GAMBRO HEALTHCARE AGREES TO PAY OVER $350 MILLION
TO RESOLVE CIVIL & CRIMINAL ALLEGATIONS IN MEDICARE FRAUD CASE

WASHINGTON, D.C. - Gambro Healthcare will pay more than $350 million in criminal fines and civil penalties to settle allegations of healthcare fraud in the Medicare, Medicaid and TRICARE programs, Assistant Attorney General Peter Keisler and James G. Martin, United States Attorney for the Eastern District of Missouri, announced today. As part of this comprehensive global resolution, Gambro Supply Corporation, a sham durable medical equipment company and a wholly owned subsidiary of Gambro Healthcare, admitted to the execution of a healthcare fraud scheme and agreed to plead guilty to criminal felony charges, pay a $25 million fine and be permanently excluded from the Medicare program.

Gambro Healthcare will also pay in excess of $310 million to resolve civil liabilities stemming from alleged kickbacks paid to physicians, false statements made to procure payment for unnecessary tests and services, and payments made to Gambro Supply. The settlement also requires Gambro to allocate an additional $15 million to resolve potential liability for the conduct resolved under the federal agreement pursuant to a preliminary understanding reached with representatives of various state Medicaid programs. Gambro Healthcare has also entered into a comprehensive Corporate Integrity Agreement.

Today’s agreement is the largest fraud settlement reached by the United States Attorney’s Office in the Eastern District of Missouri and one of the largest healthcare fraud settlements ever reached by the Department of Justice. In 2000, Gambro Healthcare and its subsidiary, Gambro Healthcare Laboratory Services, agreed to pay $40 million to settle allegations of healthcare fraud. Gambro and another subsidiary, Dialysis Holdings Laboratory Services, Inc. (DHLSI), have agreed to pay more than $13.1 million to settle similar allegations.

“This case is significant not only because of the size of the recovery but also because it demonstrates the Justice Department commitment health care fraud enforcement,” said Assistant Attorney General Peter Keisler, the head of the Civil Division. “While the false statements and sham corporation caused the loss of valuable taxpayers funds, equally as important is the loss of confidence in the integrity of our Medicare program which is engendered by the payment of illegal kickbacks.”

“This prosecution demonstrates our resolve to protect federal health insurance programs when they are used to enrich corporate and individual providers such as Gambro and the physicians with whom it contracts,” said United States Attorney Jim Martin. “We will vigorously pursue those whose fraudulent conduct causes enormous losses to the trust funds intended to protect and preserve the health of the elderly and the poor as well as the vulnerable, precarious health of those who suffer from end stage renal disease.”

The settlement resolves a suit originally filed in 2001 by Gambro’s former Chief Medical Officer, Steven J. Bander. As part of his duties, Dr. Bander oversaw medical and nursing services at Gambro’s outpatient dialysis centers across the U.S. Under the provisions of the False Claims Act, Bander will receive a share of the settlement.

“The FBI will devote the resources necessary to uncover health care fraud in all its forms whether it be a straightforward false statement made to secure payment for medically unnecessary services or a sophisticated kickback scheme designed to gain patient referrals,” said Thomas E. Bush, Special Agent in Charge of the St. Louis Office of the Federal Bureau of Investigation.

The civil settlement resolves allegations that Gambro Healthcare:

• Provided home dialysis patients equipment and supplies through a “shell” durable medical equipment company, Gambro Supply, in violation of Medicare regulations. By billing in this manner, Gambro received a higher rate of reimbursement than it would have received if it had directly submitted the claims for payment. Also, emergency home dialysis supplies were not provided as billed by Gambro;
• Engaged in “hard coding” of diagnostic codes on submitted claims. This practice resulted in the submission of false statements and bills being submitted for ancillary medications and services which were not medically necessary (bone density studies, nerve conduction studies, electrocardiograms, carnitor, epogen, vitamin D and iron); and
• Hired and compensated physicians as medical directors for their dialysis clinics based on the number and volume of anticipated patient referrals to Gambro clinics. This conduct violated the Medicare Anti-Kickback Act.

Gambro also violated the Anti-Kickback Act by entering into joint venture relationships with physician partners. Again, Gambro’s contractual dealings were premised upon the number and volume of anticipated patient referrals. Kickbacks of this type are prohibited to ensure that health care providers do not make treatment decisions based upon improper financial considerations rather than the necessity, reasonableness, quality and effectiveness of services. Gambro Healthcare has corporate headquarters in Nashville, Tennessee and Denver, Colorado. It is the third largest owner and operator of renal dialysis clinics in the United States.

The investigation and settlement were jointly handled by the Office of the United States Attorney for the Eastern District of Missouri and the Justice Department’s Civil Division, with assistance of the Department of Health and Human Services Office of Inspector General, including the Office of Counsel and the Federal Bureau of Investigation.

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