TECHNICAL REPORT UCED 2010/11-XX

Transcription

1 TECHNICAL REPORT UCED 2010/11-XX Photo courtesy of Mark Mennie, Association of Air Medical Services Mark Mennie 2007/AAMS Feasibility of Helicopter Emergency Medical Services in Humboldt County

2 Feasibility of Helicopter Emergency Medical Services in Humboldt County Report Prepared by Elizabeth Fadali Tabor Griswold John Packham and Thomas R. Harris Elizabeth Fadali is a Research Associate in the University Center for Economic Development and Department of Resource Economics at the University of Nevada, Reno Tabor Griswold is a Health Services Research Analyst in the University of Nevada School of Medicine at the University of Nevada, Reno John Packham is the Director of Health Policy Research in the University of Nevada School of Medicine at the University of Nevada, Reno Thomas R. Harris is a Professor in the Department of Resource Economics and Director of the University Center for Economic Development at the University of Nevada, Reno University Center for Economic Development Department of Resource Economics University of Nevada, Reno Reno, Nevada (775) March 2011 The University of Nevada, Reno is an equal opportunity, affirmative action employer and does not discriminate on the basis of race, color, religion, sex, age, creed, national origin, veteran status, physical or mental disability or sexual orientation in any program or activity it operates. The University of Nevada employs only United States citizens and aliens lawfully authorized to work in the United States.

3 This publication, Feasibility of Helicopter Emergency Medical Services in Humboldt County, was published by the University of Nevada Economic Development Center. Funds for the publication were provided by the United States Department of Commerce Economic Development Administration under University Centers Program contract # and the Medicare Rural Hospital Flexibility Program. This publication's statements, findings, conclusions, recommendations, and/or data represent solely the findings and views of the author and do not necessarily represent the views of the United States Department of Commerce, the Economic Development Administration, University of Nevada, or any reference sources used or quoted by this study. Reference to research projects, programs, books, magazines, or newspaper articles does not imply an endorsement or recommendation by the author unless otherwise stated. Correspondence regarding this document should be sent to: Thomas R. Harris, Director University Center for Economic Development University of Nevada, Reno Department of Resource Economics Mail Stop 204 Reno, Nevada UCED University of Nevada, Reno College of Agriculture Biotechnology and Natural Resources Department of Resource Economics University of Nevada Cooperative Extension

4 Introduction The number of helicopter emergency medical service (HEMS) programs in the United States and around the world has been expanding rapidly and are increasingly an integral part of EMS systems everywhere. At the same time, rural Americans do not have full access to healthcare equal to their urban counterparts. For example, rural trauma patients are 25% less likely to survive than are urban trauma patients. For medical patients, the Critical Access Hospital system has helped stabilize rural hospitals, but only if a hospital reduces beds and average length of stay. The system currently in place depends on rapid transfer of patients with complex medical cases to larger urban health care centers (Association of Air Medical Services). Current options for transporting a patient with heart attack, stroke or other emergency care needs that cannot be addressed at Humboldt General Hospital (HGH) are to go by ground ambulance, normally to Reno 150 miles to the southwest, which is a trip that takes two hours and ten minutes, or to wait for helicopter services from Reno or elsewhere, which can take up to four hours in some cases. If a helicopter were to be stationed in Winnemucca at the hospital, these inter-facility transfers would take an estimated 70 to 80 minutes, getting patients to definitive care 50 to 60 minutes earlier and providing the potential for better medical outcomes and for lives saved. This would better meet standard of care specifications for stroke, heart attack and emergency surgery patients. The advantages must be weighed against the high costs of helicopter EMS and the safety of EMS personnel. In addition, the HEMS cannot be considered a replacement for ground ambulances, since weather and maintenance problems will mean that a helicopter is not available at all times. This report provides local decision makers with information about the circumstances under which a HEMS is economically feasible for Humboldt General Hospital EMS. It is a starting point for decision-makers to use in determining whether their community can or should support this medical intervention. 1

5 Demand Analysis A crucial element in determining feasibility of a HEMS in a region is a demand analysis. Because a helicopter EMS system involves large fixed costs, the number of trips that the fixed costs can be spread across is one of the most critical pieces of information. A knowledgeable estimate of the number of patients per year within the region that can benefit from helicopter transport is the first and most important piece of the feasibility analysis. It was not within the scope of this project to carry out a full demand analysis. Demand numbers were based on the estimates presented to us from HGH. Because of recent experience with inter-facility transports, it was estimated that 180 transport patients a year from HGH and another 100 patients from the surrounding area of Battle Mountain in Lander County and Lovelock in Pershing County would benefit from helicopter transport. Emergency scene flights were judged by HGH decision-makers to make up only a very small part of the demand for helicopter EMS in Humboldt and surrounding counties and so were not included in this analysis. A rule of thumb for companies providing helicopter EMS services or leases is that demand of at least 30 flights per month, or 360 per year is needed to make an operation feasible. In some limited cases, with a less expensive helicopter, a demand as low as 240 trips per year could be feasible. Including demand in the catchment area, Humboldt County EMS services has a demand that is on the margin. This points again to the need to carefully assess the demand level. If the decision to go ahead with a HEMS program is made, those with access to data on inter-facility transports as well as emergency services are advised to carefully re-examine the transfer data over the past several years from HGH, Battle Mountain and Lovelock. Demand for helicopter emergency services is not static. For example, nationwide, demand for helicopter EMS fell significantly in the last couple years as the economy faltered and people travelled less and recreated less. This was one factor in the Careflight operation recently having to pull out of Lovelock. Demographic change, such as the aging of the population, could increase calls for heart attack and stroke patients while changing payer mix towards a higher share of Medicare patients. Increases or decreases in gold prices, mine closures or other local economic changes could also have a very big impact on both numbers of flights needed and payer mix. 2

