In a 24-page decision on EagleMed LLC v. Travelers, the Kansas Supreme Court reversed the Court of Appeal’s dismissal of the proceeding, as well as the Appeal Board’s order to pay EagleMed in full. In doing so it remanded back to the Appeals Board for factual findings as to the “usual and customary” language as intended by the 2012 fee schedule in a manner which reflects consideration of both federal and state laws. There may be expected litigation to continue for some time given the current result.

At issue is conflict raised between federal law under the Airline Deregulation Act (ADA) and 2012 Kansas state fee schedule. The ADA prohibits states from enacting or enforcing any law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier that may provide air transportation.”  Kansas requires usual and customary review of medical charges under a fee schedule, and provides a process for determination of fee disputes under the fee schedule.

For context, EagleMed had submitted invoices from about $21,500 to $33,000, of which Travelers paid about $4,700 to $8,000.  (***side note, the charges are all fairly dated now with some upwards of $50,000—this was raised in argument supportive of  air ambulance fee regulation to avoid exponential increases).  Travelers argued that the payments were a reasonable interpretation of the amount allowable under federal Medicare reimbursement rates, so the balance was unreasonable.  Fee dispute proceedings were initiated in the Division of Workers Compensation on each claim, which led to consolidation of multiple claims into a single action. Those were then litigated from ALJ, to Appeals Board, back to ALJ, back to Appeals Board, on to Court of Appeals, and now with the Kansas Supreme Court over the course of several years. 

At the appellate level, EagleMed generally argued the federal law preempts the state fee schedule, and in turn allows them to set the pricing based on what they establish to be market value without state review—i.e., essentially what they charge is what’s due.  Travelers generally argued the federal law doesn’t address (or require) payment of air ambulance services to an injured worker under the state WC law, however the state WC law requires this subject to review of medical fee disputes to determine fair and reasonable payments. 

The decisions throughout the process have been varied. The ALJ determined that the division was free to establish rates for air ambulance without regard to the federal law (“reverse preemption” under McCarran-Ferguson Act prohibiting Congress from interfering with state laws regulating the business of insurance) as the fee schedule and fee dispute process were integral parts of regulating and taxing the business of WC insurance. The Appeals Board determined the McCarran-Ferguson Act to be inapplicable, and further that neither the state fee schedule nor ADA specifically address an air ambulance.  Still, based on federal preemption the Board remanded to the ALJ for findings on whether the charges were usual and customary under the ADA (rather than state fee schedule). On remand the ALJ made no factual findings, instead deciding that the division had no authority to set rates and ordered the payment in full.  On further Board appeal, the Board affirmed the ALJ’s decision on payment of full charges.  Finally, the Court of Appeals dismissed the process altogether, concluding that the division had no authority under the ADA to resolve the fee dispute but left open suggestion for other legal avenues to address payment.

Notably, the Court states “federal law establishes no duty for states to pay air ambulance claims for services provided injured workers. That obligation, if any, must come from state law.”  This seems to indicate that the Court has taken a more narrow view of the federal air carrier law, in attempt to avoid preemption if possible.  The Court also made a point of outlining the state interests in the WC system providing benefit for both employers/employees, such that requiring blind payment of air ambulance services would undermine the interests of those who rely on the WC system.