The Clinton Herald, Clinton, Iowa

October 8, 2013

Mayor Vulich takes the stand during Walker trial

By Katie Dahlstrom
Assistant Editor

DAVENPORT — UPDATE: Settling was the only option Mayor Mark Vulich saw when he and then fellow council members unanimously approved the $4.5 million settlement over alleged Medicare fraud, he testified Monday.  

Vulich took the stand Monday afternoon as a witness in the city's legal malpractice suit. The city is suing Michael Walker and his law firm Hopkins and Huebner. The city retained Walker in late September 2009 to represent the city in the False Claims Act case that resulted in the city settling with whistleblower Timothy Schultheis and the federal government for $4.5 million in 2010.

Schultheis alleged the city was billing all ambulance calls as advanced life support instead of basic life support to receive higher reimbursement rates from Medicare and Medicaid.  

The city's goal is to recoup the expenses of the settlement along with other fees, totaling $4.67 million.

At the time of the False Claims suit Vulich was an at-large councilman. He told the jury Monday that based on Walker's advice, settling seemed like the only option. Walker himself had started exploring the option in March 2010, according to a letter to Schultheis' attorney asking if his client had a settlement demand. The city council during a closed session on April 13, 2010 told Walker to move forward with trying to settle, authorizing him to offer $1 million.  

The decision to move forward with a settlement came less than seven months after the council first learned it was being sued and retained Walker.

While Walker in his initial council appearance on Sept. 29, 2009, had presented the council with a number of options the city could employ to defend itself in the False Claims Act case, he was not as optimistic when he returned in April 2010, Vulich testified.  

In the months between the initial and the April meeting, Walker had reviewed records, met with city staff responsible for coding and billing along with other department heads and retained purported billing expert Douglas Wolfberg. Vulich testified that in April 2010 Walker told the council he was concerned based on what he had found in his investigation.

"Basically we were in big trouble. That's how I interpreted it," Vulich said.  "It appeared we had gone into a no-win situation."  

Walker never showed the council a scenario where it could win the Schultheis case, Vulich said. Walker informed the council the city had budgeted for 100 percent ALS and in fact billed 99 percent ALS, far above the national average of 60 percent that Wolfberg said was the benchmark. Council members had never heard these numbers before, Vulich testified. In fact, Vulich said he had never heard about ALS or BLS coding or billing before he learned the city was facing the lawsuit.

At the same time, the council was aware Walker had not reviewed the ALS ratios for other towns in the region. Walker also told the council he had tried to get copies of the dispatch records to prove the ambulance calls were as serious as they were billed, but the records were not available, Vulich testified.

When he returned for the Aug. 3 closed session of the city council, which happened in the same day as a mediation with Schultheis, Walker told the council a $4.5 million settlement was on the table and recommended the city take it.

"I was very unhappy. I was shocked we had gotten into such a mess," Vulich said.  

Still, he and fellow council members decided to move forward with the settlement. Vulich credits his decision to his belief there were no other options based on what Walker had told the council.  

When asked by Walker's attorney Bob Waterman on Monday if he had ever asked Walker any questions in the course of Walker's work on the suit, Vulich said he asked Walker if the city's insurance covered its liability for the alleged fraud. Walker was unable to answer the question. Other than this one instance, Vulich testified, he couldn't recall any other questions he asked Walker that went unanswered.

Neither Vulich nor any other council members said the council should wait to settle pending further investigation or more expert opinions, he testified.  

On Aug. 30, 2010, the council formally approved the settlement. The first payment was made on Oct. 1, 2010. The city has made three $450,000 payments and will make another this month.  

Three months later, Vulich learned a number of facts that made him reconsider. During the Civil Service Commission hearing on Nov. 23, 2010, Vulich learned no one had looked at the ambulance runs to see if they had been billed appropriately, Wolfberg had reviewed only 60 patient care reports and had not formed an opinion on the city's billing and no one had looked into a computer glitch that had been blamed for the city producing duplicate reports. It also was the first time Vulich had ever heard former fire chief Mark Regenwether's and EMS Director Andy McGovern's sides of the story.

At the end of that hearing, Vulich had formed a new opinion.  

"It didn't appear Mr. Walker had done any investigation. There were a lot of questions I thought should have been answered that weren't," Vulich said.  

In December 2010, the city council directed City Attorney Jeff Farwell to look at what the city's options were for pursuing legal malpractice. The legal malpractice suit was filed on March 28, 2012.


One of the "damning" things against the city of Clinton as it faced allegations of Medicare fraud was the fact that the city had budgeted for all ambulance calls to be billed at a higher rate, according to one unnamed Clinton City Council member.

As Michael Walker's testimony continued today in the city's legal malpractice against him and his law firm Hopkins and Huebner, light was shed on some of the things Clinton City Council members had to say about the Medicare fraud case after it had been settled for $4.5 million in 2010.  

Walker and his firm represented the city in the fraud case, which was filed by former Clinton firefighter Timothy Schultheis on behalf of the U.S. government under the federal False Claims Act. Schultheis claimed the city knowingly falsely billed ambulance runs as advanced life support rather than basic life support in order to receive higher reimbursements from Medicare and Medicaid.

As Walker testified Friday, he told the jury one of the obstacles he saw in defending the city was the fact that it had been budgeting for 100 percent of its calls to be at the higher ALS rate. In fact, around 99 percent of its calls were billed at ALS. Walker believed this would hinder his ability to prove the city did not know it was falsely billing because it showed motive for the alleged subterfuge.

During trial today, Walker was asked questions about a Sept. 28, 2010, closed session meeting of the then Clinton City Council that he did not attend. Council members at the time were: Maggie Klaes, Charlie Mulholland, Mike Kearney, Mark Vulich, Bev Hermann, Jennifer Graf and Paul Gassman. Former mayor Rodger Holm, former city administrator Jeff Horne, city clerk Pat Van Loo, city attorney Jeff Farwell and former city attorney David Pillers also took part in that closed session meeting.  

By Sept. 28, the settlement had already been unanimously approved by the council and finalized, but council members still discussed it, specifically the city's budgeting practice regarding ambulance billings.

One council member, who was not named, said he or she believed that when former fire Chief Mark Regenwether was appointed to his position, he had input into the city's ambulance coding procedures, which determined how ambulance runs were billed.  

"We've got to get some more cash to the department," the unidentified council member said, paraphrasing Regenwether. "I think he had pushed it, too."  

Another unidentified council member recalled officials from the fire department were told if they wanted newer equipment, it would need to bill at the ALS rate, according to the closed session minutes read today.   

While the fire department employees coded the calls, it was the finance department who submitted the bills. It became apparent through the case review that the finance department was not properly trained to code billing and the finance department should have reviewed the bills rather than act as it was as a data entry point, Pillers said during the closed session.

However, the "damning thing" one council member noted was that even if the bills had been reviewed, the city was budgeting for all ALS, which would likely have meant the finance clerk still would not have caught any errors.  

Walker testified today that the budget being set for 100 percent ALS bills showed the council was in a "knowing situation" regarding the overbilling, which would have hindered the city's ability to claim it was an honest mistake.  

Walker's testimony concluded Monday.