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.

Walk into Bob Goeggel's office in the former police-precinct headquarters near Carondelet Park, and two things strike you: the enormous size — Goeggel decided against splitting off a conference room after getting the contractors' estimates — and the enormous fish.

There it hangs, the crowning achievement of several summer vacations spent deep-sea fishing off the shores of Hawaii — a 525-pound, 12-and-a-half-foot-long Pacific blue marlin, captured after an hourlong struggle near Kailua-Kona. A nearby photo shows an exhausted Goeggel, forcing a weak smile, nearly as dead as the big fish suspended next to him.

The world's record blue marlin is more than three times as big, but Goeggel's nine-year-old trophy is still an eye-popper — even if what visitors see is only a fiberglass replica fabricated in Fort Lauderdale. It's not the only trophy up there, either. There's the bill of another marlin, clipped from a 518-pounder and mounted, along with a dozen or so photos of Goeggel; his wife, Kathy; son Rob; and daughter Mary Elizabeth, memorializing their efforts to reduce the world's stock of mahi mahi, ono and tuna.

"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
Former Abbott president Terrence Dougherty describes Bob Goeggel as a "bitter competitor."
photo courtesy of the St.Louis Business Journal
Former Abbott president Terrence Dougherty describes Bob Goeggel as a "bitter competitor."
"Owning your own business is like 
having a kid. It's not about money; you want it to do well." 
- Bob Goeggel
Jennifer Silverberg
"Owning your own business is like having a kid. It's not about money; you want it to do well." - Bob Goeggel

Ask Goeggel about the wall of fish only if you've got time to burn. He'll tell you more than you want to know. Fishermen are like that.

It's been a few years since Goeggel last bopped about the Pacific. Money's been tight, and there hasn't been much time. "It's been way too long," Goeggel says. "There have been so many things going on in the last few years, it's just not been practical to even consider going."

Lately Goeggel's been casting his line in St. Louis and, it turns out, has just hooked the biggest fish of his life. The owner of the largest private, for-profit ambulance company in St. Louis appears to have caught his longtime nemesis, Abbott Ambulance Services.

Thanks to a whistle-blower lawsuit Goeggel filed in late 1996, the federal government has just accused Abbott — the state's biggest ambulance provider — and its former chief executive officer, Terrence W. Dougherty, of systematically looting the Medicare program.

The alleged fraud, which the federal government says stretched back to the mid-1980s, may have cost taxpayers millions of dollars, may have given Abbott a competitive advantage that allowed it to double in size in the past decade and — as suggested by information Goeggel uncovered — also directly benefited Abbott's owners, Barnes-Jewish Hospital and St. Louis University.

Abbott and its executives dispute the federal government's allegations; Barnes-Jewish and SLU similarly say Goeggel's accusations are without merit. Nonetheless, attorneys for Abbott and the U.S. attorney's office began quiet negotiations to settle the case — a move that likely would have kept details of the case from becoming public.

Bob Goeggel made sure that wouldn't happen.

He's not about to let this fish slip away.

At 56, Bob Goeggel seems a little young for a dinosaur, but it's not clear exactly where in the modern health-care delivery system this Marlboro-smoking, blunt-spoken businessman fits. Mind you, this is no button-down policy wonk — not with the desk piled high with court filings; walls cluttered with Cardinals memorabilia and inspirational messages; one bookcase packed with binders of mind-numbing Medicaid and Medicare minutiae, another with light fare, like Bob Burnes' history of the Big Red and a copy of Party Jokes.

Goeggel began in the business in 1963 as a part-time attendant for the Pfitzinger funeral home in Kirkwood. Back then, the business of transporting accident victims, the sick and the elderly was less complicated, and most ambulance service in the St. Louis area was offered by funeral homes, Goeggel recalls. "They had a vehicle capable of horizontal transportation that they didn't use a lot." It didn't take much to get a job, either. "You needed zero qualifications to work on an ambulance," Goeggel says.

Things changed in the early 1970s, when the state began regulating ambulance services, licensing vehicles and setting training requirements for employees. That's when funeral homes began leaving the ambulance business. Goeggel bought Pfitzinger's ambulance service, starting with three vehicles and enough people to staff two.

