Seeing Red

After years of taking it on the chin, Bob Goeggel struck back at his competitor. Thanks to his accusations of fraud, the state's largest ambulance company is on the operating table and the feds are doing the cutting.

Goeggel believed Abbott was submitting below-cost bids to gain business. He suspected Abbott knew the amounts he was quoting to some potential customers. One tipster told Goeggel that Abbott's marketing director was taking a key hospital administrator on shopping excursions to Plaza Frontenac; the administrator was throwing business Abbott's way. Goeggel's own employees, people who had previously worked for Abbott, were feeding him information.

"I had an employee tell me he knew that trip tickets were being altered over there, so he made copies and kept them for himself. I looked at him and said, "You were just going to let that be your own little secret?'"

Goeggel didn't understand why he kept losing business to Abbott. He was gathering clues; he was beginning to put pieces of the puzzle together. But he couldn't see the whole picture.

"Mr. Salvati stated that the hospitals and Abbott knew that billing Medicare for this transportation was against the law, discussed that it was against the law, and 'did not ... care.'" - from Bob Goeggel's lawsuit
"Mr. Salvati stated that the hospitals and Abbott knew that billing Medicare for this transportation was against the law, discussed that it was against the law, and 'did not ... care.'" - from Bob Goeggel's lawsuit

Soon, that would change.

In early 1996, Goeggel heard Seattle lawyer Jeffrey T. Sprung speak at an industry conference. A former federal prosecutor, Sprung is an associate with Hagens Berman, a 20-lawyer shop that specializes in class-action lawsuits. You may know Hagens Berman from such high-profile cases as the tobacco trials, where the firm has represented 13 states suing the industry; or the case against Mike Tyson, in which the firm represented fans who believed the boxer shouldn't get paid for biting off a piece of Evander Holyfield's ear. Other targets include Boeing Co., where some shareholders represented by Hagens Berman claim they lost money because the aerospace giant hid production-line problems until after its 1997 merger with St. Louis-based McDonnell-Douglas.

At Hagens Berman, Sprung is the resident specialist on whistle-blower cases, a natural move from his work as an assistant U.S. attorney in Washington, D.C., where he worked on defense-procurement fraud cases, where whistle-blower lawsuits are common. "When I left the government, it made sense for me to continue to handle cases against people who are defrauding the government — and there was this great opportunity, because of the whistle-blower statute, to continue to do that kind of work," Sprung says.

Among Sprung's clients: Steven T. Hubbard, the owner of a private ambulance service in Bellingham, Wash. Hubbard filed a whistle-blower suit, alleging that a competitor — in this case, the Mason County Fire Protection District No. 5 in western Washington state — was defrauding Medicare. The fire district agreed to settle the case but never admitted wrongdoing. The amount of the settlement was sealed, Sprung says.

The case, however, launched Hubbard on a new career. He sold his ambulance company and formed a new business, Stop Health Care Fraud, LLC. Hubbard — who had served for several years in Washington state as the vice chairman of the governor's steering committee for emergency medical services — was going to help ferret out health-care fraud. "The reason we got in this business is, our competitors were defrauding the Medicare-Medicaid system to our peril, as well as the folks they served," says Hubbard. "They were offering kickbacks to the hospitals and nursing homes. We just couldn't compete without risking a trip to Leavenworth.

"Everyone agreed that we were right, but we couldn't get anybody to help. We talked to the inspector general's office; they said, "Yup, these folks can't do what they're doing, but you have to understand we have a lot of cases to look at. The same thing from the carriers, the same thing from the FBI — everybody was interested, everybody was sympathetic, but we ended up selling our company for an offer that we would have laughed at the year before."

Hubbard's move from service provider to fraud fighter, given the times, made sense.

If the 1980s were the decade for defense-procurement fraud — contractors selling the government $640 toilet seats and $436 hammers — then the 1990s have been the decade of health-care cheats billing the government for phantom patients and disguising adult diapers as pricey "external urinary collection devices."

Cheats are naturally drawn to programs where a lot of money is flowing with little oversight, and Medicare — launched in 1965 during Lyndon Johnson's administration — had billions in its pipeline and apparently little oversight.

Medicare has two basic components: Part A, an insurance program that covers hospitalization and institutional coverage for all persons ages 65 or older and eligible disabled people; and Part B, a supplementary insurance program that pays for medically necessary health-care costs, including emergency ambulance transportation to hospitals. People eligible for Part A coverage don't pay premiums; Part B is optional.

The Health Care Financing Administration, the arm of the Department of Health and Human Services that administers Medicare, now processes more than 860 million claims a year and disburses more than $220 billion in payments — equal to 80 percent of the nation's defense budget — to some 39 million beneficiaries.

A program with that many beneficiaries and that much money increasingly would be vulnerable to mismanagement and fraud. That was the position of U.S. Attorney General Janet Reno, who told Congress in 1993 that attacking health-care fraud would be a "top priority" for her Justice Department. Ditto for HHS Secretary Donna Shalala, who pushed for additional funding to beef up her department's investigatory muscle and in 1995 launched a nationwide crackdown on health-care fraud called Operation Restore Trust.

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