Medicare is short-changing the nation's air ambulance industry by $400 million a year, and some of the costs are shifting to private insurers and self-paying patients. But in many cases it's still not enough to make air ambulance operations profitable. Those are the findings of a new study prepared for the Association of Air Medical Services (AAMS) by the consulting firm Xcenda. The study examined 51 percent of all air medical bases nationwide and captured 46 percent of air medical services billed to Medicare.

Using data from 2015, the study found that inadequate public-sector reimbursements add an average of $15,984 to the cost of self-pay or privately insured air medical transport as providers attempt to recoup what they lose on below-cost transports funded by the government. Nevertheless, even with an average per-flight charge of $23,518 to these non-government funded patients, almost one-third of air ambulance providers “reported negative margins,” the study noted.

The study found that providers had per-transport fixed costs that ranged from $3,603 to $17,343 and total per-transport costs of $4,669 to $20,776 with the average total cost per transport at $10,199 and the average annual fixed cost per base at $2.9 million. Hospital-based programs had a considerably higher average cost per transport of $13,017 and an annual average fixed cost per base of $5.41 million.

The data suggests that Medicare reimbursement of air ambulance services has clearly lagged costs. According to to the report, “Findings suggest that current reimbursement rates do not adequately cover the costs of air medical emergency transports. As recently as 2015, 59 percent of reported costs for Medicare transports were covered by the Medicare program and beneficiary payments. Based on reported cost data, a pool of $1.07 billion would be required to rebase air medical service rates in 2017” to cover actual provider costs and “account for significant growth and increased costs associated with the delivery of these services.” The estimated 2017 reimbursement pool is $587 million.

The study notes growth into previously underserved rural areas, resulting in the tripling of bases over the last two decades and improving access to air medical care. In so doing, the United States population coverage within a 15- to 20-minute air medical response area had grown to 86.4 percent last year from 71.2 percent in 2003. “This type of emergency air medical service coverage results in higher overhead costs to maintain bases and aircraft and to ensure aircraft availability and adequate staffing for when emergencies arise compared to other Medicare services.” The study goes on to note that 75 percent of all Medicare air medical transports are designated as rural; the average reported patient-loaded mileage for Medicare transports was 56 miles for helicopters and 175 miles for fixed-wing; helicopters operatted 92 percent of all transports reported in the study.