National EMS Attorney Weighs in on Historic EMS Settlement

Recently, a press releaseissued by the U.S. Department of Justice announced that a number of EMS agencies agreed to settle a lawsuit alleging their violation of the Anti-Kickback Statute. Following the excerpt of the press release below is a commentary explaining the potential impact of this case on the industry, written by EMS attorney Douglas M. Wolfberg of Page, Wolfberg & Wirth, LLC, who served as an expert witness in the case.

"Seven ambulance industry defendants have agreed to pay the government a total of over $21 million to settle a False Claims Act lawsuit alleging that they knowingly submitted claims to the Medicare and Medicaid programs that violated the Anti-Kickback Statute, the Justice Department announced today.

The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid, and other federally funded programs. The Anti-Kickback Statute is intended to ensure that medical providers’ judgments are not compromised by improper financial incentives and are instead based on the best interests of their patients.

The settlements announced today resolve allegations brought in a whistleblower action filed under the False Claims Act in the U.S. District Court for the Eastern District of Texas by Stephen Dean. Dr. Dean alleged that East Texas Medical Center Regional Healthcare System, Inc. and East Texas Medical Center Regional Health Services, Inc. (together, “the ETMC Defendants”), and their affiliated ambulance company, Paramedics Plus, LLC (“Paramedics Plus”), offered kickbacks to several municipal entities to secure their lucrative ambulance business, including Emergency Medical Services Authority (“EMSA”), Alameda County, California, and Pinellas County Emergency Medical Services Authority in Florida (“Pinellas EMSA”). The False Claims Act authorizes private parties to file suit for false claims on behalf of the United States, and permits the United States to intervene in such suits, as it did here in part." 

Below is Wolfberg's response to the case. 

I served as an expert witness in the recent Paramedics Plus litigation, in which the government alleged violations of the Federal Anti-Kickback Statute (AKS) in procuring contracts, principally in Oklahoma. As this case represents one of the largest Federal settlements in EMS history, I’d like to provide some commentary on the lawsuit and what it means for the industry.

In my background as an EMS attorney with the national law firm of Page, Wolfberg & Wirth, as a professor of healthcare law, and as a former county, state and federal EMS official, I have worked extensively in applying, analyzing and advising clients under the Federal AKS. My partner Steve Wirth and I each have about 25 years’ experience working specifically with the AKS. Never before have we seen such a misapplication of this law by the Federal government – and this unfortunate prosecution can have significant effects on local EMS systems across the United States.  

The AKS cannot properly be applied to a situation where a public agency awards a contract to an ambulance company, but where it’s the public agency itself which bills Medicare and other Federal healthcare programs for the ambulance services rendered. Under its Oklahoma contract, EMSA – the public agency - owned and operated all of the ambulances, and Paramedics Plus was awarded a contract to staff those ambulances. This is a type of “public utility model” (PUM) contract. 

The “usual” type of arrangement in which the AKS could apply is where a public agency awards a 911 contract to an ambulance company, and then the ambulance company bills Medicare and other insurers directly as its compensation.  

The government failed to appreciate the critical difference between the type of PUM contract implemented by EMSA in Oklahoma and the “usual” type of ambulance contract where the ambulance company receives referrals that it bills to Medicare and other insurers. Paramedics Plus did not receive any “referrals” under the AKS – nor did Paramedics Plus bill a single dollar or a single claim in Oklahoma to Medicare, Medicaid or any other insurer. EMSA was the provider and all claims went out under its name and its provider number, and EMSA received all reimbursement for the services billed. 

In short, the AKS cannot apply where a public agency awards a contract to a vendor that can’t bill for any services, but instead all billing is done by the public agency that awarded the contract.

And beyond the significant legal flaw in the case is the Federal government’s effort to penalize a local agency’s thoughtful development of an EMS system that meets the needs of the local community in a way that was intended to simply minimize costs for the public agency – while delivering a high-quality system to the public. The government’s lawsuit alleged that a “profit cap” arrangement was the centerpiece of this alleged “kickback scheme.” In reality, Paramedics Plus refunded back into the local EMS agency excess revenues after paying its contract expenses – for the public good. These refunds benefitted a public agency, and therefore, the public. And, because the billing was done by EMSA and EMSA was the recipient of the reimbursement, all this meant was that the local government agency got to keep more of its own money and paid less of it to a vendor.

That’s like paying a kickback to yourself. That’s just not how the law works. 

Another key point: No one at Paramedics Plus personally benefited from the contracts that it has with the communities it serves. Paramedics Plus was investing back into the local EMS system for the good of the public it served, which is a far cry from the actions of some companies which seek only to bleed their local governments dry for every penny of profit they can squeeze. 

It’s surprising to see the Justice Department pursue this case when there are undoubtedly real violations of the law and real fraud that needs to be rooted out in the industry. Federal prosecutors and enforcement agents are noble professionals with a tough job, and we applaud their efforts to combat real fraud and abuse in healthcare. But sometimes they get it wrong, and it’s my professional judgment – and that of quite a few other lawyers – that this was one such case. It’s something that the EMS industry should watch, as this case could have significant impact on local governments and how they go about organizing their local EMS systems. It’s never a good outcome – or sound public policy – when $21 million that is better used at the local level is instead sent off to the Federal government in the form of a massive penalty for an arrangement that benefitted local citizens. This should send chills down the spine of every EMS system administrator.