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WC Cost Control

Air Ambulance Rate Debate Unlikely to Fly Away

Where air ambulances are concerned, health care regulation is at odds with aviation regulation, creating a dispute over rates.
By: | March 9, 2018 • 4 min read

Disputes over air ambulance transport bills continue to rage on, and a recent ruling in Texas overturning a decision in favor of insurers isn’t likely to ground the debate.

More than a half a million individuals are transported via air ambulance services each year, according to the Association of Air Medical Services. The majority of these transports are via helicopter in emergency situations; the remainder are fixed-wing transports for longer distances.

Linda Colsen, vice president and national product leader, One Call Care Management

While fees charged by traditional medical transport services are regulated under the Affordable Care Act, air ambulance providers argue that they fall under the jurisdiction of the Airline Deregulation Act (ADA) of 1978, which prevents states from enacting or enforcing laws or regulations related to the price, route or service of an air transportation carrier.

This, unfortunately, has led to runaway transport fees and no way for insurers to mitigate them.

Linda Colsen, vice president and national product leader at Jacksonville, Fla.-based One Call Care Management, said emergent care situations where an individual needs to be transported via helicopter to a trauma center is the biggest contributor to these runaway rates.

“The call is being made on the ground in an emergency situation by the local EMS provider, and from a payer perspective, there’s no oversight, no ability to negotiate savings, and they’re stuck with the invoice that can be tens, even hundreds of thousands of dollars,” she said.

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Colsen said one of her clients was billed more than $300,000 for a single helicopter emergency transport, but that One Call was able to negotiate savings of $173,000 for the insurer during a retrospective review.

Excessive helicopter transport bills were the crux of the lawsuit in PHI Air Medical, LLC v. Texas Mutual Insurance Company, et al. A trial court rendered judgment in favor of eight plaintiff insurers, which included Texas Mutual Insurance Company and Hartford Underwriters Insurance Company, who disagreed with PHI’s per-trip charge for medically transporting injured workers.

On Jan. 31, 2018, however, the Texas Court of Appeals remanded the case, holding that any rate provisions for air ambulance transports are preempted by the ADA.

Under the Texas Workers’ Compensation Act, the state’s Commissioner of Workers’ Compensation has the right to adopt policies and guidelines that reflect standardized reimbursement structures by using Medicare and Medicaid reimbursement methodologies and policies, and to ensure that these guidelines are fair and reasonable “to ensure the quality of medical care and to achieve effective medical cost control.”

The Act also defines a maximum allowable reimbursement (MAR) for workers’ comp-related medical costs, setting this MAR at 125 percent of the Medicare or state Medicaid fee schedule, or a “fair and reasonable rate” if neither applies.

While the trial court held the insurers could not be asked to pay more than 125 percent of the Medicare amount for air ambulance transport, the appeals court said the ADA’s preemption provision bars a state from enacting a law or rule “related to a price, route or service of an air carrier that may provide air transportation …”

Interestingly, the court did not demand that the insurers pay the air ambulance company.

“From a payer perspective, there’s no oversight, no ability to negotiate savings, and they’re stuck with the invoice that can be tens, even hundreds of thousands of dollars.” — Linda Colsen, vice president and national product leader, One Call Care Management

Mary Nichols, senior vice president and general counsel for Texas Mutual, said these court decisions have left no pathway to payment, and noted that the courts have not identified a single provision in the ADA or other federal statutes that would require state actors to make any payment of air ambulance claims, “much less at the rates they choose to charge.”

Although multiple states have enacted laws to combat unfair air ambulance charges — leading to dozens of lawsuits — they’re ineffectual unless Congress decides to make a change to the ADA.

“They are subject to challenge unless the courts or Congress clarifies the issue,” Nichols said. “Until then, states may lack the authority to order payment of any kind, including billed charges.”

Sen. Jon Tester, D-Montana, introduced S.B. 471 in February 2017, which would create an exemption in the ADA to allow states to regulate air ambulances. Although the bill has the support of the National Association of Insurance Commissioners, it hasn’t left committee.

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The courts could eventually clarify the issue too. Nichols said Texas Mutual will be filling a petition for review with the Texas Supreme Court, and noted that a similar case in West Virginia is on appeal to the 4th Circuit Court of Appeals.

The top executive of one southeastern air transport company said brokers who arrange services — some of whom may inflate the bill by as much as three to four times the actual cost of transport — are also a part of the problem. The executive, who asked not to be identified, said his company coordinates air ambulance services, and about 80 percent of its business involves coordinating services for workers’ comp clients.

