-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MIzUjA+fd+ZekGvS2Yw0WppnXOV4SKNiokaEsHuE5vws6NLk2BJwTJjrHZWDBOjX 1YagmC6V+LUmtR/UDa6eyA== 0000927016-00-000137.txt : 20000202 0000927016-00-000137.hdr.sgml : 20000202 ACCESSION NUMBER: 0000927016-00-000137 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20000118 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000121 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRESENIUS MEDICAL CARE HOLDINGS INC /NY/ CENTRAL INDEX KEY: 0000042872 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 133461988 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-03720 FILM NUMBER: 511006 BUSINESS ADDRESS: STREET 1: TWO LEDGEMONT CENTER STREET 2: 95 HAYDEN AVE CITY: LEXINGTON STATE: MA ZIP: 02173 BUSINESS PHONE: 6174029000 FORMER COMPANY: FORMER CONFORMED NAME: FRESENIUS NATIONAL MEDICAL CARE HOLDINGS INC DATE OF NAME CHANGE: 19961015 FORMER COMPANY: FORMER CONFORMED NAME: GRACE W R & CO /NY/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: GRACE W R & CO /CT/ DATE OF NAME CHANGE: 19900423 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 __________ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 Date of Report: January 18, 2000 Fresenius Medical Care Holdings, Inc. -------------------------------------------------- (Exact name of registrant as specified in charter) New York -------- (State or other jurisdiction of incorporation) 1-3720 13-3461988 ---------------------------------------------- (Commission File Number (IRS Employer Identification No.) Two Ledgemont Center, 95 Hayden Avenue, Lexington, Massachusetts 02420 --------------------------------------------------------------------------- (Address or principal executive offices) (Zip Code) Registrant's telephone number, including area codes: (781) 402-9000 Not Applicable -------------- (Former name or former address, if changed since last report) ITEM 5. OTHER EVENTS OIG INVESTIGATION Since 1995, National Medical Care, Inc. ("NMC"), a subsidiary of Fresenius Medical Care Holdings, Inc. (the "Company"), and certain of NMC's subsidiaries have been the subject of criminal and civil investigations (the "OIG Investigation") by the Office of Inspector General ("OIG") of the United States Department of Health and Human Services, the United States Attorney for the District of Massachusetts (the "U.S. Attorney's Office") and other government authorities concerning possible violations of federal laws, including the anti- kickback statutes and the False Claims Act. On January 18, 2000, the Company, NMC and certain affiliated companies executed definitive agreements (the "Settlement Agreements") with the United States Government (the "Government") to resolve (i) the matters covered in the OIG Investigation and (ii) NMC's claims with respect to approximately $153.5 million of outstanding Medicare receivables for nutrition therapy rendered on and before December 31, 1999 (collectively, the "Settlement"). The Settlement is subject to court approval, which is expected to be granted. Under the Settlement Agreements, the net Settlement payment to the Government is approximately $427.1 million (the "Net Settlement Amount"). The Net Settlement Amount is comprised of (i) an initial payment to the Government of approximately $286.4 million which will be paid immediately after court approval of the Settlement and dismissal of certain legal actions, (ii) additional installment payments over the next eighteen months totaling approximately $186.3 million and (iii) payments previously made to the Government under the voluntary disclosure program totaling approximately $13.6 million, less installment payments by the Government to the Company over the next eighteen months totaling approximately $59.2 million for the above- mentioned receivables claims (which shall bear interest on unpaid amounts at 7.5% per annum). Interest on the Company's installment payments will accrue at a rate equal to the 52-week treasury bill interest rate at the time of court approval of the Settlement on $51.2 million of the installment payments and at 7.5% annually on the balance of the installment payments, until paid in full. As security for its obligations under the Settlement Agreements, the Company amended the $150 million Letter of Credit that was issued to the Government in 1996 to increase the amount available for drawing under the Letter of Credit to approximately $189.6 million. The maximum drawing amount will be reduced over time consistent with the Company's installment principal payments to the Government. The Company's net cash outflow resulting from the Settlement Agreements is anticipated to be approximately $265.5 million. This amount reflects the anticipated receipt of the receivables payment from the Government, the tax benefit of the special charge discussed below and the payment terms of the Net Settlement Amount. The cash savings of the tax benefit are expected to be realized over the next eighteen months. The Company believes that it will have sufficient cash flows from continued operations and borrowing capacity under its senior credit facility to pay the Net Settlement Amount. The Company also believes that following such payments, it will continue to have sufficient funds available for both its day-to-day operations and its anticipated growth. In anticipation of the Settlement, the Company previously recorded a special pre-tax charge against its consolidated earnings for the three month period ended September 30, 1999 totaling $590 million ($412 million after tax). An additional charge to earnings of approximately $11 million was recorded in the three month period ended December 31, 1999 to reflect the reduction in payments from the Government for the resolution of the receivables claims discussed above. These charges will cover the payment of the 2 Net Settlement Amount, a $94.3 million write-off of the remaining receivables described above, and other related costs. After giving effect to the special charge, the Company remained in compliance with the financial covenants in its senior credit facility. In December 1999, the Company and the lenders under the Company's senior credit facility amended certain covenants in the senior credit facility to accommodate the Company's obligations under the Settlement Agreements and to enable the Company to continue in compliance with the covenants upon consummation of the Settlement. The OIG Investigation covered the following areas: (a) NMC's dialysis services business, principally relating to its Medical Director contracts