Sky High

Air-ambulance service saves lives. It also costs an arm and a leg.

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Terri Ann Chott was out for a walk with her grandchildren near Eastern Washington’s Dragoon Creek Campground on Sept. 30 when she suddenly started to feel poorly. She returned to her son’s house thinking she had a cold and was tired, exacerbated by the end-of-summer rush at the bed and breakfast she and her husband run in Newport, Wash. Once back at her son’s house near Spokane, she lay down to rest while her daughter-in-law dialed 911.

Chott was still alert when the fire department arrived but was surprised when she awoke two days later in Spokane’s Sacred Heart. As it turned out, Chott had walking pneumonia and had suffered a near-fatal heart attack.

Paramedics performed CPR for 40 minutes to keep Chott alive before bundling her in a Life Flight Network helicopter for an eight-minute flight to Sacred Heart. The paramedics weren’t sure she was going to survive.

But she did and has since made a strong recovery. “I can’t say enough good things about them,” Chott says of the rescue and medical personnel who participated in her transport and treatment.

Three months later, she can’t say the same about the financial impact of the treatment.

“Our insurance carrier is finally starting to make sense of our claims,” Chott says. She says she was initially angry at her daughter-in-law for calling for help: “Even in the throes of cardiac arrest, I was concerned about the medical bills.”

But one bill she won’t have to see is the more than $20,000 for the short flight to the hospital. Chott pays $60 per year for a membership with Aurora, Ore.-based Life Flight Network, which guarantees Life Flight will accept what her insurer is willing to pay and not bill her for any outstanding balance.


Chott is one of the lucky ones. Many patients in the Pacific Northwest are discovering after-the-fact that their insurers will only cover part of air medical bills, costs that can climb well above $20,000. And people without coverage must face the bills alone if they can’t prove they’re indigent.

The cost of air-ambulance service is only getting more expensive, thanks to the growth of for-profit air ambulances throughout the U.S. over the past 15 years. And high feees are now sparking a nationwide backlash as insurers balk at paying, leaving patients on the hook for the balance.

Helicopter emergency medical services, or HEMS, as they are known, used to be primarily operated by hospitals with a single helicopter staffed by emergency physicians and nurses. The programs were operated as loss leaders that brought patients suffering from trauma or other grave medical conditions to hospitals quickly for extensive treatment, the bills for which could offset the costly transport.

A sea change came in 2002. That’s when Medicare more than doubled its reimbursement rate for HEMS transports, ostensibly to increase safety.

That move sparked a gold rush that has since attracted heavyweight financial investors, including Boston-based Bain Capital and New York’s KKR. The market is now worth $5 billion annually, according to Los Angeles management consultancy IBISWorld, and is expected to continue growing 2.9% each year through 2021, following 1.9% annual growth since 2011.

Another reason for growth: The American population is aging, and state-of-the-art healthcare is concentrating in cities. If you get sick in a rural area, you want to get to a metropolitan area.

In 2016 there were 1,045 helicopters at 879 bases, a 59% increase in helicopters since 2004, according to the Association of Air Medical Services’ ADAMS database. That doesn’t include the 360 planes at 200 bases, up from 282 at 148 bases since 2007 — the first year the database included planes All told, the HEMS industry has 302 operators nationwide, up from 256 in 2004.

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The industry is dominated by just three for-profit companies: Englewood, Colo.-based Air Methods, with 23.4% of the market; West Plains, Mo.-based Air Medical Group Holdings, with 16.3%; and Lafayette, La.’s PHI with 8.5%, according to IBISWorld.

Oregon is home to five: Life Flight, which transported Chott; Hillsboro’s Lifeguard Air Ambulance; Bend’s AirLink Critical Care Transport; Mercy Flights, of Medford; and Reach Air Medical Services, which is based in Santa Rosa, Calif. but operates at bases in Oregon as well as its Cal-Ore Life Flight unit in Brookings.

Reach and Cal-Ore are owned by Air Medical Group Holdings, which in turn is held by New York financial investor KKR. AirLink is owned by Lewisville, Texas-based Med-Trans. Reach and Cal-Ore did not respond to requests for interviews.


Life Flight Network, which transported Chott, is the largest HEMS in Oregon and bills itself as the largest nonprofit HEMS in the U.S. The company is an amalgam of a hospital-based program and a for-profit provider.

It’s indirectly owned by three nonprofit hospitals and one health-related public corporation: Legacy Emanuel Medical Center, Providence Health & Services and Oregon Health & Science University, all in Portland, as well as Boise, Idaho-based Saint Alphonsus Regional Medical Center. Life Flight Network operates as a pass-through LLC that is held by the Life Flight Network Foundation, which is controlled by the four shareholders.