He noted that he doesn’t see a reimbursement cap of 125 percent of Medicare as unreasonable. But he believes further attempts to implement legislation in the industry will receive significant push-back from brokers.

“There has to be a reasonableness that is fair to the broker and that is fair for the payer based upon the actual cost of rendering the services,” said the executive. &

Angela Childers is a Chicago-based writer specializing in health care and business management. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Pharma Under Fire

Opioids Give Rise to Liability Epidemic

Opioids were supposed to help. Instead, their addictive power harmed many, and calls for accountability are broadening.
By: | May 1, 2018 • 8 min read

The opioid epidemic devastated families and flattened entire communities.

The Yale School of Medicine estimates that deaths are nearly doubling annually: “Between 2015 and 2016, drug overdose deaths went from 33,095 to 59,000, the largest annual jump ever recorded in the United States. That number is expected to continue unabated for the next   several years.”

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That’s roughly 160 deaths every day — and it’s a count that’s increasing daily.

In addition to deaths, the number of Americans struggling with an opioid disorder disease (the official name for opioid addiction) is staggering.

The National Institute on Drug Abuse (NIDA) estimates that 2 million people in the United States suffer from substance use disorders related to prescription opioid pain relievers, and roughly one-third of those people will “graduate” to heroin addiction.

Conversely, 80 percent of heroin addicts became addicted to opioids after being prescribed opioids.

As if the human toll wasn’t devastating enough, NIDA estimates that addiction costs reach “$78.5 billion a year, including the costs of health care, lost productivity, addiction treatment, and criminal justice involvement.”

Shep Tapasak, managing principal, Integro Insurance Brokers

With numbers like that, families are not the only ones left picking up the pieces. Municipalities, states, and the federal government are strained with heavy demand for social services and crushing expenditures related to opioid addiction.

Despite the amount of money being spent, services are inadequate and too short in duration. Wait times are so long that some people literally die waiting.

Public sector leaders saw firsthand the range and potency of the epidemic, and were among the first to seek a legal reckoning with the manufacturers of  synthetic painkillers.

Seeking redress for their financial burden, some municipalities, states and the federal government filed lawsuits against big pharmaceutical companies and manufacturers. To date, there are more than 100 lawsuits on court dockets.

States such as Ohio, West Virginia, New Jersey, Pennsylvania and Arkansas have been hit hard by the epidemic. In Arkansas alone, 72 counties, 15 cities, and the state filed suit, naming 65 defendants. In Pennsylvania, 16 counties, Philadelphia, and Commonwealth officials have filed lawsuits.

Forty one states also have banded together to subpoena information from some drug manufacturers.

Pennsylvania’s Attorney General, Josh Shapiro, recently told reporters that the banded effort seeks to “change corporate behavior, so that the industry can no longer do what I think it’s been doing, which is turning a blind eye to the effects of dumping these drugs in the communities.”

The volume of legal actions is growing, and some of the Federal cases have been bound together in what is called multidistrict litigation (MDL). These cases will be heard by a judge in Ohio. Plaintiffs hope for a settlement that will provide funding to be used to help thwart the opioid epidemic.

“From a societal perspective, this is obviously a big and impactful issue,”  said Jim George,  a managing director and global claims head with Swiss Re Corporate Solutions. “A lot of people are suffering in connection with this, and it won’t go away anytime soon.

“Insurance, especially those in liability, will be addressing this for a long time. This has been building over five or six years, and we are just now seeing the beginning stages of liability suits.” 

Basis for Lawsuits

The lawsuits filed to date are based on allegations concerning: What pharma knew or didn’t know; what it should have known; failure to monitor size and frequency of opioid orders, misrepresentation in marketing about the addictive nature of opioids; and false financial disclosures.

Opioid manufacturers, distributors and large drugstore chains together represent a $13 billion-a-year industry, meaning the stakes are high, and the pockets deep. Many have compared these lawsuits to the tobacco suits of the ’90s.

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But even that comparison may pale. As difficult as it is to quit smoking, that process is less arduous than the excruciating and often impossible-to-overcome opioid addiction.

Francis Collins, a physician-geneticist who heads the National Institutes of Health, said in a recorded session with the Washington Post: “One really needs to understand the diabolical way that this particular set of compounds rewires the brain in order to appreciate how those who become addicted really are in a circumstance where they can no more [by their own free will] get rid of the addiction than they can get free of needing to eat or drink.”

“Pharma and its supply chain need to know that this is here now. It’s not emerging, it’s here, and it’s being tried. It is a present risk.” — Nancy Bewlay, global chief underwriting officer for casualty, XL Catlin

The addiction creates an absolutely compelling drive that will cause people to do things against any measure of good judgment, said Collins, but the need to do them is “overwhelming.”

