Fresenius and National Medical Care: Blood Tests and the Payments Behind the Orders

The Fresenius National Medical Care laboratory fraud case formed part of a $385 million global civil resolution. In its announcement of the accompanying criminal case, the government described agreements to plead guilty to conspiring to submit false laboratory claims and to pay dialysis facilities for blood-testing orders. Medicare, funded by taxpayers, paid for the testing. For an insider, the story sits on both sides of the same test: how the order arrived and what the laboratory billed.

The Department of Justice announced the resolution on January 19, 2000. It identified National Medical Care, also known as Fresenius Medical Care North America, as the country’s largest dialysis provider at the time.

Dialysis brought the company into Medicare through patients with end-stage renal disease. The government’s account connected those patients’ blood testing to decisions in different parts of the business. LifeChem and Medical Products were National Medical Care subsidiaries.

LifeChem’s Laboratory Claims and Medical Products’ Kickbacks

In its announcement of the criminal charges and plea agreements, the Justice Department said LifeChem had agreed to plead guilty to conspiring to submit false claims for laboratory tests.

Medical Products had agreed to plead guilty to conspiring to offer and pay kickbacks to induce dialysis facilities to order blood-testing services from LifeChem, with Medicare paying for the tests, according to the same criminal announcement.

For a laboratory billing employee, the useful knowledge may concern which tests appeared on the claim and how those tests matched the order. For someone on the commercial side, it may concern the offer made to a dialysis facility and the testing business expected in return.

The Laboratory Bills for a Decision Made Elsewhere

The ordering practitioner supplies the medical reason for a test, while the laboratory performs the work and submits the claim. That separation helps explain why the referral relationship mattered in the National Medical Care case: the laboratory depended on orders originating outside its own testing operation.

Under Medicare’s ordering and documentation rules, the treating physician or qualified practitioner orders the test and retains the documentation establishing medical necessity. The laboratory performs the service and reports the result. Its claim needs to connect back to the clinical decision that caused the test to be ordered.

The 1997 Laboratory Medicine article Model Plan Helps Laboratories Fight Fraud describes the government’s response to that separation. It explains that laboratories cannot treat patients, yet can advise ordering physicians about Medicare’s medical-necessity requirements. The model plan recommended uniform requisitions with room for the physician to document why each test was needed.

That puts the requisition at the meeting point of medicine and billing. The test result shows what the laboratory did. The order and the physician’s supporting record explain why it was requested. In a referral-payment case, the financial arrangement supplies another part of the account: why that laboratory received the business.

Standing Orders Need a Continuing Clinical Decision

The inspector general’s 1998 guidance for clinical laboratories specifically called for annual written confirmation from end-stage renal disease facilities that their existing standing orders remained valid. It also called for periodic monitoring, a fixed period of validity and renewal when that period expired.

The emphasis was on keeping the order connected to a current clinical decision. A standing order can continue producing laboratory work after the original conversation between the practitioner and the laboratory. Reviewing its continuing validity brings that decision back into view.

Customized profiles raised a related issue: the physician needed to understand the collection of tests being ordered. The Laboratory Medicine article put that responsibility into a specific document:

The article also described annual notices explaining a profile’s individual components, billing codes and how the laboratory would bill Medicare. Those details make a profile visible as a set of tests and charges, rather than just a familiar name on an order form.

Eight Years of Audits and Government Reporting

The National Medical Care resolution included an eight-year corporate integrity agreement. The Justice Department described mandatory audits and reporting to the government as requirements of the civil settlement for the company and its divisions.

Whistleblowers Helped Make the Civil Recovery Possible

The Justice Department credited whistleblowers with making the National Medical Care resolution possible through False Claims Act qui tam cases. It announced that the whistleblowers would receive approximately $65 million from the civil recovery.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know How the Testing Business Arrived

If you know the dialysis orders, the referral payments or the laboratory claims, speak to one of our whistleblower experts about how the testing business was won. We build your strongest laboratory fraud whistleblower case with you and bring in laboratory fraud whistleblower lawyers who understand dialysis billing and referral arrangements. We stay beside you from the first account of what you saw through the pursuit of a recovery.