SALTVILLE — Shootings and stabbings are rare in this town of 2,000. When sirens occasionally disturb the peace, it’s likely the local rescue squad responding to an automobile crash, or tending to one of the health problems of an aging population.
So what kept the Saltville Rescue Squad so busy between 2005 and 2011?
Why did its ambulances make repeated trips to the homes of three residents, logging more than 1,000 nonemergency transports?
Federal prosecutors say it was part of a scheme to defraud Medicare of nearly $1 million – and to enrich a volunteer rescue squad and its president in the process.
The rescue squad is accused of repeatedly transporting three patients to Abingdon, 31 miles away, for dialysis treatment and then illegally billing the government and a private insurance company.
Medicare covers such transports only when the patient is bedridden. The three Saltville patients were able to get around just fine, prosecutors say.
In fact, they were seen walking to an ambulance that pulled up to their homes, climbing onto a waiting gurney, and being driven away, an indictment alleges.
By repeating that process time and time again, the rescue squad and President Eddie Louthian Sr. are charged with bilking Medicare and Anthem Blue Cross Blue Shield out of $880,000.
In a trial set to begin this week in U.S. District Court in Abingdon, prosecutors have taken the unusual step of indicting the rescue squad as a corporation. Louthian will be tried at the same time.
It’s all part of a larger crackdown on health care fraud in Western Virginia and across the country, U.S. Attorney Timothy Heaphy says.
“There’s a strong incentive, unfortunately, for people to cheat,” Heaphy said during an interview in his Roanoke office, where two years ago he announced the formation of a task force to fight health care fraud.
Nearly 30 cases are currently pending in the federal court’s Western Virginia District, which stretches from Winchester to Danville and all the way to the western tip of the state.
Nationally, the number of health care fraud investigations conducted by the FBI has grown to more than 2,500 a year.
Government insurance programs such as Medicare and Medicaid, and the taxpayers who fund them, are often the victims.
Too often with government programs, “you just submit a voucher for payment,” Heaphy said, “and you can do less work and make more money.”
Revenues, salaries attract attention
The nearest hospital is more than a half-hour’s drive away by the time you reach the town limits of Saltville, marked by signs welcoming you to the “Salt Capital of the Confederacy,” a tribute to the role nearby salt marshes played in the Civil War.
In the case of a medical emergency, that means a trip by ambulance to either Abingdon or Marion.
And for the Saltville Rescue Squad, it means lots of reimbursements.
In a financial report filed with the Internal Revenue Service for the 2010 fiscal year, the most recent records available, the rescue squad listed $462,821 in revenue from service billing fees.
Total revenue for the year was $532,544.
Saltville’s revenues were substantially higher than those of 10 other Western Virginia rescue squads of comparable size (those serving towns with populations of 2,000 to 8,000) for which IRS records were available.
Those figures, along with relatively generous salaries for top officials – Louthian made $52,000 as president in 2010, the indictment states – is what first attracted the attention of federal investigators.
In January, a grand jury indicted the rescue squad on charges of health care fraud, making false statements about a health care matter, and money laundering. Louthian faces similar charges, plus an allegation of lying to the grand jury during its investigation.
A second rescue squad member charged in the case, Monica Jane Hicks, pleaded guilty in June to health care fraud.
The trial for Louthian and the rescue squad, scheduled to begin Monday and last two weeks, will present conflicting views on whether the bills to Medicare were legitimate.
“I think there’s no question that the patients were in legitimate need of dialysis, and there’s no question that Medicare covers transportation for dialysis patients,” said Louthian’s attorney, Michael Khouri.
There is a question, however, about whether the three patients in question met the nonambulatory criteria for reimbursement.
Medicare defines a bedridden person as someone unable to walk, get up from bed without assistance or sit in a chair. Khouri said he plans to challenge the government’s interpretation of those rules.
Homing in on health care fraud
The Saltville case is just one in the growing number of such prosecutions across the United States.
Fraud consumes between 3 percent and 10 percent of total health care expenses, according to the FBI. The current cost of health care nationally is an estimated $2.4trillion. As the U.S. population ages, the FBI says, that figure is expected to exceed $4.1 trillion by 2016, making up nearly 20 percent of the gross domestic product.
Medicare and Medicaid, the government programs for senior citizens and the poor, are considered especially vulnerable to abuse, in part because of their size and complexity.
Improper billing to Medicare in 2009 alone cost $24.1billion, according to estimates from the Government Accountability Office, the investigative arm of Congress.
In fiscal year 2011, 2,690 health care fraud cases investigated by the FBI led to 1,676 charges and 736 convictions across the country, with other cases pending.
In Western Virginia, 27 cases are on the docket. Another dozen or so are under investigation, said Brian McGinn, a spokesman for the U.S. attorney’s office.
Recent cases include a Covington home health care business convicted of misrepresenting the training of its aides, a Pennington Gap dentist sent to prison for drilling his patients’ teeth unnecessarily to collect Medicaid funds, and pending charges against a Pulaski County doctor accused of prescribing painkillers after losing her licence for Medicare fraud.
And while they predate the formation of the U.S. attorney’s task force, Heaphy also cited the criminal prosecutions of two major pharmaceutical companies, Purdue Pharma and Abbott Laboratories.
Purdue was fined $634.5 million for improper marketing of OxyContin, a painkiller linked to rampant abuse. In May, Abbott Laboratories agreed to pay $1.5 billion in civil and criminal penalties for illegally marketing an anti-seizure medication for unapproved purposes.
Both fines, among the largest of their kinds in the country, were the result of proceedings in Abingdon’s federal court, which is part of Heaphy’s jurisdiction.
