ST. PAUL, Minn.-An entrepreneurial accountant who fought for restitution to Minnesota hospitals shortchanged by the state's Medicaid program now wants a cut of the take.
In February, Chuck Ulrich sued five hospitals that received about $2 million from Minnesota. Ulrich argues that they were "unjustly enriched" by his work and has asked for damages "greatly in excess" of $50,000.
The hospitals say they don't owe him a cent. "We think this guy is out of his mind," said Dave Feinwachs, general counsel of the Minnesota Hospital and Healthcare Partnership, the state's hospital association.
Ulrich already was paid just over $2 million for a legal challenge he filed on behalf of 52 hospitals. After settling with them, the state decided it ought to reimburse other hospitals, too.
His unjust enrichment suit, filed in U.S. District Court in St. Paul, targets the biggest beneficiaries of the state's change of heart: 458-bed Hennepin County Medical Center, Minneapolis; 162-bed St. Joseph's Medical Center, Brainerd; 258-bed St. Luke's Hospital, Duluth; 325-bed St. Paul-Ramsey Medical Center, St. Paul; and 554-bed University of Minnesota Hospital and Clinics, Minneapolis.
The Minnesota hospital partnership has created a fund for the hospitals' defense. Feinwachs said the five hospitals could be a test case, and other facilities would be vulnerable if Ulrich wins.
Ulrich wouldn't say what lies ahead if he wins his case.
Still, his lawsuit raises an interesting question about the debt owed trailblazers.
"I was out there fighting for every hospital in Minnesota against the vast resources of the federal and state governments," Ulrich said. "I believe I have the correct moral position as well as the correct technical one. If we permit a situation in which there is no payment for appropriate services rendered, the healthcare industry will suffer as a result."
Feinwachs countered: "This guy is out to lunch in a big way. `That means every lawyer in America who set a precedent could contact the rest of the nation and say, `You owe me.'*"
Ulrich, who lives in Aberdeen, S.D., prepared Medicare and Medicaid cost reports for Minnesota hospitals and consulted on other reimbursement issues.
In 1988, he was asked about "dual eligibility" by his son, then a finance executive at a Perham, Minn., hospital. Dual eligibility means patients qualify for both Medicare and Medicaid.
Ulrich said that after a few months of research he decided Minnesota hospitals weren't getting full Medicaid reimbursement for outpatient services provided to such patients.
Medicaid was obligated to cover the Medicare deductible and copayments of those patients because they were indigent. Yet, it hadn't reimbursed hospitals for the full amount since 1984, when it adopted payment caps for outpatient services.
If Medicare paid $400 for a $600 wheelchair, for example, Minnesota would apply that $400 to its Medicaid cap. If its cap also was $400, Minnesota wouldn't pay any of the outstanding claim.
Meanwhile, Medicare was supposed to allow hospitals to report deductibles and copayments as bad debt if Medicaid refused payment for any reason, and that wasn't always happening.
"This was all very confusing," Ulrich said. "It was something I had missed in my services to my clients, and it became apparent to me that it was universally missed."
All told, the programs might have shortchanged Minnesota hospitals by $20 million from 1984 to 1990, he estimated.
Ulrich heard opportunity knocking. He contacted about 160 Minnesota hospitals and offered to pursue the matter for a 50% contingency fee; 60 hospitals agreed.
After years of fruitless haggling with federal officials, Ulrich said, he filed suit against the Minnesota Department of Human Services in October 1993 for 52 of his clients. The state offered $4.2 million for errors it said occurred from 1988 to 1990 in return for the hospitals dropping their claims. Payments were made in May 1994.
Last year, Ulrich announced he planned to litigate further for willing hospitals. Soon after, Minnesota volunteered a total of about $5 million to all remaining hospitals that weren't paid for services from 1988 to 1990. About 150 hospitals in Minnesota and bordering states were potential recipients.
The question is, did Ulrich provoke the offer? He says "Yes." Minnesota says "No."
After Ulrich sued, Minnesota discovered it had deleted the payment-cap rule in 1988 but hadn't changed its practices until 1990, said Kim Buechel Mesun, an assistant attorney general on the case. That's why it offered payments to all hospitals participating in the Minnesota Medicaid program. The state never acknowledged any wrongdoing in its application of the cap before 1988, Buechel Mesun said.
"Fortunately for the hospitals, we found out this error," Buechel Mesun said. "We settled the case not because (Ulrich was) right on the issue but because we had not complied with the state plan."
St. Paul-Ramsey Medical Center said it was discussing the matter with the federal government on its own. It ceased its efforts when it was offered more than $400,000 in the second payment round.
"(Ulrich) approached us in '89 and said, `I've got this deal,' and we said, `Take a hike,'*" said Kay Tuveson, its associate counsel. "Our finance guys were on top of this for years."
A trial date for the lawsuit has yet to be scheduled.