and compensation; (b) NMC's treatment of credit balances resulting from overpayments received under the Medicare, Medicaid, TriCare and other Government and commercial payors, NMC's billing for home dialysis services, and its payment of supplemental medical insurance premiums on behalf of indigent patients; (c) Lifechem, Inc.'s laboratory business, including testing procedures, marketing, customer relationships, competition, overpayments that were received by Lifechem, Inc. from the Medicare program , a 1997 review of dialysis facilities' standing orders, and the provision of discounts on products from NMC's products division, grants, equipment and entertainment to Lifechem, Inc.'s customers; (d) NMC Homecare, Inc.'s intradialytic parenteral nutrition therapy ("IDPN") business and, in particular, information concerning IDPN utilization, documentation of claims and billing practices including various services, equipment and supplies and payments made to third parties as compensation for administering IDPN therapy; and (e) billing for certain doppler flow and bio- impedance analysis tests performed in clinical studies. As a result of the Settlement, NMC's subsidiaries, Lifechem, Inc., NMC Homecare, Inc. and NMC Medical Products, Inc. will plead guilty to certain violations of federal law. The plea agreements impose a total of approximately $101.2 million in federal criminal fines, which is included in the Net Settlement Amount. As a consequence of their guilty pleas, these subsidiaries will be excluded from further participation in federally-funded health care programs, including Medicare, Medicaid and TriCare. The Company believes that these exclusions will not materially interrupt its provision of, or receipt of payment for, the products and services formerly provided by the excluded subsidiaries because the Company intends to continue to provide such products and services through other subsidiaries which are qualified to participate in federal health care programs. With the exception of the three above-mentioned guilty pleas, the Company has been advised that the Government has declined criminal prosecution of the Company, its parent, and subsidiaries, with respect to all aspects of the OIG Investigation and that there is no pending federal criminal investigation of the Company. Further, with respect to the Settlement, the Government has released the Company from civil liability for all conduct described in the Settlement Agreements and has advised the Company that, with the limited exception referenced below, the Government has no current investigation and no intention of initiating an investigation in connection with any conduct that has been the subject of the OIG Investigation. The continued effectiveness of the releases described above is subject to the Company's satisfaction of all payment obligations under the Settlement Agreements. There have been allegations recently raised by private parties against the Company, most of which have been previously investigated by the Government in the course of the OIG Investigation and resolved without a finding of liability against the Company. While there can be no assurance, the Company currently believes that the resolution of such allegations will not have a material adverse impact on the Company's business, financial condition or results of operations. Each of the qui tam or "whistleblower" actions relating to the issues raised by the OIG Investigation will be dismissed as a result of the Settlement, with the exception of a portion of the qui tam filed in the United States District Court for the Middle District of Tennessee on December 15, 1994, transferred to the United States District Court for the District of Massachusetts in 1995, and disclosed to the Company in September 1999. The portion of this qui tam action that will not be dismissed as a result of the Settlement alleges, among other things, that the Company and the Company's parent Fresenius Medical 3 Care AG violated the Medicare and Medicaid Anti-Kickback Statute by providing discounted hemodialysis products to induce the purchase of laboratory services. In the Settlement Agreements, the Government has declined to continue to pursue further the investigation or prosecution of these allegations. While the dismissal of this portion of this qui tam action was offered to the Company by the Government and the current and former Company employees who filed this qui tam action (the "relators") in connection with the Settlement, such dismissal was conditioned on a full release by the Company of all Company claims against the relators. The Company is unwilling to release its claims against the relators. While there can be no assurance, the Company currently believes that the resolution of these remaining allegations will not have a material adverse impact on the Company's business, financial condition or results of operations. Whistleblower actions are filed under seal as a matter of law in the first instance, thereby preventing disclosure to the Company and to the public except by court order. The Company or certain of its subsidiaries may be the subject of other "whistleblower" actions not yet known to the Company or which have not yet been unsealed. The Settlement does not extend to any current or former employees of NMC or its subsidiaries who have been, or may be, indicted in connection with the OIG Investigation. In connection with the Settlement, the Company entered into a Corporate Integrity Agreement dated January 18, 2000 with the OIG (see Exhibit 10.1 attached to this Current Report on Form 8-K). During the eight-year term of this agreement, the Company is required, among other things, to staff and maintain a comprehensive compliance program. This program must include a written code of conduct, compliance training programs, compliance policies and procedures relating to the areas covered by the OIG Investigation, screening of employees and others for eligibility to participate in federal health care programs, annual audits by an independent review organization, a confidential disclosure program and periodic reporting to the OIG. The Corporate Integrity Agreement provides for stipulated penalties of up to $2,500 per day for each day during which the Company fails to satisfy its obligations under the agreement. The Corporate Integrity Agreement permits the OIG to exclude the Company and its subsidiaries from participation in federal health care programs in the event of a material breach of the agreement that is not rectified by the Company within