6 For Humboldt County, the Nevada State Demographer has projected a population loss of about 13% (2,050 people) over the next two decades (Hardcastle, 2006). While the under 65 year old population is projected to decrease by 3,800 people or nearly 30%, the over 65 year old population is projected to increase by 1,750 people or over 80% (see Table 1). These demographic changes will affect demand for EMS and for inter-facility transfers as well as the reasons for calls and transfers. Table 1. Humboldt County Population Projections for 2010 and 2026 Selected Cohorts Projected 2010 Projected 2026 Change 2010 to 2026 Population Population Number Percent 0 to 4 Years of Age 1,270 1, % 5 Years of Age % 6 to 18 Years of Age 3,376 2, % 19 to 64 Years of Age 10,411 7,171-3,240-31% 65 Years of Age and Over 2,131 3,881 1,750 82% Total All Ages 16,158 14,106-2,052-13% Source: Nevada State Demographer (Hardcastle, 2006) Wofford et al. (1995), in a study of North Carolina EMS transport utilization rates, found that the 85 and older population had an EMS transport rate 5.7 times higher than the 60 to 64 year old population. Total overall utilization rate for the over 60 population was per 1000 (Wofford, 1995). Applying the utilization rates in Wofford by age group to the Nevada demographer population projections, EMS calls from the population 60 years old and older would increase 75% over the next 16 years from 301 per year to about 528 per year (see Table 2). Because North Carolina in the 1990 s is quite different than Humboldt County in 2010, and because demographer projections are subject to error, this projection is not definitive, but rather suggestive of the types of changes that may take place over the coming decades. In another study, Svenson found that in Kentucky from 1994 to 1997, age was the single most important determinant of EMS usage. Usage of EMS transportation was 4.8 times higher in the population 65 years old and older than in the population under 65 years old (Svenson, 2000). This change in EMS demands due to a demographic shift to a grayer population will occur nationwide, but will affect some rural counties earlier and to a greater degree than urban counties. 3

7 Because of the difficulties of predicting demand for helicopter EMS flights, tables in the final section of this report provide financial outcomes for two different total flight numbers, so that it is easy to see how financial outcomes vary with the number of rides. Table 2. Estimates of EMS Transport Use for Humboldt Projected Population, 60 and Older 2010 projected 2026 projected Wofford EMS Estimated 2010 calls Estimated 2026 calls population population transport rate 60 to 64 Years of Age to 69 Years of Age 826 1, to 74 Years of Age 510 1, to 79 Years of Age to 84 Years of Age Years of Age and Over ,053 4, Sources: Nevada State Demographer (Hardcastle, 2006), Wofford et al Basic Set-up and Capital Costs There are different models for provision of helicopter EMS. Two of the basic options are: Private provision, in which a helicopter company provides everything, including the helicopter, pilots, mechanics, nurses and paramedics and all reimbursements flow to the company. This is the so called no money contract. Helicopter leasing, in which the hospital pays a lease for the rental of the helicopter, pilot, and mechanics as well as an hourly fee for all helicopter running time. Typical lease agreements run a minimum of three to five years. There are many variations on these themes. In some cases the local hospital or EMS agency owns the helicopter but leases pilots and mechanics. Billing services and helicopter dispatch services can also be included in a contract. There are many ways to customize the contract between helicopter leasing company and EMS agency. The option HGH is most interested in is helicopter leasing. This would be costly but most helicopter related costs would be included in the lease arrangement. Pilots, mechanics, insurance, repair and maintenance would all be handled by the helicopter leasing company. As envisioned 4

8 by HGH EMS, the same EMS personnel that currently man the ground ambulances would also man the helicopters, so that there would be no increased costs in personnel, other than a pay bonus or a raise for medical personnel due to the extra training required, and either a pay raise or an additional partial administrative management FTE due to increased paperwork, responsibility and management. Other than these two increases, we assume throughout this analysis that the HEMS would be based at HGH and use current management, staff, and EMS personnel. The focus is on any changes in costs or revenues due to the helicopter, assuming that staffing does not change. The leasing option involves a number of potentially high capital costs. Some potential capital costs and assumptions used in this report are listed in Table 3. These capital items, costs and assumptions can be discussed with decision-makers in Humboldt County. A helicopter pad built to FAA standards is a requirement. Costs related to the helicopter pad include lighting, and clear approach and departure corridors. As a part of the $14 million upgrade recently approved by the HGH board, this improvement will be moving forward regardless of any decision to lease a helicopter stationed in Winnemucca. 5

