Medical helicopter company Air Methods files for bankruptcy

By Dietrich Knauth

NEW YORK (Reuters) - Air Methods, a private equity-owned medical helicopter company, filed for bankruptcy protection on Tuesday with a plan to cut $1.7 billion in debt.

Air Methods' business had suffered recently due to rising interest rates, higher labor costs and a recent U.S. ban on "surprise" medical bills, according to court filings in Houston, Texas, bankruptcy court.

The company, acquired by private equity firm American Securities in 2017, entered bankruptcy with about $2.24 billion in debt. Air Methods has the support of a majority of its lenders, and it aims to complete its debt restructuring by the end of 2023, according to its court filings.

Air Methods' lenders are expected to control the company when it emerges from bankruptcy, and American Securities' current 95% equity stake will be wiped out.

Air Methods CEO JaeLynn Williams said in a statement that the restructuring will allow the company to reinvest in medical transportation services for people in rural and remote communities in the U.S.

"Over the past year, we have made meaningful progress optimizing our field operations, going in-network with leading commercial insurers and improving our cost structure," Williams said.

Air Methods, like other private equity-owned emergency medical services companies that have filed for bankruptcy in recent months, blamed the federal No Surprise Act for creating "red tape" that impaired its ability to collect payments from health insurers.

The No Surprises Act protects patients from "surprise" medical bills, typically sent to patients who unwittingly receive transportation services or treatment from an out-of-network provider, despite visiting a hospital or other medical facility that is in-network for their insurance.

The law impacted Air Methods' cash flow by pushing insurers and healthcare providers into a slow and understaffed "independent dispute resolution" process for out-of-network medical bills, according to the company's court filings.

Air Methods said that is has been "highly successful" in winning payment disputes so far, and has transitioned to more "in-network" relationships with insurers, but billing disputes have complicated the company's ability to make payments on its own debt.

Greenwood Village, Colorado-based Air Methods operates a fleet of 365 medical helicopters and fixed-wing aircraft from 275 locations in the U.S., and it makes 100,000 emergency medical transports a year.

Air Methods also provides Hawaii tourism and charter flights through its Blue Hawaii subsidiary and it retrofits helicopters to perform as firefighting aircraft through its United Rotorcraft subsidiary. Blue Hawaii and United Rotorcraft are not part of the company's bankruptcy filing.

(Reporting by Dietrich Knauth, Editing by Nick Zieminski)