thirty days after the Company receives written notice of the breach. NMC derives over 60% of its consolidated revenues from Federal health care benefit programs. Consequently, a material breach by the Company of the Corporate Integrity Agreement that results in the exclusion of the Company or its subsidiaries from continued participation in such programs would have a material adverse effect on the Company's business, financial condition and results of operations. The foregoing discussion of the Settlement, the Settlement Agreements and the plea agreements is qualified in its entirety by reference to the full text of the Settlement Agreements and the plea agreements attached as Exhibits 10.1 through 10.9 to this Current Report on Form 8-K. This document contains certain forward-looking statements that are subject to various risks and uncertainties. Actual results could differ materially from those contained in these forward-looking statements due to certain factors including, without limitation, changes in business, economic and competitive conditions, regulatory reforms, uncertainties in litigation or investigative proceedings, the failure to realize anticipated tax deductions, and the availability of financing. These and other risks and uncertainties, which are more fully described in the Company's reports filed from time to time with the Commission, could cause the Company's actual results to differ materially from the results that have been or may be projected by or on behalf of the Company. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits 4 Exhibit 10.1 Corporate Integrity Agreement dated January 18, 2000 between the Company and Office of the Inspector General of the Department of Health and Human Services Exhibit 10.2 Settlement Agreement and Release dated January 18, 2000 by and among United States of America, Lifechem, Inc., NMC Medical Products, Inc., National Medical Care, Inc., the Company and Jay A. Buford, Russell J. Davis and William L. Schoff Exhibit 10.3 Settlement Agreement and Release dated January 18, 2000 by and among United States of America, NMC Homecare, Inc., National Medical Care, Inc., the Company Ven-A-Care of the Florida Keys, Inc. and Dana R. Austin Exhibit 10.4 Settlement Agreement and Release dated January 18, 2000 by and among United States of America, Clinical Diagnostic Systems, Inc., NMC Diagnostic Services, Inc., Bio-Medical Applications Management Company, Inc., National Medical Care, Inc. and the Company Exhibit 10.5 Settlement Agreement and Release dated January 18, 2000 by and among United States of America, National Medical Care, Inc., the Company, Gregory S. Price and Richard Bradford Exhibit 10.6 Plea Agreement dated January 13, 2000 by and among Lifechem, Inc., the United States Department of Justice and the United States Attorney for the District of Massachusetts. Exhibit 10.7 Plea Agreement dated January 13, 2000 by and among NMC Medical Products, Inc., the United States Department of Justice and the United States Attorney for the District of Massachusetts. Exhibit 10.8 Plea Agreement dated January 13, 2000 by and among NMC Homecare, Inc., the United States Department of Justice and the United States Attorney for the District of Massachusetts. Exhibit 10.9 Letter Agreement dated January 17, 2000 by and among the Company, the United States Department of Justice and the United States Attorney for the District of Massachusetts 5 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FRESENIUS MEDICAL CARE HOLDINGS, INC. Date: January 21, 2000 By: /s/ Jerry A. Schneider --------------------------- Jerry A. Schneider Chief Financial Officer 6 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION Exhibit 10.1 Corporate Integrity Agreement dated January 18, 2000 between the Company and Office of the Inspector General of the Department of Health and Human Services Exhibit 10.2 Settlement Agreement and Release dated January 18, 2000 by and among United States of America, Lifechem, Inc., NMC Medical Products, Inc., National Medical Care, Inc., the Company and Jay A. Buford, Russell J. Davis and William L. Schoff Exhibit 10.3 Settlement Agreement and Release dated January 18, 2000 by and among United States of America, NMC Homecare, Inc., National Medical Care, Inc., the Company Ven-A-Care of the Florida Keys, Inc. and Dana R. Austin Exhibit 10.4 Settlement Agreement and Release dated January 18, 2000 by and among United States of America, Clinical Diagnostic Systems, Inc., NMC Diagnostic Services, Inc., Bio-Medical Applications Management Company, Inc., National Medical Care, Inc. and the Company Exhibit 10.5 Settlement Agreement and Release dated January 18, 2000 by and among United States of America, National Medical Care, Inc., the Company, Gregory S. Price and Richard Bradford Exhibit 10.6 Plea Agreement dated January 13, 2000 by and among Lifechem, Inc., the United States Department of Justice and the United States Attorney for the District of Massachusetts. Exhibit 10.7 Plea Agreement dated January 13, 2000 by and among NMC Medical Products, Inc., the United States Department of Justice and the United States Attorney for the District of Massachusetts. Exhibit 10.8 Plea Agreement dated January 13, 2000 by and among NMC Homecare, Inc., the United States Department of Justice and the United States Attorney for the District of Massachusetts. Exhibit 10.9 Letter Agreement dated January 17, 2000 by and among the Company, the Untied States Department of Justice and the United States Attorney for the District of Massachusetts EX-10.1 2 CORPORATE INTEGRITY AGREEMENT EXHIBIT 10.1 CORPORATE INTEGRITY AGREEMENT between the Office of Inspector General of the Department of Health and Human Services and Fresenius Medical Care Holdings, Inc. I. Preamble -------- Fresenius Medical Care Holdings, Inc. d/b/a Fresenius Medical Care North America hereby enters into this Corporate Integrity Agreement ("CIA") with the Office of Inspector General ("OIG") of the United States Department of Health and Human Services ("HHS") to ensure compliance by Fresenius Medical Care Holdings, Inc. and each of its subsidiaries that provides items or services for which payment may be made by any Federal health care program (hereinafter collectively referred to as "Fresenius"), and by all of Fresenius's employees, contractors, and agents, with the requirements of Medicare, Medicaid and all other Federal health care programs (as defined in 42 U.S.C. (S) 1320a-7b(f)) (hereinafter collectively referred to as the "Federal health care programs"). This CIA shall be applicable only to those operations of Fresenius that are subject to United States law and regulations. Fresenius's compliance with the terms and conditions in this CIA shall constitute an element of Fresenius's present responsibility with regard to participation in the Federal health care programs. Contemporaneously with this CIA, Fresenius is entering into Settlement Agreements with the United States, and this CIA is incorporated by reference into the Settlement Agreements. 