When he started his business, Goeggel says, there were at least 16 private, for-profit ambulance companies competing in St. Louis and St. Louis County. The field would be winnowed down as companies were acquired and standards toughened. Goeggel, whose ambulances in those early days operated mostly in South City and County, would be one of the survivors. In 1984, he bought Gateway Ambulance Services and dropped the Pfitzinger name. "Gateway" sounded more St. Louis to him, what with the Arch and all.

Today, Gateway runs about 15 ambulances and has 63 full-time employees.

Like Goeggel, Terry Dougherty built his company with a series of acquisitions, starting with Collier's Ambulance Service in 1970, then North County in 1971 and Guy Mullen in 1980.

Unlike Goeggel, Dougherty sold his company. In 1984 — the same year Goeggel bought Gateway — St. Louis University bought Abbott. Dougherty remained as president and chief executive officer; Abbott converted to a not-for- profit corporation. In 1988, Barnes Hospital, which had been shopping for an ambulance service, too, bought a 50 percent interest in Abbott.

Dougherty, who at one time had operated Abbott from offices behind a pet store in St. Ann, was now running Missouri's biggest ambulance company for Barnes and St. Louis University Hospital, two of the area's biggest medical institutions. Within months of the Barnes deal, Dougherty and his wife, Sharon, paid $891,900 for a 15-room home on Forest Ridge Place in Clayton and, befitting his status, began hosting charity fundraisers and making an occasional appearance in the society pages. Goeggel stayed put in the Bedford Oaks Drive house in Kirkwood — currently appraised at $196,070, according to St. Louis County assessor's records — he and his wife bought in 1978.

Under the sponsorship of the two hospitals, which made a 20-year, $6.57 million loan to the company in 1988, Abbott grew steadily. Today, Abbott has 80 ambulances and more than 600 employees, including operations in Madison and St. Clair counties in Illinois. The recent wave of mergers and sales in the local health-care scene has meant change for Abbott's sponsors. Barnes-Jewish, formed by the 1996 merger of Barnes and Jewish hospitals, controls 50 percent of Abbott; SLU, which sold its hospital last year to Tenet Healthcare Corp., controls the other half. Barnes-Jewish and SLU executives serve on Abbott's board.

In the early days, Goeggel and Dougherty seldom competed directly, though there were occasional skirmishes. In the late 1970s or early '80s, Goeggel says, he negotiated a deal with two of his contractors for neonatal transport — St. Louis Children's Hospital and Cardinal Glennon Children's Hospital — making them responsible for the cost of the service. Soon after, Abbott walked away with the business. "Dougherty came in and undercut us — he's really good at doing that," Goeggel says.

As Abbott grew, the two companies increasingly would compete over new business. Sometimes Gateway would win, sometimes Abbott. In recent years, Goeggel says, Abbott has been winning more than losing.

In 1990, Gateway won a contract to provide ambulance service to the city of Crestwood; Abbott got the business when it was rebid a couple of years later. It was the same story with the Lambert International Airport contract that year. "When we bid the airport, Abbott's bid was double our bid. When we rebid it three years later, they came in under our bid because by then they had taken a person away from us ... who knew the price that we had bid," Goeggel says. "I'm not going to bid anything to lose money, but they didn't seem to care about that — they came in and bid the thing so that kept us from having that piece of business. Whether they made money on it or not didn't seem to matter to them too much."

In 1990, Goeggel lost the contract to handle service for the Veterans Administration hospitals to Abbott. He won it back in 1993, then lost it again in 1996. That year, Goeggel also lost the exclusive contract to provide backup ambulances to the city of St. Louis' EMS service.

Gateway had held that contract since the 1980s. In 1995, the city decided to open the contract to competitive bids, and Gateway won the bid. After Abbott demanded a piece of the business — Goeggel says Abbott executives lodged a protest with then-Mayor Freeman Bosley Jr. — Gateway's deal was rescinded. A revised request for proposals was issued. "It was very clear what they intended to do — they intended to hand the contract to two providers, and that's what they did," Goeggel says.

