EMSA helps its paramedic provider avoid taxes, investigation shows
BY ZIVA BRANSTETTER World Enterprise Editor
Sunday, January 27, 2013
1/27/13 at 7:13 AM
Read past stories and view documents
related to the World’s EMSA investigation,
including a memo from the state
auditor’s office discussing tax-free purchases
EMSA made for its contractor.
EMSA allowed its contractor, a Texas-based paramedic provider, to receive more than $7 million worth of fuel and other items at EMSA's tax-free rate, an apparent violation of state law and the company's contract, a Tulsa World investigation has found.
EMSA allowed the company, Paramedics Plus, to avoid paying taxes on at least $7.1 million in purchases statewide since 2009, records show. Of that total, about $6.3 million went to buy fuel for ambulances, records show.
Under the current contract with EMSA, signed in 2008, Paramedics Plus is required to "supply, at the contractor's own cost, all fuel, oil, and routine maintenance" for the ambulances, records show. State taxes add 17 cents per gallon of fuel, a cost EMSA does not have to pay.
At Oklahoma's average cost per gallon, Paramedics Plus would have paid about $390,000 in gas taxes over the period - Jan. 1, 2009, through June 30, 2012 - a World analysis shows. That money would have gone to fund roads, bridges and other state needs.
EMSA's chief financial officer told state auditors the practice made "good business sense" for EMSA and that Paramedics Plus "relies on EMSA for purchases" because it lacks a local checking account.
Paula Ross, a spokeswoman for the Oklahoma Tax Commission, said while she cannot comment specifically on whether EMSA violated state law, "public trusts cannot pass that (tax) exemption on" to private companies with which they contract.
Ross said she could not say whether the Tax Commission would pursue action against Paramedics Plus.
In general, the Tax Commission "always will follow up on that ... to make sure that the correct tax was taken," Ross said.
An EMSA spokeswoman did not respond to the World's requests for comment about the practice.
Lillian Perryman, chairwoman of EMSA's board, said in an email that EMSA's attorney, Jim Orbison, was preparing a legal opinion to present at the board's next meeting, Feb. 27.
A spokeswoman for Paramedics Plus, a private company based in Tyler, Texas, declined a request for an interview and did not respond to questions submitted in writing.
Ed Shadid, an EMSA trustee and city council member in Oklahoma City, said EMSA should not allow its contractor to avoid paying taxes. He said the issue is part of a larger pattern of conflicts of interest between EMSA and its contractor.
"The incestuous blurring of boundaries beyond distinction and the financial malfeasance between and by a public trust (EMSA) and its for-profit subcontractor (Paramedics Plus) has crossed any reasonable threshold of acceptability," he said.
'Extravagant' items
The Emergency Medical Services Authority is a government agency that oversees a contractor providing medical care to more than 1.1 million people in Tulsa, Oklahoma City and some surrounding cities. Residents in most of those cities pay a fee on their utility bills designed to cover out-of-pocket expenses for emergency transports.
Since at least 1998, Paramedics Plus has held a contract with EMSA to provide paramedics who staff EMSA ambulances. EMSA employees provide services such as contract oversight, accounting and customer billing.
The current five-year contract is valued at approximately $150 million and expires this year. EMSA's board is seeking proposals for a new contract.
An audit by the State Auditor and Inspector's Office, released last week, found that EMSA was making purchases on behalf of Paramedics Plus and deducting the amount from what it pays the company each month.
It notes that the practice may not be legal, citing language in the state Constitution prohibiting the state from making gifts to private companies. The auditor's office urged EMSA to seek legal advice on the matter.
The 56-page audit covered 3 1/2 years and was sparked by a World investigation that began in October 2011.
The audit found that EMSA spent lavishly on "unwarranted and extravagant" items and that the expenditures were part of a pattern.
Questioned costs included $905 for two spa treatments for EMSA CEO Steve Williamson, $35,190 for floral arrangements, $23,875 for employee fitness classes taught by the wife of an EMSA employee and more than $4,000 each for two catered employee retirement parties.
The audit also found that EMSA filed four collections lawsuits against patients who should not have been sued. The suits were filed due to "human error," including a "wrong address," the audit report states.
The report says EMSA does not enforce a contract clause allowing it to fine Paramedics Plus when paramedics fail to collect accurate patient information. It recommends that EMSA take steps to improve its address data system, enhance patient outreach and enforce its contract with Paramedics Plus.
EMSA has taken numerous steps to improve the agency's billing process, including indicating on bills whether customers are members of the utility fee program. The agency has also worked with the city of Tulsa to improve its process of gathering accurate address data.
'Unique relationship'
In addition to billing and spending issues, the state audit highlights apparent conflicts of interest between EMSA and Paramedics Plus. The company donated $25,000 to EMSA in 2010 to defray Williamson's travel costs as head of an ambulance industry group, a fact not disclosed to the board, the audit states.
