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May 27, 2013 Healthcare Fraud

U.S. Renal Care Settles False Claims Act Lawsuit for $7.3 Million

A Texas-based dialysis clinic recently agreed to a $7.3 million settlement with the United States government, resolving allegations of Medicare fraud contained in a False Claims Act lawsuit. U.S. Renal Care, who acquired Dialysis Corporation of America (DCA) in June 2010, is accused of knowingly overbilling Medicare for Epogen, a specific anemia drug used to treat its dialysis patients. The original whistleblower lawsuit was filed in 2008.

Allegations of Medicare Fraud

According to the whistleblower lawsuit, DCA submitted fraudulent reimbursement claims to Medicare, a government sponsored healthcare program, for  at least seven years. From January 2004 to May 2011, DCA allegedly billed Medicare not only for the amount of Epogen that was administered to patients, but also billed for the amount of overfill that was left behind in the vials. Federal authorities claim DCA fraudulently billed the federal government for 10 to 11 percent of Epogen overfill every time it administered the medication to a patient. It was the illegal billing of Epogen overfill that led to DCA’s False Claims Act violations.

Epogen is a man-made medication used to help the body produce an increased number of red blood cells in kidney dialysis patients. It is used to combat anemia, which occurs in patients who have an insufficient amount of red blood cells circulating in the body. Patients suffering from chronic kidney disease are prone to anemia, making Epogen the drug of choice for those who receive frequent dialysis treatments as a result of the disease.

Epogen comes pre-packaged in small glass vials. In order for DCA staff members to properly administer Epogen, they needed to draw the medication up using syringes. Once in a syringe, the Epogen was injected into a patient’s blood during the dialysis procedure.

According to the False Claims Act lawsuit, DCA staff members were allegedly unable to remove or administer all of the medication from the glass vials, as the design of the syringes prevented it. When a liquid medication is packaged in a glass vial for withdrawal using a syringe, a small amount of the drug typically adheres to the inside of the vial. Using a standard syringe, it is physically impossible to draw the full amount of liquid out of a vial.

In order to make sure providers can obtain the correct amount of purchased Epogen from the vial, the manufacturer, Amgen, overfills their vials with approximately 11 percent more Epogen than is stated on the label. That extra 11 percent is called “overfill” and compensates providers for the portion of drug that adheres to the glass vials.  Amgen does not charge providers an additional fee for the 11 percent overfill. The leftover medication is generally thrown away once staff members have used up all the Epogen inside the vials.

Instead of simply throwing out the glass vials and billing Medicare for the amount of Epogen that was actually used, DCA billed the government for the 10 to 11 percent overfill each time it administered Epogen.  As a result, DCA, which has over 100 outpatient dialysis clinics around the country, submitted false and fraudulent reimbursement claims to Medicare. According to authorities, there was a time when DCA’s reimbursement for Epogen made up over 25 percent of its revenue for medical services.

The Whistleblower

The original qui tam, or whistleblower, complaint was filed by a former DCA nurse. Laura Davis worked as a registered nurse at a DCA dialysis clinic located in Georgia. After learning of the fraudulent billing scheme, Davis claims she reported the issue to management, but was brushed off each time. Discouraged with their lack of response, Davis chose to consult with a False Claims Act attorney and filed an official complaint in the federal district court of Baltimore, Maryland during 2008.

As a result of the case, Davis will receive a relator’s share of $1,314,000.