1 A. Definitions 1. "Affiliate": subject to the provisions of Section I.A.6 below relating to dialysis facilities which are subsidiaries of Fresenius as of the effective date of this CIA, any corporation, joint venture or other organization or entity that provides or is involved in the provision of dialysis services to beneficiaries of Federal health care programs in which Fresenius holds a direct or indirect equity interest of 5% or more but does not exercise majority voting control; or with respect to which Fresenius has a management contract to provide management and administrative services that gives it control over the day-to-day operations of the dialysis facility. 2. "Business Segment": each of the core business activities of Fresenius, including at a minimum, (i) dialysis services; (ii) medical products; (iii) clinical laboratory services; (iv) diagnostic testing services; and (v) parenteral and enteral nutrition. 3. "Contractor": any individual or entity whose work is performed at a location neither owned nor operated by Fresenius, with whom Fresenius has entered into a contract or other arrangement to furnish health care items or services for which Fresenius claims reimbursement from any Federal health care program. 4. "Covered Person": any (i) officer, director, or employee of Fresenius; or (ii) agent or other individual (including medical director) who furnishes health care items or services at a Fresenius owned or operated location for which Fresenius claims reimbursement from any Federal health care 2 program or who participates in the preparation or submission of claims for payment on behalf of Fresenius with respect to items or services for which Fresenius claims reimbursement from any Federal health care program (regardless of where such activity takes place). Notwithstanding the above, this term does not include part-time or per diem employees who are not reasonably expected to work more than 160 hours per year, except that any such individuals shall become "Covered Persons" at the point when they work more than 160 hours during any 12 month period. 5. "Federal Rules": any statutes, regulations, manual provisions, or formal bulletins or notices issued by the Health Care Financing Administration, its contractors (i.e., intermediaries or carriers) or other regulatory agencies (e.g., State Medicaid agencies) or their contractors responsible for administering Federal health care programs. Any references or citations within the CIA to any particular Federal Rule shall be deemed to apply to such Federal Rule as it may be amended from time to time. In the event of any change to a Federal Rule that has a material effect on the obligations of Fresenius under this CIA, the parties shall negotiate in good faith to amend this CIA to accommodate such change. 6. "Subsidiary": any corporation or other organization that provides items or services for which payment may be made by any Federal health care program and in which Fresenius holds a direct or indirect equity interest and exercises majority voting control; provided, however, that if a dialysis facility meets the definition of subsidiary as of the effective date of this 3 CIA, then that facility shall remain a subsidiary for as long as Fresenius holds a direct or indirect equity interest of 5% or more in the facility and for all purposes during the duration of this CIA, nothwithstanding any subsequent changes in ownership or control that otherwise would change the status of the facility from a subsidiary to an affiliate. II. Term of the CIA --------------- The period of the compliance obligations assumed by Fresenius under this CIA shall be eight years from the effective date of this CIA (unless otherwise specified). The effective date of this CIA will be the date on which the final signatory of this CIA executes this CIA. The OIG may, at its sole discretion and in writing, terminate or reduce the compliance obligations assumed by Fresenius under this Agreement after five years. III. Corporate Integrity Obligations -------------------------------- Fresenius warrants and represents that it currently operates and maintains a compliance program ("Program"). Pursuant to and for the duration of this CIA, Fresenius shall maintain its current Program, and, as required below, amend the Program to adhere to or include the following obligations or elements. A. Compliance Officers and Committee --------------------------------- 1. Corporate Compliance Officer. For the duration of this CIA, Fresenius shall continue to maintain an individual to serve as Corporate Compliance Officer, consistent with the following requirements. The Corporate Compliance Officer shall be responsible for ensuring the development and implementation of policies, procedures, and practices designed to ensure compliance with the requirements set forth in this CIA 4 and with the requirements of the Federal health care programs. The Corporate Compliance Officer shall be a member of senior management of Fresenius, shall make regular (at least quarterly) reports regarding compliance matters directly to the CEO and/or to the Board of Directors of Fresenius and shall be authorized to report to the Board of Directors at any time. The Corporate Compliance Officer shall be responsible for monitoring the day-to-day activities engaged in by Fresenius to further its compliance objectives, as well as any reporting obligations created under this CIA. 2. Business Unit Compliance Infrastructure. (a) Within 90 days of the execution of this CIA, Fresenius shall also appoint compliance officers for each of its corporate Business Units identified in Schedule A. These Business Unit Compliance Officers will cooperate with the Corporate Compliance Officer to ensure the development and implementation of policies, procedures, and practices designed to ensure compliance with applicable Federal Rules and with the requirements of this CIA. The Business Unit Compliance Officers also will be responsible for assisting the Corporate Compliance Officer in meeting the reporting obligations created by this Agreement. (b) Within 90 days of the execution of this CIA, each of the Business Units shall establish a Compliance Committee. These Compliance Committees shall consist of representatives from departments or functional areas within such Business Unit, including: (i) sales and marketing; (ii) billing and reimbursement; (iii) human resources; and (iv) operations. 