Renal Care Group Liable for $19.3 Million in False Claims Submitted to Medicare

April 8, 2010

On March 24, 2010, as a result of a whistleblower lawsuit filed in 2005, a federal district court judge in the Middle District of Tennessee found that Renal Care Group (RCG), Renal Care Group Supply Company (RCGSC), and their successor-in-interest Fresenius Medical Care Holdings, Inc. (Fresenius), (collectively the defendants), had submitted claims for reimbursement to Medicare and that they must return more than $19.3 million of those funds to the government.

In so holding, the court found that RCG, a company that provided dialysis supplies to patients with end-stage renal disease at RCG’s dialysis facilities, created and operated RCGSC as a shell company to supply dialysis equipment to patients who received dialysis treatment at their homes.

The court determined that RCG’s motivation for creating and operating RCGSC was that Medicare pays for dialysis equipment pursuant to two different payment methods. “Method I” pays a given rate for dialysis “facilities” for equipment and supplies, while “Method II” pays an additional 30% to firms that sell dialysis equipment and supplies for dialysis treatment at a patient’s home.

The court concluded that RCG and RCGSC were not independent from one another, and thus RCGSC was not eligible to receive the higher Method II reimbursements. The court based this conclusion on evidence that established that 95% of RCGSC’s reimbursements were allocated to RCG’s facilities to cover costs; RCGSC returned its revenues from the Method II payments to the region of the RCG facility in which the patients resided; RCGSC relied on RCG’s facilities’ staff to enroll patients for in-home dialysis equipment that qualified for Method II payment; and at least 90% of RCGSC’s patients were also treated in RCG’s dialysis facilities.

As such, the court concluded that RCGSC was not a legitimate supplier of home dialysis supplies. Accordingly, the court granted the United States’ partial motion for summary judgment and awarded $19,366,705 – an amount the court agreed represented the overpayment made to RCGSC pursuant to the Method II payments when the lower Method I payments were required. The defendants have appealed this ruling.

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