9 Table 3. Capital Cost Assumptions and Estimates Capital Item Assumption Assumed Cost Likely needed to get wholesale price on jet fuel (15 year Fuel storage system Maintenance hangar or work area Flight suits Camera surveillance system life) $ 130,000 Place out of the weather is a requirement for mechanic doing regular maintenance and unscheduled repairs. If rented at airport ($45 a day for occasional use, around $750 a month for long-term rental) will effect response times (15 year life) $ 50,000 Twenty matching flight suits for EMS personnel (2 year life) $ 6,000 Security for helicopter is necessary, screen can be watched by paramedics or other existing personnel (5 year life) $ 2,000 All of the following items are assumed not to change existing costs: If helicopter is leased and stationed at HGH, it is necessary to have a pad that meets FAA standards for lighting, approach, departure corridors, etc. HGH will build with or Helipad without helicopter. $ - Bunk space for pilots and mechanics Will use existing space at HGH EMS building or hospital $ - CAMTS certification Not required at this time $ - Any extra ground vehicles Will have the same number of paramedics and same space they are currently using - no additional costs $ - Medical Equipment In some contracts hospital provides, assume included in lease or use existing equipment $ - Hangar Beneficial and recommended but not an absolute requirement $ - Support or towing vehicle Included in lease $ - Office space/storage for pilot and mechanic Will use existing space at HGH EMS building $ - Office space/storage for paramedics Will have the same number of paramedics and use same space they are currently using - no additional costs $ - Kitchen space for crew Will have the same number of paramedics and same space they are currently using - no additional costs $ - Upgrade communication systems, air-desk Use existing, or include in lease agreement $ - Communication systems, phone, fax, e- mail Will use current systems $ - Secondary site costs Possible in future $ - Office storage or costs for administration Will be able to use existing space, assume no additional costs $ - Total $188,000 6

10 A hangar for the helicopter is not a hard requirement, but would be recommended. A place for the mechanic to work out of the weather in bad weather is required however. In some contracts, building a shed for the work could be included in the lease agreement. It might also be possible to rent a hangar at the airport. There is one hangar available by the night that is normally vacant. It costs $45 a night. A long-term rental of the hangar would cost $25 a night or about $750 a month. Otherwise, hangar space at the airport is limited. Other estimates for building a facility ran as high as $100,000. Having a facility at the hospital instead of the airport would reduce the effect on response times. Fuel costs are generally handled by the hospital. If fuel is included in the contract for the helicopter lease, it is unlikely that a fuel price could be locked in for any long period of time in the contract. A fuel system at the hospital can be a wise investment. This is because a large storage tank allows the hospital to purchase aviation fuel at wholesale rather than retail costs. As of June 2010, wholesale fuel costs in Humboldt County were $3.41 per gallon as compared to $4.26 per gallon for retail aviation fuel. 1 A $130,000 fuel storage system would pay off in the sixth year if HGH EMS ran 180 flights a year, assuming that the helicopter gets 50 gallons/hr and takes one hour and fifteen minutes to fly to Reno. Under the assumption of 280 flights per year, the fuel system would pay off in 4.4 years. If fuel prices were higher, there would likely be a shorter time to recouping the investment, and a longer time if fuel prices were to decrease (see Table 2). Other options might include negotiations for a bigger price discount from the local airport. Table 4. Retail versus Wholesale Fuel Cost per Helicopter Roundtrip from Winnemucca to Reno Wholesale fuel costs Cost per trip to Reno Retail fuel costs Cost per trip to Reno Years to pay-off (180 trips/yr) Trips needed to pay off system Years to pay-off (280 trips/yr) 6/1/2010 (dollars per $ 3.41 $ 426 $ 4.26 $ 533 1, gallon) Higher cost scenario $ 5.60 $ 700 $7.00 $ Lower cost Scenario $ 2.40 $ 300 $3.00 $ 375 1, Assumes medium weight helicopter with fuel needs of 50 gallons per hour, a 2 hour 30 minute round trip time from Reno to Winnemucca and a fuel storage system cost of $130, This price quote included a $0.20 bulk discount on the retail price. 2 Adjustment for inflation uses a medical cost inflation adjustment. 3 For example, the only rural UK study is in Cornwall with a population density of about 390 people per square 7

11 Other possible capital costs include bunks, storage, and office facilities needed for the mechanic and pilots. Pilots and mechanics may or may not need bunk space, depending on the leasing company and contract. A minimum total area of 800 to 1,000 square feet is usually needed. This extra space is assumed to be available at the current EMS facility. Another item that could be included in the capital costs is the fees for Commission on Accreditation of Medical Transport Systems (CAMTS) accreditation. Accreditation fees cost over $10,000 and the accreditation must be renewed every three years. In addition to the fees, a large number of personnel hours are required to complete the process. Services based in Humboldt County do not need to have this accreditation at this time. One option for funding capital costs could be to fold the costs into the lease agreement with the helicopter company. Agreements are typically flexible and open to negotiation. If capital costs could be folded into the lease agreement, this would reduce up-front costs but increase monthly lease costs. This would mean a large increase in leasing costs unless a longer term lease is signed. For modeling purposes, the assumed $188,000 in capital costs have been depreciated using straight line methods with 15 year life on large items and rolled into annual operating costs of $15,400. If paid out over a 3 to 5 year lease costs over this time would be higher. Whether these capital costs are paid at the outset or whether they are paid over time, they represent a long-term investment and commitment to the helicopter EMS program. Operating Costs Given the assumption that EMS staffing remains the same as it is now with ground ambulance crews, the main operating cost would be the lease costs of the helicopter and the fuel costs. The cost breaks down into a fixed monthly fee and an hourly operating charge. These and other possible operating costs and assumptions are listed in Table 5 and Table 6. Monthly leases do not require any up-front fees, but helicopter leasing companies typically will not sign less than a three year lease agreement. Variable Operating Costs Variable operating costs of the helicopter EMS system would be the fuel costs discussed above and the hourly charge of the leasing company. These charges would vary significantly with the type of helicopter leased. Heavier helicopters with higher capacity and ability to fly longer distances will cost more and use more fuel. Helicopter flying times also vary depending on the type of helicopter leased. Hourly fuel costs given current aviation wholesale prices for 8

