In another false claims case decided by Judge Haynes of the Middle District of Tennessee, judgment in excess of $19 million (plus interest) was entered against Renal Care Group (“RCG”), its related company, Renal Care Group Supply Company (“RCGSC”), and Fresenius Medical Care Holdings, Inc. (as the successor-in-interest to RCG and RCGSC.) See U.S. ex rel. Williams v. Renal Care Group, 2010 WL 1062634 (M.D. Tenn. Mar. 22, 2010)(Judge Haynes).

RCG provided dialysis supplies to patients with end-state renal disease at more than 260 of RCG’s free standing dialysis facilities. The related company, RCGSC, supplied dialysis equipment to patients who receive dialysis treatment at their homes. Between 1999 and 2005, RCG and/or RCGSC submitted claims for payment for these services and supplies to Medicare. The Court found that RCG created, operated and controlled RCGSC without separate corporate formalities. Further, they were interconnected businesses: sharing office space, payroll, insurance, benefits, employees, email systems, finance services, and back office services. They relied upon one another for patient enrollments. Significantly, all money deposited in RCGSC was swept into RCG’s corporate account at the end of each day. RCG and/or RCGSC submitted claims for payments for their services and supplies to Medicare using the higher reimbursement, method II, for dialysis patients receiving services and supplies at home.

The Court found that the Medicare regulations governing the formation and operation of RCG’s related supply company, RCGSC, were clear and unambiguous. RCG failed to heed the advice of their counsel to maintain RCGSC as a separate entity, and RCG recklessly disregarded Medicare regulations to realize the higher, method II reimbursement. RCG claimed the arrangement complied with the regulations because CMS officials had told RCG’s attorneys that the corporate structure and supply arrangement was legal and, further CMS had paid RCG’s claims under the arrangement for more than six years. The Court, however, found that RCG could not wantonly disregard clear Medicare regulations, no matter what representations it received from CMS personnel. Making the case for FCA liability more absolute was the fact that RCG was found to have violated a Medicare condition of payment rather than a condition of participation. While both may lead to false claims liability with the same treble damages plus interest, the former is nearly synonymous with a false claim, while the latter may have a weaker link between the claim for payment and the disadvantage to the government in paying the claim.

Health care providers should never rely on the advice of CMS or other HHS personnel when such advice appears to contradict the plain language of a statute or regulation. The courts are loath to accept the defense that regulators endorsed a certain arrangement or structure when the regulations and statute clearly prohibit such an arrangement. If your facility believes it is getting advice from regulators which conflicts with the statutes or regulations, contact legal counsel to determine the best way to proceed.