DRI Comp Conversations: Episode 4

The Air Ambulance Controversy with Steve Tipton

This week, Ryan Hathcock of Chartwell Law and Steve Armstrong of Armstrong and Peake PLLC are joined by Steve Tipton of Flahive, Ogden & Latson to discuss the air ambulance billing controversy, and how the Airline Deregulation Act from the 1970s affects workers' compensation billing for air ambulance providers.   Steve Tipton has been defending employers and insurers for many years on these claims.  This is a rare situation where employers’ and plaintiffs’ interests may align.

He discusses the arc of these claims with recent Federal litigation. Air ambulance providers argue that workers' compensation fee schedules do not apply and that they can charge their market rates. Employers and insurers argue that workers' compensation laws should apply and that they should be able to charge their reasonable and customary rate, and that air ambulance fees should be reigned in. You can find Steve Tipton here on LinkedIn https://www.linkedin.com/in/steven-tipton-65a85416/ .

To learn more about DRI and the Workers' Compensation Committee vist www.DRI.org.
#DRILawyer
#DRICommunity

Episode Transcript

(00:18):
Welcome to episode four of Conversations,a podcast developed through dri to explore topics
relating to workers' compensation, including workinjuries and the resulting litigation, as well
as future trends and every aspect inbetween. My name is Ryan Hathcock.
I'm an attorney licensed in the stateof Georgia, and joining me today is
Steve Armstrong, an attorney licensed inKentucky. I'm also excited to introduce our

(00:42):
speaker today, another Steve, SteveTipton, who I feel is an expert
for our discussion on air ambulance litigation. Steve Armstrong, have you had any
experience writing in a helicopter? AndI certainly hope not from a situation relating
to our topic today. Definitely not, and I'm glad that I haven't.
I've not even headed chance to litigateone of these claims, which is probably

(01:02):
a good thing. So this isall new to me. Yeah, So,
Steve Tipton, we we're lucky tohave you on our podcast to discuss
the state of air ambulance litigation.This seems to me to be a topic
that workers compensation practitioners have likely seen, but I doubt have the depth of
knowledge you're able to share, sothat's certainly that goes for me as well

(01:23):
personally. I have seen a handfulof workers compensation claims in Georgia that involve
injuries requiring the need for ambulance services, but in my experience, I have
seen those claims come to a resolution, but for the single air Ambulance bill.
So before we dive into it towhy that is, can you tell
me a little bit more about youwhere you're located in your practice. In

(01:44):
general, I'm a native Texan.I have a prior background in the restaurant
business, clinical medicine, and medicalresearch. After Loscoo did a briefing attorney
for Justice Robert M. Campbell ofthe Supreme Court of Texas and joined Playhouse
Ogden in Latson in nineteen eighty two. We are located in Austin, Texas.

(02:08):
We have offices in Houston and Dallas. I'm the senior litigation and appellate
attorney with the firm and bar membershipsa Supreme Court of the United States and
of course Texas. We do workers'compensation almost exclusively now, both state and

(02:29):
federal within Texas. And I've spentthe last pretty much twenty five years essentially
doing medical fee and medical utilization disputes. Okay, well, Steve, tell
us, what is the basic controversyin workers compensation claims regarding air ambulance bills?

(02:50):
What why are they different than otherbills? Well, they became different
because the air ambulance companies said theywere different. And they're using federal law
that was designed to create a competitivemarket in the air transport industry to make
you believe that they're different. Thecontroversy is really a convergence of federal law,

(03:16):
state law, and constitutional law,and all those elements of butting heads,
if you will. And they involvereally two federal statutes, but primarily
the Airline Deregulation Act, And whenI refer to the ADA, I'm referring

(03:36):
to the Deregulation Act, not theAmericans with Disabilities Act. And specifically,
that's a statute that says that statelaw cannot have a significant effect on areabulence
companies pricing. And so the AirlineDeregulation Act, it looks like that was

(03:57):
from nineteen seventy eight according to yourinformation that you gave us, and that
was do you think that they hadworkers count claims in mind when they issued
that statute back in the seventies.No, absolutely not. The Unfortunately,
the language is very broad in it. It simply says states cannot enact laws

(04:21):
that quote relate to price. Whatdoes relate to mean? And there's been
hundreds of cases that have talked aboutthat issue in the federal courts, and
it's been very narrowly construed by theU. S. Supreme Court, so
that virtually anything can can relate toprice unless it's you know, very tangential.

