Five California Ambulance Companies Settle Fraud Allegations for $11.5 Million

On May 4, 2015, the U.S. District Court Southern District of California unsealed a lawsuit filed by a whistleblower alleging illegal kickbacks involving five California ambulance companies and thousands of government healthcare enrollees transported by said companies. Allegedly, the misconduct began in 2009 and involved several serious violations of the state and federal False Claims Act. The lawsuit was filed by a whistleblower who operated a competitor ambulance service provider in the Los Angeles and San Diego areas. Due to his willingness to come forward, he is expected to receive $1.7 million as a reward under the False Claims Act.

Details of the alleged kickback scheme involving ambulance companies

Under the False Claims Act, kickback arrangements are considered highly unlawful because they can negatively impact the provider-patient relationship. Accordingly, any kickback arrangements involving Medicare or Medicaid enrollees is considered unlawful and will trigger liability under the False Claims Act, which imposes up to triple damages against defendants found to be engaging in these transactions.

Here, the lawsuit was filed against five total defendants, including Pacific Ambulance, Inc., Bowers Companies, Inc., Care Ambulance Service, Balboa Ambulance Service, Inc. and E.R. Ambulance, Inc.

According to the allegations, the companies sought to transport as many Medicare and Medicaid patients as possible, as these transports tended to result in higher reimbursements than those with private insurance providers. Consequently, the companies enticed area hospitals and skilled nursing facilities by offering deeply discounted and below-market prices to these facilities for contract ambulance services in exchange for exclusive rights to Medicare and Medicaid transport opportunities.

Known as a “swapping scheme,” government officials have long warned against this practice as not only illegal under the False Claims Act, but also wasteful, because it can create inflated Medicare and Medicaid costs for everyone.

According to the details of the recently unsealed lawsuit and settlement agreement, Pacific Ambulance and Bowers Companies agreed to pay a combined $8 million, while Care Ambulance settled for $2.2 million. The remaining allocation between Balboa and E.R. Ambulance was not immediately disclosed.

The U.S. Attorney for the Southern District of California said in a statement, “We will continue to work closely with our investigative partners to pursue those who refuse to play by the rules and offer kickbacks to induce health care referrals….”

Reporting fraud increases patient safety

The main crux of the prohibition against kickbacks and financial incentives is the avoidance of a financial “taint” upon the doctor-patient relationship. In other words, it is much more beneficial for a provider to suggest a referral to a patient based solely on that patient’s unique needs than based on a lucrative financial incentive.

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