The Clinton Herald, Clinton, Iowa

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October 4, 2013

Trial Day 4: Walker 'disturbed' by records

DAVENPORT — 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. 

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