Grady taps profits, controversy in EMS expansion throughout Georgia

» RELATED: Ambulance delays continue to put south Fulton lives at risk

» MORE: EMS in Georgia due for overhaul

After picking up the tab for Atlanta's poor for more than a century, Atlanta's iconic public health care provider, Grady Memorial Hospital, has now become a household name in medical transport services throughout the state. Grady has expanded ambulance service to more than 16 counties and scooped up contracts for patient transfers with a half-dozen hospital systems.

To Grady executives, the effort is synonymous with its drive to provide quality healthcare to Georgians. Its far-flung reach falls right in line with the hospital’s motto: “We are Grady. Our arms are open wide.” And the profits, Grady says, help support its mission to care for the underserved in Atlanta.

But a growing chorus of critics wonder if Grady’s widening business strategy for EMS has it veering away from its charitable purpose. First responders, public officials and competitors say it is emphasizing profitable ambulance runs, undercutting other EMS providers because of the advantages it has as a tax-supported nonprofit. Some of its expansion efforts, tax experts say, also may have Grady blurring the lines on the rules for nonprofit organizations, particularly when it comes to a for-profit business it established to maintain ambulances.

Others complain the effort does not serve the best interests of Atlanta-area residents.

“Grady needs to stick to Atlanta,” said Thomas M. Kamplain, a former Grady executive who helped establish its in-house accreditation program for paramedics and EMTs, enabling the expansion. “You made promises here that you need to uphold.”

In south Fulton, the provider is still struggling to deliver on a promise to provide a nine-minute response to life-threatening calls for several cities. The EMS director and other leaders say the promise was unrealistic given the expanse of the area, and that Grady hasn't devoted enough resources to meet EMS demands.

Meanwhile, Grady has told counties elsewhere in Georgia that its plentiful fleet of ambulances is dedicated to prompt response of 9-1-1 emergencies, while saving taxpayers millions.

William Compton, the senior vice president of EMS for Grady who is largely responsible for the expansion strategy, said his ambulance service draws customers because it offers efficencies that competitors don’t provide. It also makes his service cost-effective for Grady, he said.

In a prepared statement to the Atlanta Journal-Constitution, the hospital administration emphasized that their expansion doesn’t have an impact on its level of services in the Atlanta area. In south Fulton, it says it has doubled the number of ambulances in service during peak hour and reduced response times, while still working for further improvements.

“Grady goes all in no matter where it is located and is committed to improving levels of service in every jurisdiction,’’ the statement read.

Atlanta Councilman Dustin Hillis said he would like to see greater proof of that in Atlanta. The chairman of the city's public safety committee said he plans to start asking Grady for response time information and other service data. He himself has experienced a situation where Grady fell short in response to a life-threatening emergency.

The councilmember, who is also an ICU nurse, said he provided CPR while waiting at least 20 minutes for a Grady ambulance to arrive to a call of a teenaged male who had been shot in the groin and leg. The delay put the teen at risk and tied up several first responders at the scene, keeping them from addressing emergencies in other parts of the city, Hillis said.

When he had first learned of the shooting in his neighborhood, Hillis said he had grabbed the jump bang he keeps in his Jeep and raced over to where the teen was shot. Firefighters were already there, as well as several officers from the Atlanta Police Department. But the first responders couldn’t transport the victim to the hospital. They needed an ambulance to get him there before he bled to death.

“Their priority certainly should be the city before expanding into other services, especially since they are subsidized,” the councilman said. “There’s an issue in the city with response times.”

‘Unfair advantage’

Grady's efforts likely reflect a broader trend in the marketplace in which medical facilities partner with other entities, such as insurers, physicians and ambulance services, to push their business interests, said Chester Spatt, a finance professor Carnegie Mellon University in Pittsburgh.

“So, to speak, these large hospitals are trying to extend their product lines in various ways,” said Spatt, a former senior economist for the Securities & Exchange Commission.

That was the opportunity Grady seized.

The financial pressures of trying to operate a safety-net hospital in a climate of limited resources had put the hospital on the verge of closing in 2007, the administration told the AJC in a written response to questions.

The hospital’s leadership, under a new governance board, introduced measures to make the hospital system less dependent on government assistance by improving “operational efficiency,” Grady says. That included embracing the concept of new programs that would make money.

One of those was the EMS operation.

Grady began seeking EMS contracts in other parts of Georgia and partnerships with other hospitals for non-emergency transfers of patients.

