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From Health Law Daily, March 8, 2013

Ambiguous settlement agreement saves qui tam complaint from summary judgment

By Sheila Lynch-Afryl, JD, MA

A counterclaim filed by providers of dialysis services in a qui tam action was dismissed because it amounted to a claim for contribution or indemnity for wrongdoing, which is prohibited by the False Claims Act (FCA) (United States ex rel. Vainer v DaVita, Inc., February 13, 2013, Pannell, C). Although the counterclaim alleged a breach of the relator’s medical director agreement, an element of that claim required the defendants to prove that the relator caused them damages by contributing to the very actions that underlay the qui tam claim. In addition, the complaint filed by the qui tam relators was not barred by a previous settlement agreement between one of the providers and the United States because the conduct covered by the settlement agreement was ambiguous.

Background. For certain medications, Medicare allowed reimbursement not only for the amount actually administered, but also for necessary waste that remained after administration. The relators and former employees, Alon Vainer and Daniel Barbir, filed a qui tam action against DaVita, Inc. (DaVita), and Gambro Healthcare, Inc. (Gambro), providers of kidney dialysis services, alleging that the providers created a number of policies to maximize the “waste” created in their administration of two vitamin D and iron supplements to patients in order to maximize their Medicare reimbursement. For example, the providers implemented a protocol that intentionally spread out dosages over several treatments instead of one treatment solely to increase reimbursements.

Vainer entered into agreements with DaVita and Gambro providing that he would provide medical director services for several facilities; among the requirements of the agreements was performing all duties in accordance with applicable laws. Vainer’s monthly invoices certified that he materially performed the terms and conditions of the medical director agreement.

Counterclaim. The providers filed a counterclaim against Vainer alleging that he breached his medical director agreements by not informing them of violations of federal law and by filing invoices stating that he had materially complied with the agreements, which he could not have done if he failed to inform the providers of violations of federal law. The relators filed a motion to dismiss arguing that the counterclaim amounted to a claim for contribution or indemnity for wrongdoing, which is prohibited by the FCA.

A counterclaim for contribution or indemnity for wrongdoing is barred by the FCA because these types of counterclaims serve only to offset the defendant’s liability, which would frustrate the FCA’s purpose of whistleblowing. The providers alleged that Vainer breached his contract and caused independent damages by not alerting them to violations of federal law, as required by the agreements. However, to prove that Vainer breached the contract, the providers would have to first prove that such violations of law occurred, and if the violations occurred, then the providers would be liable for them. Therefore, the court concluded, the providers’ counterclaim amounted to a claim for indemnification or contribution, and the counterclaim was dismissed.

Settlement agreement. The providers filed a motion for partial summary judgment arguing that all claims against Gambro arising on or before December 1, 2004, were barred because the government released it from these claims in a settlement agreement for a prior action concerning the same medications. The court found that the covered conduct section of the settlement agreement was ambiguous when taken in context with the release language; it was possible that the parties intended to cover all claims the government may have had against Gambro arising from fraudulent reimbursements related to vitamin D and iron drugs, but it was also possible that the parties intended the release to apply more narrowly to only fraudulent claims related to medicines meant to be injected into or ingested by patients. Because the parties’ intent was a factual question, the court denied the motion for summary judgment.

The case number is 1:07-CV-2509-CAP.

Attorneys: Brian T. Ross (Gibbs & Bruns, LLP) for DaVita, Inc., Gambro Healthcare, Inc., and their respective subsidiaries and affiliated companies.

Companies: DaVita, Inc.; Gambro Healthcare, Inc., and their respective subsidiaries and affiliated companies.

MainStory: TopStory FCANews QuiTamNews DrugBiologicalNews ESRDNews GeorgiaNews

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