Under the old contract, the city used to compensate Gateway for any transports it couldn't collect on. Under the new "zero cost" backup contract, the city doesn't guarantee the ambulance companies payment; they must collect directly from the patient, the patient's insurance company, Medicare or Medicaid. Gary Ludwig, chief paramedic for the city's EMS service, says the competition has been good for the city. Ludwig estimates that Abbott handled about 3,100 backup calls for the city last year, Gateway 800. EMS handled the bulk of the calls, about 71,000-72,000 runs.

Gateway went from handling about 100 city backup transports a month to less than 50 this year; overall, the company has seen the number of transports drop by about a third in the past three years, with much of that business going to Abbott.

Matt McCormick, Abbott's director of corporate development, contends that the company won business fair and square. "If (Goeggel) believes that there was unfair competition in the marketplace, I would point out a number of contracts have no pricing," McCormick says. "Crestwood, for example, doesn't pay for ambulance service. We can't underbid him, because there is no bid. A community makes a decision based on the quality of service they believe they will receive or have received in the past."

As for other contracts in which bidders submit prices, such as the airport, McCormick says the process tends to be "pretty open": "Being government bids, a lot of the information is available to the public — what the pricing was, how much was bid, what the current vendor is charging."

Dougherty declined a request for an interview, but in written responses to our questions, provided by one of his lawyers, Stephen B. Higgins of Thompson Coburn, he describes Goeggel as a "bitter competitor" who is responsible for Gateway's flagging fortunes and calls Goeggel's allegations of improper bidding "blatantly false."

The relationship between the two companies, Dougherty says, "has been intensely competitive. I believe that the reason Abbott grew greatly during the 1970s and 1980s — while Mr. Goeggel's company did not — was because Gateway did not invest in their business, improve service, upgrade or add equipment, provide ongoing training to medical technicians or respond to client needs. Abbott not only spent a lot more in these areas but also had numerous economies of scale."

But, for Goeggel, losing contract after contract seemed to show that Abbott executives would challenge him for every piece of business in the market. Goeggel was convinced Abbott had targeted his company for extinction. "Not only was my company name used in their management meetings, but my name was also personally used, as in "We're going to put him out of business.'" A former Abbott executive was the source, Goeggel says.

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.

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.

The heightened focus on health-care fraud came at the same time the Clinton administration was putting health-care reform on the front burner. Focusing on fraud could put pressure on provider groups while sending a message that out-of-control spending was the result of something other than poor policy decisions.

Once Washington got the ball rolling, health-care fraud investigations gained a momentum of their own, for a couple of major reasons. The first was an important piece of legislation — the 1996 Kassebaum-Kennedy bill — which increased funding for HHS investigators and health-care prosecutions. The second factor was the increased use of the federal False Claims Act, especially when it became clear that whistle-blower cases could be used to enforce the federal government's broad anti-kickback law.

Congress passed the False Claims Act in 1863 after the government was billed for mules that were diseased, blind and lame. The Civil War-era law was dusted off and amended in 1986 in a move to strengthen the government's attack on defense-procurement fraud. The act was changed to allow private citizens with knowledge of substantial and previously undisclosed fraud to file suit on behalf of the federal government. The law provides that the government can recover three times the amount stolen, plus $5,000-$10,000 for each fraudulent claim.

As an incentive for the private citizen to blow the whistle, the law provided a reward: 15 to 30 percent of the total funds recovered.

Last year, HHS's Office of the Inspector General brought 261 criminal convictions and 927 civil settlements and barred 3,000 providers or organizations from the Medicare and Medicaid programs. It claims $38 billion in savings since 1993. Many of the government's biggest cases, including its investigations of Columbia/HCA Healthcare and Quorum Health Group, were triggered by whistle-blowers.

Malcolm Sparrow, a professor at Harvard's Kennedy School of Government and author of License to Steal, a 1996 book examining health-care fraud, says whistle-blower lawsuits have become a popular way of attacking fraud because they can yield large financial penalties for false claims without the whistle-blower's having to prove criminal intent. Today, Sparrow says, the Justice Department is getting health-care whistle-blower cases "at the rate of one per day."

