Experts in Case
It is a long story. In 1978, Congress passed the Airline Deregulation Act (ADA), which prohibited states from regulating airlines, including the price of airline tickets. The wording of the Act has been interpreted to prohibit states from regulating prices charged by fixed-wing and rotary-wing air ambulances. Some (but not all) courts have stretched the ADA to mean that it prevents state regulations of amounts paid by third-party insurance companies for covered air-ambulance transports.
Private equity firms saw the opportunity to buy air-ambulance companies, charge outrageous prices, and use the threat of balance billing patients to coerce health plans and employer-sponsored plans to pay unreasonable amounts. The federal No Surprises Act, passed in 2020, was intended to put the brakes on escalating air-ambulance payments by prohibiting balance billing of patients and establishing an Independent Dispute Resolution (IDR) process to set the amount health plans had to pay air-ambulance providers. Unfortunately, the IDR process has so far not set reasonable payment rates, sometimes awarding providers more than their billed charges. In any case, the IDR process does not cover workers’ compensation medical claims.
How much workers’ compensation carriers in Texas should pay air ambulances became an issue in around 2012. Until then, carriers had paid—and air ambulances had accepted—payment of 125% of Medicare’s air-ambulance rate, assuming the services were covered by the Medical Fee Guideline adopted in 2003. Then, several providers, including Petroleum Helicopters Inc. (PHI) and Global Medical Response (GMR), began filing medical disputes claiming they had the right to receive payment for their billed charges. The Division of Workers’ Compensation initially found for the air ambulances, and several carriers, chief among them Texas Mutual Insurance Company (TMIC), appealed to the State Office of Administrative Hearings (SOAH).
In 2014, TMIC’s counsel, Matt Baumgartner and Pete Schenkkan, and counsel for other workers’ compensation carriers, James Loughlin, retained Ron Luke, JD, PhD, and RPC as their economic experts for the SOAH hearing. TMIC, the attorneys, and RPC had collaborated on workers’ compensation matters for many years, including disputes over the stop-loss provision of the Hospital Fee Guideline and the defense of the 2003 Medical Fee Guideline.
Dr. Luke, assisted by industry expert Jeff Frazier, developed a method for determining payments for rotary-wing air ambulances (helicopters) using payment adjustment factors (PAFs) to the Medicare rates. The PAFs were based on air-ambulance operating costs at reasonable flight volumes, inflation rates for air-ambulance operating costs, and increases in Medicare payment rates. Increases in Medicare rates had not kept pace with inflation in air-ambulance operating costs. RPC calculated annual base and mileage PAFs to cover inflation and to provide a reasonable profit margin.
In 2015, the administrative law judge accepted RPC’s general approach but substituted a different payment adjustment factor. All parties appealed the SOAH decision through Texas courts,[1] and the case was eventually remanded to SOAH for new administrative hearings in 2025.[2] This time there were two hearings: one for PHI and one for GMR.[3]
TMIC again retained Dr. Luke and RPC as their economic experts. Jeff Frazier again provided industry expertise. Matt Baumgartner was the lead counsel for TMIC, which took the lead for the Texas workers’ compensation insurance industry. This time, RPC consultants Brian Piper, PhD, and Cameron Holstead, CPA, CVA, PhD, were involved. Dr. Piper prepared a report and testified on the flaws in the regression model prepared by the air ambulances’ economic expert. Dr. Holstead analyzed the new accounting data from PHI and GMR and the new data on inflation rates. Dr. Luke prepared a new report using the same methods and data sources as in the 2015 report. He also criticized the failure of the air ambulances’ expert to advance a payment model that followed the requirements of the Insurance Code and Texas Department of Insurance rules.
On January 16, 2026, the SOAH administrative law judges issued decisions on the PHI case[4] and the GMR case.[5] Those decisions are attached here. In short, SOAH found the RPC payment method and PAFs were reasonable and consistent with TDI rules. They also found TDI’s authority to set the maximum amount workers’ compensation carriers had to pay was not preempted by the ARA. Because some carriers had paid 125% of Medicare for the disputed claims, they were ordered to make additional payment per the RPC report. Still, the air-ambulance companies were considered the non-prevailing parties and were assessed SOAH’s costs for the hearings. The conclusions of law were the same in both cases. Selected conclusions from the GMR case are shown below.
- The relevant reimbursement provisions in Rule 134.1 and Texas Labor Code section 413.011 are not preempted by the Airline Deregulation Act. Tex. Mut. Ins. Co. v. PHI Air Med., LLC, 610 S.W.3d 839 (Tex. 2020).
- Between 2012 and 2015, the reimbursement for air-ambulance services was not governed by a Division fee guideline or negotiated 28 Tex. Admin. Code § 134.1(e)(1)-(2).
- The reimbursement for air-ambulance services provided by GMR Providers must be a fair and reasonable 28 Tex. Admin. Code § 134.1(e)(3).
- A fair and reasonable reimbursement shall (1) be consistent with the criteria of Texas Labor Code 413.011; (2) ensure that similar procedures provided in similar circumstances receive similar reimbursement; and (3) be based on nationally recognized published studies, published Division medical dispute decisions, and/or values assigned for services involving similar work and resource commitments, if available. 28 Tex. Admin. Code § 134.1(f); see Tex. Labor Code § 413.011.
