Fresenius' Merry Christmas

Despite the mounting litigation against Granuflo manufacturer Fresenius Medical Care (only about a dozen cases at the moment – but there will be many more lawsuits filed in the coming year), the German-based company got a very nice present from the U.S. Department of Justice just before Christmas. In fact, it was a gift worth $83 million.

But let's go back a couple of years...

The story begins in 1999, when Fresenius allegedly started a billing scam that went on for six years.  Fresenius has its own home care division for “end stage renal dialysis” (ESND) patients, known as Renal Care Group.  This division provides the actual treatment.

At the same time, there was a company known as the “Renal Care Group Supply Co.” Not surprisingly, this was the company that supplied the actual medications, Granuflo and NaturaLyte, used for the dialysis.  According to federal law, the company that furnishes these medications and other supplies are entitled to Medicare patients only if they are unaffiliated with the company providing the dialysis – and the patients have elected to receive their medications from that independent supplier.

Hmmm....let's see... “Renal Care Group,” a division of Fresenius, and “Renal Care Group Supply Company” - supposedly independent from Fresenius. Not too clever...particularly when a former Fresenius employee spilled the beans. The unnamed employee in question was ordered to direct patients to the Renal Care Group Supply Company for their supplies. Expressing a desire to avoid incarceration in an email, the employee stated that Renal Care Group executives' orders were “not in the best interest of patients.”

A U.S. district court in Nashville, Tennessee agreed. Judge William Haynes Jr.  found that Fresenius was engaging in fraud by setting up a “sham company” - Renal Care Group Supply Company – for the purpose of double-dipping. In short, Fresenius was billing Medicare for both dialysis services and dialysis supplies in direct violation of federal law. In March 2010, Judge Haynes ordered Fresenius and its two subsidiaries to pay over $19.3 million.  

Just over a year later, Judge Haynes realized he had misunderstood the federal government's case. Fresenius had in fact overbilled Medicare much more – and had done so deliberately, with “reckless disregard” of the law. Judge Haynes corrected the error, ordering the company to pay $43.8 million in penalties and $38.8 million  in damages. (To put those figures in perspective, read this.)

Just before Christmas of 2012, the 6th U.S. Court of Appeals threw the case out – and Fresenius is now off the hook. According to the appellate ruling, Fresenius had in fact sought legal counsel over its billing arrangement and had received no response. Additionally, when officials from Medicare conducted an inspection of the supply company, they said nothing about it. According to the panel, Frenesius

                        “consistently sought clarification on the issue, followed industry practice in

                        trying to sort through ambiguous regulations and were forthright with government

                        officials over RCGSC’s structure...to deem such behavior 'reckless disregard' of

                        controlling statutes and regulations imposes a burden on government contractors far

                        higher than what Congress intended.”

Fresenius CEO Ben Lipps was quoted as stating that he was “pleased to have this lengthy litigation successfully concluded.”

The case isn't over; part of it has been remanded to the District Court. In the meantime, Fresenius' total sales figures for 2012  are estimated to be approximately $14 billion.  Despite strong allegations that Fresenius knew about the possibility of adverse events from its products and failed to warn doctors and facilities outside of its own company,  don't expect anyone to go to jail. Corporate personhood confers human rights – but sadly, not human accountability.

Sources

Bolado, Carolina. “Fresenius Must Pay $83M For Medicare Overcharges.” Law360.com, 26 May 2011.

Gee, Brandon. “Medicare Penalty Increased.” The Tennessean, 27 May 2011.

Vanderford, Richard. “DOJ Drops $83M FCA Medicare case Against Fresenius.” Law360.com, 21 December 2012.

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