Most competitors, including some metro area hospitals, initially didn’t see Grady’s moves as a threat — until it began courting elected officials in their home turf.

In Covington, Piedmont Newton Hospital had initiated a move to stop sending ambulances to 911 calls unless Newton County provided additional subsidies, said Charles McFall, a former paramedic who teaches at the Georgia Institute of Emergency Medical Services in Covington.

But after Grady EMS offered to run the emergency transports, the hospital reversed course, McFall said. Piedmont Newton didn’t want to risk having patients transported to Grady.

“They changed their tune,’’ McFall said. “Piedmont didn’t want to lose any patients.”

Too many hats

Compton, a former ambulance executive from Florida, helped craft Grady’s expansion strategy.

It involves what Compton told the AJC is a matrix of new programs within Grady Hospital’s EMS division.

One is the in-house accredited school that provides a pipeline of work-ready EMT and paramedic graduates to Grady.

Another is a company it purchased several years ago that provides emergency medical personnel at entertainment venues, including sports events and fundraisers.

A third is its Mobile Integrated Health Program, which deploys SUVs staffed with paramedics to provide medical care in a patient’s home. That frees up the emergency room, the costliest place to receive care.

» RELATED: Politics and conflicts mire EMS service in Georgia

» EARLIER COVERAGE: Atlanta worries about ambulance response times if Grady expands

Shannon Sale, senior vice president and chief strategic officer for Grady EMS, told the AJC in a phone interview the matrix enables Grady to launch new services in other territories and do it quickly, as it had to do in south Fulton.

“That was a big operation that we had to start very quickly,’’ Sale said.

Perhaps the best example of Grady’s shift to operational efficiency is its creation of a for-profit fleet maintenance and ambulance remount shop.

Grady told the AJC it set out to lower maintenance costs and get better control of management of its fleet.

Reliant Emergency Specialties, with Compton as its president, was launched as an "offshoot of that service" when Grady discovered a need by other ambulance operators for lower cost maintenance and "that there was capacity to provide that service without negatively impacting the needs of our EMS fleet," the hospital said.

In an interview earlier this year, Compton told the AJC that Reliant repairs and reconstructs hundreds of ambulances from all over the nation. It operates out of a facility adjacent to Grady’s EMS headquarters on Memorial Drive.

“Grady EMS maintenance staff perform the work, and the businesses are billed by Reliant for the services provided,” Grady told the AJC. “Proceeds from the services become part of the health system’s general fund.”

While Grady sees this as an innovative and profitable business strategy, others caution that it might run afoul of laws governing nonprofits.

Nonprofits are allowed to establish for-profit subsidiaries, but there have to be clear divisions between the operations, several attorneys who specialize in tax law for nonprofits told the AJC.

One issue may be that Grady employees work for Reliant, and Compton is listed as an executive for both the nonprofit and for-profit businesses.

Tracy Green Landauer, an attorney and partner at Culhane Meadows in New York City, advises her clients to name different primary officers to head up the separate entities.

That’s because the IRS expects the officers of the separate organizations to be paid separately. In an audit, IRS will ask for records to show that the compensation paid by the nonprofit is reasonable given the time the officer spent on its behalf.

It’s easy to get roles, and funding sources, improperly mixed up if there are too many overlaps, Landauer said.

“As human beings, if you wear too many hats, it can be hard to remember what hat you’re wearing at a particular time,’’ she said. “And if you’re thinking you’re wearing the for-profit hat while you’re actually doing something for the nonprofit, you can start pushing the nonprofit into areas it’s not supposed to be.”

Grady told the AJC that there is nothing inappropriate about the relationship between its nonprofit and for-profit operations.

‘Building an empire’

Years ago, Compton had encountered concerns about relationships between a Florida nonprofit hospital and a for-profit ambulance company he led.

Compton had overseen emergency services for Waterman Hospital in Florida but left in 1992 after co-founding Regional Emergency Services, Inc. The hospital then contracted with the company to manage and operate EMS services.

On his resume, Compton said that the operation grew into one of the nation’s largest hospital-based EMS management companies.

By 1998, however, the company became a target of a probe by the U.S. Department of Justice concerning allegations that management fees Waterman paid to Regional for ambulance services were inflated, defrauding Medicare.

The hospital, a whistle-blower lawsuit said, provided the personnel and capital equipment for the ambulances, while paying “grossly excessive” management fees to Regional. The fees amounted to an unlawful kickback, the suit alleged.

