A Medical Device Daily

The U.S. 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 has reported.

The companies are McKesson (San Francisco), McKesson Medical-Surgical MediNet (Happy Valley, Oregon), GGNSC Holdings (Fort Smith, Arkansas), Golden Gate Ancillary (Fort Smith, Arkansas), Beverly Enterprises (Fort Smith, Arkansas), Ceres Strategies (Fort Smith, Arkansas) and Ceres Strategies Medical Services (CSMS; Fort Smith, Arkansas).

The government alleges that McKesson, through its subsidiary MediNet, structured arrangements ensuring 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. It said that MediNet set up and managed a purported DME supplier, called CSMS, affiliated with Beverly, but actually managed by MediNet.

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 payments for services and supplies that actually were supplied by MediNet and not by CSMS. In exchange for accepting this arrangement, Beverly agreed to refer to McKesson its facilities' needs for DME supplies, according to the allegations.

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 which a private individual can potentially share in any recovery.

McKesson is a major supplier of DME equipment, which includes enteral feeding devices and oxygen supplies.

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