State News : Texas

There is no limit on how much an air ambulance provider (or any other health care provider, for that
matter) can charge for its services or how often it can raise its charges. For example, one of the
largest air ambulance providers in Texas, PHI Air Medical, increased its base rate from $11,492.00
in 2010 to $26,177.00 in 2014, a 128% increase. At the same time, it increased its mileage rate from
$150.00 per mile to $290.00 per mile, an increase of 93%.

However, the lack of any restrictions on a provider’s billed charges is only a problem when it is held
that the provider is entitled to reimbursement of its billed charges. Since January 2014, the Division
has been doing just that, issuing medical fee dispute decisions holding that its medical fee guideline
does not cover air ambulance services and ordering payment of the air ambulance providers’ billed
charges on the grounds that they are “fair and reasonable.”

Many of the Division’s decisions have been appealed to the State Office of Administrative Hearings
(SOAH) where they have been assigned to Administrative Law Judge Craig Bennett. Judge Bennett
consolidated a group of early cases between PHI Air Medical and eight insurance carriers. These
lead cases will determine the legal issues for the remainder of the air ambulance cases pending at
SOAH. James Loughlin with the Firm represents seven of the eight carriers.

Judge Bennett issued a preliminary order on August 5, 2015 announcing his decision that “the
proper reimbursement rate for the air ambulance services in issue is 149% of Medicare.” This is a
great victory for the carriers because Judge Bennett has rejected the Division’s position that PHI’s
billed charges are fair and reasonable, he has concluded that reimbursement should be Medicarebased,
i.e., a percentage of the Medicare rate, and he has picked a percentage which is not much
higher in dollar terms than 125% of Medicare.

The carriers paid PHI at 125% of the Medicare rate based on their understanding that the Division's
fee guideline applies to ambulance services. The difference between the 125% paid by the carriers
and the 149% determined by Judge Bennett to be fair and reasonable is less than 13% of the amount
sought by PHI which was based on its claim that it is entitled to reimbursement of its billed charges.

Judge Bennett's decision and order which will explain his reasoning in detail is expected by the
second week of September. PHI's counsel has already indicated that PHI intends to appeal Judge
Bennett's decision to district court. Judge Bennett previously rejected PHI's argument that the
federal Airline Deregulation Act preempts Texas' workers' compensation laws governing
reimbursement to health care providers from being applied to it. This issue has national implications
for PHI.

The carriers will likely cross-appeal Judge Bennett's decision on the grounds that the fee guideline
applies and 125% is more than fair and reasonable. The carriers presented compelling, unrebutted
evidence at hearing that 125% is more than fair and reasonable. The sticking point on appeal may
boil down to the legal issue of whether the statutory standards for fair and reasonable
reimbursement, if properly interpreted, guarantee health care providers a profit.

Judge Bennett's decision will hopefully encourage the Division to move quickly to adopt a fee
guideline for ambulance services. Air ambulance fee disputes will continue to pile up at the
Division until it does so. Judge Bennett's decision will hopefully also cause the Division to
reconsider its approach to these disputes of ordering payment of the air ambulance providers’ billed
charges.