The Bitter Pill

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Dialysis Fraud Pays Big Bucks

Evelyn Pringle March 2006

Medicare payments for dialysis cost the US government $5 billion a year. The global market for chronic dialysis services is worth approximately $43 billion and the US market is the largest in the world in terms of value.

Worldwide, by the end of 2005, the number of dialysis patients reached 1.5 million. Of that number, approximately 23% patients were treated in the US, 20 percent in Europe, 17% in Japan, and 40% in the rest of the world.

Having said all that, it will probably come as no surprise that most of the major renal care facilities in the US have come under investigation for fraud in recent years, to include Fresenius Medical Care America, DaVita Inc, Renal Care Group, Quest Diagnostics, and Bone Care International.

The 6th largest medical fraud case in US history was settled in December 2004 against Gambro Healthcare, for $325 million. At the time, Gambro was the third largest operator of renal-dialysis clinics in the US. The settlement period covered fraud that occurred from January 1, 1991, through September 30, 2004.

Gambro Healthcare is owned by a holding company, Gambro Inc, a subsidiary of Gambro AB, headquartered in Stockholm, Sweden, which produces dialysis products, operates dialysis clinics and markets blood bank technology products.

In fiscal 2004, the company had revenue of $3.6 billion. Gambro had revenue of $1.4 billion in the first nine months of 2005, with the latter significantly lower than 2004 due to the company selling off its US operations to DaVita in October 2005.

In December 2004, Gambro entered into an agreement to sell it’s US renal business to DeVita Inc for $3.05 billion and the FTC approved the deal in October 2005. Since the sale of its US operations, Gambro has around 11,300 employees in 40 countries.

The federal fraud investigation began in 2001, after Dr Steven Bander filed a federal whistle-blower lawsuit against the company in St. Louis, alleging fraudulent billing practices. Dr Bander is a kidney specialist and served as Gambro’s chief medical officer from 1995 to 2000, according to the lawsuit complaint.

In the end, the investigation involved the FBI, the Justice Department’s Civil Division and the Health and Human Services’ Office of Inspector General.

On December 2, 2004, the Department of Justice announced that Gambro would pay more than $350 million in criminal fines and civil penalties to settle allegations of fraud against government healthcare programs,

Gambro paid in excess of $310 million to resolve civil liabilities stemming from kickbacks paid to physicians, false statements made to procure payment for unnecessary tests and services, and payments made to the sham equipment company Gambro Supply.

The settlement also required Gambro to pay $15 million to resolve liability with the individual state Medicaid programs to include Arizona, Arkansas, Alabama, California, Colorado, Connecticut, Kansas, Kentucky, Michigan, Missouri, Nevada, Oklahoma, Texas, Virginia, Florida, Georgia, Louisiana, Mississippi, North Carolina, Pennsylvania, Tennessee, Wisconsin, Washington, Illinois, Maryland, Massachusetts, New Jersey, New Mexico, New York, Ohio, Oregon, Indiana, Utah, Iowa, Minnesota, Nebraska, New Hampshire, Rhode Island, South Carolina and West Virginia.

Upon receiving his state’s portion of the settlement last fall, Connecticut Attorney General, Richard Blumenthal, said in a September 27, 2005 press release, “Gambro’s conduct was reprehensible. Their scams and schemes – including kickbacks, unnecessary tests and billing fraud – stole precious funds intended to care for some of society’s neediest patients.”

According to the Department of Justice, the settlement resolved allegations that Gambro Healthcare:

(1) 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;

(2) 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

(3) Hired and compensated physicians as medical directors for their dialysis clinics based on the number and volume of anticipated patient referrals to Gambro clinics.

Gambro also violated the Anti-Kickback Act, the DOJ said, by entering into joint venture relationships with physician partners and contractual dealings “premised upon the number and volume of anticipated patient referrals.”

“Kickbacks of this type are prohibited,” according to the DOJ, “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.”

As part of the overall scheme, Gambro Supply was set up as a medical equipment company, to inflate billings in a way that would allow the company to earn nearly $500 more per patient each month. The company billed for the rate charged at clinics rather than the lower rate it should have billed for home dialysis.

In addition, Gambro Supply, then known as REN Supply Corp, intentionally left a line blank on Medicare application forms in 1993 and 1996 to conceal its connection to the parent company, which made it possible to collect the extra $500 per person.

According to court records, in St Louis, Gambro Supply pled guilty to one felony count of execution of a health care fraud scheme, paid a $25 million fine and was permanently barred from the Medicare program.

This was the second time in four years that Gambro paid large fines for ripping off government programs. In 2000, the company and two subsidiaries, Dialysis Holdings Laboratory services and Gambro Healthcare Laboratory Services, paid over $53 million to settle charges of health car fraud similar to the allegations in the later investigation.

The $53 million settlement resolved charges that the firms submitted false claims to Medicare, Medicaid and Tricare, the Defense Department’s health care program, for laboratory services provided to End Stage Renal Disease patients, according to the US Department of Justice.

