used just in dire emergencies and are a rarity. But that’s not the case. Eighty percent of the more than half a million air ambulance flights a year (1,300 per day) in the United States are not emergencies but are much more like routine transfers. In other words, most of the time, these helicopters are taking stabilized patients from one facility to another—just as I took nursing home patients to the hospital as a teenage ambulance driver. “Many of those trips could be done at a much lower cost with a ground ambulance,” said Frazier.
Even among so-called emergency flights, there appears to be a lot of waste. An analysis by the University of Arizona of more than 5,200 trauma patients concluded that “nearly one-third of patients transferred by helicopter were minimally injured.”3
Frazier’s Sentinel Air Medical Alliance fights the predatory tactics of the air ambulance industry in several ways. They have put together a network of air ambulance providers all over the country who are willing to bid for jobs so consumers can get a fair price. Most transports aren’t emergencies, so Sentinel’s staff can quickly make calls to get a reasonable rate. That’s how Sentinel Air guarantees that a customer can get anywhere in the United States, coast to coast, for a reasonable price, never to exceed $20,000.
Not every air ambulance patient gets hit with an inflated bill. Patients covered by Medicare and Medicaid, aka the government payers, make up a large percentage of air ambulance flights. The law doesn’t allow companies to bill Medicare or Medicaid patients for anything above what the government pays. It’s only non-Medicare, non-Medicaid patients who are affected by price gouging.
Sentinel Air sometimes represents patients and insurance companies who are hit with unfair charges, stepping in to negotiate with air ambulance companies. Since they know the real costs of helicopters, staff and fuel, they get right down to the numbers. Some of the markups they’ve seen make drug markups looks like peanuts. In one case, an 18-year-old girl with cystic fibrosis was traveling with her family in Ixtapa, Mexico, and needed to get home to Chicago. The air ambulance plane had to land in Houston for fuel, where the patient went into respiratory distress. The girl probably should
have been rushed to a hospital in Houston, but the air ambulance service kept her on the plane to Chicago. The doctor who reviewed the case for Sentinel said it was borderline malpractice. The patient died a couple of days later.
It’s a long way from Ixtapa to Chicago, so you would expect a large bill. But the air ambulance company charged a whopping $382,000. I went online to see how far I could fly on a private Lear jet for that price. It turns out that for $382,000 I could fly a private plane to China and back five times.
For the family who lost their 18-year-old daughter, Sentinel price-checked the company that charged $382,000 by calling and asking for a quote for the same aircraft and crew for the same two flights. The company quoted a total of about $54,000. The $382,000, Frazier said, is what they can get when they do business using the element of surprise. While there are many social injustices in this world, the reason I’m so appalled at predatory medical billing is that it’s done to people when they are at their most vulnerable.
In another case, a young man suffered brain injuries in a freak accident when a tree fell on his car. He spent a month in the hospital and then needed to go to Atlanta, Georgia, for rehabilitation. The air ambulance company brokered, or outsourced, the flight and charged $150,000 just as a broker fee (by comparison, the Sentinel broker fee is $750). When Sentinel called to get a quote for the same flight, with the same craft and crew, the company said it would do it for $14,300.
With their industry knowledge, Sentinel calculates the true aircraft, crew, maintenance, and fuel costs to shed light on inflated bills. Hearing Sisser and Frazier describe how they are challenging a nontransparent industry in health care, I was amazed at their boldness. Even though both of them live in bear country, they don’t seem to believe in the “Don’t poke the bear” rule. As you would expect, Sentinel is hitting a nerve by cutting into the industry’s profits. That’s why one of the industry giants is suing Sentinel, on the grounds of defamation for calling out their unfair prices.
Sisser has spent hundreds of thousands of dollars fighting this lawsuit. And the lawsuit has been revealing. In one deposition statement, the CEO of the air ambulance company argued that whatever amount they charge, the bill should be paid in full, even if it is $1 million.
The U.S. Government Accountability Office exposed the alarming air ambulance industry practices in a 2017 report. The price inflation may have been the most disturbing finding. Companies charge patients a lift-off fee and then a price per mile. Between 2010 and 2014 the median prices for an air ambulance doubled, from about $15,000 to about $30,000 per transport. Some companies average much more today and the trend is continuing upward. Charges by Air Methods, the country’s largest air ambulance company, increased from $13,000 in 2007 to $49,800 in 2016, said the government report. That’s a 283% increase in ten years.
Three large companies control 75% of the helicopters in the business, government investigators found. The companies are for-profit and often owned by private equity firms. “Investors see profit opportunities in the industry,” investigators wrote.
Air ambulance companies claim they lose money from government payments, so they charge insured patients more to make up for it. One air ambulance provider had contracts with fewer than 10 out of approximately 1,000 private insurance companies. That means 99% of its patients are out-of-network. Going after the patient for the balance above what insurance may pay is a profitable tactic, browbeating either the insurance company or the patient to pay up.
The costs to run an air ambulance business are high, and fixed, the government report said. Air Methods said it requires 13 people to maintain 24/7 readiness—4 pilots, 4 paramedics, 4 nurses, and a mechanic. The average cost per transport was between $6,000 and $13,000 in 2016, according to the 8 providers who spoke to the GAO. A typical Medicare payment is about $6,500, and Medicaid and self-pay reimbursements are even lower, according to the providers.
