United States District Court, D. Utah, Central Division
EAGLE AIR MED CORPORATION, a Utah corporation; and VALLEY MED FLIGHT INC., a North Dakota corporation, Plaintiffs,
SENTINEL AIR MEDICAL ALLIANCE, LLC, a Wyoming limited liability company; and JEFFREY FRAZIER, Defendants.
MEMORANDUM DECISION AND ORDER
CAMPBELL, U.S. DISTRICT COURT JUDGE
Eagle Air Med Corporation (Eagle) and Valley Med Flight Inc.
(Valley) operate air ambulances-typically fixed-wing
aircraft-that transport patients from small, rural hospitals
to larger, better-equipped hospitals. Defendants Sentinel Air
Medical Alliance (Sentinel) and Jeffrey Frazier,
Sentinel's principal and part owner, provide information
for health insurance companies and benefit plan
administrators to use to determine how much to reimburse air
ambulance companies for their services. According to Eagle
and Valley, Sentinel and Mr. Frazier made false and
defamatory statements concerning the rates they charged to
transport patients, the medical necessity of the flights, and
their billing practices. They bring state law claims of
defamation, false light, and tortious interference with
economic relations. Sentinel and Mr. Frazier have moved for
summary judgment on all of Eagle and Valley's claims. For
the reasons set forth below, the motion is granted in part
and denied in part.
Frazier and Sentinel (the court will refer to the Defendants
together as “Sentinel”) provide consulting
services to health insurance companies and third-party
benefit plan administrators. Specifically, Sentinel reviews
claims for air ambulance transports and advises on the
medical necessity of the flights and the reasonableness of
the billed charges (“medical necessity” and
“reasonable” are common defined terms in benefit
case largely concerns twenty-one claim review letters that
Sentinel sent to insurance claim adjusters and benefit plan
administrators as part of its consulting work. The letters
all follow the same general form:
Thank you for the opportunity to review and evaluate a claim
for air ambulance transport service provided by Valley Med
Flight. The patient is a beneficiary of Consumer's Mutual
On September 13, 2015, Valley transported the patient from
Calumet, Michigan, to Gwinn, Michigan, by fixed-wing air
ambulance. Transport distance was 81 air miles. Billed
charges for this transport amount to $29,
659. . . .
. . .
Reimbursement provided under Medicare for
this transport would be $5, 368[.]
. . .
Transport time: The total elapsed time for
this patient transport, from initial notification to when the
patient arrived at the receiving facility, was 2 hours.
This patient was transported by fixed wing air ambulance over
a very short distance, 81air [sic] miles. For fixed wing
transports, the patient must be transported by ground
ambulance from the sending facility to the airport, then
flown to an airport in the city where the receiving facility
is located, then transported by ground ambulance to the
receiving facility. For transports less than 250 miles, it is
generally faster to send the patient by ground ambulance than
by fixed wing air ambulance. If time were truly critical, the
patient should have been transported by helicopter.
Medical necessity: Our physician reviewed the
patient records associated with this transport and determined
that transport by air ambulance was not medically
Provider's costs: The aircraft used for this
transport was a Pilatus PC-12 single engine turbo-prop
airplane. Charter costs for this aircraft run from $1200 to
$1, 800 per flight hour. It must be assumed the charter
operator makes a profit at this rate.
Total flight time for Valley's aircraft during
this transport was approximately 40 minutes.
If Valley's charges are placed on an hourly basis, they
amount to $42, 370 per flight hour ($29, 659/.7).
By way of comparison, charter costs for a Boeing 747 are
approximately $25, 000 per flight hour.
Valley's costs for the medical crew that participated in
this transport are less than $75 per hour each, inclusive of
benefits. Total medical crew time for this transport was less
than 3 hours.
Aircraft charter costs and medical crew cost data are
presented for comparison purposes. Sentinel Air Medical
Alliance maintains a comprehensive database of air ambulance
provider costs. For a given geographic area and aircraft
type, we can determine with great accuracy the provider's
cost to perform the service. In this case, an accurate
estimate of Valley's costs can be derived by dividing
their monthly operating costs of approximately $192, 000 by
an assumed 30 transports per month, or $6,
400. We are confident that a cost-plus reimbursement
can be based on this figure.
Charges by other providers: Sentinel has a
contracted provider that would have performed this transport
for $8, 700.
Recommendation: Health plan administrators have a
responsibility to ensure plan funds are expended for
reasonable plan expenses. It is assumed that the
word “reasonable” relates to the pricing of
services, as well as medical necessity. Many plan documents
contain language relating to “customary” charges.
In this case, Sentinel's provider can be used as a
comparable for purposes of determining whether the charges
are customary. In other words, this is the customary rate.
