Pacific Ambulance: Discounted Trips for Exclusive Medicare Referrals

In the Pacific Ambulance settlement, five Southern California ambulance companies agreed to pay more than $11.5 million collectively to resolve allegations of ambulance swapping. The Justice Department alleged that they offered deeply discounted facility trips in exchange for exclusive Medicare referrals. The alleged bargain saved facilities money on the rides they paid for, while Medicare Part B transports subsidized the discount.

Pacific Ambulance, Bowers Companies and Care Ambulance Service were based in Orange County. Balboa Ambulance Service and E.R. Ambulance were based in San Diego. A competitor brought the False Claims Act case, and the Department of Health and Human Services Office of Inspector General and the FBI investigated it. The Justice Department said Rural/Metro acquired Pacific and Bowers after the alleged misconduct.

What Are Some Examples of Kickbacks in Healthcare?

Discounted ambulance services for a hospital or skilled nursing facility, offered in exchange for Medicare referrals, were the alleged kickbacks in the Pacific case. The benefit went to the facility through a lower bill. The ambulance supplier allegedly received exclusive access to more lucrative patient transports in return.

That payment split explains the incentive. A facility pays for some transports from its own bundled payment. Other transports can be billed separately to Medicare by the ambulance supplier. A discount on the facility’s own bill therefore benefits the party that can direct the separately paid business. The same facility sits on both sides of the commercial decision: buying rides and sending patients.

The government’s allegation connected those decisions. Pacific and the other settling suppliers allegedly offered deep discounts, often below cost, on the facility business to obtain the Medicare referrals. The government alleged that the resulting Part B claims subsidized the discounted trips.

We call that a discount with someone else’s money. Under the government’s allegations, the facility got cheaper trips, the supplier got Medicare business, and taxpayers financed the exchange.

The recipient matters. Payments or benefits offered to patients seek business through the passenger. In facility swapping, the financial benefit reaches the institution directing the ambulance business. Following the money means looking at the price concession as well as the referral.

Why the Discount Needed the Referrals

HHS-OIG’s 1999 ambulance advisory opinion examined whether a discount made commercial sense without the other, undiscounted business. That is the economic question behind swapping: what makes the cheap contract worth accepting?

An ambulance supplier has costs beyond the miles that earn a payment. Under Medicare’s ambulance payment manual, mileage payment covers miles with the patient aboard. The miles to the patient and back to quarters are unpaid. Those costs still have to be financed. That makes the expected mix of paid work important when a supplier prices a facility contract.

The opinion identified below-cost prices as particularly suspect. It also described a revealing comparison: a supplier offers a facility a lower price than it offers another buyer with the same or greater volume, when that other buyer has no federal-program referrals to offer. The difference is the business the purchaser can send afterward.

For a pricing or contract employee, that comparison goes beyond the quoted rate. We look at what the supplier expected to earn from the relationship as a whole, and which referrals made the facility price attractive. A contract priced around expected Medicare business has a different commercial story from the one the facility invoice tells by itself.

OIG also explained the pressure this bargain can create. A supplier losing money on discounted trips may have an incentive to increase utilization or engage in abusive billing to recover those losses. In the Pacific case, the Justice Department alleged the connection to false Part B claims directly. The discounted work and the Medicare work belonged to the same alleged bargain.

Why a Competitor Brought the Case

The whistleblower competed in the San Diego, Orange and Los Angeles County ambulance markets. The case began with someone who knew the market from outside the settling companies.

That vantage point matters in a pricing case. A competing supplier may know what it costs to serve a facility, what price it offered and where the referral business went. A losing bidder can see a price that makes little commercial sense on its own, followed by a shift in patient referrals. Those observations concern the bargain that secured the business, before a crew ever arrives for a pickup.

A crew member sees the patient and the trip. The contract negotiator sees the expected mix of facility-paid and Medicare-paid work. The competing bidder sees the price it had to beat.

The Pacific case makes that outside perspective concrete. The competitor brought a qui tam case in the Southern District of California, and the federal government joined it. Market knowledge supplied a route into a case about health care referrals and government claims.

What Evidence Is Needed to Report Fraud?

For alleged ambulance swapping, the useful evidence connects the facility’s discounted price, the referrals sought in return and the government-paid transport business. We work with the person who understands those connections, whether their knowledge comes from bidding, contract negotiations, facility operations or billing.

We examine contract terms, communications, referrals and billing together to explain what business the supplier expected in return for the discount. We connect that pricing and referral history to the crew’s account of the ride and any physician certification statement behind the claim.

We examine the connection between the promised business and the discount with you. A facility employee may understand why one ambulance supplier received the calls. A pricing employee may understand the revenue assumptions behind a quote. A competitor may be able to explain why that quote was striking in the local market. Your knowledge of the arrangement gives the paperwork meaning.

The Same Bargain From the Hospital Side

Four Houston-area hospitals agreed to pay $8.6 million in a separate swapping settlement announced on October 4, 2017. The government alleged that they received free or heavily discounted ambulance transports in exchange for referring other lucrative Medicare and Medicaid business to the same suppliers. Without that alleged arrangement, the hospitals would have owed substantially higher rates for the transports they purchased.

The comparison puts the facility’s saving in focus. The Southern California resolutions concerned ambulance companies offering the discounts. The Houston resolutions concerned hospitals receiving them. Both show why we examine the purchasing side of an ambulance relationship as closely as the company submitting the transport claim.

For a hospital contracting or finance employee, the facility’s own bill can therefore be an important part of the story. The saving to the hospital explains what it received. The separately paid referrals explain what the supplier allegedly wanted in return.

What Is the Reward for Uncovering Fraud?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. In the Pacific case, the Justice Department announced that the competitor would receive more than $1.7 million as part of the resolution.

You Know What the Price Was Buying

If you priced the facility work, negotiated the referrals or competed against the arrangement, talk with our whistleblower experts about the bargain behind the ambulance contract. We build the case with you and bring in ambulance fraud whistleblower lawyers who understand facility discounts and Medicare referral arrangements. We stay at your side throughout, building your strongest ambulance swapping whistleblower case.