(04:50):
So that's where we are. Theact itself had nothing to do with
workers' compensation. It was a deregulationof the airline industry. The beginning of
the nineteen fifties, they were closelyregulated, and it took us about twenty
five years to figure out that wasa really bad idea, and so in

(05:12):
nineteen seventy eight they completely deregulated it. And to make sure that states didn't
come back in and begin regulating itin some way, you have this pre
emption that says you can't do that, okay. And so if we've got
you know, a patient or aninjured worker is somewhere and a helicopter or
a plane transports them to a hospitalor to a medical facility. Is that

(05:36):
what we're talking about here with theirambulance. Correct, Sometimes we're talking about
inner facility transfers. But most ofthe time, certainly in my experience in
Texas, where this is very commonin the off fields, the person's picked
up either at the scene of atraffic accident or at the rig site in

(05:59):
trans supported over to an emergency roomwhere they can get sufficient care. Okay,
and can you give our listeners asense of what is at state here?
I mean, what how many claimsare we talking about at least in
your area, and what do thoselook like? Right now? We have
about twenty three hundred cases that areabated at the agency, though are beta

(06:28):
because we had two lines of casesgoing up to the courts, one in
the federal courts, one in thestate courts, and so the agency is
waiting for all of those to filterout to figure out what they need to
be doing where they're preempts, ifat preempts, if they're preempted from using
state law. They don't know theanswer to that question. We think we

(06:48):
do know, but those are allpending, and we're talking probably around sixty
five million dollars roughly at stake inthe in the current cases in Texas,
and so we're talking. You know, ambulance services range from about fifteen thousand

(07:10):
dollars to seventy five thousand dollars foreach transport, depending on how far talking.
And we're talking about an hour ortwo of work, correct, and
it really less. But you know, legitimately, they have to have the
correct personnel on the aircraft, theyhave to maintain the aircraft, they have

(07:32):
to be ready to dispatch it anytime. So it's an expensive proposition. But
one of the problems we have isthat these are all created by venture capital
groups, so there's lots of moneybehind them, and they're not going to
go away quietly into the night.And so we're talking one hundreds of million

(07:56):
dollars you know, nationwide that's atstake. So somebody will be injured,
you know, perhaps on an interstateor a back road or an oil rig
or somewhere remotely, and then theyneed to get to the hospital fast.
Somebody calls the air ambulance and theinjured worker doesn't maybe do that, so

(08:18):
you know what happens. Then afterthat they get transport, the bill comes
in. Well, typically we getthe request for the transport, either from
a local clinic that doesn't have thecapability of treating the person and they need

(08:39):
care quickly, and so the doctorsthere will ask for air transport. But
most of the time, certainly inmy experience, it's the local ems that
shows up at the scene of theaccident and then they will request the air
transport. They have to make adecision. There's all kinds of regulations and

(09:00):
criteria for requesting air transport versus justtaking them by ground, and those vary
a lot, but essentially you've gotmedical personnel that are requesting the air transport
and the idea being that it takesless time with the air transport versus ground

(09:24):
right, right, And so youand I and Ryan, we all represent
insurers, employers, self insurance.When you get the bill for this is
that the controversy. You know thatthe bill is high and we want to
apply our standards to it, andthey want exactly. In Texas, we've

