Mark Huber is an aviation industry veteran who has worked in the flight training, aircraft sales, aircraft component, and airport development businesses. He has flight time in more than 50 different and diverse aircraft, including helicopters, aerobatic aircraft, vintage warbirds, jet fighters, business jets and turboprops, and transport-category aircraft. He has jumped out of several of these—on purpose—with a parachute. His defense and aviation journalism has been published in a variety of national and international periodicals.

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Mark Huber

The largest helicopter EMS company in the U.S. posted slightly lower quarterly year-over-year net income for the quarter ended June 30 but higher income for the first six months of the year. Air Methods also reported significantly higher quarterly revenue for the period, up to $292.6 million from $263.6 million a year ago. Net income for the quarter fell to $26.98 million from $27.06 million from the year-ago period but climbed for the first six months of the year to $47.4 million from $39.9 million in the first six months of last year. While the overall financial report was good, there were hints of mild and looming turbulence.

 


Air Methods noted that reimbursements from <a href="http://www.ainonline.com/aviation-news/business-aviation/2016-08-23/hems-odds-insurers-medicare">insurers of patient transports</a> continue to stretch out, to 155 days from a previous average of 131 days. “Receivables were up by $13.9 million during 2016, compared to $1.6 million in 2015. Days’ sales outstanding (DSOs) related to patient transports, measured by comparing net patient transport revenue for the annualized previous six-month period to outstanding open net accounts receivable, were 155 at June 30 this year compared with 131 at the same time last year. The increase in DSOs is attributed in part to additional time taken by private insurers to review claims and related documentation, including proof of medical necessity, before processing and to an increase in the number of accounts subjected to the extended review process by private insurers. We do not expect the claims processing times for private insurers to improve in the near term,” the company said.

 


It also noted that it expects to receive less than full reimbursement from private insurers. “Although price increases generally drive up net reimbursement per transport from insurance payers, the amount per transport collectible from self-pay patients, Medicare and Medicaid does not go up proportionately with price rises. Therefore, depending upon overall payer mix, price hikes will usually raise the percentage of uncollectible accounts. Certain insurance companies have also not raised their reimbursement rates proportionately with recent price adjustments to the same extent they did with previous higher prices. Continued price increases may cause insurance companies to limit coverage for air medical transport to amounts less than our historical collection rates.”

 


Air Methods also noted that the Affordable Care Act (PPACA) a k a Obamacare had not produced a demonstrable increase in the number of patients it transported who had private insurance coverage. “One of the primary goals of PPACA was to reduce the number of uninsured Americans. Although we have experienced a movement from self-pay patients to Medicaid in our payer mix in prior periods, to date we have not experienced an increase in the percentage of transports covered by private insurance as a result of PPACA.”

 


<h2>Scheduled Deliveries Could Change</h2>

 


While it has taken delivery of 38 new helicopters during the first half of the year and expects to take six more by year-end, it also hinted that it is in the process of curtailing its massive buy of 200 Bell 407GXPs, worth almost $900 million, announced last year. Air Methods stated, “In the first quarter of 2015, we entered into an agreement to purchase 200 Bell 407GXPs totaling $882.6 million over a ten-year term beginning in 2016. We expect to take delivery of 12 aircraft under this agreement in 2016, including seven that have already been delivered. During 2016 we began discussions with Bell Helicopter Textron to modify the terms of the purchase agreement, including the total number of aircraft to be delivered under the agreement and application of related deposits. In the event we exercise our right to termination for convenience or are prevented from taking or decline to take delivery of the aircraft for any other reason, we may forfeit nonrefundable deposits up to $6.3 million. We intend to use the new aircraft for base expansion opportunities as well as to replace older aircraft in the fleet. We plan to either sell the aircraft which are replaced, use them for spare parts or redeploy them into the backup fleet.”

 


"Air Methods remains committed to Bell Helicopter as our preferred single-engine aircraft provider and to the Bell 407GXP as our preferred single-engine aircraft. We rely heavily on our aircraft to support our promise of giving more tomorrows, and given the capabilities and performance of the Bell 407GXP, it continues to be the right fit for our needs. We will not receive new aircraft deliveries for the remainder of the year and have scaled back our deliveries for 2017, however, we look forward to continuing our long-term partnership with Bell Helicopter for the duration of our 10-year commitment,"&nbsp;the company told AIN on September 14.

 


Revenue and net income from the company’s air tourism division declined in the quarter from the year-ago period, dropping to $32.2 million from $34.4 million and to $2 million from $3.9 million, respectively. Air Methods’ United Rotorcraft modifications business posted a 66.4 percent climb in revenue for the quarter, to $7.4 million, on the strength of contracts to provide air medical interiors under a military contract, but still managed to post a narrow quarterly loss of $200,000 on external sales.&nbsp;

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