When Igor Sikorsky developed the first practical helicopter, he emphasized time and again that the aircraft’s greatest purpose would be to save lives.
Indeed, helicopters have done just that, rescuing countless people over the decades. Their unique ability to land — or hoist — from virtually anywhere, combined with the speed to deliver patients to life-saving care, has made them indispensable.
Yet today, that mission is becoming increasingly difficult, as helicopter emergency medical services (HEMS) providers face steeply rising costs that far outpace current medical reimbursement rates.
Compounding costs
Across the board, HEMS operators are facing rising expenses as a perfect storm of factors converge.
Labor costs have climbed dramatically in the post-COVID era, with salaries for pilots, mechanics, clinicians, and paramedics all on a steep upward trajectory.
“Post-COVID is when we really started seeing changes in the healthcare and transportation workforce,” said Josh Howell, president and CEO of Life Link III Air Medical Transport in Minnesota. “There were staff shortages and increased salary demands for very specialized services. For example, with the Minnesota Nurses Association, the tone of negotiations changed with a six to eight percent a year salary escalation rate. Our aircraft teams saw that, and they expected similar increases, especially with the airlines in our backyard recruiting pilots. They absolutely deserved those increases.”
At the same time, equipment costs have surged. Aircraft and component prices are up sharply, while supply chain challenges have slowed access to parts — particularly for specialized aircraft built overseas.
Medical equipment prices also spiked post-COVID, with supply chain disruptions and high demand pushing costs higher. Fuel costs rose as well, and insurance premiums jumped amid another “perfect storm” of increased claims across the helicopter market.
“Inflationary and global economic pressures have contributed to a really uncharacteristic pace of cost increases overall,” Howell added. “At one point, we were paying $6 a gallon for jet fuel — twice what it’s been years prior.”
Reimbursement challenges
Most HEMS operators are reimbursed primarily through commercial insurance, followed by federal Medicare and Medicaid programs. But it’s no secret that federal programs fall far short of today’s costs.
The last time Medicare increased air ambulance reimbursement rates was in 2002 — based on cost data from 1998 to 2002. According to a 2022 Association of Air Medical Services report, those rates covered only about 50 percent of costs at the time, and expenses have continued to rise since.
On the commercial side, the No Surprises Act (NSA) has added further financial strain. The law, which took effect in January 2022, prevents HEMS providers from billing patients directly for the balance not covered by insurance for emergency flights — even when providers are out of network. Instead, patients are only responsible for in-network cost-sharing, such as co-pays and deductibles, leaving air ambulance operators to negotiate with insurers for the remainder.
The NSA established an independent dispute resolution (IDR) process — binding arbitration that can be used when providers and insurers disagree on reimbursement. But the act does not require insurers to pay within a set timeframe once a determination is made. As a result, operators often wait months, or even years, for payment.
“When we go through arbitration, it adds 200-plus days to the time between when we performed the flight and when we get paid,” said Jeff Richey, associate administrator of UW Medicine’s Airlift NW in Seattle. “And even if we get a decision that’s in our favor, insurance companies sometimes don’t pay, or there’s a delay in payment.”
Regulatory pressures
Beyond the NSA, HEMS operators face a range of local, state, and federal regulations that add to their costs. Operators with bases or service areas spanning multiple states must meet each state’s licensing and operational requirements, which can vary widely. For example, Clark County, Nevada, mandates twin-engine helicopters for scene flights, while neighboring jurisdictions served by the same operator may not.
On top of this, federal agencies like the Federal Aviation Administration (FAA) and the Occupational Safety and Health Administration (OSHA), as well as accreditation bodies such as the Commission on Accreditation of Medical Transport Systems (CAMTS), all impose standards that require additional investment.
“Across our service area, we are licensed in six states, and changes in a state requirement result in increased costs,” said Clinton Burley, president and CEO of HealthNet Aeromedical Services in West Virginia. “Annual inspection fees for each aircraft, licensing renewal fees for clinicians in each state, equipment changes some states or regions require that others don’t — it all adds up.”
Burley noted that hospitals expect operators to meet the highest standards, but complying with multiple regulatory structures drives costs ever higher — on top of the many other financial pressures they face.