4. Changes in Compliance Officers. In the event a new Corporate or Business Unit Compliance Officer is appointed during the term of this CIA, Fresenius shall notify the OIG, in writing, within 15 days of such a change. 5. Corporate Compliance Committee. For the duration of this CIA, Fresenius shall continue to maintain its "Corporate Compliance Task Force" or similar group however denominated (hereinafter referred to as "the Corporate Compliance Committee") and, to the extent necessary, shall amend the Program within 90 days after the effective date of this CIA to ensure that the Corporate Compliance Committee meets the following requirements. The Corporate Compliance Committee shall, at a minimum, include the Compliance Officer and any other member of senior management within the provider's corporate structure as necessary to meet the requirements of this CIA (e.g., senior executives ---- responsible for major functions, such as billing, clinical, human resources, audit, and operations). The Compliance Officer shall chair the Corporate Compliance Committee and the Committee shall support the Compliance Officer in fulfilling his/her responsibilities. B. Written Standards. ----------------- 1. Code of Conduct. For the duration of this CIA, Fresenius shall continue to maintain its "Code of Ethics and Business Conduct" or similar code however denominated (hereinafter referred to as "Code of Conduct") and, to the extent necessary, shall amend the Program and/or Code of Conduct within 90 days of the effective date of this CIA to ensure that the Code of Conduct meets the following requirements. The Code of Conduct shall be distributed within 90 days of the effective date of this CIA to all Covered Persons who have not already received the Code of Conduct. Fresenius shall make adherence to Company policies and procedures designed to ensure compliance with Federal health care program requirements an element in evaluating the performance of managers, supervisors, and all other employees. The Code of Conduct shall, at a minimum, set forth: a. Fresenius's commitment to full compliance with Federal Rules, including its commitment to prepare and submit accurate billings consistent with Federal Rules; b. a requirement that all of its Covered Persons shall be expected to comply with all applicable Federal Rules and with Fresenius's own policies and procedures; c. a requirement that all Covered Persons shall be expected to report to Fresenius suspected violations of any Federal Rules or of Fresenius's own policies and procedures; d. the possible consequences to both Fresenius and Covered Persons of their failure to comply with the Federal Rules or with Fresenius's own policies and procedures, or of their failure to report such non-compliance; and e. the right of all Covered Persons to use the Confidential Disclosure Program, as well as Fresenius's commitment to confidentiality and non-retaliation with respect to disclosures. New Covered Persons shall receive the Code of Conduct within 30 days after becoming a Covered Person and shall certify, in writing, that he or she has received and will abide by Fresenius's Code of Conduct. Fresenius shall annually review the Code of Conduct and will make any necessary material revisions. These revisions shall be promptly distributed to Covered Persons. Covered persons shall certify on an annual basis that they have received, read, understand and will abide by the Code of Conduct. 2. Compliance Guidelines. Within 120 days of the effective date of this CIA, Fresenius shall review and revise or develop written compliance guidelines for each business segment. Such guidelines shall include (i) general Compliance Guidelines; (ii) Sales and Marketing Guidelines; and (iii) Billing and Reimbursement Guidelines (collectively referred to as "Business Segment Compliance Guidelines"). Collectively, the various Business Segment Compliance Guidelines shall, at a minimum, include: a. Provisions implementing the substantive requirements of this CIA, including those set forth in section III. b. Disciplinary guidelines and methods for Covered Persons to make disclosures or otherwise report on compliance issues to Fresenius management through the Confidential Disclosure Program required by section III.G. c. Provisions consistent with those set forth in section III.B.3 below that are appropriate for inclusion in such Guidelines. Within 150 days of the effective date of the CIA, copies of the applicable set of Business Segment Compliance Guidelines shall be provided to the appropriate Covered Persons. Managers or supervisors shall be prepared to explain the policies and procedures incorporated in the Guidelines to affected Covered Persons. Copies of the Business Segment Compliance Guidelines will be provided to OIG as part of the Implementation Report. Fresenius shall assess and update the Business Segment Compliance Guidelines at least annually or as necessary when changes in Federal Rules require such updates. 3. Substantive Area Policies and Procedures. Within 120 days of the effective date of this CIA, Fresenius shall review and, where appropriate, revise or develop written policies and procedures to address the specific obligations identified below regarding Fresenius's provisions of items and services and submission of claims to the Federal health care programs. Where appropriate, such policies and procedures shall be incorporated into the Business Segment Compliance Guidelines. a. Credit balances. Fresenius shall have policies and procedures regarding unreconciled payments and credit balances designed to ensure that overpayments from Federal health care programs are identified promptly and refunded to the appropriate payor in accordance with Federal Rules. At a minimum, such policies and procedures shall address the following issues in the manner prescribed below: (1) Fresenius shall make adequate provisions for timely and accurate reporting of Federal health care program unreconciled payments and credit balances; (2) Fresenius shall address the HCFA requirements for reporting credit balances through the filing of credit balance reports (FORM HCFA-838); (3) Fresenius shall