(09:48):
got a new feegadline in two thousandand eight and started paying one hundred and
twenty five percent of medicare, andfor the first couple of years, the
aremints industry didn't complain and apparently theyhire a consultant who decided, well,
the ADA preempt state regulation. Andtheir argument is one, the ADA preempts

(10:11):
your state fee guidelines, so youcan't apply them to us. And then
they say, we're entitled to ourfull bill charges. Therefore, now that
letter claim that they're entitled full billcharges. They've never been in explain why
that derives from preemption in the firstplace. But they're arguing that you have

(10:35):
to pay our full bill charges becauseyou're federally preempted from applying your state fee
guidelines. Right. Just so we'reclear, preemption is essentially allowing the federal
government or the air ambulance bills tobuild whatever they want and not allowing the
states to step in and say thatthat billing is unacceptable and should be reduced.

(11:00):
There's really no control on what theycharge in Texas, and I think
in most states don't control that atall. They don't control what the actual
price in charge is. What thecontrol is the reimbursement, and so that's
what we're talking about here. Theycan charge whatever they want. They charge

(11:22):
in Texas they have to actually puton the bill they're usual and customary charge.
So that we can track that data, but that doesn't mean you have
to pay it. It's not likean airline ticket or a freight charge,
where whatever is on the ticket orthe freight bill of lighting you have to
pay. We all know that inworkers' compensation, actually in healthcare, health

(11:46):
care providers usually get paid a fractionof what's actually on their bill, and
that's common and that's understood. Butthe airline air ambulance folks say that doesn't
apply to us because underal law doesn'tallow you to control what either we charge
or what we're reimbursed. You haveto pay us whatever we ask, right,

(12:07):
And so that's the basis of thecontroversy here is the air ambulance companies
are very aware of preemption and thestatutes behind that, so they're going to
continue to say these are our bills, you need to pay it. And
then conversely, the states or theworkers' compensation agencies for each state are coming
back and say, well, wehave a fee schedule and your billing or

(12:30):
the reimbursement for that has to complywith that. Is that the bottom crux
of the argument here between the twoentities. Yeah, that's the basic dispute
that's correct, And so I'm goingto say to back up you said earlier
that you've got the state of Texashas twenty three hundred cases in a bance
on this issue. Is that right? That's correct and so and growing,

(12:52):
growing every day and growing. Sowhat is the state of the legal process
in Texas to fetes? Well,these started years ago, and there's as
I mentioned before, there's going uptwo tracks. The first was a federal
track company by the name of airEvac filed a declaratory judgment in federal court

(13:18):
which simply, this is against theDivision of Workers' Compensation, the agency that
adjudicates these and regulates these issues.And the injunction was to do two things.
To stop the agency from applying ourfee guideline and then to prevent the
agency from enforcing the very important elementof the Grand Bargain that we talk about,

(13:43):
and that's the prohibition against ballots billingthe injured worker. In other words,
if the bills ten thousand dollars inthe fee schedule, the fee guideline
says they're owed five thousand. Theair ambulance company and no medical provider could
then build the patient, the injuredworker for the remaining five thousand dollars.

(14:03):
So they got an injunction that's eventuallygoing up to the Fifth Circuit courts of
them back that basically prohibits the agencyfrom enforcing the fee guideline and the prohibition
against balance billing, but it's onlydirected to the air evac companies and to

(14:24):
the Division of Workers' Compensation only.So then we had another track, which
was in the Texas courts, whichis simply straight up what guidelines supply,
and that's a group of thirty threetests, what we call test cases at
this point in time, and sothose have gone all the way up to

(14:46):
the Supreme Court and back, andessentially the District court determined that we owed
one hundred and twenty five percent ofmedicare in the the Supreme Court said,
well, the federal ADYA does notprevent Texas law that we can still apply

(15:09):
our fair and reasonable standard. Sofear and reasonable standard, can you tell
us about that, and how whatyour clients and what your position is on
that. Well, the basic ideain most states and agencies have this kind
of what sometimes we call default,where the it's not a specific fee and