Documented knowledge of that chemistry could be devastating to insureds.

“It’s about what big pharma knew — or should have known.  A key allegation is that opioids were aggressively marketed as the clear answer or miracle cure for pain,” said Shep Tapasak, managing principal, Integro Insurance Brokers.

These cases, Tapasak said, have the potential to be severe. “This type of litigation boils down to a “profits over people” strategy, which historically has resonated with juries.”

Broadening Liability

As suits progress, all sides will be waiting and watching to see what case law stems from them. In the meantime, insurance watchers are predicting that the scope of these suits will broaden to include other players in the supply chain including manufacturers, distribution services, retail pharmacies, hospitals, physician practices, clinics, clinical laboratories and marketing agencies.

Litigation is, to some extent, about who can pay. In these cases, there are several places along the distribution chain where plaintiffs will seek relief.

Nancy Bewlay, global chief underwriting officer for casualty, XL Catlin

Nancy Bewlay, XL Catlin’s global chief underwriting officer for casualty, said that insurers and their insureds need to pay close attention to this trend.

“Pharma and its supply chain need to know that this is here now. It’s not emerging, it’s here, and it’s being tried. It is a present risk,” she said.

“We, as insurers who identify emerging risks, have to communicate to clients. We like to be on the forefront and, if we can, positively influence the outcome for our clients in terms of getting ahead of their risks.”

In addition to all aspects of the distribution chain, plaintiffs could launch suits against directors and officers based on allegations that they are ultimately responsible for what the company knew or should have known, or that they misrepresented their products or signed off on misleading financial statements.

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Shareholders, too, could take aim at directors and officers for loss of profits or misleading statements related to litigation.

Civil litigation could pave the way, in some specific instances, for criminal charges. Mississippi Attorney General Jim Hood, who in 2015 became the first state attorney general to file suit against a prescription drug maker, has been quoted as saying that if evidence in civil suits points to criminal behavior, he won’t hesitate to file those charges as well.

Governing, a publication for municipalities and states, quoted Hood in late 2017 as saying, “If we get into those emails, and executives are in the chain knowing what they’ve unleashed on the American public, I’m going to kick it over to a criminal lawsuit. I’ve been to too many funerals.”

Insurers and insureds can act now to get ahead of this rising wave of liability.

It may be appropriate to conduct a review of policy underwriting and pricing. XL Catlin’s Bewlay said, “We are not writing as if everyone is a pharma manufacturer. Our perception of what is happening is that everyone is being held accountable as if they are the manufacturer.

“The reality is that when insurers look at the pharma industry and each part of the supply chain, including the pharma companies, those in the chain of distribution, transportation, sales, marketing and retail, there are different considerations and different liabilities for each. This could change the underwriting and affect pricing.”

Bewlay also suggests focusing on communications between claims teams and underwriters and keeping a strong line of communication open with insureds, too.

“We are here to partner with insureds, and we talk to them and advise them about this crisis. We encourage them to talk about it with their risk managers.”

Tapasak from Integro encourages insureds to educate themselves and be a part of the solution. “The laws are evolving,” he said. “Make absolutely certain you know your respective state laws. It’s not enough to know about the crisis, you must know the trends. Be part of the solution and get as much education as possible.

“Most states have ASHRM chapters that are helping their members to stay current on both passed and pending legislation. Health care facilities and providers want to do the right thing and get educated. And at the same time, there will likely be an uptick in frivolous claims, so it’s important to defend the claims that are defensible.”

Social Service Risk

In addition to supply chain concerns, insurers and insureds are concerned that even those whose mission it is to help could be at risk.

Hailed as a lifesaver, and approved by the Food and Drug Administration (FDA), the drug Naloxone, can be administered to someone who is overdosing on opioids.  Naloxone prevents overdose by blocking opioid receptor sites and reversing the effects of the overdose.

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Some industry experts are concerned that police and emergency responders could incur liability after administering Naloxone.

But according to the U.S. Department of Justice, “From a legal standpoint, it would be extremely difficult to win a lawsuit against an officer who administers Naloxone in good faith and in the course of employment. … Such immunity applies to … other professional responders.”

Especially hard hit are foster care agencies, both by increased child placements and stretched budgets. More details in our related coverage.

While the number of suits is growing and their aim broadening, experts think that some good will come of the litigation. Settlements will fund services for the addicted and opioid risk awareness is higher than ever. &

Mercedes Ott is managing editor of Risk & Insurance. She can be reached at [email protected]