James F. Blumstein, a Vanderbilt University law professor and director of the Health Policy Center at the Vanderbilt Institute for Public Policy Studies, sees the explosion of whistle-blower cases as a disturbing trend. He worries that whistle-blowers, in effect, push prosecutors to pursue cases they might otherwise drop. "The government has been, as prosecutor, rather reasonable, because it exercises discretion. Where things happen that aren't so bad, they tend to let it go," says Blumstein.

"A whistle-blower is more like a bounty hunter than a sheriff. A sheriff exercises some discretion. But the whistle-blower has a completely different set of financial incentives. What's a whistle-blower's motivation? The only thing a whistle-blower has to care about is money," Blumstein argues.

Goeggel denies he's in it for the money. "Owning your own business is like having a kid. It's not about money; you want it to do well. That's all."

In June 1996, Goeggel decided to go ahead with the lawsuit and hired Jeff Sprung, whom he had heard describe whistle-blower lawsuits at the conference earlier that year. Steve Hubbard, the ambulance owner-turned-investigator, joined the team to help build the case.

"Steve came into town and did a little more digging," Goeggel recalls. "If I was asking the questions, it would be blatantly obvious. He came in and was able, on my behalf, to ask some questions of some people and get them to say some things that were incredibly interesting and confirm an awful lot. We had some people that were really, really impressed with talking. They liked to talk."

Among the most chatty was Philip Salvati, a former Abbott vice president and chief financial officer. Goeggel had heard that Salvati left Abbott — the circumstances were unclear — and suggested that Hubbard approach him.

Salvati agreed to meet with Hubbard in late August 1996, and then, in the course of their conversation, described a range of practices at Abbott that not only seemed to confirm the allegations of fraud by Dougherty and other Abbott officers but also suggested that executives of the sponsoring hospitals — Barnes-Jewish and SLU — knew of those activities.

Goeggel speculates that Salvati spilled the beans because he thought "he was being interviewed or being considered for a very important position someplace else. It wasn't like somebody was pointing a finger at him, saying, "Here, make up as much as you can about this guy so that you can get your ass off the hook.' He didn't have a clue what was going on."

Hubbard says, "I met with (Salvati) and never told him for sure I was going to hire him. What I told him was absolutely the truth.... I told him I'd been told he was the guy who knew all about hospital-based ambulance systems and wondered if I could pick his brain and see what would develop from that. I'm sure he read into that, and it was my intention that he would read something into it.

"Frankly, I was amazed at the information he gave someone who was a total stranger to him." Later, after Goeggel's lawsuit was filed under seal, triggering a federal investigation, Hubbard met a second time with Salvati. For the second meeting, the feds supplied Hubbard with questions. They also supplied him with a wire.

At both meetings, Salvati apparently was an unwitting source — never knowing that he was providing information that would help solidify a federal case against his former employer. Though Salvati, who now runs a Clayton-based company called High Performance Solutions Inc., had a lot to tell Hubbard about Abbott Ambulance three years ago, he doesn't have much to say about the subject these days. "I'm not interested in talking about that," Salvati told us, before hanging up the telephone.

For Goeggel's legal team, Salvati was a huge break. "He basically walked through Abbott's fraudulent scheme with the investigator," Sprung says. "That was really compelling evidence for us, so we went into overdrive and tried to put together the information as quickly and as carefully as we could for the government."

Salvati provided two key elements to help make Goeggel's case: confirmation of the types of Medicare fraud that Goeggel had gathered evidence of and, more important, evidence that Abbott officials knew what they were doing. "When you have an insider come forward, especially a senior officer, and say, "Yes, we did this all deliberately,' that is really important evidence," Sprung says.

Sprung insists that Salvati's evidence — outlined in an affidavit Hubbard provided the U.S. attorney's office and also on tape from the second meeting — is credible because of its specificity: "He gave us so much specific information, it was unlikely he was just making it up."

Dougherty describes Salvati as a disgruntled employee who "threatened to ruin me when Abbott terminated him four years ago."

"Until his termination in 1995, Mr. Salvati was a key Abbott executive with primary responsibility for establishing Abbott's compliance with Medicare regulations. I relied totally on Mr. Salvati to guide Abbott through the complex maze of confusing Medicare regulations," Dougherty says in his written responses to us.

