State News : Texas

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The Lead Case in the Air Ambulance Litigation Comes in for a Landing

Travis County District Court Judge Madeleine Connor signed a judgment in favor of the insurance carriers in the PHI Air Medical Case on August 8, 2023.  PHI Air Medical had until September 7, 2023 to appeal Judge Connor’s decision to the court of appeals but did not do so, making her decision final.  Judge Connor found that PHI Air Medical did not timely file its petition for judicial review challenging SOAH’s decision awarding payment of 149% of the Medicare rate and agreed with the carriers that 149% of the Medicare rate exceeds the Workers’ Compensation Act’s fair and reasonable reimbursement standards for the 33 fee disputes at issue in the case.  
The PHI case began at the State Office of Administrative Hearings (SOAH) in 2015 when Administrative Law Judge Craig Bennett consolidated the 33 fee disputes involving eight carriers consisting of Texas Mutual Insurance Company, Hartford Underwriters Insurance Company, TASB Risk Management Fund, Transportation Insurance Company, Truck Insurance Exchange, Twin City Fire Insurance Company, Valley Forge Insurance Company, and Zenith Insurance Company.

The PHI case went all the way to the Texas Supreme Court which ruled in favor of the carriers.  PHI petitioned the U.S. Supreme Court for review but it declined to hear the case.  The case then went back to the court of appeals for a second decision before heading back down to the trial court where the carriers filed a motion for summary judgment.  Because PHI did not appeal Judge Connor’s order granting summary judgment for the carriers, the PHI case will now be remanded to SOAH for further proceedings consistent with Judge Connor’s final judgment.    

The rest of the air ambulance disputes at SOAH and DWC have been abated while the PHI case proceeded.  However, Air Evac, another air ambulance provider, recently filed a motion to lift the abatement of its cases at SOAH so that it could brief how a 2018 injunction that it obtained applies to its cases at SOAH.  The injunction states that DWC is “enjoined from enforcing Texas Labor Code § 413.011 and 28 Texas Administrative Code against Plaintiff Air Evac EMS, Inc.”  The parties filed a proposed briefing schedule on September 15, 2023 which the ALJ has not yet ruled upon.

As of August 2023, there are 2,414 air ambulance disputes pending at DWC.  This figure does not include the air ambulance fee disputes pending at SOAH.  The average amount sought by the air ambulance provider in each case at DWC is estimated to be at least $50,000, which is the difference between what the air ambulance provider was paid by the carrier and its unregulated billed charges.  This makes the total amount sought by the air ambulance providers in the disputes at DWC over one hundred and twenty million dollars plus interest.    

There are five air ambulance providers that comprise the vast majority of the air ambulance disputes. These providers are Air Evac EMS, Inc., EagleMed, LLC, Med-Trans Corp., Rocky Mountain Holdings, and PHI Air Medical, LLC.  These five providers are owned by two private equity firms and a publicly traded company.  Air Evac EMS, Inc., EagleMed, LLC, and Med-Trans Corp. are subsidiaries of Air Medical Group Holdings (AMGH) which is owned by private equity firm KKR.  Rocky Mountain Holdings (a subsidiary of Air Methods) is owned by private equity firm American Securities, LLC. And PHI Air Medical, LLC is a subsidiary of publicly-traded Petroleum Helicopter International, Inc. (PHIL). 

The air ambulance providers continue to argue that the federal Airline Deregulation Act (ADA) preempts Texas workers’ compensation laws that regulate reimbursement to air ambulance carriers and therefore, DWC must order the carriers to pay their grossly inflated billed charges.  However, the Texas Supreme Court already squarely rejected this argument in the PHI case: 

“First, if ADA preemption applies, neither state nor federal law provides for full reimbursement of air carrier bills—or for any reimbursement at all.  Second, the effect of federal preemption cannot be that States must provide full reimbursement, as that outcome would violate the Tenth Amendment. For these reasons, the result of ADA preemption here would not be full reimbursement—it would be no reimbursement.”

If the air ambulance providers were able to force DWC to order payment of its billed charges, it would result in a massive wealth transfer to private equity investors and reward the takeover of the air ambulance industry by private equity. See The Air-Ambulance Vultures A search for why my flight cost $86,184 led to a hidden culprit: private equity.

Copyright 2023, Stone Loughlin & Swanson, LLP