The defendants denied any wrongdoing. But in late 2000, Waterman, owned by Adventist Health System, paid $8.7 million to settle the case.

The Adventist auditor-turned-whistleblower who prompted the probe also accused Compton of using the hospital's employees to work on his collection of classic cars and other personal vehicles.

The Orlando Sentinel reported that Compton admitted the work had been done, but he said he paid for it and would continue to use the hospital's maintenance shop and mechanics.

Compton resigned from the ambulance company in October 1999, the newspaper reported.

Compton did not respond to AJC questions about the probe.

For years after the federal settlement, Compton’s resume shows, he was an adjunct faculty member at the University of Florida. Just prior to accepting the job at Grady, his resume says he owned a relocation and property placement firm in Jacksonville Beach that served executives and physicians.

When Grady hired him in late 2008, hospital officials were confident he could generate the profits they were seeking, his personnel file shows.

At the time, the hospital’s EMS operation was said to be in disarray. But by 2010, its EMS was self-sufficient, no longer needing support from Fulton County, according to Compton’s personnel file.

Within five years, according to the file, the operation was thriving. By then, Compton’s salary had increased by 65%. He was hired at a salary of $130,000 and received a signing bonus of $20,000. In 2013, his pay had climbed to more than $200,000. He was also eligible for a $200,000 retention bonus.

By 2014, as a senior vice president for Grady EMS, his total compensation was more than $340,000, according to the hospital’s tax filings. His salary wasn’t listed on subsequent tax filings.

It is unclear how much total compensation he receives now. The AJC asked Grady for details but the hospital provided only his base compensation of $315,000 a year.

In Atlanta, former employees and others say, he has shaped a strategy to build another EMS powerhouse.

"He's dedicated to building an empire," said Kamplain, who left Grady to start the Georgia Institute of Emergency Medical Services. "That's his niche. That's what he wants to do. He has a drive to continue that expansion."

Unfulfilled promises

Compton says Grady has reaped the benefits of his strategy, generating more money for indigent care in Atlanta while helping others around the state struggling with ambulance costs.

Cook County, in south-central Georgia, says it saved money with Grady. That county’s ambulance provider had said it would need ambulance subsidies doubled. Grady said it could provide the service for much less.

"It's a lot cheaper now for us,'' said Lindsey Parrish, chairman of the county's board of commissioners.

Competing ambulance services, however, say Grady uses the tax benefits of its nonprofit status to undercut them while not delivering on promises.

"They will tell everyone they can do it better and cheaper,'' Steve Vincent, chief operating officer for Gold Cross EMS in Augusta, said. "But they can't."

Before Grady took over non-emergency transport for Augusta University Medical Center, Vincent said his company had provided the service for 22 years. It was a big loss for Gold Cross, he said, because reimbursements from insurance or Medicare can be profitable.

“I’m not sure why they are coming more than two hours from their base operation,’’ Vincent said. “The contract they got in Augusta was not to serve the indigent. We thought their mission was to serve the indigent of Atlanta.”

Some also contend that Grady’s sales pitches aren’t back up by a sustained effort to meet manpower needs and support.

Fred Dent, chairman of the Worth County board of commissioners, said his county had to demand that Grady hold up its side of the bargain. Grady had pledged that two ambulances would be dedicated to respond to 9-1-1 calls, but it had been using those ambulances to transfer non-emergency patients between hospitals, he said.

Dent said the county would not have renewed the contract this summer had Grady not addressed the problem. “We made them understand what we’re saying,” Dent said.

Last year, Dougherty County backed away from a contract with Grady.

The 90,000-resident community in southwestern Georgia was providing its own EMS services for the county and the city of Albany, when Compton said Grady could save county taxpayers $8 million over five years.

A consultant hired by the county to advise on EMS services was skeptical that Grady could save all that amount. The consultant also said that Grady’s proposal had vague key performance measures and didn’t provide details about what would happen if Grady failed to meet its stipulated response times.

The proposal also was silent on how many ambulances would be restricted to handle only emergency calls.

Dougherty is still running its own EMS service.

OUR REPORTING

In a series of stories over the past 10 months, the AJC has examined ambulance service in Georgia.

The investigations found that long waits for ambulances in some areas were eroding public trust and putting lives at risk.

Such concerns have pitted community officials and first responders, such as fire chiefs, against ambulance providers and raised concerns about whether decisions were being made in the public interest.

The AJC found that ambulance providers can be chosen based on little more than subjective information and promises of results that later don’t materialize.