Justice Department moves forward in its case against ETMC, Paramedics Plus


The U.S. Department of Justice continues to build its case against East Texas Medical Center and its ambulance division, Paramedics Plus, in what they say is a $20 million kickback scheme to ensure Paramedics Plus retained lucrative contracts.

Most recently, Justice Department attorneys filed a list of people they expect to depose in coming months. In all, more than 100 people could be deposed as this case moves forward.

The government also filed a proposed schedule, which outlines when fact discovery will take place, when expert discovery will occur, deadlines for motions and trial preparation and finally, an expected timeframe for the start of the trial - summer of 2018.

ETMC declined to comment for this update. But in previous statements, Paramedics Plus President Ron Schwartz said claims of a kickback scheme are unfounded.

“One of our most precious freedoms is the right to defend ourselves against false accusations, even when brought by the federal government,” he said in a statement in January. “We intend to vigorously exercise that right and expect to be vindicated.”



In January, the Justice Department announced it would intervene in a lawsuit against ETMC and Paramedics Plus brought by a whistleblower - former employee Stephen Dean, who was Paramedics Plus’ chief operating officer. According to the suit, ETMC and Paramedics Plus paid more than $20 million in kickbacks and bribes, including cash payments to Oklahoma officials.

“Beginning in 1998 and ending in 2013, Defendants engaged in a kickback scheme designed to control the awarding of a lucrative public ambulance contract in the State of Oklahoma,” the lawsuit reads. “Paramedics Plus and its parent company ETMC - both Texas entities - offered and paid EMSA, a public organization established by a trust indenture under Oklahoma law, over $20 million to obtain, and then retain, an ambulance services contract with EMSA.”

EMSA operates in Oklahoma as a public utility.

“EMSA owns or leases ambulances, but does not employ drivers, emergency medical technicians or paramedics. Instead, EMSA contracts with a private contractor for drivers, EMTs, paramedics and other personnel that actually perform health care services. EMSA then bills Medicare, Oklahoma Medicaid, private payers and patients for the services provided by its contractor’s personnel,” the lawsuit explains.

EMSA bills the state and federal government tens of millions of dollars per year, the lawsuit notes.

In 1997, it explains, EMSA President H. Stephen Williamson met Anthony “Tony” Myers, a vice president with ETMC.

“Myers and Williamson devised a scheme by which ETMC would create a new, for-profit company to displace AMR (American Medical Response) as EMSA’s ambulance services contractor in Oklahoma,” the lawsuit says. “In exchange, the new ETMC-created company would kick back part of its proceeds to EMSA and Williamson.”

On June 22, 1998, Paramedics Plus LLC was formed, though it had “no history of providing ambulance services in Oklahoma or anywhere else,” as the lawsuit points out. And then, on Sept. 23, 1998, “EMSA announced that it was dropping AMR and awarding its multimillion-dollar ambulance services contract to Paramedics Plus, the brand-new company from Tyler, Texas.”

In the years following, the lawsuit says, “ETMC and Paramedics Plus continued to pay kickbacks and engaged in other illegal activity at the request of EMSA officials, paid for certain costs incurred by EMSA, made political contributions to Oklahoma politicians at Williamson’s behest, paid millions of dollars in bribes to EMSA and Williamson at key moments, including leading up to and on the date of a critical contract extension in 2008, gave EMSA interest-free cash payments and loans, and showered EMSA employees, including Williamson, with expensive gifts.”

Over the years, the lawsuit says, ETMC and Paramedics Plus earned a total of $45 million in profit under the EMSA contract, and “kicked back nearly half” to EMSA.

Myers died in 2012 at the age of 73.


ETMC, for its part, says there were no kickbacks and no bribes, but a not-unusual profit cap provision in its contract. In other words, anything that ETMC and Paramedics Plus earned above that cap would be returned to the state of Oklahoma.

“These claims involve one provision of a contractual relationship made in 1998 to provide EMS staffing for an Oklahoma public trust called EMSA,” read the statement from Schwartz, head of Paramedics Plus. “Under that relationship, we at Paramedics Plus helped EMSA provide emergency medical services, which were independently judged to be among the best in the country. We also agreed to return a share of our profit to EMSA - a standard and legal practice in this industry - which was publicly disclosed. The whistleblower and the federal government now say that limiting our profit and returning a portion of it back to these communities somehow violated federal law.”

The Justice Department disputes that, saying “defendants later called the illegal kickback arrangement a ‘profit cap’ in hopes of giving it an air of legitimacy.”

The department also says that the phrase “profit cap” isn’t anywhere in the EMSA’s requests for proposals, or in ETMC’s 1998 bid for the contract, in the contract itself, or in any modification of the EMSA contract.

“For over a decade, defendants never reduced the supposed profit cap to writing, and they never formalized when the payments would be made or how they would be calculated,” the suit says. “Instead, ETMC and Paramedics Plus simply paid huge sums of money to EMSA (often in conspicuously rounded amounts) whenever EMSA asked for whenever ETMC and Paramedics Plus had something to gain (such as a contract renewal).”

Those payments were concealed in a “slush fund” account, the government claims.

ETMC earned approximately $45 million from Oklahoma from 2006 through 2013, and paid nearly half of this sum back in some form, the Justice Department contends.


This lawsuit was a contributing factor - but not the only factor - in Moody’s downgrade of ETMC Regional Healthcare System’s debt rating in April.

The downgrade, from a level just below investment grade to speculative, directly affects about $280 million in outstanding revenue bonds issued by Tyler Health Facilities Development Corp. and Wood County Central Hospital District.

Moody’s said the downgrade “reflects the significant variance to budget through the first quarter of FY 2017 and the rapid, unexpected decline in liquidity… Weakened system performance is driven by declining volumes, a recent change in the highly competitive Tyler market following the acquisition of the competing system by a much larger entity, continued pressures on the rural hospitals, and high expense base given the system’s large physician employment division.”

In response, ETMC said it is working on a plan of action to avoid default.

And in late April, the health care system said it’s “looking for a strategic partner” to bring in capital and provide support.

“In the past, health care systems of our size could uphold their mission of care and remain independent. It wasn’t easy, but it was doable,” said ETMC president and CEO Elmer Ellis in a news release at the time. “In today’s rapidly evolving and challenging health care environment, regional health systems have come to realize that partnering with larger organizations is helpful in many ways.”

According to the news release, the strategic partner “will provide additional capital for growth and expansion, as well as other resources to support the operation of ETMC hospitals, clinics and other services.”

Ellis added that “nearly all non-government-funded hospitals in Texas have joined with a larger system in some capacity.”


According to the Justice Department’s latest filings, the fact-finding portion of the case will continue through Oct. 25. If there’s to be any mediation of the case, it must take place by Nov. 8. Depositions will continue through Jan. 17, 2018, when discovery closes. Trial preparation begins after that, concluding with deadlines for objections to witnesses, deposition extracts and exhibits on June 11, 2018.

The case could go to trial at any point after that.

The suit will be prosecuted by Assistant U.S. Attorney Josh Russ, before U.S. District Judge Amos Mazzant in Sherman. A jury trial has been requested.


Twitter: @tmt_roy

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