This year, yet another challenge emerged. The new federal budget bill is projected to cut Medicaid and health insurance coverage for 17 to 20 million people by 2034.
“The majority of our clientele are insured through some form of Medicare or Medicaid, and these programs already do not fully cover our costs,” said Dusty Ross, a floating flight paramedic for a large HEMS operator and 15-year HEMS veteran. “With this new bill, we’re going to see bases close and the market shrink overall. In the most rural locations with the highest percentage of Medicaid patients, we’re already seeing rural hospitals closing specialty services, forcing people to go further.”
Ross observed that flight volumes are rising in rural areas, as patients who once received care locally must now be flown to distant facilities due to hospital service closures and a shortage of ground ambulances.
Rising to the challenge
HEMS operators are meeting these pressures with a mix of optimization, efficiency measures, and adjustments to their business models.
“We’re trying to figure out how to survive,” said John Hamilton, co-director of Future Flight Crew at ECHO and a flight paramedic for a not-for-profit hospital consortium HEMS operation. “If air medical is going to survive this funding crisis or the No Surprise Act, money is going to have to come from somewhere.”
Hamilton acknowledged that while some might argue the U.S. has more EMS aircraft than necessary, the service itself remains essential, especially as rural hospitals close.
“It’s kind of scary to think about, but at the same time, agencies are doing a good job of opening the government’s eyes to the ramifications of not supporting HEMS and what they, the operators, are doing to manage costs,” he said.
In response to the NSA, many operators are moving away from balance billing and community membership models, instead working to become in-network with as many insurers as possible. Those with negotiated agreements are less affected by the NSA — and in some cases have even seen profitability improve, according to Life Link III’s Howell.
Life Link III itself formed a consortium of 10 health systems representing more than 80 hospitals — the largest of its kind in the U.S. This collaboration allows the operator to share resources and coordinate care, even across competing health systems, Howell explained. The partnership has been key to ensuring Life Link III’s ability to continue providing service.
Organizations are also making changes on the aviation side. Many operators have worked to standardize their fleets and partner with original equipment manufacturers (OEMs) on predictive maintenance programs for aircraft and engines, along with associated parts supply. Others have delayed fleet replacements or turned to used aircraft instead of new models to reduce costs.
Staffing and workforce strategies have also helped narrow the gap between rising expenses and limited reimbursement. Michael Benton, president of VyClimb Consulting and a board member of the National EMS Pilots Association (NEMSPA) and CAMTS, said operators are finding creative ways to manage salary pressures without sacrificing safety or quality.
“Some operators have shifted from 24-hour bases to 12-hour bases, focusing on peak demand times, while others introduced relief pilots and invested in duty calculators to reduce overtime costs,” Benton said. “Operators have even restructured leadership to improve efficiency while maintaining quality of care.”
But when it comes to serving rural communities, the challenge is far more complex. As hospitals in these areas close or scale back specialized services, and as ground ambulance coverage becomes increasingly scarce, the demand for air ambulance transport continues to rise.
HealthNet Aeromedical Services is jointly owned by West Virginia’s three academic health systems and serves the entire state, as well as rural communities in neighboring states. In a state with the third-highest percentage of residents living in rural areas and the fourth-highest poverty rate, HealthNet depends heavily on the support of its hospital networks.
“Seventy-eight percent of the patients we transport are covered by Medicare and Medicaid,” HealthNet’s Burley said. “We are extremely lucky that our hospitals support us, but that isn’t a realistic sustainability plan with upcoming decreases to the number of people who can access that support.”
Burley pointed out that five critical-access hospitals in West Virginia — about 10 percent of the state’s total — are at risk of closing. If that happens, demand for air medical services will rise even as reimbursement falls and costs keep climbing.
Education has become a central part of the industry’s survival strategy, with HEMS leaders engaging insurers and legislators about the urgent need for higher reimbursement rates from both government and commercial programs.
“I see the industry coming together to a degree with a common message to payers, reiterating the actual cost of operating these assets,” Burley said. “But we clearly have to do more. As more need rises in rural areas, that becomes even more important.”