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Eagle Air Med Corp. v. Sentinel Air Medical Alliance, LLC

United States District Court, D. Utah, Central Division

August 30, 2019

EAGLE AIR MED CORPORATION, a Utah corporation; and VALLEY MED FLIGHT INC., a North Dakota corporation, Plaintiffs,
v.
SENTINEL AIR MEDICAL ALLIANCE, LLC, a Wyoming limited liability company; and JEFFREY FRAZIER, Defendants.

          MEMORANDUM DECISION AND ORDER

          TENA CAMPBELL, U.S. DISTRICT COURT JUDGE

         Plaintiffs 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.

         BACKGROUND

         Mr. 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 plans).

         This 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 of Michigan.
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 necessary.
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 percent margin.
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).)

         In 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 here.

         The 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:

Jeff,
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!!
Best Regards,
Jeff

(Ex. 2 to Pls.' Opp. to Mot. Summ. J. (ECF No. 227-2).)

         Mr. Frazier also sent an October 3, 2014, email to Michelle Greenfield, a claim administrator with Tall Tree Administrators about a claim from Eagle:

Michelle,
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 ...

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