OCTOBER 8, 2012 – WASHINGTON, DC – Last week, the US Court of Appeals for the Sixth Circuit awarded Fresenius Medical Care a major victory in a False Claims Act case alleging Fresenius subsidiary Renal Care Group submitted false claims to the Medicare program for supplies and services provided to home dialysis patients. Fresenius is a long-time client of Arent Fox partner Lisa Estrada, who leads the firm’s national Health Care Practice.

The case, U.S. ex rel Williams v. Renal Care Group, was first brought by two whistleblowers in 2005. The Department of Justice intervened in the case in 2008. In 2011, after a lengthy government investigation and extensive discovery, a Tennessee District Court granted summary judgment, awarding the government $82.6 million in damages and penalties. The Sixth Circuit reversed the District Court's judgment and determined, as a matter of law, that Renal Care Group's business practices related to Method II home dialysis supplies and services did not result in false or fraudulent claims for payment.

Estrada said the case reveals the government's tendency to overreach in health fraud cases and pointed to a notable passage in the opinion. In rejecting the “alter ego” theory advanced by the government, the Court noted that “the United States focuses, somewhat obsessively, on evidence demonstrating that RCG sought Method II reimbursements for the sole purpose of increasing its profit margins. Why a business ought to be punished solely for seeking to maximize profits escapes us.”

“Too frequently, the government and whistleblowers acting on the government's behalf portray a health care company's legitimate efforts to maximize profits as fraud,” Estrada said. “Fortunately, in this case, the Sixth Circuit sent a very clear message that health care companies that participate in the Medicare program can have a profit motive just like any other business.”

Estrada also noted that the Sixth Circuit's opinion sets precedent favorable to health care providers: “The Circuit Court's opinion established two really important principles that will be helpful to providers facing False Claims Act allegations. First, the Court held that a provider that makes reasonable efforts to clarify the proper interpretation of a law or regulation — as Renal Care Group did in this case — does not act in reckless disregard of the truth or falsity of its claims. Second, the Court recognized the important distinction between conditions of Medicare payment and conditions of Medicare participation, holding that violations of the latter do not trigger False Claims Act liability.”

According to Estrada, a circuit court ruling establishing these precedents may provide more incentive for health care providers faced with FCA allegations to litigate even in cases where the government intervenes.

Estrada represents institutional health care providers and suppliers in government enforcement actions and investigations, cases under the False Claims Act and administrative litigation. Through this work, she has gained a solid understanding of health care fraud and abuse issues and frequently counsels a broad range of health industry clients on compliance matters.

The Sixth Circuit's opinion in U.S. ex rel Williams is available here.

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