12 aviation fuel would be about $170 for a helicopter requiring 50 gallons of fuel per hour, assuming that a round trip from Reno to Winnemucca would take about two and a half hours. Depending on the company, the leasing costs for a Bell 407 helicopter, for example, could run about $720 per hour. Lease costs include pilots and mechanics, repair, routine maintenance, provision of an alternate helicopter if repair will take longer than 24 hours (depends on contract), and insurance. Medical equipment could come from the EMS agency, in which case the leasing company would work with the EMS agency to ensure that the equipment can be secured in the helicopter according to FAA regulations. It is also possible to include equipment in the lease agreement. Given all the assumptions discussed here, the total variable cost per hour would be $896 an hour, implying that a two and a half hour round trip to Reno would have variable costs of $2,239. An additional cost that can be included as a type of variable cost is the cost of a certain percentage of flight cancellations. This may be minimal for IFTs, but for scene flights one HEMS service reported flight cancellations of up to 25%. Cancellations are a part of doing business, but may be higher where scene flights are called in by ordinary bystanders rather than trained first responders, as often could be the case in Humboldt County and surrounding catchment area. To account for cancellations such as these, the scenarios in this report add about a 1% surcharge onto the variable operating costs in Table 5. This would correspond to an additional 5% of calls responded to and cancelled mid-flight or about an additional 9 calls and cancellations a year in the 180 trip case and 13 in the 280 trip scenario. This raises the variable operating cost per hour to $904. Table 5. Variable Operating Costs Assumptions and Estimates Variable Operating Costs Assumption Cost per hour Cost Per Mile Cost per Reno Trip Helicopter operating charges Mid size single engine lease $725 $6.04 $1,813 Fuel 50 gallons/hour $171 $1.42 $426 Total Variable Costs Per Hour $896 $7 $2,239 Note: Assume that lube, and unscheduled repairs are included in lease agreement. Assume that medical supply cost remains the same as current ground operation. Assume no bonus pay for EMS personnel flight time. Fixed Operating Costs The main additional fixed cost would be a monthly lease fee for the helicopter and its associated costs of operation. Monthly lease costs vary according to the type of helicopter leased, 9

13 the company that is leasing the helicopter, whether any capital costs are folded in and many other specific elements of the negotiated contract. For example, estimate for a mid-size single engine helicopter such as a Bell 407 ranged from $85,000 to $105,000 a month. We assume the lower lease rate of $85,000 per month. Other fixed operating costs are assumed not to change for the most part and remain mostly as they are with the ground ambulance system. However, once again there are some additional costs to consider (see Table 6). Some costs that were most pertinent in the case of HGH were: An assumed increase of $50,000 a year either for administrative FTEs or for a higher salary paid to existing management. The EMS director would be taking on more responsibility so his pay level might increase, or more FTEs might be needed to handle the extra training, coordination and paperwork necessary. Training costs for the EMS crew to be certified for helicopter operations will be required and could run $10,000 to $30,000 a year. Given the requirements for extra training, and an increase in the hazardous nature of the work, EMS personnel may require either bonus pay for flying or an increase in wages. Maintenance of helipad, shed, fuel system and pilot and mechanic offices or quarters, and additional utility use may cause some increase in costs. Although one of the largest cost considerations for HEMS is the crew, in the scenarios considered in this study, no change in crew cost is included, other than the small increase in pay. This is because costs for the helicopter pilots and maintenance crew would be included in the lease of the helicopter and we assume that the existing ground EMS crew is used to man the helicopter. It is possible that a membership program could bring in a small amount of revenue, and many helicopter services are part of membership networks. However, a large database of members would likely require 0.5 FTE employee to manage. One helicopter service used 0.9 FTE to manage their 9,000 members, conservatively estimated at $22,000 a year. In addition, the membership program would face the adverse selection problem in which the people most likely to need a helicopter EMS ride are the most likely to sign up for membership. Those who are otherwise uninsured or have lower quality insurance will be more likely to sign up. For the 9,000 member service mentioned, over 5% of its calls were from its membership. If many of 10

