The Justice Department 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 companies are McKesson Corporation, McKesson Medical-Surgical MediNet Inc. (MediNET), GGNSC Holdings LLC, Golden Gate Ancillary LLC, Beverly Enterprises Inc., CERES Strategies Inc. and CERES Strategies Medical Services Inc. (CSMC). McKesson is one of the nation’s largest suppliers of DME equipment, which includes, among other things, enteral feeding devices and oxygen supplies. Federal officials alleged that McKesson, through its subsidiary MediNet, structured arrangements that ensured that McKesson supplies were used by Beverly nursing facilities.

McKesson allegedly 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. The plan was for MediNet to set up and manage a purported DME supplier, called CSMS, which was actually affiliated with Beverly. But, CSMS was in reality managed by MediNet. Federal officials alleged 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 Medicare payments for services and supplies that actually were supplied by MediNet and not by CSMS.

In exchange for accepting this arrangement that enabled Beverly to retain these profits, the government alleges that Beverly agreed to refer to McKesson its facilities’ needs for DME supplies. The case originally was filed by a private citizen under the False Claims Act in the U.S. District Court for the Northern District of Mississippi. The federal government has now intervened and that is most significant.

Source: Corporate Crime Reporter

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