(15:35):
so that in each case it's determinedon a case by case basis as to
basically what is fair and reasonable.Now, in Texas, we have a
several criteria that require that it beeffective medical cost control, that it not
interfere with that actually be enough toentice the medical provider to divide the service,

(16:03):
but not so much that we can'tafford it. So it finds a
middle ground basically, and states haveall the states have different specific criteria for
what's fair and reasonable, but it'san equitable standard that's throughout the legal profession
and in all areas of law.And that's why we call it sometimes the

(16:26):
default reimbursement. And so the argumentis what's fair and reasonable reimbursement from its
Yeah, from your from your experienceand where you are with Texas. Can
you tell us where the status ofthe litigation is in Texas and how you

(16:47):
think it's affect and whether it's youknow, going to be one of the
first, and whether that effect willkind of ripple throughout the country. It's
it's not the first. In California, recently we got a determination from their
board that the ADA does not preemptagain their default fair and reasonable standard,

(17:12):
and so they will go forward anddetermine the amount of reimbursement based upon that
standard rather than this standard created bythe air ambulance companies, which they're calling
their market rates, which is basicallytheir bill charges. And we're in the
same position in Texas. We havea little over a couple of hundred cases

(17:36):
teed up at the agency that determinesthose things, and we're in the process
of the judges currently in the processof trying to decide exactly what he's entitled
to do. Based upon the federalinjunction and the case laws really clear,
we think that he has to makethat determination of the amount due based upon

(18:00):
Texas for and reasonable standards. Iexpect that we'll be able to try those
cases by the end of the year. Steve Bell, the balance building issue,
and come back to that for asecond, if we could, could
you tell us where do the airambulance companies stand on that, and where
does your state agency stand on that? And where to insurance stand on that?

(18:23):
Well, that's obviously a key elementof the grand bargain between the insurance
companies and self insurance, the employerand the injured worker that we call the
worker compensation system, because if againthe guarantee to the employee is they can't

(18:48):
sue their employer for injuries on thejob, but they don't have to face
any medical bills. We pay onehundred percent. And so the prohibition of
balance billing is extremely important to thewhole system, the underwriting by the insurance
carriers, to the employer and tothe injured worker, and so coming in

(19:15):
the companies, the air ambulance companieswere very aggressive in saying, well,
we're going to balance bill these folksif you don't pass one hundred percent of
our bill charges, and that's badpress. They got a lot of bad
press about that, and that resultedactually in a separate statue congressional action a
couple of years ago related to grouphealth issues on the same thing. But

(19:41):
they've backed away from aggressively doing that. They understand it's bad press, they
understand that's a key function. Sothey've kind of left that issue on the
side, kind of implying, well, we're really not going to balance bill
these people, although we know thatthey do and so, and they don't

(20:03):
want to create bad press, sothat congressional action is taken to actually carve
them out of the ADA and eliminatetheir pre emption argument, so they kind
of tiptoed through that. And myconclusion is that from the cases around the
country, if the agency of thestate enforces that at this point in time,

(20:33):
the courts are probably going to sayit does the ADA does preempt your
figaidelines in your system if you dothat. But then we get back down
to the question of assume that itdoes preempt, and they do balance bill,
what we can do about that,And that's a big question. Right

(20:57):
now. We've got a federal injunctionto prevent the agency at least from enforcing
that statute that prohibition against the airevac companies, and no other company has
pursued that, So it's a sideissue. It's a very important one,
but it's leverage we have that mayget us to the end here legislatively years

(21:25):
from now. I mean, canyou imagine being injured on a remote site
somewhere, either you know, alogging camp or or an oil rig or
somewhere way out the middle of nowhere, and then getting a month later or
two getting a bill for thousands ofdollars on a balance bill from the air
ambulance company that you didn't even call. Correct, you had no choice.

