The Clinton Herald, Clinton, Iowa

October 3, 2013

Schultheis, Walker take stand as adverse witnesses

By Katie Dahlstrom
Assistant Editor

DAVENPORT — The former Clinton firefighter who sued the city of Clinton for defrauding the U.S. government and the attorney accused of settling that suit for too much, too soon testified Wednesday as the city of Clinton’s legal malpractice suit continued.

Ex-firefighter Timothy Schultheis and attorney Michael Walker were called to the stand Wednesday by the city of Clinton as adverse witnesses. The city is suing Walker and his law firm Hopkins and Huebner, which represented the city in the emergency medical services case that resulted in the city settling with whistleblower Schultheis and the U.S.

Department of Justice for $4.5 million in 2010. Schultheis and his attorneys received 30 percent of that settlement, $1.35 million, which is being paid in annual installments over a period of 10 years. Walker’s firm was retained to represent the city’s interests in 2009 after Schultheis filed a complaint under the Federal False Claims Act that emergency medical calls handled by city ambulances were being improperly coded. By listing even routine calls as advanced life support instead of basic life support, Schultheis claimed the city was able to receive higher reimbursement rates from Medicare and Medicaid.

The city alleges Walker failed to properly analyze the whistleblower case and his negligence led to the city settling. It is seeking $4.67 million in order to recoup the expenses of the settlement along with

Walker’s and other fees.

SCHULTHEIS TESTIMONY

Schultheis, who was under subpoena to appear, took the stand first, facing two rounds of questions from Mike Hannafan, the attorney with Chicago law firm Hannafan and Hannafan retained by the city for the legal malpractice suit, and two from Walker’s attorney, Bob Waterman.

Schultheis worked at the Clinton Fire Department from April 2007 and worked his last shift in November 2008. He was technically employed until April 2009, when he received a disability pension. Hannafan began his questioning Wednesday with the Federal False Claims Act complaint Schultheis filed on behalf of the U.S. government under seal in federal district court in September 2008. Schultheis’s attorney in that case was Ben Roach, who is an attorney with Des Moines law firm, Nyemaster, Goode, the firm with which Schultheis’s brother, Mark, is an attorney.

In September 2009, nearly a year after Schultheis filed his complaint on behalf of the U.S. government, it was unsealed following the feds’ decision not to intervene and pursue the lawsuit. The complaint stated that Schultheis had personal knowledge that the city had knowingly, deliberately or recklessly submitted all of its claims for ambulance runs to Medicare and Medicaid as advanced life support (ALS1) when some of the calls should have been classified as basic life support (BLS). As a result of this alleged fraud, the city received higher reimbursement rates from the government programs.

However, Schultheis testified Wednesday he had never seen a bill produced by the city to Medicare or Medicaid. While Schultheis said he complained numerous times to his battalion chief, Joel Atkinson, and EMS Director Andew McGovern, those complaints were about the way the city coded ambulance calls, not billed them as cited in his federal complaint. Schultheis also testified that while the complaint said the city received a higher reimbursement, he did not know what payments the city received from Medicare and Medicaid. Those payments went to the city’s general fund and were not earmarked for the fire department.

Schultheis said he complained to McGovern at least six times, maybe more about his disagreement with the city’s method for coding ambulance calls at the ALS level. His first complaint came in the summer of 2007 after he started completing patient care reports and coding on his own. When

he first complained, he said he was told it would be looked into. His later complaints didn’t warrant the same response. Schultheis said he was told the city of Clinton was an ALS service and all calls were to be coded as ALS. He was instructed by Atkinson to follow McGovern’s instructions about ALS coding.

“If we were doing something wrong, we would have been caught by now,” Schultheis said Wednesday, paraphrasing Atkinson. No one ever said the coding was a means to defraud the government, he

testified.

Schultheis was concerned the city, the fire department or individuals would be sued or lose their licenses because of the fraud, he said. While employed as a firefighter, Schultheis also had an insurance and real-estate business. He further testified that he believed he was being an asset and a leader when he filed his suit on behalf of the federal government.

He said he showed McGovern a Medicare manual and an article from a consulting firm about ALS coding, complained to all the firefighters on his shift and at union meetings and eventually contacted federal investigators about his concerns regarding the coding.

When asked why he never directly contacted then-fire chief Mark Regenwether, the city attorney or mayor about his concerns, Schultheis said he was told he should adhere to the chain of command. He said he couldn’t make an anonymous complaint because it would have become obvious very quickly that he was the one to submit the anonymous complaint. He never put his complaints in writing because he felt he didn’t need to, he testified. When he decided to talk to the feds about the alleged fraud, Schultheis went as far as to break fire department policy and the Health Insurance Portability and Accountability Act by secretly taking patient care reports of people who had been served by the city ambulance from the fire department’s computers. Schultheis did this at the request of federal fraud investigator Kory Ihnken. He took 30 to 40 reports home before sending them to Ihnken. He didn’t know if the reports he took resulted in claims that had been billed to Medicare, he testified.

In the summer of 2008, Schultheis met with his attorney, Ihnken and Assistant U.S. Attorney Maureen McGuire in Des Moines to share his concerns the city had been committing Medicare fraud. He testified they told him they would investigate the potential fraud. Schultheis filed suit in Septemeber. His complaint contained six alleged examples of false claims, though one was never billed to Medicare or Medicaid for payment and Schultheis was not involved in the call.

WALKER TESTIFIES

Walker’s testimony started Wednesday afternoon and quickly moved into his role in the city settling the lawsuit for $4.5 million. The city retained Walker on Oct. 1, 2009 to defend it in the whistleblower case brought on by Schultheis. Around 10 months later, the suit was settled.

Prior to being retained, Walker said, he was called by then-city attorney Paul Walter to speak to the City Council about the suit, which he did on Sept. 29, 2009. Based on six years of infractions, which the suit covered, Walker estimated the city could have had 8,760 infractions and told council members the city could have faced up to $100 million in fines. Walker also used the ratio supplied by purported EMS coding and billing expert Douglas Wolfberg that said an average city should have 60 percent ALS calls and 40 percent BLS calls. The city had an average of 99 percent ALS calls, meaning if the Wolfberg ratio held true it could face up to $40 million in fines, Walker told the council.

McGovern provided Walker with information regarding other cities’ ALS/BLS rates, which showed five Iowa cities with rates ranging from 69 to 100 percent ALS.

Walker testified he received this information very close to the mediation in August 2010 when the settlement was reached. While he could have postponed the mediation, he did not, he testified.

Walker further testified he was told to retain Wolfberg as an expert witness by McGovern, who called Wolfberg the “best in the business.”

McGovern had attended training conducted by Wolfberg. The city alleges Walker didn’t monitor Wolfberg’s work, claiming Wolfberg only reviewed 60 out of thousands of ambulance calls. Wolfberg’s bills, which came to around $5,000, were sent directly to the city for payment. The city paid Walker $163,000 for his work.

Before the third day of the trial came to a close, Hannafan asked Walker about some of the defenses the city alleges he neglected to pursue when defending it in the EMS case, including one that could have set the city up to be reimbursed by Medicare for $6 million.

Hannafan asked Walker about another code available between 2004 and 2006 under which the city could have upcoded a number of its BLS calls. While Walker said he did not know the city could have upcoded some of its BLS calls, his deposition testimony reflected that he was aware.

Another possible defense would have been a mistake on the city’s part. The crux of the Schultheis case was that the city knowingly or intentionally submitted false claims. In his deposition testimony read Wednesday Walker stated that “depending on the nature of the mistake, yes,” a mistake by the city would have provided a complete defense.

Walker’s testimony will continue Thursday.