14 these members were not insured, it is possible that net income would be low with a membership program. A membership program is not included in the cost and returns scenarios in this report. Table 6. Fixed Operating Cost Assumptions and Estimates Fixed Operating Costs Assumption Annual Cost Helicopter lease Mid size single engine monthly lease of $85,000 $ 1,020,000 Extra administration costs and Assume greater responsibility for director with other office supplies more pay or hire extra management FTE $ 50,000 Crew labor raises Assume $2 an hour raise for 12 paramedics or nurses $ 50,000 Interagency coordination & EMS Crew require extra training for CAMTS training certification or other training $ 20,000 Depreciation From capital expenses in Table 3 $ 15,400 Janitor Slightly more space or more use of existing space $ 2,000 Maintenance of heli-pad, hangar work area, pilot and mechanic Slightly higher maintenance costs $ 2,000 areas Utility costs for work-shed, extra lighting Security lighting, heating and cooling of hangar/work-shed for mechanic $ 1,000 The following costs are assumed not to change with addition of helicopter: Membership marketing and administration costs None see text. $ - Licensing and fees License fee for aviation fuel storage depot, assume negligible $ - Hospital office space Assume current space sufficient $ - Total Fixed Costs $ 1,140,400 Note: Assumes scheduled maintenance, insurance is included in monthly lease agreement. Total fixed costs are estimated to be $1,140,400 given the assumptions made. This is the annual fixed cost that would need to be covered regardless of the number of helicopter calls completed. If there were 180 helicopter trips, the fixed cost would average $7,040 per trip. If there were 280 helicopter trips, the fixed cost would average $4,525 per trip. In addition, each trip generates variable costs. Since variable costs per trip are estimated to be $2,239, total costs to HGH EMS per helicopter trip would be $9,278 if only 180 trips were run and $6,764 if 280 trips were run. If a cancelled trip surcharge is added on, the corresponding costs would be $9,301 and $6,788. The program is obviously more likely to be sustainable with the larger number of trips. 11

15 Charges Charges must be relatively high to ensure that fixed costs can be covered. On the other hand, many insurance companies have a cap on the amount they reimburse for helicopter transports. In addition, very high charges can create pushback by private individuals who get very large co-pay bills for the helicopter service in cases that in hindsight do not appear to have been necessary or lifesaving. A base charge of $12,500 with a $90 mileage charge is assumed for the feasibility demonstration in this report. The total charge for a trip from Winnemucca to Reno then works out to $26,000. These charges are not much different than prices already charged in the area. It might be possible to charge slightly more on the mileage rates if a tiered system which discounts mileage greater than 50 miles is adopted. Reimbursement One industry reimbursement rate cited was 46%. This will vary with payer mix, contracted arrangements with insurers, Medicare and Medicaid reimbursement rates and policies. The payer mix can vary with demographics, economic cycles, and government policy. Problems with denial of coverage from insurance companies or Medicare and Medicaid can be very low if there is a good process for ongoing clinical review of each case, quality assurance reviews, and medical necessity reviews. In the best case, denial of coverage can be as low as 3% or less. If a bad process is followed denials can rise to 20%. Documentation, skill and training are important in maintaining a good process. The scenarios used in this report assume a 3% denial rate. Table 8 gives the HGH payer mix as of fiscal year to date March Medicare and Medicaid reimburse at a given rate as listed in the table. Medicare reimbursement for a typical trip from Winnemucca to Reno would be $9,871 per trip and Medicaid would be $4,629 per trip. One unknown is what proportion of the actual charge would be received from private insurance patients. One industry representative guessed that average repayment from private insurance patients might be as low as 40%. Caps and contracted discounts affect the amount received from the insurer. Co-pays of 20 to 50% are usually not fully collected. A 50% collection rate on privately insured patient s bills is assumed in Table 8. Using the information in Table 8 and the assumptions in it, along with a 3% denial rate across the board, average collection rate would be 32%. This means that an average $26,000 trip 12

16 to Reno would receive a reimbursement of $8,274. Actual collection rates at both HGH generally and for EMS in particular can be determined more accurately with an examination of the available billing data. Data on these patients could potentially be examined to determine the IFT population payer mix specifically. This is another critical area to evaluate before making a decision to proceed with a HEMS at Humboldt General Hospital. If the rate of denials were to rise to 20%, overall collection rate would be reduced to 14% (an average of $3,599 per trip) in the case that private insurance pays off 50% of the charges. A large number of denials could easily become a critical issue for the program and for HGH. Transfer patients may have a different payer mix. Specifically, it may be an older population with a higher percentage of Medicare coverage. A higher Medicare mix might improve overall collection rates if it means that corresponding uninsured rates are reduced. Rather than assuming any one given collection rate, the scenarios reported in this report present results for several different collection rates. Given the calculations and assumptions in this section, we would expect collection rates to be low, between 30% and 50%. Table 7. HGH Payer Mix and Assumed Reimbursement on Winnemucca-Reno Flights Number if Number if Payer Mix Percent of Estimated Average Total Flights Total Flights HGH HGH Patients Reimbursement 180* 280* 13 % of Total Charge Medicare 32% $9,871 38% Medicaid 13% $4,629 18% Private pay 14% $0 0% Private 41% $13,000 50% Insurance Medicaid source: Nevada Dept. of Health and Human Services, Division of Health Care Financing and Policy Medicare: *In scenarios these are reduced by 10% to simulate weather and repair cancellations. Changes from Baseline Ground Ambulance Service This report ultimately reports on changes in revenues and costs due to a helicopter EMS service. To find total change in revenue, each existing ground ambulance trip that is replaced with a helicopter trip must be accounted for. Other than a small increase in wages, it is assumed that medical personnel costs remain the same whether there is a helicopter or not. It is also assumed that a cost of $5.55 per mile for each ground ambulance trip is avoided, or a total of $1,655 for each Reno ground ambulance trip. On the reimbursement side, each ground ambulance trip not taken means that a ground ambulance charge of $6,000 is not sent out and is