Money collected from the two cases will be used to repay government programs that covered the prescriptions and other costs. Various state and federal agencies involved in the prosecution also got a cut of the proceeds.
Heaphy hopes the cases accomplished at least two goals: returning lost funds to government programs, and creating a culture of compliance within the health care industry that eventually will bring costs down.
“Health care costs too much,” Heaphy said. “And the price is affected to a certain extent by fraud.”
Heaphy said the crackdown on fraud complements President Barack Obama’s overhaul of health care.
“It’s one thing to try to ensure that people have adequate coverage, but you have to tighten the bolts in the system” to prevent losses from illegal billing, he said.
Louthian’s attorney sees it differently.
“They have to try to collect money and save money in order to pay for Obamacare,” Khouri said.
“I think that U.S. attorney offices all over the country are looking at cases that they otherwise would not look at in order to collect funds to pay for the Patient [Protection and] Affordable Care Act.”
During a telephone interview from his law office in Irvine, Calif., Khouri raised a question that has been circulating through Saltville:
In the event of a conviction and a hefty fine, will the rescue squad survive?
“You have to wonder why a prosecuting authority is trying to put a rescue squad out of business,” Khouri said.
Governance, accountability are ‘red flags’
By 2008, word was out in Saltville that federal officials were investigating the rescue squad.
Investigators who trailed the ambulances to the homes of the three dialysis patients, identified in the indictment only by their initials, saw the three supposedly bedridden people walking from their homes to the waiting ambulance.
After the rescue workers realized they were being watched, the indictment alleges, the patients were promptly put on stretchers for the entire transport.
But later, investigators saw the same people walking and driving around town.
In fact, one woman resisted when told by rescue workers that she had to be carted across her front yard rather than walking to the ambulance.
Later, when Louthian was called to testify before the investigating grand jury, he recounted what he told his volunteers to do in such a situation.
“I told ’em, I said, ‘I don’t care how much hell she raises, I don’t care what she says, she’s either going on the stretcher or she ain’t going,'” Louthian told the grand jury, according to the indictment.
Prosecutors later charged Louthian with perjury, saying his statement that the woman was always on a stretcher was a lie.
Except for questions raised by law enforcement, there seems to have been little scrutiny of the Saltville Rescue Squad over the years.
The squad’s board of directors consisted entirely of its own members in the 2010 fiscal year, the most recent year for which documents were available. Until his indictment, Louthian served as president of a board that includes his son, a captain with the squad.
Four of the six board members are paid, essentially by themselves, and there’s little of the outside oversight needed for appropriate accountability, said Daniel Borochoff, president of CharityWatch, an independent group that monitors nonprofits.
“The two giant red flags have to do with their governance and their accountability,” said Borochoff, who reviewed the paperwork the rescue squad is required to file with the IRS as part of its nonprofit status.
Among other things, the document shows that the organization has no conflict of interest policy and no independent audits.
“They’re not opening themselves up to scrutiny and they’re not taking the most basic steps that any well-run nonprofit would want to take,” Borochoff said.
Loyalty despite indictments
The Saltville Rescue Squad is headquartered in a large, well-kept building on the edge of town. On a late August afternoon, open garage doors revealed five emergency vehicles.
Two rescue workers on duty that day declined to talk about the pending charges, referring questions to the squad’s attorney, Robert Austin of Abingdon. Austin did not return calls to his office.
The treasurer of the rescue squad, who has testified on its behalf in recent court hearings, also did not return calls.
But based on what others say, the cloud of a federal indictment has not disrupted the rescue squad’s day-to-day operations.
“They have some very hardworking and dedicated members who have given a lot of their time and devoted their lives to the community, and they are still doing that,” said Charles Harrington, emergency management coordinator for Smyth County.
Still, the prospect of a conviction and fine as high as $880,000, the amount prosecutors allege was improperly billed, makes for an uncertain future.
“I think there are concerns of varying levels all through town,” Saltville Town Manager Mike Taylor said.
“Any time you are a rural community as far from the hospitals as we are, and there’s a chance you might not get there, there’s going to be concern.”
With its bank account frozen by court order until the trial is completed, the squad has struggled to come up with money to hire an attorney. Last month, Magistrate Judge Pamela Meade Sargent allowed the squad to sell one of its emergency trucks.
Taylor said town officials have discussed what to do in the event the rescue squad is forced to disband, but declined to elaborate on those talks.
Relations between the town and the rescue squad, which for years has operated with near total autonomy, seem even more distant now that charges are pending.
“Right now, the town is staying out of the matter and letting it take its course,” Saltville Mayor Joel Frye said. Both Frye and Taylor said they did not know who is the acting head of the squad.
While Louthian is no longer the president, he still works for the squad as an unpaid volunteer, his attorney said.
Despite the charges and bad press it has brought, some town residents remain loyal to a rescue squad that does more than offer help in times of crisis. Every September, the squad puts on a Labor Day parade that last year cost $10,000, according to IRS documents.
When Lincoln Hunt suffered a ruptured appendix, he recalled recently, rescue workers rushed to his aid.
“When they’re called to your home, they’re out there just as quick at 2 a.m. in the morning as they are at 2 in the afternoon,” Hunt said.
“I don’t think there’s anybody in the community who couldn’t say that Eddie Louthian and the rescue squad has helped them in some way or another,” said Bill Haynes, who was talking with Hunt and several other local residents who gathered at his Main Street furniture store on a recent afternoon.
“Eddie has devoted his life to the community and the rescue squad,” Haynes said. “In bad times, he was the first one to be there.”