Sprung, however, says Salvati "didn't try to denigrate or badmouth Abbott, and he didn't express a desire to grind an ax."

Nov. 8, 1996, was a typical day in St. Louis. The city mayor, under political pressure, fired a top aide. Authorities recovered a body from the Missouri River. Attorney-activist Eric Vickers called on the government to block NationsBank's takeover of Boatmen's.

And Bob Goeggel's St. Louis lawyer, John J. Carey, went to federal court.

Under the False Claims Act, the whistle-blower's lawsuit is initially sealed — hidden from public view — for 60 days so that the federal government has an opportunity to investigate the allegations. Typically, the U.S. attorney's office gets the federal judge to extend the seal as the investigation proceeds, and the defendants don't learn about the whistle-blower action until the federal prosecutors decide whether to join the action.

In this case, Abbott first found out something was going on after the company was served in May 1998 with subpoenas seeking records.

Things began to happen within months of Abbott's learning of the investigation and while the case was still under seal. In August, Terry Dougherty announced his retirement — something he says he had planned "for several years." And the U.S. attorney's office began settlement talks with Abbott.

The settlement talks did not include Goeggel or his attorneys, and when they learned of the discussions this spring, they asked Chief U.S. District Judge Jean C. Hamilton to unseal their client's complaint and order that the government allow Goeggel and his attorneys to be present during any settlement discussions.

Federal prosecutors opposed making the complaint public. A May 3 filing, prepared by Assistant U.S. Attorney Claire M. Schenk, described the settlement talks with the corporate defendants — Abbott, Barnes-Jewish and SLU — as "active and virtually continuous." Additional meetings, Schenk advised Hamilton, would "determine whether or not it will be necessary for the United States to undertake further document production as well as a more detailed and extensive review of the documents which have been produced."

Schenk tells us that it's "not unusual" for the government to pursue a settlement before a lawsuit is ever filed. "If litigation can be avoided and the parties can come to agreement on the terms and a monetary amount, that's the goal," Schenk says. "If one can avoid committing the time and expense that goes along with the litigation, and if the parties can come to a mutually satisfactory resolution, that's what we hope to do."

The government, Schenk says, planned to bring Goeggel and his lawyers into the discussions before reaching any agreement. "I think it's a strategy call as to who is in the room at what point in time," Schenk says. "But certainly (Goeggel) would be included at a critical juncture, or critical point, where he needed to be included."

Schenk's boss, U.S. Attorney Edward L. Dowd Jr., couldn't talk about the case, according to spokeswoman Jan Diltz, because he wasn't involved in it. "Ed can't really talk to you about this case; he's recused from it. He's completely recused," Diltz says. "We never really say particularly why. He may have represented somebody when he was in private practice, or just somebody in the company. If there's any indication that there could be a conflict, he has to be recused.... It's an internal thing within the department, where he says, "I really, because of a possible conflict of interest, can't be involved in this case.'"

Daniel R. O'Neill, an attorney with Bryan Cave, which represents Abbott, Barnes-Jewish and SLU, declined comment on settlement discussions and the lawsuit.

Goeggel, once he learned of the settlement talks, thought it was time to go public. "We felt that this thing had been under seal for a sufficient period of time, and that an additional four-month extension, which would have taken us to Sept. 11, was not warranted," he says. Goeggel also believes that Abbott knew, by then, that he had triggered the investigation. "I figured, what the heck, let's let this become part of the public domain and let the community at large make its own decision." Judge Hamilton agreed, and the case was unsealed May 26.

On June 18, federal prosecutors filed a 29-page civil complaint, accusing Dougherty of defrauding Medicare beginning as early as January 1984. The complaint, which names only Dougherty and Abbott as defendants, portrays Dougherty as the final decision-maker at Abbott on "matters relating to Medicare billing policies or procedures."