EMSA policy forbids employees from accepting or soliciting gifts or favors that could be "viewed by the public to compromise impartial performance."
Records show that in addition to the travel funds, Paramedics Plus apparently paid for Williamson's spa services.
Receipts show that Williamson submitted expense reports in July 2009 and August 2010 claiming two visits to Marilyn Ihloff Day Spa in Tulsa at a cost of $415 and $490 each.
The reports note that Paramedics Plus should be billed for the expenses, categorized as "miscellaneous." The spa visits were among more than $416,000 in purchases that Williamson billed to EMSA during the years covered by the audit.
Records show that in June 2012, the most recent month for which figures are available, EMSA paid for more than $200,000 in goods and services on behalf of Paramedics Plus, deducting that amount from the company's monthly payment. Payments that month included $50 for iPad service, $695 for the company's softball team fees and $195,000 for fuel, paid to the Mansfield Oil Co., records show.
According to a Dec. 4 memo written by the state auditor's office, EMSA Accounting Manager Mike Albright said the company "has a unique relationship with EMSA."
Albright went on to tell state auditors that "EMSA can pay bills faster than P+ (Paramedics Plus) and they're tax exempt. For these reasons the contractual relationship allows for P+ to request EMSA to pay for certain vendor expenses. ... These expenses are largely recurring items (such as an annual Christmas party, snacks and fuel for the vehicles)," the auditor's memo states.
While about $6 million of the purchases made by EMSA for Paramedics Plus were for fuel, other purchases included $1,490 to rent a "slushy machine" from Margaritas to Go to celebrate EMS Week, $2,200 in catering costs for an employee appreciation luncheon and $1,300 for "casino style entertainment" at a Christmas party.
Auditors asked EMSA's chief financial officer, Kent Torrence, to explain the purchasing practice, according to the Dec. 4 memo. Torrence said portions of the contract require the company to pay for fuel at its own cost. He added that other contract portions "lay the groundwork for additional activities not specified in the contract."
"Anything purchased by EMSA on P+'s behalf is purchased tax-free," Torrence told the auditors.
"Mr. Torrence stated this is good business sense as the contract specifies a limit to how much revenue P+ can generate," the auditor's memo continues. "Anything over that limit is returned to EMSA. Therefore, EMSA has an incentive to keep P+'s costs low as they will be the ultimately benefiting party. He further stated this relationship exists because P+ does not have a checking account at the EMSA offices and relies on EMSA for purchases."
Joe Hodges, an EMSA trustee and regional president of SSM Health Care, said he believes EMSA made purchases for the company "to keep expenses lower" and ultimately benefit the cities it serves.
"When you look at the organization as a whole, it's one of the best-performing ambulance programs in the country in a very difficult and challenging health-care environment. ... I feel confident that we are going to move forward, and things are going to get better."
But Shadid said sweeping changes are in order before improvement will occur.
"Any response from the board other than swift implementation of the state auditor's recommendations, replacement of EMSA's discredited leadership whose transgressions have been ingrained for many years, if not decades, and repayment of any amount owed to the taxpayers, would sacrifice the public's trust," Shadid said.
EMSA board members
The Emergency Medical Services Authority is a government agency overseen by an 11-member board of trustees.
Board members are unpaid volunteers representing the cities served by EMSA.
EMSA has 44 employees in its Tulsa and Oklahoma City offices. They provide administrative services, including accounting, patient billing and contract oversight.
The agency's board has the authority to set policy, approve contracts and budgets and take a variety of other actions, according to EMSA's trust indenture and bylaws.
EMSA's CEO, Steve Williamson, serves at the pleasure of the board, which has the authority to fire him with or without cause, according to Williamson's contract.
Eight of the 11 members of the EMSA Board of Trustees are appointed by the cities of Tulsa and Oklahoma City. One member represents the Tulsa-area suburbs that are served by EMSA, and another represents the Oklahoma City area.
The medical director of the Oklahoma Medical Control Board also has a position on the EMSA Board of Trustees.
EMSA's board, which has one vacancy, is made up of the following members:
- Clay Bird, chief economic development director, city of Tulsa
- Jeffrey Goodloe, M.D., medical director, Medical Control Board
- Joe M. Hodges, regional president, SSM Health Care
- Mark Joslin, representing the city of Sand Springs
- Phil Lakin, city councilor, city of Tulsa
- Gary Marrs, city councilor, Oklahoma City
- Lillian Perryman (chairwoman), director of emergency services, Integris Health
- Jim Rodgers, M.D., neurosurgeon, Tulsa NeuroSpine
- Ed Shadid, M.D., city councilor, Oklahoma City
Larry Stevens, representing the city of Edmond
World Staff Writer Casey Smith contributed to this story.
Original Print Headline: EMSA aids in tax avoidance
Ziva Branstetter 918-581-8306
ziva.branstetter@tulsaworld.com
Associated Images:
Ambulances line up in a loading bay at the St. John Medical Center emergency room. MATT BARNARD/Tulsa World
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