Department of Justice SealDepartment of Justice
Monday, October 6, 2008
(202) 514-2007
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U.S. Intervenes in False Claims Act Suit Against McKesson Corp. and Golden Horizons Nursing Homes

WASHINGTON - The United States has intervened in a lawsuit against several companies alleging that they submitted false claims to Medicare arising from illegal kickbacks and the establishment of sham durable medical equipment (DME) suppliers, the Justice Department announced today. The companies are McKesson Corporation, McKesson Medical-Surgical MediNet Inc. (MediNet), GGNSC Holdings LLC, Golden Gate Ancillary LLC, Beverly Enterprises Inc., CERES Strategies Inc. and CERES Strategies Medical Services Inc. (CSMS).

The government alleges in its complaint that McKesson, through its subsidiary MediNet, structured arrangements that ensured that McKesson supplies were used by Beverly nursing facilities. The suit further alleges that McKesson promised Beverly facilities (now known as Golden Horizons) significant profits to be gained from making it appear to Medicare that it was Beverly – not McKesson or MediNet – that was supplying the DME equipment and supplies. MediNet did so by setting up and managing a purported DME supplier, called CSMS, which was affiliated with Beverly, but which was actually managed by MediNet. McKesson is one of the nation’s largest suppliers of DME equipment, which includes, among other things, enteral feeding devices and oxygen supplies.

The government’s complaint alleges that MediNet’s management allowed this entity (which was thinly capitalized, had few employees, had almost no DME equipment and performed none of the DME patient services at the Beverly facilities) to bill Medicare and retain millions of dollars in Medicare payments for services and supplies that actually were supplied by MediNet and not by CSMS. In exchange for accepting this arrangement that enabled Beverly to retain these profits, the government alleges that Beverly agreed to refer to McKesson its facilities’ needs for DME supplies.

The case originally was filed by a private citizen under the qui tam provisions of the False Claims Act in the U.S. District Court for the Northern District of Mississippi. Under the act, a private individual can sue on behalf of the government and can potentially share in any recovery.

The investigation has been handled by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Northern District of Mississippi and the Office of the Inspector General at the Department of Health and Human Services.