Medics, Markets, and Medicare

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I. INTRODUCTION 38 II. THE UNITED STATES CANNOT AFFORD ALL THE AIR AMBULANCES IT HAS 39 III. THE UNITED STATES CAN AFFORD TO REDUCE HEMS ACCIDENTS 49 IV. SOLUTIONS 80 A. FIXING THE ECONOMIC CRISIS 81 B. FIXING THE SAFETY CRISIS 90 C. FIXING PILOT PARANOIA 95 I. INTRODUCTION Too many helicopter air ambulances are flying, (1) and too many of them are crashing. A 2002 boost in Medicare reimbursement rates stimulated a threefold growth in the numbers of air ambulances, and now Helicopter Emergency Medical Services (HEMS) (2) operators are scrambling for missions and flight time. Most air ambulances are helicopters, the HMS industry has the second worst accident record in aviation, and flying air ambulances is one of the most dangerous occupations the United States. (3) A central policy question is whether air ambulances are most appropriately regulated as part of a national airspace system or whether they should be regulated as part of the national healthcare system. Safety and patient care could be improved by letting the industry shrink. If it does shrink, either as a matter of public policy or because of simple governmental inertia, the question remains whether this aspect of healthcare deserves more public subsidy. If it does, where should that subsidy come from? This article begins by exploring the industry's economic crisis in the context of cost control in the healthcare industry more generally. Then, it explores the safety problem, explaining the risks, mitigating technology, and regulatory responses for the deadliest risks. It follows the factual sections by recommending solutions. II. THE UNITED STATES CANNOT AFFORD ALL THE AIR AMBULANCES IT HAS The title of this section is only one verse accompanying a broader refrain: the United States cannot afford all the healthcare technology it has. An economic crisis in the air ambulance industry cannot be addressed coherently outside the context of a more general discussion of healthcare technology policy. About 900 air ambulances operate in the United States. Most of them are single engine, single pilot helicopters such as AS350. The industry is highly concentrated, with 65% of the fleet operated by the three largest operators. (4) Air Methods, based in Denver, is the biggest, (5) and it has been buying up smaller HEMS operators. (6) Fewer than half of the HEMS missions flown involve extraction of trauma victims from accident scenes; most involve inter-facility transport--picking up critically ill patients from one hospital and transporting them to another that can provide more appropriate advanced care. The federal government planted the seeds of the economic crisis by increasing Medicare reimbursement rates for air ambulances. In 2002, there were only a couple hundred HEMS operators, and most of them were operated in conjunction with hospitals. The hospital made the decision whether air transport of a patient was necessary and handled the billing. In 2002, United States Department of Health and Human Services' Centers for Medicare and Medicaid responded to a congressional mandate by changing the reimbursement system for air ambulances. (7) The previous system had followed the traditional healthcare reimbursement approach of fee for service, in which air ambulance transportation was paid for based on the cost of the transport or on the provider's customary, usual, and reasonable fees for the transport. (8) The fee-for-service system distinguished between hospital-provided air ambulance services and independent--what came to be called community-based--services. Hospital-based services were compensated based on costs, without a ceiling; community-based services were compensated subject to an overall cap on expenditures for that category of transportation. …