(21:52):
And sometimes there's one case of actuallyit was a judge that they showed up
with the helicopter and she said sureand took it, and she got a
thirty five thousand dollars bill, andshe's just saying, well, I would
have taken the ground ambulance. Thatwould have cost me like fifteen hundred dollars
if I'd known. And so,yeah, they can be devastating to an

(22:19):
individual. And if the areamas companiesare able to carve themselves out of workers'
compensation system, the injured worker getsno bill with the exception of this one.
So what you mentioned a few minutesago that they're essentially have stopped balance
billing, or you think to somedegree they have. If they're not balance

(22:41):
billing, they're not receiving full compensationwhere they believe their services. And you
mentioned how expensive just the maintenance,the training and the operation of the helicopters
can be. What are they decidingto do instead? Are they referring us
over to collection so that the billsaren't coming directly from the air ambulance companies?
Are they just discontinuing their services orare there any issues like that that

(23:03):
are kind of bridging the gap untilthis this litigation comes through. Well,
I think that's what the venture capitalfolks are for. I think they're continuing
to be funded and they think inthe end they will be reimbursted at much
greater rates than currently made. Youknow, and in some states they've been

(23:25):
successful where they've argued preemption and there'sbeen no pushback once they make that claim,
and they're getting paid their full billcharges in some states and circumstances.
So I think they've missed in sittingback out. I suspect that they've done

(23:48):
some balance billing because perhaps they haveto. They haven't really cut back on
their services to our understanding. Wewill get back into the cost issue and
what it really costs them to dothis. Medicare only did it last I
think in nineteen ninety seven, andthey've just been attaching inflation increases to that.

(24:14):
And we did all that discovery whenwe first started these cases that went
up to the state courts. Butthat's pretty much old data now and we
need a lot of new data ontheir costs. But I can say they
haven't shut down. In fact,they have more available services, certainly in
Texas than ever before. They've grownover the years, and they grew substantially

(24:38):
in size and scope while we wereplaying one hundred and twenty five percent of
medicare that they're complaining about, Sothey haven't gone away, they've grown,
And interestingly, a lot of thosecompanies have absorbed hospital helicopter systems. The
hospitals can figure exactly how to runthose properly, so those were mainly absorbed

(25:04):
now by third parties. These thirdparty companies. It sounds like to me
that obviously, arguing over what isfair and reasonable with allowing a small margin
of profits so these companies continue tooperate, is a logical argument here.
But in terms of federal legislation tomaybe amend the ADA and carve out a

(25:30):
portion of it to say that thestate workers compensation system is not preempted by
the ADA. Is there any pendinglegislation regarding that as a potential solution that's
been floated around for years. Somerepresentatives from Iotomy and Montana have done that
for at least to my knowledge,approximately ten years. It gets nowhere in

(25:55):
Congress, But because of the surprisebills people were get in the bad press,
Congress created in i think late twentyeighteen an Air Ambulance and Patient Billing
Advisory Committee through the US Department ofTransportation. They issued their final report in

(26:17):
twenty twenty two and they specifically recommendedamending the ADA so that does not create
state regulation. And its specifically mentionedthe monopolistic states that of Ohio, North
Dakota, Washington in Wyoming because offederal court decisions that they're not really engaged

(26:41):
in insurance, so they had tospecifically mention those. But again that's the
proposal. And I do know thatsome boards and some commission members are commissioners
groups, some insurance groups, someemployer groups have been quietly approaching congressional members

(27:08):
to get that done in Congress,but has to be done federally. And
that's in the end, that's thereal answer to all of this, to
eliminate these but that that doesn't takecare and would not take care of all
these pending cases. What do youthink, Steve, Do you think that

(27:29):
legislation will pass or is it onthe moving forward at all? How do
you see that? Well, youknow, if the area runs companies start
doing balance billing, I think that'llyou know, raise enough, we'll put
enough fire or gasoline on the fire, that that will probably get done.

