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Judge Rules Air Ambulance Providers Bound by Fee Schedule

By Sherri Okamoto (Legal Reporter)

Monday, December 19, 2016 | 1372 | 0 | 22 min read

A Texas trial court judge last week ruled that federal law does not prohibit the Texas Division of Workers' Compensation from setting the rates at which an air ambulance provider can be paid for its services.

Up until now, air ambulance providers have met with wide success in arguing that the Airline Deregulation Act bars states from limiting the amounts they charge for transporting patients. The ADA prohibits state governments from enacting laws "related to a price, route or service of an air carrier."

Travis County District Court Judge Stephen Yelenosky on Thursday found that the ADA plainly applied to PHI Air Medical, a national provider of emergency medical flight services.

However, he said, the ADA did not trump the McCarran-Ferguson Act, which grants authority to the states to regulate the business of insurance without interference from the federal government.

Because of the McCarran Ferguson Act, Yelenosky said, the ADA does not pre-empt the Texas workers' compensation health care provider fee schedule, or the state's prohibition on the practice of balance-billing claimants for charges not covered by workers' compensation insurers.

Texas workers' compensation law does not set prices for air ambulance services, but directs the Division of Workers’ Compensation to determine “a fair and reasonable reimbursement amount” for air ambulance service providers.

In 33 cases between 2010 and 2013, the division issued orders deeming the amount billed by PHI to be appropriate. Each of the eight carriers subject to the orders protested, arguing that the provider fee schedule required payment at 125% of the Medicare rate for ambulance services.

Last year, an administrative law judge for the State Office of Administrative Hearings consolidated the billing disputes and decided that payment at 149% of the rate set by Centers for Medicare and Medicaid Services for air ambulance transportation generated an appropriate fee for PHI.

PHI and the carriers appealed that ruling to the Travis County District Court, although PHI later tried to move the case to the federal court system.

U.S. District Court Judge Sam Sparks kicked the case back to the state court system in August. The parties presented their arguments on the pre-emption issue to Yelenosky on Dec. 2.

Yelenosky on Thursday issued an order saying he agreed with the carriers that the McCarran Ferguson Act pre-empts the ADA. He also said that PHI was not owed any payments in excess of the 125% of the Medicare rate and reversed the SOAH's award to PHI at 149% of Medicare.

Amy Saberian of Enoch Kever, the lead attorney for PHI, said Friday that she and her client "respectfully disagree" with the judge's decision because it conflicts with several other recent rulings from courts in other jurisdictions.

This March, a district court judge in North Dakota found that the state's fee schedule for air ambulance providers serving workers' compensation claimants was pre-empted by the ADA. A district court judge in Wyoming arrived at the same conclusion in May.

Last October, a federal trial judge in Florida found that the ADA barred a class-action suit over air ambulance service providers' billing and collection practices.

And two years ago, California's 2nd District Court of Appeals declined to disturb a decision by the Workers' Compensation Appeals Board finding a state regulation setting the specific rates of reimbursement that a carrier must pay for air and ground ambulance services ran afoul of the ADA.

On the other hand, many states still have fee schedules that set the reimbursement rates to air ambulances serving injured workers. Alabama, Georgia, Hawaii, Illinois, Tennessee, Washington and the District of Columbia all set maximum air ambulance fees. Alaska and Ohio established fee schedules last year.

Saberian said PHI was still "evaluating its options" on what to do about Yelenosky's ruling as of Friday afternoon, although she anticipated that the decision will be appealed.

DWC spokesman Ben Gonzalez said that as of Nov. 10, 2016, there were 665 active air ambulance billing disputes pending at the agency — up from 643 a month prior — which makes for a lot of interested parties.

The attorneys for the carriers involved in the PHI dispute all said they doubted Yelenosky's ruling will be the last word on the pre-emption issue, even though they say he got it right.

Going forward, James Loughlin of Stone Loughlin & Swanson said he hoped that any other court being asked to rule on ADA pre-emption will now take the judge's ruling into consideration.

Mary Nichols of Texas Mutual said the carrier "always believed the rate for reimbursement was 125% (of the Medicare rate), and that was affirmed and validated by this order."

Matthew Baumgartner of Graves, Dougherty, Hearon & Moody said he thought the decision also established that the only way for an air ambulance provider to get paid is through the comp system, and the amount the provider gets paid is something that has to be determined by the state.

Texas Commissioner of Workers’ Compensation Ryan Brannan on Friday issued a statement saying the agency is "pleased with this first-of-its-kind decision, as it tracks with the way we’ve held the law was intended," and that it "eliminates the threat of balance billing that has been a real concern for Texas injured workers who require air transportation services, and their employers.”

Steve Nichols, the manager of workers' compensation services for the Insurance Council of Texas, said he thought Thursday's ruling was "right on target" in terms of the applying federal and state law.

Trey Gillespie, the assistant vice president of workers' compensation at the Property Casualty Insurers Association of America, said he was aware that many federal court decisions have found that the ADA pre-empts state fee schedules. The Texas ruling could be the first state court to go the opposite way, but he expects this issue will keep being litigated.

Gillespie reflected that all the courts to have addressed the ADA seem to "have struggled" with deciding the proper scope of the act's pre-emptive reach, so he wouldn't be surprised to see decisions that conflict with the Texas ruling from other trial courts, and eventually, at the appellate level.

Once that starts happening, Gillespie said the ADA pre-emption question "will be very ripe for proceeding to the U.S. Supreme Court" for resolution.

There are at least two air ambulance disputes now pending in federal appellate courts.

Wyoming Attorney General Peter Michael filed a petition for review of the district court ruling that had struck down the state's fee schedule with the 10th U.S. Circuit Court of Appeals in August.

Earlier this month, the 5th Circuit heard oral argument over the dismissal of air ambulance provider's lawsuit against the state of Texas, which was predicated on a theory that the Texas workers' compensation provider payment scheme violates the ADA.

Joshua Fuchs of Jones Day is representing Air Evac EMS in that case. He said Friday that he was aware of Yelenosky's decision, but he noted that was for a state court case, and his client's case is in the federal court system.

A state court's ruling is not controlling precedent on a federal court, and vice versa.

Fuchs said he and his client still believe the Texas state laws are pre-empted by the ADA, and "we intend to continue to litigate this issue in federal court."

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