Michael Griffiths became CEO in 2007, when the company’s owners decided to abandon its hospital-centric structure and begin placing aircraft throughout the Pacific Northwest to better compete against for-profit rivals. Life Flight is now based at the semirural Aurora Jet Center, south of Portland and flies 38 aircraft from bases in Oregon, Idaho, Montana and Washington. CEO Griffiths is a flight nurse by training who still takes over shifts and brings his dogs to work, even while expanding the company’s workforce to 650 from the 30 when he took over.Sky High 4

“We were the first hospital-based network,” says Griffiths during an interview in the company’s boardroom, which overlooks Life Flight’s maintenance hangar.

An Airbus helicopter is being retrofitted as part of the recent acquisition of Eastern Washington’s Northwest MedStar while a Leonardo helicopter undergoes routine maintenance. Mechanics monkey with the wing of a Pilatus PC-12 NG airplane, rolling it in and out of the hangar several times during the interview.

The HEMS industry is roughly divided into nonprofit providers that fly out of a hospital and for-profit providers, known as community providers, that fly out of airports and helipads in communities, serving a number of hospitals.

But the boom in HEMS has muddied these divisions, leading to hybrids like Life Flight, which merged several hospital-based operations.

Mercy Flights in Medford is not-for-profit but isn’t linked to a specific hospital, and Reach as well as AirLink are both for-profit — AirLink was previously operated by the St. Charles Health System in Bend before it was acquired by Med-Trans in 2012, in part because St. Charles couldn’t compete with the for-profit services entering the market.

Griffiths says the move away from hospitals with a single helicopter was necessary; helicopters based at urban hospitals wasted time flying to rural patients before returning.

The new model, spurred by the move to for-profit providers, places aircraft in towns throughout states, shortening transport times. The model, he says, is even more important as rising healthcare costs spark the consolidation of hospitals and critical-care facilities into urban centers and away from rural communities.

“A person who 20 years ago stayed in their community [for treatment], today does not,” he says. Life Flight bills “about” $20,000 to set off on a mission and $200 an air mile thereafter, with a cap of $50,000 per flight.

Exact figures for the increase in costs are difficult to come by since most companies are privately held and aren’t required to divulge figures. This apparent lack of transparency would make it even more difficult for patients to make an informed choice of providers if they were in any position to do so when needing transport.

The Oregon Health Authority maintains a list of air-ambulance services along with ground-ambulance providers but doesn’t collect statistics on the number of trips or pricing. The agency says it regulates what it can without running afoul of federal regulations — for example, setting requirements for the medical equipment onboard.

The Association of Air Medical Services says it also has no reliable stats on Oregon since its ADAMS database relies on voluntary reporting and not all services have provided stats.


That said, an expansion like Life Flight’s can’t be cheap — profit accounts for just 16.7% of industry revenue, according to IBISWorld. Although HEMS can save money by flying smaller single-engine planes and helicopters that are cheaper to operate, they still cost millions and require pilots with at least some experience — and sacrifice the safety offered by twin-engine aircraft. Some operators also carry blood, adding another level of cost, though few rely on flight physicians as some hospital programs do.

Critics say the expansion has benefited shareholders, not patients.

“You have these bases that are charging two to three times what they did five years ago,” says Michael Abernethy, a clinical professor at the University of Wisconsin and flight physician with UW Med Flight.

Indeed, Air Methods’ average bill in 2014 was $40,766, according to a recent New York Times article that used numbers from Research 360. That’s up from $17,262 five years earlier — Air Methods said it had to boost the bills to offset insurers that refused to pay. “There is such redundancy. It’s grossly over-utilized and there’s no one to say, ‘Hey, we don’t need another helicopter.’”

Although HEMS are essentially just airborne ambulances — albeit often with superior medical teams and equipment — they differ in one key component from their ground rivals: Federal regulations forbid local governments from regulating the number, pricing and makeup of HEMS companies.

Meanwhile, communities can force ground-ambulance companies to demonstrate a need for their services before issuing a license. To the Feds, HEMS are airlines and are protected by the 1978 Airline Deregulation Act, or ADA. The act sought to create a free market for airlines to spark lower prices for consumers, but it’s now helping fuel the HEMS boom.

“The ADA has nothing to do with helicopter EMS. It has everything to do with passenger airlines,” Abernethy says.

One easy way to see the difference between HEMS and airlines is that airlines compete on price — but it’s difficult to find out what different HEMS charge. Montana recently began publishing a database, but few providers, save for Mercy Flights, publish their fees. Still, the ADA was the reason a judge struck down North Dakota’s attempt at regulating the industry in 2015.


That was when Senators John Tester (D-Mont.) and John Hoeven (R-N.D.) unsuccessfully tried to convince Congress to exclude air ambulances from ADA provisions that prevent states from limiting the number of HEMS or controlling prices. A U.S. District Court in 2016 threw out a North Dakota law that would have rewarded air-ambulance providers that negotiated in-network prices with insurers. Montana is now working on bipartisan legislation to require health insurers to cover the entire cost of air-ambulance services to take patients out of the fight over high prices.

