U.S. Renal Care has agreed to pay $7.3 million to the federal government to settle a whistleblower lawsuit brought by a nurse that alleged a company U.S. Renal Care acquired in 2010, Dialysis Corporation of America, overcharged Medicare for years for an anemia drug used to treat dialysis patients.

The whistleblower lawsuit alleged that Dialysis Corporation of America was billing Medicare for more Epogen than was actually used. The Department of Justice investigated the allegations and joined the lawsuit, which was under seal and not made public until May 21.

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Dialysis Corporation of America allegedly billed Medicare for not just the Epogen the patients received but also for the overfill that remained in the vials, even though Dialysis Corporation of America used standard syringes and did nothing to ensure that it was actually withdrawing and administering any overfill. At one point, reimbursement for Epogen use accounted for more than 25% of Dialysis Corporation of America's medical-services revenue, according to background information provided by the prosecutors in the case.

"Since the patients didn't receive the overfill, DCA shouldn't have billed Medicare for that amount," said Stephen S. Hasegawa, an attorney with Phillips & Cohen LLP, which represents the whistleblower.

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U.S. Renal Care CEO Chris Brengard said in a memo to employees that when the company was acquiring Dialysis Corporation of America, they "were aware of litigation that had been pending against DCA going back to 2008, two years prior to our acquisition.  Nonetheless, we took over DCA knowing that we would need to resolve it. While we denied all of the allegations in the litigation, we believed it was in the best interest of the company to put this matter behind us."

The lawsuit was filed in 2008 in federal district court in Baltimore by Laura Davis, a registered nurse who worked at one of Dialysis Corporation of America's dialysis centers in Georgia. Dialysis Corporation of America operated more than 35 outpatient dialysis facilities and was acquired in 2010 by U.S. Renal Care, based in Plano, Texas.

"Laura Davis raised concerns about DCA's billing practices for Epogen internally, but no one listened to her," Hasegawa said. "They thought she was a little strange to care that the government was being overcharged. She is very glad that the government cared and has recovered these overcharges for taxpayers."