Frazier can cut through the industry’s excuses for its high prices because he knows how they play the game. He said Medicare’s reimbursement rates are enough to cover the cost of most air ambulance flights. In 2004, Medicare used the industry’s numbers to set favorable rates, he said. And you can see the air ambulance industry liked the rates because of the incredible increase in companies, he said. Back in the 1980s, there were fewer than 100 air ambulance helicopters nationwide. In 2016, there were 1,045. When I asked experts how many air ambulance helicopters we need in the United States to ensure the safe and rapid transport of critical patients, they said we probably need about 600.
The reason our country has so many helicopters is because there’s money to be made, said Frazier, not because people are suddenly having more medical emergencies. Air ambulance companies were setting up across the street from one another. The Dallas–Fort Worth area alone has 24, while the neighboring Rio Grande Valley, a migrant farm worker area, has none.
Dr. Abernathy
I wanted to hear the truth about the industry from someone who really knew, so I reached out to Dr. Michael Abernathy, professor of emergency medicine at the University of Wisconsin School of Medicine and director of the hospital’s medical flight program. He knows the industry and its money games. Dr. Abernathy’s medical flight program has been retained by the hospital and does not gouge anyone.
“We operate in the black and we charge less than half of what the others charge,” he told me in a long phone conversation. “In fact, our hospital’s air ambulance prices are in the lowest 15th percentile in the country.” Dr. Abernathy explained that after private companies moved into the market, they added a $30,000 “lift-off” fee in addition to a per mile fee. He added that some for-profit companies are good and fair: Boston Med Flight and Acadian, among others. He even described how Sentara, a Virginia-based hospital system, operated their high-quality program at a loss to serve their community. But, he added, many air ambulance companies are charging more than they should.
Dr. Abernathy said the state of Wisconsin does “a pretty good job with 13 helicopters.” The adjacent state of Missouri has 37, he said, even though both states have roughly the same population (12 million), same size (65,000 versus 69,000 square miles) and same flying conditions (lots of snow). I asked Dr. Abernathy why the big difference in the number of helicopters. “Medicaid reimburses better in Missouri,” he said.
Dr. Abernathy also pointed out that Medicare and Medicaid do not pay based on quality, which drives many for-profit companies to use old planes and staff with bare-bones training. His medical flight team at the University of Wisconsin, a nonprofit operation, flies “state-of-the-art twin-engine birds, has excellent crew training, and includes a physician on each flight. Other companies fly 30-year-old single-engine AS350 and Bell 206 aircraft, with little training and no physician on board. Both get paid the same.”
A Consumer Reports analysis suggests Dr. Abernathy may be on to something. Based on their review of National Transportation Safety Board data about air ambulance accidents between 2010 and 2016, Consumer Reports concluded the nonprofit companies were safer.4 A 2014 study published in the Journal of Trauma and Acute Care Surgery found that of 139 crashes, 118 involved for-profit operators.5
Breaking It Down
I realized that the growth of air ambulance is facilitated by the portability of the business. Imagine you had a burger shop and noticed that business would be better in the next town. Moving a brick-and-mortar store involves acquiring new property, moving, hiring new employees, and the bureaucracy of permits, utilities, and other paperwork. Now, if your business was a food cart without government regulation or permits, you could home in on the profit centers. That’s how the air ambulance business works. The industry claims it needs all these air ambulances, but that’s not true, said Dr. Abernathy, and I trust his judgment. Dr. Abernathy has flown more hours on air ambulances than any other physician in the country.
The excess number of helicopters in some states means each aircraft gets fewer flights. Frazier said it’s true that mos
t of the costs are fixed, and he broke them down for me. The fuel and the equipment and staff are about $160,000 per month for one helicopter. If you have a lot of flights, the cost per flight is lower than if you have a few flights. If a company has 40 flights per month, each flight will be about $4,750. Medicare pays an average of $6,200 per flight, so that’s a handsome profit if a company gets enough flights. If the company gets half as many flights, the cost per flight will be about twice as much. Then the Medicare reimbursement doesn’t cut it.
Now that air ambulances have flooded the market, to make their profits, companies need to push for more flights and higher prices. How do they bring in all those flights? They staff their flights with local doctors, nurses, and EMTs who work in the facilities. When they work shifts outside their ambulance jobs, and someone needs a transport, they remain loyal to their air ambulance company.
The undisclosed conflicts of interest create an unfair situation for patients. Frazier compared it to a scenario in which you’re driving down the road and your car stalls. A sheriff calls a tow truck for you, which takes you five miles down the road to the nearest town. Then the tow truck driver says you owe him $5,000, and if you don’t pay it he’ll send you to collections and put a lien on your house. Then a few days later you see the sheriff off duty driving the tow truck, and you realize the sheriff works on the side for the tow truck company.
It seems that profiteering air ambulance companies strive to avoid having patients shop for a fair price. Sentinel’s process of getting bids, when the patient’s condition allows them to take an hour to collect bids from multiple air ambulance companies, uses the free market principle. Hence the market prevents companies from exploiting patients with inflated charges.