In a move that seems kind of silly in hindsight, as part of the 2000 settlement, Gambro entered into a 5-year integrity agreement with the Department of Health and Human Services’ Office of Inspector General. Under the agreement, reportedly designed to promote compliance with federal program requirements, Gambro agreed to provide compliance training to employees, undergo annual independent audits and submit annual reports to the Office of Inspector General.

“The corporate integrity agreement provides important safeguards to prevent misconduct and requires ongoing monitoring of the companies to help ensure compliance with federal health care program requirements,” Inspector General June Gibbs Brown said at the time.

In light of the recent $300 million plus 2004 settlement, its probably safe to assume that signing the “integrity agreement” was a meaningless gesture on the part of Gambro.

However, for whatever its worth, if anything, Gambro was required to sign another “integrity agreement” as part of the December 2004 settlement.

The charges above beg the questions of how many patients received unnecessary testing, medications and equipment, and how many patients went without services that were billed for? Also, how much out-of-pocket money did patients lose in co-payments as a result of bogus billings for services not rendered or for services rendered needlessly?

Gambro also has a long history of causing death and injury by producing faulty products. On June 19, 1998, the New York Times National News Brief reported that four “hemodialysis patients died and at least 40 others required hospitalization because of defective tubing that damaged their red blood cells.”

Gambro issued a nationwide recall of the products. A company press release at the time said the “blood tubing sets may be associated with incidents of hemolysis that have been reported in Nebraska, New Jersey, Alabama, Massachusetts, and Maryland within the past three (3) weeks.”

Hemolysis is the medical term for the destruction of the red blood cells, according to the company.

Customers who received the products were notified “to immediately cease using them, quarantine any inventory, and arrange for their return to GAMBRO Healthcare.”

“A total of four patient deaths have been reported following dialysis treatment,” the press release wrote. “Symptoms reported include abdominal pain, nausea, vomiting, cyanosis, chest pain, and flushing that occurred during and/or following dialysis treatment,” it warned.

The tubing was manufactured in Tijuana, Mexico, according United Press International, and as many as 6,000 sets of tubing may have been shipped.

In another product malfunction, on August 16, 2005, Gambro issued a “Worldwide Safety Alert” to all users of its Prisma System dialysis machine explaining what actions to take to reduce the problems with the device that resulted in excessive fluid removal.

The Prisma System is specially designed to perform the complete range of continuous renal replacement therapy for critically ill patients in the intensive care unit.

In this country, the FDA now says nine deaths and 11 serious injuries have been linked to the Prisma System. Since the device was introduced in 1997, approximately 1,900 units have been distributed to facilities in the US, and about 5,000 were sold worldwide. The system serves about 80% of the market for acute dialysis care in this country.

On January 5, 2006, Gambro Dasco, SpA, a production unit located in Italy, received a warning letter from the FDA reflecting continued concerns about the safety, adequacy and effectiveness of Gambro renal systems. The FDA also issued an import ban, calling for the detention of all Gambro’s dialysis machines shipped from Italy until the issues are resolved.

In addition to the Prisma, the ban covers the Phoenix machine, used in outpatient dialysis care, and the company’s newest product the Prismaflex machine, which is said to be an improved version of the Prisma System.

That letter arrived shortly after the FDA sent a 13-page report to Gambro following a September 2005, inspection of the company’s plant in Italy where the Prisma System is produced. The report listed numerous violations at the plant, and said more than 90 incidences of serious problems with the device, had been reported to Gambro but had not been reported to the FDA, including deaths. The report specifically noted Cambro‘s:

1. Failure to submit reports to FDA after receiving information that reasonably suggested that one of your marketed devices may have caused or contributed to a death or serious injury, as required by 21 CFR 803.50(a)(1). For example:

a) A patient died on June 6, 2004, two days after the Prisma removed 100 cc too much fluid from the patient. This event should be reported as a device-related death.

b) A facility reported that a Prisma contributed to the death of a patient on November 20, 2004, after multiple alarms for air in the blood and a blood leak. This event should be reported as a device-related death.

The report also lists more than 17 events that should have been reported under serious injuries.

Until recently, Gambro claimed user error was the sole cause of the problems with the Prisma system. However, in a letter to renal caregivers in January 2006, the company’s medical director, Juan Bosch, MD, acknowledged that software glitches might be giving users incorrect readings on fluid removal.

On February 27, 2006, the FDA sent another letter to all Renal Dialysis Caregivers, stating: “The FDA has become aware of additional serious injuries and deaths associated with the use of the Gambro Prisma® Continuous Renal Replacement Therapy (CRRT) device since the release of our preliminary Public Health Notification in August 2005.”

“We want to emphasize again that special caution must be used when operating the Prisma® System to prevent excessive fluid removal from patients,” the agency wrote.

“Caregivers must adhere strictly to the labeled operating instructions, including the Manufacturer’s Instructions for Use, Operator’s Manual, and the User Interface on the Prisma® System control panel,” it warned.

The FDA now points out that device “design issues may also be contributing to the problem, and this is currently under investigation by both the FDA and the firm.”

Filed under: 2006, anemia drugs, DaVita, dialysis, Fresenius, Gambro, MEDICAID, MEDICARE, Renal Care


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