retain an audit trail of patient account transactions involving Federal health care program payors for a period of seven years from the date that at a claim for payment was submitted; (4) Fresenius shall track accounts with unreconciled payments and/or credit balances involving Federal health care programs payors so that it can determine the status of refund requests and the payment of refunds; (5) Fresenius's actions with regard to unreconciled payments and credit balances shall be in accordance with Federal Rules; and (6) Fresenius shall designate at least one individual for each of its business segments as having responsibility for the tracking, recording, reporting and refunding of unreconciled payments and credit balances. b. Parenteral and Enteral Nutrition (PEN). Fresenius shall have policies and procedures designed to ensure adherence to relevant Federal Rules governing the provision and reimbursement of intradialytic parenteral nutrition or other forms of enteral or parenteral nutrition (e.g., intraperitoneal nutrition) (collectively all of which shall be referred to as "PEN"). At a minimum, such policies and procedures shall address the following issues in the manner prescribed below: (1) Fresenius shall design and implement internal controls designed to prevent it from receiving Federal health care program reimbursement for PEN that: (a) is not prescribed by the patient's physician; or (b) does not satisfy coverage criteria for such items or services published by HCFA, other appropriate regulatory agencies, or the appropriate contractors. If Fresenius submits a claim for PEN that it reasonably believes does not satisfy the coverage criteria for a Federal health care program, Fresenius shall submit the claim to the appropriate Federal health care program contractor with an appropriate modifier, or other form of notice to permit such contractor to issue a formal denial. (2) Fresenius shall submit claims for payment for PEN in accordance with HCFA's current coverage criteria for PEN set forth in C.I.M (S) 65.10 as well as relevant DMERC Supplier Manuals, as in effect at the time the claim is submitted. (3) Fresenius shall submit claims for PEN only if such claims are properly documented to establish coverage under applicable Federal Rules governing the provision and reimbursement for PEN. If Fresenius is unable to establish coverage and, therefore, is unable to claim reimbursement for the service from a Federal health care program, Fresenius may choose to provide the service without charge if the treating physician determines that PEN is required to treat a life threatening nutritional disorder and Fresenius determines that the patient has no other means for paying for the service; provided that Fresenius make a determination of inability to pay on an individualized, case-by-case basis in accordance with a reasonable set of income guidelines uniformly applied in all cases. The guidelines should be based on objective criteria and appropriate for the applicable locality. (4) To the extent that Fresenius utilizes an IDPN Information Sheet ("IIS") or Clinical Nutrition Summary ("CNS") (or any other similar document, however denominated) to accompany the certificate of medical necessity ("CMN") in support of a PEN claim, the IIS or CNS shall fully and accurately describe the patient's medical condition that is the basis for the therapy, as that condition is documented in the medical record and as may be required by the applicable Medicare carrier, and shall not contain false statements by affirmative misrepresentation and/or material omission. (5) To the extent that Fresenius utilizes an IIS, CNS or similar form to support payment of a PEN claim, the form provides for (i) a certification by the attending physician that to the best of the physician's knowledge, the information contained on the form is a true, accurate and complete representation of the patient's medical condition that is the basis for the therapy; and (ii) a certification by any other person that has entered medical information on the form that to the best of that person's knowledge, the information so entered is a true, accurate and complete representation of the patient's medical condition and/or clinical status that is the basis for the therapy. (6) Fresenius shall provide memoranda setting forth the policies and procedures regarding PEN documentation, medical necessity and coverage criteria to non-Fresenius facilities and attending physicians for whom Fresenius provides PEN items or services. (7) Fresenius shall not illegally influence the physician's medical judgment or the physician's documentation of the medical necessity of PEN for a particular patient. (8) Fresenius shall not pay "hang fees" to individuals or entities for whom Fresenius provides PEN items or services and shall not offer any form of remuneration to its PEN coordinators or to any other individual or entity in a manner that provides illegal incentives to qualify patients for PEN coverage. (9) Fresenius shall provide and claim reimbursement for PEN administration kits in conformance with applicable Federal Rules. If Fresenius sells an administration kit that does not include the standard components prescribed by the DMERC, Fresenius shall contact the relevant DMERC to arrange for the use of a modifier or other code based upon procedures followed by that DMERC. c. Laboratory Services. Fresenius shall have policies and procedures designed to ensure adherence to relevant Federal Rules relating to the provision of and reimbursement for clinical laboratory services. At a minimum, such policies and procedures shall address the following issues in the manner prescribed below: (1) Medical Necessity. ----------------- (a) Generally. (i) Fresenius shall ensure that it does not engage in any conduct or activities that causes the submission of claims to Federal health care programs for laboratory tests and/or services that lack medical necessity; (ii) Fresenius shall design and implement internal controls (1) designed to prevent Fresenius from receiving reimbursement for medically unnecessary tests and (2) designed to enable Fresenius to identify utilization patterns that may indicate Fresenius is receiving reimbursement for medically unnecessary tests; and (iii) Fresenius shall communicate to physicians that claims submitted for service will only be paid if the services are covered, reasonable and medically necessary for the beneficiary, given his or her clinical condition; (b) Denials. Fresenius shall ensure that its claims for