According to the complaint, Abbott engaged in a practice described as "ticket managing" — systematically submitting false information on state ambulance reporting forms and Medicare claim forms. Trips were described as "medically necessary" when they weren't. Billing codes and diagnosis indicators were falsified. Destinations were inaccurately reported: Abbott would say a patient had been transported to a hospital for emergency treatment, the complaint alleges, when "those patients had, in fact, been transported to a doctor's office buildings for routine care."

The false claims, according to the federal complaint, weren't just isolated billing errors but submitted intentionally. In fact, say the feds, the false claims were built into the system.

Ten years ago, Abbott acquired new computers. In a short business feature in the St. Louis Post-Dispatch, published in 1989, Dougherty said the new computers were being used to predict where ambulance calls were likely to originate. "It's an extremely sophisticated system using historical data and probability modeling that tells where ambulance calls are likely to occur," Dougherty told the Post.

Abbott's computers had another purpose, prosecutors allege. According to their investigation, Dougherty instructed his company's computer personnel to program "at least two improper automatic defaults into the billing computer system" in order to qualify the claims for Medicare payments. The first default automatically changed the destination of ambulance trips from doctor's-office buildings to hospitals. The second default automatically reported a patient's condition as a Medicare-covered medical necessity regardless of what the Abbott crew reported on the separate state ambulance reporting form.

According to the federal complaint, the defaults could not be overridden.

Dougherty, says the complaint, also told Abbott's training personnel to instruct crews to complete the ambulance reporting forms in a way that would ensure the biggest Medicare reimbursement, regardless of the patient's actual condition.

The result? Prosecutors offer eight examples of false claims submitted by Abbott. For instance, according to one claim form, Abbott said it transported a 74-year-old nursing-home resident suffering from uncontrolled bleeding, and collected $132 from Medicare. In reality, the patient's hand had already been sutured and Abbott simply gave the patient a ride back home. In another case, Abbott told Medicare it had transported an 89-year-old Medicare patient with a "spinal cord or column injury," and collected $130. In reality, Abbott took the patient to a podiatrist to have an ingrown toenail evaluated.

According to prosecutors, Abbott's ambulances were taking so many Medicare patients on routine doctor visits that the company became known, even among its own employees, as "AbaCab" for providing a taxi service for such patients.

A week after the U.S. attorney's office filed its civil complaint, Goeggel's attorneys filed an amended complaint accusing Abbott of violating the federal Anti-Kickback Act by offering remuneration to hospitals and nursing homes in exchange for referring elderly patients who are eligible for Medicare and Medicaid services.

Goeggel's complaint also accuses Abbott's owners — Barnes-Jewish and SLU — of not only benefiting from the fraud but actually orchestrating part of it. On the basis of what Salvati told Hubbard in 1996, Goeggel's complaint says the hospitals "directed Abbott to provide ambulance service" to dialysis patients that were served by its affiliated dialysis centers "because otherwise the hospitals may "lose the patient' to another dialysis center that was "not part of their network.'"

Rather than charge the cost of the transportation to the hospitals, Abbott management, including Dougherty and Salvati, were told to bill those services to Medicare, according to Goeggel's complaint. "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,'" the complaint says.

Matt McCormick, who was hired by Abbott three years ago and never worked with Salvati, says he can't discuss specific charges in the lawsuit but rejects any assertion that Abbott's owners benefited from the ambulance company's operations. "During all of my experience at Abbott, neither our board nor our sponsoring institutions have never, to my knowledge, been at all involved with who we transport (or) where we transport to," says McCormick. "I certainly do not believe our sponsoring institutions direct us to transport any patient to any specific location — other than when our sponsoring institution is our client and they're paying for our service."

The question of how the two civil lawsuits — filed by Goeggel and by the government — will proceed is an issue before Judge Hamilton.

Because Dowd's office didn't name Barnes-Jewish and SLU in its civil complaint, it has taken the position that Goeggel can pursue his claims against them separately. However, prosecutors say Goeggel can't assert any separate claims against Abbott and Dougherty.

Barnes-Jewish and SLU, for their part, contend that they didn't participate in any of the fraud allegedly committed by Abbott, so Goeggel doesn't have a case against them. Goeggel's attorneys argue they and the government are pursuing different types of fraud.

