By Katie Dahlstrom
City of Clinton officials discussed filing for bankruptcy after learning the city was being sued for Medicare fraud, court testimony Thursday revealed.
Attorney Michael Walker returned to the stand Thursday morning as the city’s legal malpractice suit continued. Through his testimony, jurors learned city officials feared devastating effects as a result of the 2008 emergency medical services lawsuit.
Walker, along with his firm Hopkins and Huebner, represented the city in that case, which former firefighter and whistleblower Timothy Schultheis brought upon the city, claiming the city had violated the federal False Claims Act by knowingly billing Medicare and Medicaid incorrectly for ambulance calls in order to receive a higher reimbursement rate.
The city is suing Walker for $4.67 million in order to recoup the $4.5 million settlement along with Walker’s and other fees.
The first time Walker spoke to the Clinton City Council was during a closed session meeting on Sept. 29, 2009, shortly after the case was unsealed in federal court. At that time, Walker told the city of the potential risk it faced in the worst-case scenario.
If all ambulance calls had been improperly coded at the higher advanced life support code instead of the lower basic life support code during the six-year period under scrutiny, the city could have faced a $100 million penalty, Walker told council members at that meeting. Although, he testified Thursday, he and the city knew that not all of the records had been improperly coded and therefore the $100 million fine was not a real threat.
However, Walker told them based on a ratio from billing and coding expert Douglas Wolfberg showing an average city had 60 percent ALS compared to the city of Clinton’s 99 percent ALS coding, a worst-case scenario of $40 million was a potential risk. The city could have been fined between $5,500 and $11,000 for each infraction, plus the difference between what should have been billed and what was billed multiplied by three, not to mention attorney fees for the plaintiff.
During the initial meeting in September 2009, one council member asked if the citizens would be able to file for bankruptcy because of the suit. Walker testified Thursday he told the council during that meeting he could not answer that question because he did not work with bankruptcy law.
Walker did tell members of the city council that if it went to court the case would be decided in a jury trial and producing all the documents would “drive a jury nuts.” Walker did this despite the fact that the court order that was issued in January 2010 stated it would be a non-jury trial.
The council agreed to move forward with mediation during a closed session on April 13, it was divulged in court Thursday.
Roughly a week after that meeting, the city offered a $1 million settlement.
The issue of bankruptcy again surfaced in a letter to John Nahra, who served as the mediator during the mediation session on Aug. 2 and 3, 2010 when the $4.5 million settlement was tentatively reached subject to council and federal approval.
“It is my goal to keep the city from filing a bankruptcy petition,” Walker wrote in a letter to Nahra dated July 28, 2010.
Walker testified in his deposition taken last year that the city was not considering bankruptcy at that point, but had visited as to whether it was an option for the future.
The council approved the $4.5 million settlement during a closed session on Aug. 3. It was never determined how many upcoding infractions the city had.
WALKER TESTIMONY CONTINUES
Walker was questioned by Mike Hannafan, an attorney with the Chicago law firm the city retained for the legal malpractice suit, for more than 5 hours Thursday. Many of his questions centered around the work Walker did before advising the city to settle, including the review of the city’s ambulance run records.
The city had around 1,500 Medicare or Medicaid ambulance runs a year, which equated to 9,000 runs for the period from 2002 to 2008 that was within the statute of limitations of the federal False Claims Act. Because of the “logistical challenge” to review or have an expert review those thousands of records, Walker and fellow attorneys looked at two years of records.
Walker explained that he and four other attorneys with Hopkins and Huebner reviewed patient care reports and explanation of benefits statements from 2004 and 2008 to summarize them and highlight the codes used on them. In 2004, there were arguably 12 percent of the calls that should have been billed BLS, Walker found.
They were advised to review these records by Wolfberg, Walker explained. According to bills from Hopkins and Huebner to the city, around 70 percent of the billing entries were for review of records, Hannafan said.
Wolfberg was sent thousands of records, but as his testimony in the Civil Cervice Commission from Nov. 23, 2010 showed, he only reviewed around 60 of those records. Walker testified Thursday he never called Wolfberg to see what he had done with the records after they were sent in February 2010.
Wolfberg’s testimony from the Civil Service Commission hearing also shows he said he wasn’t hired to ascertain if the bills were correct. Walker said Thursday that was absolutely not true, Wolfberg had been asked to tell him if any of the city’s practices violated federal codes. This request was evident in an June 17, 2010 communication from Walker to Wolfberg.
The purported expert never told Walker if there had been any violations.
When asked Thursday if he had drawn any conclusions from his review of the records about the city’s coding and billing procedures, Walker said he formed an opinion as someone who was seeing a patient care report for the first time and did not have any expertise in that field.
“It didn’t pass the smell test,” Walker said.
He went on to say he thought there was something wrong when he kept seeing the same ALS code on reports for people who merely needed a ride, a friend or were intoxicated.
“When you read the narratives as a layperson it was disturbing,” he said.
Walker said he never asked anyone but EMS Director Andy McGovern why the reports were coded as they were. He and McGovern never discussed specific reports, only the reports as a group.
Being wrong in its billings would not have been enough for Schultheis to win had the case gone to trial. Under the Federal False Claims Act, the city would have to have known the bills it was submitting to the federal government were false.
At the time Walker was representing the city’s interests, he was convinced the city was unaware its billing practices were inaccurate, he testified Thursday.
During his deposition performed by Hannafan last year, Walker was asked if he thought McGovern thought he was doing the right thing with ALS and BLS coding.
“If you take what he was telling me at face value, yes,” Walker answered.
In the 10 months he worked on the Medicare fraud suit, Walker didn’t take any depositions, something Hannafan asked him several questions about Thursday. Among the depositions he didn’t take was that of Schultheis.
Walker testified that he thought taking Schultheis’s deposition was not in the best interest of the case. Walker further testified he had been told by city employees Schultheis was a “disgruntled firefighter” and his credibility was “suspect.” He knew what Schultheis would say had a deposition been taken, Walker testified.
Walker agreed Hannafan impeached Schultheis on Wednesday by showing his testimony regarding ALS rules were inconsistent. However, Walker said he believed Schultheis’s testimony Wednesday was not in the best interest of the city for the legal malpractice case.
“I think he was a poor witness for the city,” Walker said. “I think it hurt your case.”
Hannafan’s other questions focused on the defenses that were raised in the city’s answer to the Schultheis complaint. Walker never filed motions to dismiss, Hannafan pointed out.
The questioning stopped Thursday afternoon shortly before 4:30 p.m. Walker’s attorney, Bob Waterman, will perform his cross examination Friday.