Whether Valley's billed charges for this transport are
viewed from the perspective of Medicare-plus, cost-plus, or
in comparison to charges from other providers, they are not
reasonable. In fact, they are egregious. These charges
represent 552 percent of the Medicare
reimbursement rate, 340 percent of charges
from a competing provider, and 463 percent
of the cost of providing the service.
A reasonable reimbursement for this transport would be
$11, 900. This represents 221 percent of the
Medicare reimbursement rate and provides Valley with an 86
For perspective, the average margin in the (for-profit)
commercial aviation (charter) industry is approximately 10
percent, though many operators experience much lower margins.
Alternatively, since transport by air ambulance was
determined to be not medically necessary, the plan may wish
to reimburse the provider at the amount that would have been
charged by a ground ambulance service, approximately $4, 400.
(Ex. B-1-21 to Defs.' Mot. Summ. J. (ECF No. 206-4)
(emphases in original).)
addition to providing these review letters, Sentinel emailed
plan administrators with advice for the claim handling
process. Three emails, all sent by Mr. Frazier, are at issue
first, sent on April 12, 2014, to Ross Hinman, a benefit
consultant, and Jeff Shepherd, a claim administrator, reads:
Ross and Jeff,
I have attached a review of your claim along with an invoice
for our services. As you can see, you can deny the claim as
not medically necessary. Additionally, the patient was not
transported to the nearest appropriate facility.
If you chose to pay the provider, we recommend that you offer
$8, 164 in settlement of this claim. It is important to
remain firm when negotiating with air ambulance providers.
Eagle Air Med's charges are among the most egregious in
the industry. Air ambulance providers have become accustomed
to threatening payors with the specter of balance-billing
beneficiaries if their demands for full payment are not met.
Please do not acquiesce to this threat!
You can inform the provider that the beneficiary's plan
has limits on reimbursement for ambulance services and you
are willing to send them a check directly for $8, 164. You
can also inform the provider that, under ERISA, a plan
sponsor can only reimburse for reasonable plan
expenditures. If they tell you they will balance-bill your
beneficiary, tell them the same amount will be sent, not to
the provider, but to the beneficiary. I have provided you
with an expert opinion on Eagle Air Med's cost of
service, along with a recommended reasonable
reimbursement rate. Further, if this case should go to trial,
we have a copy of a report prepared on behalf of the air
ambulance industry which details the provider's cost of
performing air transport services.
Our service does not end here. . . . Please let me know the
final disposition of this claim.
Best regards, Jeff Frazier
(Ex. 1 to Pls.' Opp. to Mot. Summ. J. (ECF No. 227-1)
(emphases in original).) The second, a follow-up sent by Mr.
Frazier to Mr. Shepherd on May 13, 2014, reads:
It's my understanding there has not yet been an attempt
to negotiate this claim. If that's the case, send an
adverse determination of benefits and reference the report
created by Sentinel. Ensure you let them know the plan docs
don't allow for reimbursement of non- medically necessary
services, nor do they allow for unreasonable plan
expenditures. Tell them you would like to make some payment
as the patient did require transport (just not to the
hospital was transferred to, and not by air). Offer them the
$8K number. Then, wait. At some point, they will respond to
you and inform you that they will balance-bill your
beneficiary. They will also notify the beneficiary and let
them know they are on the hook for $80K, in the hopes they
will be scared into coercing their employer into paying the
claim. At that point, you can either send the revocation
letter already signed by the beneficiary, or (better yet)
have the beneficiary sign the attached form
“Patientletter1” and submit it to the provider.
Concurrently, you will send the attached letter
“AOB-Threaten-Revocation” to the provider (have
both of these docs looked at by your counsel). Then wait.
Expect this thing to play out over a period of 3 to 4 months.
At some point in the future, you will again offer the $8K and
they will accept is [sic] as payment in full. Let's stay
in touch on this. Above all, be patient!!
(Ex. 2 to Pls.' Opp. to Mot. Summ. J. (ECF No. 227-2).)
Frazier also sent an October 3, 2014, email to Michelle
Greenfield, a claim administrator with Tall Tree
Administrators about a claim from Eagle:
This is all a bunch of smoke! The writer refers to level one
trauma services. The patient was not injured as the result of
a trauma. [The patient] required pulmonary services in
response to pneumonia. These services are available at both
facilities referenced in your denial letter. Advance Life
Support level ground ambulance services are available through
San Juan County EMS. They do perform long distance ground
transports. I would stand firm with he [sic] provider and let
them know that the plan documents only allow for
reimbursement of medically-necessary services. You may want
to offer them the ground rate. [P]ay them directly only if
they agree to accept your payment as full consideration for
services provided. You can also offer to pay them at the rate
that would have been charged by San Juan Regional AirCare.
We have had several payors receive appeals from this
provider. They will attempt to coerce you through a lot of
bluster to pay the claim. As long as you are faithfully