(27:55):
You know, I can't predict whatCongress will do, and the lobbyist I
talk to don't have any idea either. All they do is try every year
or so and try to get itdone. So I can't predict that.
But the good answer here in theend is that federal law allows us to

(28:21):
apply our fair and reasonable standards tothese anyway pre emption are not. And
so I say, you know,let the ambulance companies prove what is acceptable
under the applicable state requirements. AndSteve Wick can defense counsel that insurers,
insurer groups, state agencies, commissionersgroups, and employers do with this type

(28:45):
of legislation, well, they youcan have. Well, in some states,
you don't have a really good fairand reasonable standard. It's kind of
default general standard. If if youhave a specific fee gadline that would apply
to air ambulance, then you probablyneed to change that because that probably at

(29:10):
least arguably does not comply with theada's pre emption. But we do have
again federal legislation, and we havethe Tenth Amendment, the good old tenth
Amendment that saves us here. TenthAmendment of the US Constitution that basically reserves
to the states these kinds of issues, And the Texas Supreme Court said it

(29:38):
best. This is a question ofwhat we call federalism, meaning that the
state has the right to regulate thesekinds of things unless the Constitution specifically allows
the government, the US government tocontrol it. And it's back to the

(29:59):
states belongs. And what can weexpect in the future from these air ambulance
litigation and controversy in general. Well, I think these will carry on for
quite some time. And I knowthat some states are sitting back waiting for
you know, states like California andTexas to move forward and establish the precedent

(30:25):
to go forward. But as Isaid, we already have a precedent that
we can apply our state default,fair and reasonable standards to these cases,
and that's what we ought to bedoing. You can always try to do
agreements with the companies, but theyhave not done so. They do so

(30:49):
rarely in the group health field,and they don't do it in workers comptpy
knowledge at all, So that's notan avenue for us. So I see
that these will continue to pile up. We will. Whether they take them
forward remains to be seen. Inreality, if we litigate these and they

(31:14):
get a reasonable reimbursement amount that againallows them to cover their cost and give
them a reasonable profit, they maylearn to live with it. I can't
predict that they will, but itmay get to the point where they don't
have a choice. If all thestates are doing the same thing. In

(31:37):
the absence of the federal change ofthe statute, we just have to do
it state by state. Yeah,well, Steve, there's no doubt that
this topic in general is just goingto be sitting here for a little while
we get some rulings, So itmight be useful for us to check back
in with you in a couple ofyears. Hopefully it doesn't take that long.

(31:59):
But I don't think we have anyidea of when these are all going
to get pushed through and decided on. But I know that you told us
that it's going to have to bedecided by the US Supreme Court, So
that's going to be an interesting rulingwhen that ultimately comes out, and certainly
you'll be at the forefront of that. So you know, the information that
Steve provided us is really in depth, and there's a ton of additional information

(32:20):
that we could dive into so,but for our listeners, is there a
way they can get in touch withyou if they've gotten the additional questions or
want to, you know, figureout what else you know about this?
Again, I'm with flayhow Ogden andLatson in Austin, Texas. You can
reach me at email is s MT my initials s as in Sam m

(32:47):
as and Michael ts in Tom atf o L dot com and welcome to
answer questions. But I will larnyou that I'm planning retiring soon. I've
been doing this forty three years andI'm ready to move on. But I

(33:07):
also expect to have my toe inall of this for the next few years
anyway, and I welcome the contact. I'm happy to talk to anybody about
it. I was about to say, there's no way you can't see this
through to the end. Yeah,yeah at this point? Yeah true.

(33:28):
So are you you're also on LinkedIn? Can they reach out to you that
way? Yes? I am?Okay, great, Well, we'll put
your contact information in the episode notes. But again, we really appreciate your
time. This is an interesting topicand we were waiting to try to get
a hold of you to talk aboutthis, so we again thank you so
much and look forward to hearing fromyou in the future. It's been my
pleasure. Thank you, thank you. Steve bore Us