Here are portions of the lawsuit filed by the city of Clinton against Hopkins & Heubner, the law firm that represented the city in the EMS settlement process; and lead attorney Michael Walker.
The city is claiming malpractice against both Walker and the firm and is seeking $3 million damages.
• On Sept. 19, 2008, former Clinton city firefighter Timothy Schultheis filed a federal False Claims Act lawsuit under seal on behalf of the United States against the city in U.S. District Court. The city denied the claims alleged in the complaint. On Sept. 10, 2009, the United States declined to intervene in the action. In his complaint, Schultheis alleged that the city violated the False Claims Act by knowingly submitting false or fraudulent emergency medical service claims to the government under the Medicare and Medicaid programs. The Schultheis action alleged that the city knowingly, deliberately or recklessly submitted all of its claims for ambulance to Medicare and Medicaid which were classified as Advanced Life Support Level I Emergency Services, commonly known as ALS. It was also alleged that certain claims should have been classified as Basic Life Support Services, which called for lower government-reimbursed payments to the city.
• The Schultheis case was kept under seal by the federal court until Sept. 19, 2009. The city was served with the complaint on Sept. 29, 2009. Shortly after, the city hired Hopkins and Heubner PC to represent and defend the city in the case. Michael Walker, a partner with the firm, was the lead attorney representing the city. Defendants were the counsel of record for the city in the federal action. The firm continued its legal representation of the city through at least Sept. 22, 2010, when the federal court dismissed the Schultheis complaint with prejudice pursuant to the $4.5 million settlement agreement reached with the city.
• The Schultheis case principally involved the city’s classification of its ambulance service dispatches for the statutory period of six years from September 2002 though September 2008. The principal issue in the suit was whether the city was justified in its ambulance run classification of ALS or BLS that were assigned to each run.
• As part of the firm and Walker’s representation of the city, the retained and consulted with Douglas Wolfberg, a purported expert in the field who said he was an emergency medical services consultant and supposedly had specialized knowledge about EMS compliance with Medicare and other government regulations. H & H and Wolfberg determined that from 2002 to 2008, the city had classified 95 percent of its ambulance runs at the higher federal reimbursement rate of ALS and only 5 percent of its runs at the lower BLS rate. According to the defendants and Wolfberg, the normal trend for ALS Medicare billing, based upon the national average, was about 60 percent of all municipal ambulance services. Therefore, Walker assumed that the city would be having a liability of at least $37 million of alleged ALS charges in excess of the national average. Further, Walker told the city council on April 13, 2010 that the city could be liable for $100 million in damages under the False Claims Act after calculating statutory overcharge penalties and the plaintiff’s attorneys’ fees.
• By the summer of 2010, the defendants advised the city to settle the Schultheis case for $4.5 million. As a result ,on Sept. 14, 2010, only one year after service of the process, the city signed a settlement agreement with the United States and Schultheis to pay the United States $4.5 million over a 10-year period in equal annual installments. However, by contract, the actual claimed overcharges calculated by the defendants were at most $108,000 for the six-year statutory period. To date, the city has paid $900,000 of the settlement amount. Payments are due in October of each year.
• The city is claiming the defendants negligently performed only minimal pretrial and investigative work. The city in the lawsuit states that during the 12 months between the service of the complaint on the city and the execution of the settlement agreement, the defendants did not seek or take the deposition of Schultheis, did not interview several potential witnesses, did not sufficiently involve fire chief Mark Regenwether in the investigative process, conducted only a superficial examination of the reasons for the city’s 95 percent-5 percent ALS-BLS ambulance run split and otherwise negligently jumped to the erroneous conclusion that the city faced catastrophic liability merely because the national trend of municipalities’ ALS billing ratios was far lower than the city’s.
The lawsuit states that the defendants negligently failed to adequately pursue the city’s defenses under the False Claims Act and that for example, the city’s computer programs regarding the classification of ambulance runs were not properly synchronized and were partially corrupted which resulted in inadvertent changes in ambulance run narrative descriptions. In addition, the Medicare ALS-BLS rules and regulations are complex, confusing and difficult to apply, city officials say; they also say there are other factors that would have supported the city’s defense but the defendants negligently ignored them.
In the fall of 2010, the city retained a new Medicare ambulance billing service. Since 2010 to the present, the city’s ambulance billing service has conservately established the ALS-BLS split as about 86 percent ALS and 14 percent BLS. That correct ratio still is substantially higher than the national trend upon which the defendants relied when they advised the city to pay $4.5 million in the settlement of the Schultheis case.
• The lawsuit says that when Walker testified at a Clinton Civil Service Commission public hearing on Nov. 23, he said the defendants had determined the actual difference between the city’s Medicare reimbursement charges for ALS ambulance when compared with the BLS runs for 2002-2008. The lawsuit says the defendants’ determination of those charges, as Walker stated at the hearing, was that the city’s total Medicare purported overcharges were about $15,000 to $18,000 per year. “Consequently, the total estimated overcharges for the False Claims Act statutory period were at most only $108,000. Despite that relatively paltry sum, the defendants told the city to settle the Schultheis case for more than 41 times that amount,” the lawsuit states.
At the Civil Service Commission hearing, Walker also attempted to justify the city’s $4.5 million settlement by claiming the city faced $5,000 to$10,000 in statutory penalties for each incident of ALS overbilling plus treble damages and plaintiff’s attorneys’ fees, the lawsuit states. He admitted the actual amount of possible overbilling was only $45 per incident, the lawsuit claims.
“It was negligent for defendants to have reasonably believed that any court or jury actually would have penalized the city in the amount of $10,000 to $15,000 for an inadvertent $45 overcharge to Medicare,” the lawsuit reads. “Moreover, the legal analysis of the False Claims Act by defendants was negligently and fundamentally flawed as the result of the failure to adequately investigate the facts underlying the city’s ambulance billing practices.”