Federal health care program reimbursement for clinical laboratory tests are either consistent with coverage rules or are accompanied by the appropriate modifier or other indication to the relevant contractor that the claims are being submitted to obtain denials of payment from the contractor; (c) If Fresenius is unable to obtain required documentation of medical necessity from the ordering physician after a good faith effort to obtain it, and therefore, is unable to claim reimbursement for a service from a Federal health care program, and the ordering physician has not provided an appropriately completed advance beneficiary notice ("ABN"), Fresenius may choose to provide the service at no charge to the patient, the dialysis facility where the patient obtains the service, or the ordering physician, provided that Fresenius (1) undertakes to educate the ordering physician on the need to document medical necessity for tests that under Federal Rules or local medical review policy require a diagnosis code in order to obtain reimbursement or obtain an ABN and the potential for violations of sections 1128A(a)(5) and 1128B(b) of the Social Security Act for failure to provide required documentation, including an ABN, to the laboratory; and (2) monitors orders from such ordering physician to assess compliance with proper documentation requirements. In the event that a pattern of physician non-compliance continues notwithstanding these efforts, Fresenius shall either bill and obtain payment from the ordering physician, obtain payment from the dialysis facility with which the ordering physician is affiliated, or cease processing such physician's orders. (2) Test Ordering Procedure and Forms. --------------------------------- (a) Generally. Fresenius shall ensure that all requisition forms (including computer-based ordering forms) are constructed to eliminate any improper influence on the independence of the medical necessity decision by the physician or other authorized individual with regard to each test that Fresenius bills for; and that the forms contain the following bold-faced and easily readable statements: (i) Medicare generally does not cover routine screening tests; (ii) Medicare will only pay for those tests that are reasonable and necessary; (iii) Tests ordered pursuant to panels and/or profiles should be reviewed to ensure that the tests are medically necessary; and (iv) Diagnosis codes should be reviewed to ensure that they accurately reflect the patients condition which supports the medical necessity of the tests ordered. (b) Individual Requisition Form Design . Fresenius shall require that its Individual Patient Custom Profile ("IPCP") or any other form which identifies a routine battery of tests to appear on the requisition form for a patient on a regular basis is signed and dated by the ordering physician, or person authorized by the physician and are reviewed annually to ensure that the IPCP continues accurately to reflect the individual medical needs of the patient. At least annually, Fresenius will contact each physician that has established an IPCP for his or her patient to request confirmation in writing that the selected tests should continue to appear on the IPCP and that any diagnoses codes indicated on the IPCP are appropriate given the patient's clinical condition. Such review shall be appropriately documented in Fresenius's files. For the purposes of this section, "physician" includes any person authorized by state law to order clinical laboratory tests. (c) Fresenius shall ensure that it does not use as part of its computerized test scheduling and reporting system any type of function that, except for tests where Medicare has established frequency rules and the tests are performed within those rules, allows non-composite rate tests to be automatically assigned to multiple patients (e.g., patients receiving dialysis through the same modality). (3) Panels. Fresenius shall ensure that to the extent its laboratories ------ permit physicians to order tests by panels, the laboratories fully disclose the contents of their panels on their test ordering forms or other test ordering system and give physicians the option of ordering each test in a panel individually. If Fresenius permits tests to be ordered as panels, procedures shall be in place to assure that the tests that compose the panels are properly billed to Federal health care programs. (4) Billing. Fresenius shall ensure that each claim submitted for payment ------- to Federal health care programs reflect services that have been ordered pursuant to a valid order from the ordering physician or other authorized person and have been performed. (a) CPT/HCPCS Codes. Fresenius shall ensure that the CPT/HCPCS codes used to bill services accurately describe the service that was ordered and performed. (b) ICD-9 Codes. Fresenius shall request physicians or other authorized individuals to submit diagnostic information for all non- composite tests ordered as documentation of the medical necessity of the service. Fresenius shall encourage ordering physicians and other persons authorized to order tests to submit diagnoses in ICD-9 code format. Fresenius shall ensure that when diagnoses received in non- ICD-9 format are translated into ICD-9 code format, such translations will be performed by persons with appropriate technical expertise. (c) Dialysis Billing Rules. Fresenius shall ensure that claims submitted for clinical laboratory tests provided to ESRD patients are submitted consistent with the special rules applicable to dialysis testing, including the "50-50 rule," as such rules may be in effect during the term of this CIA. (d) Calculations. Fresenius shall not bill for calculations (i.e., clinical data mathematically derived from the results of individual laboratory tests ordered by a physician or other authorized person as part of a calculation panel), but only for such tests that are ordered and performed in order to derive such calculations. (5) OIG Fraud Alert Compliance. Fresenius shall comply with the OIG Fraud -------------------------- Alert for clinical laboratories published by the HHS/OIG in October 1994, which provides standards for the pricing of ESRD composite rate tests and the provision of phlebotomists and computers to customers. See 59 F.R. --- 65372 (December 19, 1994). During the term of this CIA, Fresenius shall review annually the fair market value of the laboratory composite rate offered to dialysis facilities. Each annual review shall be set forth in a report in which Fresenius