LifeFlight, Maine’s only emergency air ambulance provider and a key lifesaving asset for islands and other remote communities across the state, has taken direct control of its aviation operations.

The move frees the nonprofit from an aviation services contractor now owned by a venture capital firm that has become notorious for charging patients and their insurers about twice as much as hospital- or nonprofit-owned rivals.

“The consolidation drive in the industry has been driving up costs for us and for our patients,” said Tom Judge, LifeFlight’s executive director, who estimates that taking air services management in house will save $760,000 to $887,000 a year, or almost a tenth of its aviation budget. “If we can keep ourselves lean we can redirect resources to the pointy end of our operations and improve the services to patients.”

LifeFlight has always owned its aircraft and directly managed its medical personnel but contracted specialized firms to oversee aviation operations, including the hiring, training and management of its pilots and mechanics. But over the past two decades its aviation partners have been repeatedly eaten up by ever-larger competitors, causing uncertainty and occasional anxiety to their aviation staff, who had to respond to changes in everything from their own health benefits to scheduling to air operations guidelines.

“The short of it is that it’s been horrible,” said LifeFlight’s director of aviation operations, David Burr. The veteran helicopter pilot has worked out of the same offices and worn the same green flight suits for nearly 22 years but has seen his official employer change at least seven times. “Everybody’s pay structure was different, their benefits were different, their retirement options were different, and the way they interpreted how to apply certain regulations was different.”

The people they worked under at the various aviation management firms were generally excellent, Burr said. But because many of them were based in the South, he said, they sometimes didn’t understand technical and operational needs in Maine’s cold weather environment, leading to unnecessary delays in getting the most appropriate deicing procedures in place.

Starting this month, however, LifeFlight has its own federal air operations certification and has brought its aviation team in house. The service, which is co-owned by Northern Light Health and Central Maine Health Care, employs 110, including doctors, nurses, paramedics and an aviation staff of 23 pilots and 12 support personnel. It operates four twin-engine air ambulance helicopters and a twin engine airplane out of bases in Sanford, Lewiston and Bangor. In fiscal year 2020 it transported more than 2,200 patients.

The change, which took three years of preparation, will help insulate Mainers from excessive air ambulance charges, Judge says. The service has the lowest charges in New England and one of the lowest in the United States. “We couldn’t have maintained our efficiency and leanness and effectiveness and our commitment to having the lowest charges if we had continued to pay hundreds of thousands of dollars in management costs,” he says. “Either we would have had to make that up by increasing charges to patients or via additional philanthropy, and neither of that was acceptable for us.”

In 2019, LifeFlight’s previous aviation management firm, Dallas-based Seven Bar Aviation, was bought by a massive air ambulance company owned by KKR, a New York private equity firm. It was then merged with another KKR-owned air ambulance company to form Global Medical Response, which has 397 aircraft, 35,000 employees, a third of the nation’s helicopter ambulance market and 53 percent of its fixed-wing market.

A study released in October by the Brookings Institution and the University of Southern California’s Schaeffer Center for Health Policy & Economics found that air ambulances owned by venture capital firms like KKR had an average standardized charge of $48,241 per helicopter transport and $58,750 per fixed-wing evacuation in 2017. For hospital-owned services the average charges were about half as much: $24,896 for helicopters and $27,008 for fixed wing. LifeFlight’s average charges were under $14,000.

The venture-capital-owned services also typically do not negotiate in-network pricing with insurance carriers, resulting in surprise bills for many patients, the study noted.

“There’s really no functioning market for air ambulance services,” said the study’s lead author, USC-Brookings Schaeffer associate director Loren Adler. “The 911 dispatcher usually calls the air ambulance company, which responds without knowing the insurance status of the patient. It’s the epitome of market failure.”

“People figured out there was money to be made by being aggressive on pricing and taking advantage of that,” Adler added, noting that venture-capital-owned firms have raised their prices by 10 to 12 percent a year for the past decade.

KKR referred questions about why the air ambulances it owned have such high and rapidly increasing charges to spokespeople at its Global Medical Response subsidiary, which declined an interview request and sent a written statement that did not directly answer the questions.

“Rates are calculated based on several factors including costs, volume, payor mix, and certain geographic market dynamics,” the statement said. “There are no other factors that impact our rates. 80 percent of our costs are fixed, and the remainder are variable, such as fuel and wages.”

It added that the firm had been proud to work with LifeFlight. “Our partnership ended amicably when they decided to insource the aviation operations for their program,” it said.

A number of other well-regarded nonprofit air ambulance operations across the country have their own in-house aviation team, including Minnesota’s Mayo Clinic, Boston-based MedFlight, and Utah’s Intermountain Healthcare.

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