17 replaced with a helicopter ride charge. Each ground trip not taken reduces revenue by the average collection rate on the $6,000 charge. It is assumed that ground and helicopter have the same collection rate. Data estimates were that 150 of the 180 local intra-facility transfers would be replacing trips that were previously ground ambulance trips from HGH EMS and 30 would replace non HGH EMS trips. Some amount of EMS catchment inter-facility transfers are currently ground ambulance trips provided by the HGH EMS service. This was deemed this to be a small enough number to ignore. Thus all 100 extra flights from the catchment area in the second scenario are assumed to be new to HGH EMS transports. To the extent this is not true, net change in revenues will be less. Again, better estimates may be possible by closer observation of the available data. Weather and Repair Caused Cancellations Some percentage of helicopter trips will be cancelled due to repair issues or weather difficulties. One HEMS service estimated repair time at less than 20 days per year or about 5% of the time. Weather conditions vary year by year, but Humboldt County generally has positive weather conditions. We assume another 5% of the time the weather does not permit the EMS helicopter to fly for a total of 10% of missed flights that must revert to ground ambulance. A higher weather and repair cancellation rate might reduce flight numbers below a viable threshold. Scenarios Given all of the factors and assumptions discussed above, Tables 9 and 10 present some scenarios for how stationing a helicopter service at HGH EMS would affect net change in revenues. Table 9 assumes that the HEMS will have 180 transfer flights from Winnemucca. Breakeven collection rate is 31% for this case. If payments from privately insured individuals are as low as 40%, an overall payback lower than 30% is possible. Table 10 assumes that 100 extra new helicopter transfer flights are carried out for Battle Mountain, Austin and Lovelock. A collection rate of 23% is then the breakeven rate. A helicopter EMS stationed at Humboldt General Hospital appears to be feasible, given the assumptions made in this report. Key variables, such as the total number of flights that will be demanded, and the collection rate, are not well substantiated, however. Given the advice from industry representatives that normally at least 300 flights a year or more are necessary for a helicopter service to survive, caution is indicated. Winnemucca is in a borderline situation 14

18 between a feasible operation and non-feasible operation. If a helicopter service seems desirable, it may need some level of community financial support. Table 8. Change in Costs, Revenue, and Net Revenue for 180 Humboldt General Hospital IFTs by HGH Helicopter for Selected Collection Rates Collection Rate: Change in: 30% 50% 70% Costs $ 1,057,154 $ 1,057,154 $ 1,057,154 Revenue $ 1,022,909 $ 1,704,848 $ 2,386,787 Net $ (34,246) $ 647,693 $ 1,329,632 Table 9. Change in Costs, Revenue, and Net Revenue for 280 Catchment Area IFTs by Helicopter for Selected Collection Rates Collection Rate: Change in: 30% 50% 70% Costs $ 1,292,130 $ 1,292,130 $ 1,292,130 Revenue $ 1,704,375 $ 2,840,625 $ 3,976,875 Net $ 412,245 $ 1,548,495 $ 2,684,745 15

19 References Association of Air Medical Services. "Air Med 101". Booz-Allen-Hamilton "Feasibility Study on a Helicopter Emergency Medical Service (Hems) for the Island of Ireland," In. Dublin: Department of Health, Social Services and Public Safety and Department of Health and Children. Gearhart, Peter A.,Richard Wuerz and A. Russell Localio "Cost-Effectiveness Analysis of Helicopter Ems for Trauma Patients." Annals of Emergency Medicine, 30(4), pp Hardcastle, Jeff "Age, Sex, Race and Hispanice Origin Estimates from 2000 to 2005 and Projections from 2006 to 2026 for Nevada and Its Counties," Nevada State Demographer's Office. Reno, Nevada: Nevada Small Business Development Center. Moga, Carmen and Christa Harstall "Air Ambulance with Advanced Life Support," Alberta, Canada: Institute Of Health Economics. Nicholl, J.,J. Turner,K. Stevens,C. O'keefe,L. Cross,S. Goodacre and H. Snooks "A Review of the Costs and Benefits of Helicopter Emergency Ambulance Services in England and Wales," Sheffield: Medical Care Research Unit, Sheffield University. Silbergleit, Robert,Phillip A. Scott and Mark J. Lowell "Cost-Effectiveness of Helicopter Transport of Stroke Patients for Thrombolysis." Academic Emergency Medicine, 10(9), pp Snooks, H. A.,J. P. Nicholl,J. E. Brazier and S. Lees-Mlanga "The Costs and Benefits of Helicopter Emergency Ambulance Services in England and Wales." Journal of Public Health Medicine, 18(1), pp Svenson, James E "Patterns of Use of Emergency Medical Transport: A Population- Based Study." American Journal of Emergency Medicine, 18(2), pp Tayor, Colman B.,Mark Stevenson,Stephen Jan,Paul M. Middleton,Michael Fitzharris and John A. Myburgh "A Systematic Review of the Costs and Benefits of Helicopter Emergency Medical Services." Injury, pp Wofford, James L.,William P. Moran,Mark D. Heuser,Earl Schwartz,Ramon Velez and Maurice Mittelmark "Emergency Medical Transport of the Elderly: A Population-Based Study." American Journal of Emergency Medicine, 13(3), pp

