For decades, ambulance companies edged each other out for emergency calls by slipping $5 bills to a hospital employee, or bigger sums to doctors who sent patients their way.
Today, it is largely state, city or county governments that are responsible for deciding which company shows up when residents dial 911.
But bureaucracy did not end the kickbacks, industry experts and law enforcement officials say. "The issue of kickbacks in the ambulance industry has been there since Medicare first paid for ambulance rides," said assistant U.S. attorney in Philadelphia Jim Sheehan.
The illegal payments became widespread because of the nature of the industry, where a small number of people and health care organizations controlled who received millions of dollars in Medicare cash.
Instead of being offered on the sly, kickbacks today are spelled out in government contracts.
Locally, the issue has come to the forefront of negotiations between ambulance providers and the cities they want to service, with accusations of kickbacks arising in Chandler and Scottsdale.
When a local government picks an ambulance firm, in addition to asking about operations — such as response times — it often wants to know about "enhancements." Those are sometimes vehicles, equipment or even cash that cities or towns require from emergency response companies.
Depending on how enhancements are doled out, they may be illegal under a 1972 law called the Medicare antikickback statute. That law "makes it a criminal offense knowingly and willfully to offer, pay, solicit, or receive any remuneration" in exchange for services that may be charged to federal health care programs, such as Medicare, an opinion from the U.S. Department of Health and Human Services states.
Several cities in the East Valley have opened their lucrative 911 response contracts to competition or are considering doing so.
Southwest Ambulance, long a Goliath in the local ambulance industry, is being challenged by a smaller firm, Professional Medical Transport, owned by Southwest’s founder.
In Scottsdale, Southwest has accused PMT of violating the anti-kickback law by offering 150 defibrillators if it lands the contract. Similarly, Southwest’s parent company — Rural/Metro Corp. — paid out $400,000 to the Salem Fire Department in Oregon as part of an ambulance contract in July, Salem Chief Mike Knode said.
Both companies deny any violation of anti-kickback laws.
Pat Cantelme, PMT’s chief executive officer, said the lifesaving defibrillators are not going to Scottsdale or its fire department but to community groups, making them a legal enhancement.
Liz Merritt, a Rural/Metro spokeswoman, said the sum given to Salem Fire was a collection of fees the department required of it, also making it legal.
On Friday, Chandler delayed its competitive process after Southwest sent a letter arguing that the city’s conditions to win the 911 contract were illegal. One requirement was that the winning firm rent city facilities for garages and dispatch stations, guaranteeing Chandler a revenue stream.
In the ambulance industry, legal can be a fuzzy line.
"It’s a competitive business and like most situations where you’ve got a political decision being made, people are going to do what they think they can do right up to the line," said Bill Darling, an Austin, Texas, lawyer who represents ambulance firms. "I guess in some instances, they get over the line."
Both Southwest and PMT have been indicted on fraud charges over the past 15 years.
In 1997, PMT and several members of its ownership family were indicted by the U.S. Justice Department on 68 counts of Medicare fraud, conspiracy and witness tampering, court records show. The Tempe-based firm reached a settlement with prosecutors, the conditions of which are sealed.
"It was resolved with no admittance of wrongdoing and no finding of guilt in anybody that’s with the company," said Michael Baker, the lone family member remaining with PMT.
In January, Bob Ramsey and Cantelme purchased a controlling share of the firm from the Baker family.
Ramsey founded Southwest, his current competitor, in 1982 and was indicted by the Arizona attorney general with his former company in 1991 on Medicaid fraud charges.
Ramsey, who sold Southwest to Rural/Metro in 1998, maintained his innocence, and the charges were dropped.
The Justice Department launched a horde of Medicare fraud investigations against ambulance companies throughout the 1990s as local governments increasingly sought enhancements from them. At the time, Congress funded the hiring of many new FBI agents and prosecutors to specialize in health care fraud, Sheehan said.
But with the new investigators becoming more senior, he said they now focus on more complex cases, paying less attention to ambulance kickbacks.
"If you have a choice between a billion-dollar case against a pharmaceutical company or a $250,000 case against an ambulance operator," Sheehan said, "it’s a (more) appropriate use of government resources to go after the billion-dollar case."
Last month, a panel of health and emergency response experts from around the country recommended that Scottsdale choose PMT.
Southwest has filed a protest, hoping to block its competitor from the city contract, arguing that it offered faster response times and more ambulances.
PMT could only win, Southwest spokesman Josh Weiss said, if it illegally offered equipment to the city.
Cantelme has dismissed the charge as "sour grapes."
"Everything that we do will be reviewed by our attorneys, (and Scottsdale’s) attorneys to ensure that there’s no violation, not just of Medicare antikickback laws," Cantelme said.