The air ambulance industry faces a significant credit risk as Congress considers the Lower Health Care Costs Act.
Bipartisan surprise billing legislation would put the air ambulance industry in "significant risk," according to a Moody's Investors Service report released Monday.
The report looked at the potential impact of the Lower Health Care Costs Act of 2019, a bipartisan bill aimed at eliminating surprise medical bills. The bill, introduced by Sen. Lamar Alexander, R-Tenn., passed the Senate Committee on Health, Education, Labor, and Pensions in late June while its companion bill, the No Surprises Act, passed the House Committee on Energy and Commerce weeks later.
In mid-July, the Congressional Budget Office estimated that the Lower Health Care Costs Act would save the federal government $7.5 billion over the next decade.
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Moody's stated that because air ambulance operators largely rely on private insurance payments, any decrease in private reimbursement rates without a rise in government reimbursement rates would damage the industry's profitability.
According to a U.S. Government Accountability Office report released in March, nearly one-third of air ambulance transports are reimbursed by private insurers.
The ratings agency estimated that air ambulance companies on average collect between $35,000 to $40,000 from private insurers per transport and collect between $5,000 to $6,000 from per transport from Medicare.
If legislation is passed to address surprise billing, Moody's estimated that reimbursement rates from private insurers would need to be between $35,000 to $37,500 for air ambulance providers to maintain the current level of profitability.
Moody's estimated that 80% of operating costs for air ambulance providers are fixed, leaving little room for adjusting to lower reimbursement rates.
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Additionally, Moody's found that Air Methods Corp., a Colorado-based air ambulance is at greater risk than its competitor Global Medical Response because nearly 70% of the company's total net revenues come from air ambulance patient transport.
In the past 12 months, Air Methods reported $859 million in revenues while Global Medical Response reported $1.38 billion in revenues.
Global Medical Response and Air Methods Corp. did not respond to requests for comment.
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Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.