20 Appendix A: Non-financial Costs and Benefits The research team was able to find several previous reviews of helicopter emergency medical services costs and benefits (Booz-Allen-Hamilton, 2003; Gearhart, 1997; Moga, 2008; Nicholl, 2003; Silbergleit, 2003; Snooks, 1996; Tayor, 2010). The purpose of each of these reviews varied, but the message to a potential helicopter EMS provider was often the same: studies that have been done comparing patient outcomes of ground versus air transportation are mostly weak and methodologically flawed. Evidence of improved outcomes is ambiguous and complex, depending on the different types of patients, the overall system of care, equipment and level of care offered by ground or air crew, relative distances and so forth. Costs are similarly ambiguous, depending in part on triage systems, training, size and density of total population served. In addition, the majority of the studies are of large urban areas or rural areas with a high population density, so do not address issues specific to Humboldt County. Nine of the studies were reviewed and an annotated bibliography of them is below. HEMS Cost-Benefit Annotated Bibliography Booz-Allen-Hamilton "Feasibility Study on a Helicopter Emergency Medical Service (HEMS) for the Island of Ireland," In. Dublin: Department of Health, Social Services and Public Safety and Department of Health and Children. A private economic consulting firm was hired to study the feasilibity of creating a comprehensive dedicated HEMS program for all of Ireland. Costs and benefits are measured from a social welfare viewpoint. As a part of the research they assembled and reviewed 34 academic international studies on the costs and benefits of HEMS. They concluded that there was some evidence supporting interfacility transports (IFTs) but that the evidence supporting helicopter transport over ground transport directly from the scene of an emergency was mixed and sometimes negative where funds can be more cost effectively invested in other pre-hospital care measures. The 34 studies were widely varied in the focus of study, type and severity of medical injury or condition of the patient, location, and medical skill level of crew making it difficult to draw general conclusions. Support was strongest for the use of HEMS for IFTs and for obvious cases of severe injury where a helicopter intervention can reach the patient much more easily than ground transport. Bruhn, Jarrett D.; Kenneth A. Williams and New England Life Flight "True Costs of Air Medical Vs. Ground Ambulance Systems." Air Medical Journal, pp This is a much cited study that concludes that adding a HEMS to a ground network is actually less expensive than a ground only network. Cost per patient transport, adjusted for inflation to 17

21 2009 dollars, was $6,483 for the helicopter and ground system while for the ground only it was $10,320. The key to understanding the results of the study is that cost effectiveness was based on which system would meet a 30 minute or less response time with the fewest resources in the state of Massachusetts. That is, it assumes an equal level of emergency care, a 30 minute response, should be the standard and works backward to determine the costs. The helicopter can more cheaply provide coverage for more isolated areas. The results may depend in part on the specific geography of Massachusetts including three islands which would each need their own ground ambulance without helicopter service, as well as a relatively dense population that helps spread out the high fixed costs of a helicopter service with many flights. Gearhart, Peter A.; Richard Wuerz and A. Russell Localio "Cost-Effectiveness Analysis of Helicopter EMS for Trauma Patients." Annals of Emergency Medicine, 30(4), pp This study focuses on trauma victims only. The authors attempt to measure the cost of HEMS per year of life saved. Adjusting for inflation to 2009 values, they find that the transport cost per patient is $3,941 per ride using data from a hospital in Pennsylvania 2. Reviewing 10 studies, they find a range of from 1.1 to 12.1 lives saved per 100 HEMS flights. Using a base case of 5 lives saved per 100 flights they find the cost per discounted year of life saved is $4,368. Compared with other emergency medical interventions with a median cost of $33,818, they find this cost favorable to helicopter transport. They do not adjust for quality of life. Costs of disability and lost wages were not included in the calculations. The study has been criticized for using the Trauma Injury Severity Score (TRISS) methodology. Moga, Carmen and Christa Harstall "Air Ambulance with Advanced Life Support," In. Alberta, Canada: Institute Of Health Economics. The study carries out a review of HEMS costs and benefits literature in order to better inform Albertan health policy in Canada. Sixteen different studies are examined. All these studies compare helicopter and ground transport with advanced life support services. They find the literature studied to be weak in method and design. Some studies support HEMS intervention for very specific conditions and distances, with studies sometimes reporting conflicting evidence. Nevertheless, overall results showed benefits in survival rates, time to a hospital and time to definitive treatment. Researchers often have not been able to ascertain whether benefits are directly provided by helicopter service or whether they may result from other factors such as improved triage, or more medical expertise and equipment brought to the site. Ultimately, the study authors believe that outcomes are more dependent on the greater healthcare resources brought to bear on the patient s circumstances than anything specific to helicopter transport. They advocate better data collection for measurement of benefits and costs and a concentration on the entire system of emergency medical care rather than just one component of it. Nicholl, J.; J. Turner; K. Stevens; C. O'Keefe; L. Cross; S. Goodacre and H. Snooks "A Review of the Costs and Benefits of Helicopter Emergency Ambulance Services in England and Wales," In. Sheffield: Medical Care Research Unit, Sheffield University. 2 Adjustment for inflation uses a medical cost inflation adjustment. 18