In the larger scheme of things, Medicare fraud by ambulance companies is a pittance. The Medicare program paid $210 billion in benefits during the last federal fiscal year, which ended Sept. 30, 1998. Of that amount, about $176.1 billion was paid on fee-for-service claims; the rest, about $33 billion, was paid to managed-care companies.

On the basis of a statistical sampling, looking at about 600 beneficiaries with 5,540 claims, the inspector general estimates about $12.6 billion was paid improperly — or about 7.1 percent of the total fee-for-service payments. How much of those payments were fraudulent, the feds can't say, acknowledging that in many cases, the billing and coding errors may have been inadvertent. Most Medicare dollars flow to hospitals, physicians and home-health agencies and — no surprise here — that's where most of the billing errors were found.

Improper payments to ambulance companies and other transportation providers made up a tiny fraction of the total overpayments, a mere 0.69 percent of the total overpayments, or about $86 million. Medicare payments for transportation services totaled about $1.65 billion in fiscal year '98.

"In the scheme of things, is it considered to be one of the most vulnerable benefits of the program? We've not identified it as such," says Ben St. John, a spokesman for the inspector general. "Home-health agencies, durable medical equipment, hospice — some of the other areas where much, much more money is spent have been identified as vulnerable benefits in the programs."

According to examples of fraud alleged in the government's lawsuit against Abbott, the average false claim cost Medicare about $152. The government doesn't say how many false claims Abbott may have submitted or how much money Abbott may have collected.

Sprung, however, estimates the total exceeds $5 million from 1992-98, up until the time subpoenas were executed. With treble damages, and thousands of claims at $5,000-$10,000 a pop, the case could theoretically yield penalties topping $100 million, though no one expects any settlement to reach that level.

Indeed, one of the largest Medicare cases brought against an ambulance company resulted in a settlement that was substantially smaller.

New York City agreed last fall to pay $9.5 million to settle charges that it had billed Medicare for ambulance services for patients who didn't need them, then mischaracterized the patient's condition to collect the reimbursement. No criminal charges were filed, the city admitted no wrongdoing and the whistle-blower, a former city paramedic, collected $1.425 million.

Others haven't fared as well, because the government tends to prosecute smaller companies more aggressively. Last year, Michael Schooler, president of Georgia Intensive Care, received a one-year prison sentence for submitting false claims; Harley Revis, accused of submitting more than $1 million in false claims on behalf of his Oklahoma ambulance company, got 51 months.

More than 100 ambulance companies have been nailed in the past five years for Medicare fraud.

Amid the clampdown, all providers are feeling the pressure — ironically, even Bob Goeggel; his Medicare carrier is putting his claims under a microscope and has denied a bunch. "We met all the criteria, but they're apparently under great pressure to produce these reports (to the government) and do them quickly," he says. "One of the quickest ways to do that is to deny a lot of stuff."

Gateway is resubmitting the claims and expects to be paid, but for a small company, where cash flow is critical for meeting payrolls and paying vendors, the delay has been an "inconvenience of major proportions," Goeggel says.

He blames companies that defrauded the government for making it hard on honest businesses.

Since his retirement from his $225,000-a-year job at Abbott, Dougherty, who turned 60 last week, has launched a consulting-and-management-coaching business. According to his still-under-construction Web site, T.W. Dougherty Associates "specializes in personalized management and consulting and coaching for mid-sized businesses in the greater St. Louis, Missouri region." It doesn't say whether he has any clients.

McCormick says Abbott has become a stronger organization in the past year, working hard to develop "the strongest Medicare-compliance program that we know of for an ambulance service in the Midwest.... I have no idea how it'll all wind up, but I know this: I'm proud to come to work every day at Abbott."

Goeggel, for his part, is confident that federal prosecutors will push forward, expand their investigation and prevail. What that would mean for Gateway's future, however, is unclear.

Whatever the outcome of his whistle-blower suit, Goeggel says he has no regrets. "There were activities going on that were illegal," he says. "I didn't do this for competitive advantage. I did it because there was illegal activity going on and I was aware of it.

"Competition is part of business — matter of fact, it makes business very, very healthy. But you know what's not part of business? Fraud. That's not part of business."

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