Critics and politicians like Abernethy and Montana’s Tester would like to see Congress carve air ambulance services out of the ADA but have found little support among federal colleagues looking to fight other healthcare battles.

“If you look at healthcare, HEMS is a small fish in a big pond,” Abernethy says.

Industry association AAMS says that only 30% of the flights its members make are compensated fairly. The remaining 70% either only cover costs or force air ambulance operators to write off much of the expense, increasing the cost for the solvent 30%. Medicare, the AAMS claims, doesn’t even cover the cost of a flight.

“A person who 20 years ago stayed in their community [for treatment], today does not.”
— Michael Griffiths, Life Flight Network CEO 

Dan Brattain is co-founder and president of Cal-Ore Life Flight, now a unit of Air Medical Group Holdings, and says the combination of indigent and insured patients is what makes the industry so expensive.

“Probably one of the things that the general public doesn’t understand is that it’s not so much the cost of the flight but the cost to be ready to make the flight,” he says. Brattain also doubles as a Cal-Ore pilot and launched the service in 1989 with a partner. They had been providing aviation services to the timber industry when they discovered a need for air ambulances. In the late ’90s they also started providing ground, ambulance services.

Brattain likes to talk about the payer mix as a vital component of the HEMS industry— the mix of how patients pay for the flights. He says his company works with patients whose insurers won’t cover the complete cost and has been very generous — something Life Flight’s Griffiths also said.

“We respond. We don’t ask if you can pay for it,” Brattain says, noting that Cal-Ore flights generally cost between $22,000 and $27,000.

The company operates six twin-engine Piper Cheyenne aircraft in Southern Oregon and Northern California. It’s gradually replacing the planes with Beechcraft King Airs. Despite the costs, Brattain says he hears little criticism: “I can’t go into a local store here without someone talking about a transport.”

Cal-Ore, like most HEMS, offers memberships to offset the costs of transport. An annual membership costs about $70 and ensures the provider won’t bill patients beyond what their insurance or Medicare/Medicaid is willing to pay. Because of this, many providers only offer memberships to those with health insurance.

While many of the memberships include reciprocity agreements with other providers, Cal-Ore’s membership only covers flights within the Air Medical Group Holdings network. If a patient is involved in an accident or, like Teri Ann Chott, suffers a heart attack in a rural community, medical personnel on-scene decide who to call, potentially leaving a patient to foot all or part of an HEMS invoice even if they have a membership.

This inability of patients to select a provider is another reason critics say regulation is badly needed — a patient can’t pick a cheaper provider or opt to take their chances with a far less expensive ground transport. But they still have to pay the bill.

As costs have risen along with the expansion in HEMS, critics say safety has also often been overlooked in favor of profits. The troubles peaked in 2008 when the industry saw 12 accidents that resulted in 29 fatalities, according to Aberdeen, Scotland aviation consultancy Aerossurrance.

That number fell following heavy press coverage and intervention by the Federal Aviation Administration, which required more training and safety equipment.

Industry associations such as the AAMS also advocated for better equipment, such as crash-resistant fuel tanks that can withstand minor accidents. In 2015 HEMS in the U.S. saw nine fatalities in seven accidents.

Despite the hefty criticism of the industry in surrounding states, few patients in Oregon have complained about HEMS bills. Both Brattain and Griffiths say their companies often write off entire bills for insolvent patients and are irked by the low reimbursement rate for Medicare patients.

Medicare’s set rate of between $3,000 and $4,000 per flight only covers about 30% of the actual cost of the transport, according to the AAMS, and providers are prohibited by law from seeking more than a fraction of the remaining costs from Medicare patients.

Oregon’s Division of Financial Regulation, which handles insurance-related complaints, has seen 10 complaints about HEMS since 2014, according to regulator Brian Fordham.

“From our point of view, it’s a small number,” he says. “That doesn’t mean it isn’t a big issue.”

The main difference between Oregon and Montana (and other states), he says, is the presence of a dominant insurer. Blue Cross covers about 60% of Montana so they pay air ambulances whatever they feel like. In Oregon there are more insurers who are hesitant to not pay because consumers have a choice. Fordham says he is concerned about the bigger issue of healthcare providers looking to patients to cover out-of-network costs incurred during treatment.

“I’m always concerned if there’s consumer harm out there. The bills tend not to be small but rather large,” he says.

And with judges falling back on the ADA and Congress unwilling to take action, those bills won’t be getting any smaller anytime soon.

Correction appended: This article has been edited to reflect the following changes.  Life Flight Network is directly held by its four owners, one of which is a public corporation.