ESRD Medicare Fraud Attorneys

Nolan Auerbach & White are experienced Healthcare Fraud Attorneys helping courageous whistleblowers.

When Medicare published its proposed rule on reimbursement for outpatient dialysis services (47 FR 6556), back in 1982, the regulations provided that each facility would receive a payment rate per dialysis treatment (“composite rate”), that is adjusted for geographic differences in area wage levels for the treatment furnished in the facility or at home.

Aside from resulting in a single comprehensive payment for all services included in the bundle, the Centers for Medicare and Medicaid Services (CMS) believed the ESRD PPS would meet several objectives. These include reducing incentives to overuse profitable separately billable drugs, particularly recombinant human erythropoietin (EPO), the targeting of greater payments to ESRD facilities with more costly patients to promote both equitable payment and access to services, and the promotion of outpatient efficiency. Because of the increased flexibility a bundled PPS would provide in the delivery of outpatient maintenance dialysis services, CMS believed that it could also increase desirable clinical outcomes, resulting in an enhanced quality of care.

Because of the extended weekly encounter time for an ESRD patient with his or her dialysis facility, additional health care services, including traditional primary care services, may be rendered by a nephrologist during visits to the ESRD unit for standing dialysis treatments. For example, a common clinical dilemma faced by nephrologists is the determination of whether a skin infection, common in dialysis patients, is related to the dialysis treatment (since large needles puncture the skin to establish access to the blood stream), or is totally unrelated.This presents an opportunity to increase reimbursements, and, if unnecessary or otherwise inappropriate, could be Medicare fraud.

The End-Stage Renal Disease (ESRD) entitlement has been the only condition-specific entitlement in the Medicare program; thus, whether aging into the entitlement or gaining coverage through under-65 SSA disability, no other disease or condition automatically provides Medicare coverage except ESRD. Since its inception to the present, the program has grown to cover more than 400,000 beneficiaries at a cost to Medicare of about $30 billion annually.  (Approximately 20% of ESRD patients are covered through commercial plans.)  Thus, this 0.7% of Medicare beneficiaries consumes 6% of Medicare’s annual pay-out.

This cost trend has concerned Congress for many years.  A significant step toward controlling the trend became effective January 2011, with the “bundled” payment transition for a costly component of treatments, the drug erythropoietin, or EPO.

The Centers for Medicare and Medicaid Services (CMS) released the Final ESRD Prospective Payment System (PPS) Rule in 2010. Under the new “bundled” payment system, effective January 1, 2011, Medicare changed reimbursement to a single payment that covers all renal dialysis services—including drugs and diagnostic laboratory tests—to dialysis facilities for each dialysis treatment.

With this new reimbursement methodology, the opportunity for Medicare fraud creep in case mix indexing arises.  This is analogous to “case mix creep” in billing for Home Health visits, where the illness burden of beneficiaries is significantly over-reported, given the incentive for improved payments. The opportunity for fraud with this new ESRD reimbursement program also includes inappropriate use of erythropoiesis stimulating agents for patient red blood cell counts (a component of billing which enables reimbursement); and billing for erythropoiesis stimulating agents based on false acquisition costs.

Kathleen Hawkins

Dignity Health
$37 million

Kathleen Hawkins, RN MSN, had been employed by Defendant, Catholic Healthcare West (CHW) for approximately 6 years when she decided she had had enough of trying to change the hospital system from within.

CHW, a California not-for-profit corporation that operated hospitals in California, Arizona, and Nevada, was at the time the eighth largest hospital system in the nation and the largest not-for-profit hospital provider in California.


Joe Strom

Johnson & Johnson
$184 Million

Joe Strom contacted us in 2005. We were very grateful that he did. We immediately formed an all-star legal team and a process to stop a very harmful pharmaceutical marketing strategy. It was this process we set into motion that ultimately returned hundreds of millions of dollars to the U.S. Treasury, and a portion of that, very well-deserved, into Joe’s bank account.

Joe told us a very troubling story about the off-label promotion of a pharmaceutical drug for patients who already suffered from chronic heart failure.


Bruce A. Moilan Sr.

$27 Million

Bruce Moilan was a seasoned hospital systems expert by the time he contacted our Firm. At the time he decided to file his qui tam lawsuit, he was employed by South Texas Health System as a System Director for Materials Management. In this position, he oversaw $24 million in annual purchases of supplies and equipment and helped determine budget, reduction and cost analysis throughout the contract bidding and negotiations process. His job was to insure proper implementation for purchasing, receiving and management of inventory, for McAllen Hospitals, L.P.


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