22 This was a university study done for the United Kingdom National Health Service to examine how the Health Service should be involved in helicopter emergency services. A meta-analysis of nine studies which had information with which to estimate an odds ratio was performed. The estimated odds ratio of death for patients transferred by helicopter versus those transferred by ground was 0.86, implying a 14% risk reduction for trauma patients, but was not significantly different than one so that evidence was weak in support of the risk reduction. The odds of death were adjusted for severity of injury. Almost all of the studies concentrated on urban areas. Conclusion is that studies are of poor quality, mixed results, and that helicopter emergency services are most likely the same as any other intervention; good only for certain subgroups of the patient population. For non-trauma patients such as stroke and heart attack victims, there was not anough information to determine whether helicopter service improved outcomes. For interhospital transfers, rural areas far from tertiary care are mentioned as the most likely to benefit from helicopter services. Silbergleit, Robert; Phillip A. Scott and Mark J. Lowell "Cost-Effectiveness of Helicopter Transport of Stroke Patients for Thrombolysis." Academic Emergency Medicine, 10(9), pp This paper examines only stroke patients. The authors find that ischemic stroke victims do benefit from helicopter transfer to a hospital with resources to treat with IV or IA thrombolysis and that helicopter transport is cost effective. Assumptions include diagnosis before transport good enough that 65% of the patients transported end up being eligible for treatment and that 38% of the patients get to definitive care in less than 3 hours while 62% get to definitive care in 3 to 6 hours. Cost was found to be $7,268 per Quality Adjusted Life Year or $41,703 per good outcome (2009 dollars). The authors strongly recommend helicopter transport for these particular patients. Snooks, H. A.; J. P. Nicholl; J. E. Brazier and S. Lees-Mlanga "The Costs and Benefits of Helicopter Emergency Ambulance Services in England and Wales." Journal of Public Health Medicine, 18(1), pp Ground ambulance and helicopter patient s outcomes are compared for three areas in the United Kingdom. The conclusion of the study is that there are only very limited opportunities for helicopter service to improve outcomes. The only evidence of increased good outcomes from helicopter service were Cornwall trauma and cardiac patients, who had less residual disability. The Cornwall patients were in a rural area, which would be the most similar to the situation in Humboldt County. However, the population density of the two areas are completely different. 3 This study also reviews 12 other papers that compare the outcomes of helicopter and ground ambulance patients. Almost all the studies take place in much more urban regions than Humboldt Co. 3 For example, the only rural UK study is in Cornwall with a population density of about 390 people per square mile, whereas Humboldt County has a population density of about 2 people per square mile. 19

23 Taylor, Colman B.; Mark Stevenson; Stephen Jan; Paul M. Middleton; Michael Fitzharris and John A. Myburgh "A Systematic Review of the Costs and Benefits of Helicopter Emergency Medical Services." Injury, pp The authors review 15 academic studies of HEMS costs and benefits. Five of the studies found helicopter transport was more expensive than ground transport without offering any benefit in return. Of these five studies, three were carried out in the United Kingdom where population density and the size of the area covered are vastly different than the case of Humboldt County, implying a likely much more dense network of ground ambulances and trauma centers. One other study applied only to special types of burn patients who had flown less than 200 miles to a tertiary burn center in California. Only one of the studies with a finding of high costs without benefit applied directly to the case in Humboldt County. This older study (Frank Thomas et al., 1990). strongly recommended that for areas 100 miles or farther from a trauma center, fixed wing transport be used rather than rotor. Eight studies found lifes were saved and cost from $2277 to $3292 per life year saved and from $7138 to $12,022 per quality adjusted life year saved. The authors find that the studies vary so much in design, context and methodology that they are very difficult to compare. Thomas, Frank; Josh Wisham; Terry P. Clemmer; James F. Orme and Keith G. Larsen "Outcome, Transport Times, and Costs of Patients Evacuated by Helicopter Versus Fixed-Wing Aircraft." The Western Journal of Medicine, 153(1), pp This older study uses data from a Utah trauma center which has both fixed wing and rotor capacity to respond to emergency calls. The study simply divides all patients into groups that are the same radial distance from the trauma center and compares the fixed wing and helicopter return time to hospital, injury severity scores, mortality, discharge disability scores and hospital length of stays. Since the authors find no statistically significant differences in transport times or outcomes between fixed wing transported patients and helicopter transported patients from 100 to 150 miles away from the trauma center in a relatively small sample (n=195), they conclude that there are no differences in outcome. The methodology of the study is weak. No regression analysis is performed even though it would be easy to do so with this data. Because costs are four times as high for the helicopter as compared to the fixed wing, the authors strongly recommend using the fixed wing option for patients at this distance from the trauma center. The situation described would be analagous to the situation that a Reno helicopter service to Lovelock or Winnemucca would face, rather than the situation facing Humboldt County since they are making a round trip to pick up the patient from outlying areas and carry them back to the trauma center. 20