Feds Intervene in Alleged $20M Ambulance Kickback Scheme

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By Eric Topor

A Texas health system paid an Oklahoma agency and its president $20 million in cash bribes in exchange for lucrative ambulance service contracts over 15 years, federal prosecutors said ( United States ex rel. Dean v. Paramedics Plus, LLC , E.D. Tex., No. 14-cv-203, complaint in intervention 1/23/17 ).

The U.S. Attorney’s Office for the Eastern District of Texas partially intervened Jan. 23 in a whistle-blower lawsuit, filed under court seal in 2014, accusing East Texas Medical Center Regional Healthcare System (ETMC) of paying the kickbacks to Oklahoma’s Emergency Medical Services Authority (EMSA). Specifically, the government said ETMC concocted the kickback scheme with EMSA president and co-defendant Herbert S. Williamson, and paid the kickbacks through checks, bank wires and inflated service contracts, mostly through ETMC’s ambulance service company, Paramedics Plus LLC.

The government said it paid the defendants over $70 million in Medicare reimbursements and over $38 million in Medicaid reimbursements just from 2009 through 2013, and it was seeking treble damages on all payments tainted by the kickback scheme, plus monetary penalties for each individual false claim submitted. The FCA authorizes monetary fines of up to $11,000 for each false claim submission.

The U.S. Attorney’s Office declined to comment on whether criminal charges against Williamson would be coming in the future. In a statement provided to Bloomberg BNA, the EMSA stated that it “makes every effort to adhere to applicable rules, regulations, and laws,” and the agency “looks forward to continuing our mission long after this issue is resolved.”

Prosecutors said ETMC’s kickbacks ranged from six- and seven-figure cash transfers around key contract renewals, to over $50,000 in travel expenses for Williamson, spa visits, parties and steak purchases. They said Williamson directed ETMC and Paramedics Plus to make monetary contributions to various Oklahoma municipal officials to ensure the EMSA’s continuing authority over ambulance service contracts for Oklahoma City and Tulsa, Okla.

In a statement provided to Bloomberg BNA by the ETMC, Paramedics Plus President Ron Schwartz characterized Dean and the government as “seeking money from us and others” through the lawsuit. Schwartz said Paramedics Plus returned profits back to the EMSA in a publicly disclosed arrangement, and he said the company “expect[s] to be vindicated” in defending against the lawsuit.

Government Targets Those Responsible

Whistle-blower Stephen Dean initially brought the allegations against the defendants to the government’s attention and described the operation of the alleged kickback scheme. However, Dean didn’t identify Williamson as having a role in the scheme, or name Williamson as a defendant. The government specifically added Williamson as an individual defendant in its own complaint, and detailed allegations of his integral role in initiating and sustaining the alleged kickback scheme.

The investigation and prosecution of Williamson individually could be the result of the Department of Justice’s 2015 directive (informally known as the Yates memo) from former Deputy Attorney General Sally Q. Yates to focus more on holding culpable individuals accountable in corporate fraud investigations.

Whistle-blowers like Dean are typically entitled to 15 percent to 25 percent of any eventual recovery from an FCA action. DOJ statistics show that the chances of a financial settlement or award from an intervened FCA action, and the amount of recovery, are far greater than when the government declines to intervene and a whistle-blower chooses to continue to pursue a case alone. Counsel for Dean didn’t respond to Bloomberg BNA’s request for comment on the government’s decision to intervene in the action.

Impact on Ambulance Service

Acting U.S. Attorney Brit Featherston said in a statement that “[k]ickback schemes are anti-competitive, undermine the integrity of our nation’s health care programs, and wrongly prioritize profits over patient care.”

The EMSA said in its statement that the case “is in no way related to the high quality care that the EMSA system provides to all patients.” However, prosecutors described how the alleged kickbacks did in fact affect ambulance services provided by the EMSA.

The complaint describes how Paramedics Plus, which contracted with the EMSA to provide ambulance services within the EMSA’s jurisdiction, was forced to “cut corners” due to the amount of its revenue that went to paying kickbacks.

Paramedics Plus “avoided training and personnel expenses” to make sure enough money was available to pay kickbacks to the EMSA and Williamson, according to prosecutors. The complaint alleges Paramedics Plus executives were forced to forgo paying drivers and paramedics retention bonuses to stem high paramedic turnover because the company “would not have enough excess profits to make [Williamson] whole.”

Further, the government alleged internal documents showed that Paramedics Plus halted spending, including training expenses, in 2010 to make sure it had enough funds on hand to pay Williamson a promised $4.8 million kickback.

James & Hoffman PC and the Law Offices of Patrick J. O’Connell PLLC represented Dean.

To contact the reporter on this story: Eric Topor in Washington at etopor@bna.com

To contact the editor responsible for this story: Peyton Sturges at psturges@bna.com

For More Information

The government's complaint is at http://src.bna.com/lD0.

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