- Fee guidelines must be fair and reasonable and designed to ensure the quality of medical care and to achieve effective medical cost control. The guidelines may not provide for payment of a fee in excess of the fee charged for similar treatment of an injured individual of an equivalent standard of living and paid by that individual or by someone acting on that individual’s behalf. In establishing fee guidelines, the Commissioner shall consider the increased security of payment afforded by the TWCA. Tex. Labor Code § 413.011(d).
- The insurance carrier shall consistently apply fair and reasonable reimbursement amounts and maintain, in reproducible format, documentation of the insurance carrier’s methodology(ies) establishing fair and reasonable reimbursement amounts. Upon request of the Division, an insurance carrier shall provide copies of such documentation. 28 Tex. Admin. Code § 1(g).
- As the appealing party, Insurers have the burden of proving by a preponderance of the evidence the proper reimbursement amount to be paid to GMR Providers for the air-ambulance services provided to the injured workers in the 348 cases involved in this 1 Tex. Admin. Code § 155.427; 28 Tex. Admin. Code § 148.14(a)-(b); see Patients Med. Ctr. v. Facility Ins. Corp., 623 S.W.3d 336, 341, 343 (Tex. 2021).
- Insurers’ method for calculating a fair and reasonable reimbursement is appropriate in these cases. See Tex. Labor Code § 413.011(a), (d).
- The preponderance of the evidence establishes that Insurers’ proposed reimbursement amounts for RWAA, as reflected in Attachment A, are fair and reasonable pursuant to Rule 134.1(f) and Texas Labor Code § 011.
- Insurers failed to prove that Dr. Luke’s payment method applies to fixed-wing air-ambulance services. Therefore, Insurers must pay the amounts ordered in the underlying MFDR decisions, as reflected in Attachment B.
- GMR Providers’ proposed reimbursement amounts do not represent a market value for air-ambulance services and are not fair and reasonable reimbursements pursuant to Rule 134.1 and Texas Labor Code section 413.011.
- GMR Providers’ proposed reimbursement amount is not calculated pursuant to Texas Labor Code § 413.011(a)-(b).
- GMR Providers’ proposed reimbursement amounts do not represent a market value for air-ambulance services and are not fair and reasonable reimbursements pursuant to Rule 134.1 and Texas Labor Code section 011.
- GMR Providers’ proposed reimbursement amount is not calculated pursuant to Texas Labor Code § 011(a)-(b).
Before the 2025 hearing, TMIC had not asked RPC to develop a payment method for fixed-wing air ambulances and there were disputed claims for these services in the GMR hearing. The carriers had to pay billed charges for the fixed-wing air ambulance claims, despite the fact that GMR had submitted its fixed-wing claims as non-preapproved emergency transports. It is well understood in the industry that fixed-wing transports are not emergencies. After the hearing, TMIC retained RPC to develop a payment method for fixed-wing air ambulances, comparable to the one for rotary wing air ambulances SOAH upheld. SOAH may be called upon to decide whether RPC’s method is valid for fixed-wing transports in the next several months.
The long story that began in 2012 keeps getting longer. GMR and PHI appealed the SOAH decisions to the district court[6] and curiously filed motions for contempt against the SOAH administrative law judges in federal court.[7],[8] RPC expects to continue to be involved on behalf of TMIC and other Texas workers’ compensation carriers.
[1] Tex. Mut. Ins. Co. v. PHI Air Med., LLC, Dkt. No. D-1-GN-15-004940, Order (2016 District Court Ruling) (Tx. Dist. Ct. Dec. 15, 2016).; PHI Air Med., LLC v. Tex. Mut. Ins. Co., 549 S.W.3d 804 (Tex. App.—Austin 2018), rev’d 610 S.W.3d 839 (Tex. 2020); Tex. Mut. Ins. Co. v. PHI Air Med., LLC, 610 S.W.3d 839 (Tex. 2020); PHI Air Med., LLC v. Tex. Mut. Ins. Co., 641 S.W.3d 542 (Tex. App.—Austin 2022, no pet.).
[2] SOAH Docket Nos. 454-15-0681, et al.; Texas Mutual Insurance Company, et al. v. PHI Health, LLC.
[3] Docket Number 454-15-1877.M4, et al.; Texas Mutual Insurance Company, et al. vs. Air Evac EMS Inc., et al. (GMR matters).
[4] SOAH Docket Nos. 454-15-0681, et al.; Texas Mutual Insurance Company, et al. v. PHI Health, LLC.
[5] Docket Number 454-15-1877.M4, et al.; Texas Mutual Insurance Company, et al. vs. Air Evac EMS Inc., et al. (GMR matters).
[6] Cause No. D-1-GN-26-001681; PHI Health, LLC, v. Texas Mutual Insurance Company, et al.
[7] Civil Action No. 1:26-cv-1028; PHI Health, LLC, v. Crawford.
[8] Civil Action No. 1:16-cv-00060-SS; Air Evac EMS Inc. v. Sullivan.
If you have questions or would like to discuss a case, please contact Ron Luke, JD, PhD, at 512.371.8166, rluke@rpcconsulting.com.
RPC is not a law firm and nothing in this email or blog post is intended as legal advice. The information and attachments are offered as general information. Readers who are not attorneys should consult their legal counsel before taking any action or using the attachments.