Fresenius Off the Hook for Million-Dollar Lawsuit

In 2011, a whistleblower lawsuit alleged that Fresenius Medical Care Holdings Inc.-owned Renal Care Group (RCG) falsified claims to Medicare for its dialysis machines, setting up a fraudulent billing entity—Renal Care Group Supply Company (RCGSC)—that forced patients to deal with the company. U.S. District Court Judge William Haynes (in Tennessee) ordered Fresenius to pay $82.6 million in penalties and damages to the federal government, but the judgment was overturned on Oct. 12.

“The defendants did not act with reckless disregard of the alleged falsity of their submissions to Medicare,” U.S. Appeals Court Judge R. Guy Cole Jr. wrote for a three-member appellate court panel. “And given there is no evidence in the record that they acted with actual knowledge . . . or in deliberate ignorance of the truth . . . they are therefore not liable under count one of the complaint for False Claims Act liability.”

The court’s opinion stated that “Dialysis facilities may not seek Method II reimbursements, and RCGSC was an alter ego of RCG, a dialysis facility; ergo, RCGSC improperly sought Method II reimbursements. The flaw in the argument, however, is that it misunderstands the contours of our alter-ego jurisprudence… 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.”

The argument that the company should not be punished merely for seeking to increase profits was persuasive enough for Cole, who threw the case out.