shall explain the methodology used in the review and provide its calculations for determining the fair market value of its composite rate. Fresenius shall provide the OIG with a copy of this report in its Annual Reports. d. Diagnostic Testing Services. Fresenius shall have policies and procedures designed to ensure adherence to relevant Federal Rules relating to diagnostic testing services. At a minimum, such policies and procedures shall address the following issues in the manner prescribed below: (1) Test Ordering Procedures. Fresenius shall ensure that all diagnostic ------------------------ procedures performed by Fresenius's independent diagnostic testing facilities ("IDTFs") are specifically ordered in writing by a physician or other authorized person, and are provided in accordance with state and federal regulatory requirements governing IDTFs, including but not limited to federal requirements set forth in 62 Fed. Reg. 59,099 (Oct. 21, 1997). (2) Medical Necessity. (i) Fresenius shall ensure that all diagnostic ----------------- procedures performed by Fresenius's IDTFs and billed to Federal health care programs are specifically ordered in writing by a physician or other authorized person; (ii) Fresenius shall ensure that it does not engage in any conduct or activities that causes the submission of claims to the Federal health care programs for diagnostic testing that lacks medical necessity; (iii) Fresenius shall design and implement internal controls (1) designed to prevent Fresenius from receiving reimbursement for medically unnecessary tests and (2) designed to enable Fresenius to identify utilization patterns that may indicate Fresenius is receiving reimbursement for medically unnecessary tests; and (iv) Fresenius shall communicate to physicians that claims submitted for a service will only be paid if the service is covered, reasonable and medically necessary for the beneficiary, given his or her clinical condition. (3) ICD-9 Codes. Fresenius shall request and encourage ordering ----------- physicians and other persons authorized to order tests to submit diagnoses in ICD-9 code format. Fresenius shall ensure that when diagnoses received in non-ICD-9 format are translated into code format, such translations will be performed by persons with appropriate technical expertise. (4) Supervising Physician. Fresenius shall ensure that each IDTF has one --------------------- or more supervising physicians who: (a) are responsible for the direct and ongoing oversight of the quality of the testing performed; (b) are responsible for the proper operation and calibration of the equipment used to perform tests; (c) have proficiency in the performance and interpretation of each type of diagnostic procedure performed; and (d) are responsible for the qualification of non-physician personnel who use the equipment in accordance with applicable State law, licensing and certification requirements. (5) CPT Codes. Fresenius shall ensure that the CPT codes used to bill for --------- diagnostic testing and/or services accurately describe the service that was ordered and performed. e. Kickbacks and Self-Referrals (1) Generally. Fresenius shall refrain from offering or paying anything --------- of value (i.e., remuneration) to dialysis facilities, their medical directors, physicians, hospitals or other referral sources in violation of the anti-kickback statute (codified at 42 U.S.C. (S) 1320a-7b(b)), the federal physician self referral prohibition (also known as the "Stark Statute" and codified at 42 U.S.C. (S) 1395nn), or other applicable statutes, regulations, and program requirements relating to payments to and from referral sources. (2) Sales and Marketing. Fresenius shall have policies and procedures ------------------- designed to ensure that its sales and marketing practices and information are clear, accurate, informative and non-deceptive, and are designed to ensure that physicians and other individuals authorized to order tests, items, or services provided by Fresenius understand the services offered by Fresenius and the services that will be provided when tests, items or services are ordered. Fresenius shall ensure that its marketing materials and sales tactics are not designed for the purpose of generating orders for unnecessary tests or services. Fresenius shall not calculate the commissions it pays to sales staff in a manner that causes the sales staff illegally to influence a physician's judgment regarding the medical necessity of tests or services offered by Fresenius. (3) Discounts. Fresenius shall not offer discounts on one item or service --------- in exchange for an agreement to purchase a different item or service from Fresenius, unless the discount meets all of the applicable requirements to fall within the Safe Harbor described at 42 C.F.R. 1001.952(h), as in effect at the time of the offer. C. Training and Education. Fresenius shall maintain and further develop ---------------------- its compliance training program to provide necessary training and information to Covered Persons about applicable Federal Rules and related Fresenius policies and procedures. The objective of the program shall be to enable Fresenius to operate in conformity with Federal Rules and to satisfy the requirements of this CIA. At a minimum, the compliance training program shall include the following elements: 1. Corporate Integrity Agreement. Fresenius shall take steps to ----------------------------- inform Covered Persons of the existence of, and obligations imposed by, this CIA. Copies of this CIA shall be made available to all Covered Persons. 2. General Compliance Training. Fresenius shall maintain a --------------------------- compliance training and orientation program for all Covered Persons. Such training shall cover: a. the requirements of this Corporate Integrity Agreement; b. Fresenius's Compliance Program (including the policies and procedures pertaining to general compliance issues); and c. Fresenius's Code of Conduct. 3. Functional Compliance Training. In addition to the general ------------------------------ compliance training described in paragraph (2), all Covered Persons, excluding medical directors, shall receive at least two (2) hours of additional compliance training relating to legal and regulatory issues specifically affecting their business segment. This training shall cover relevant Federal Rules, general and substantive area policies and procedures, including those addressed in the Business Segment Compliance Guidelines, as well as other relevant regulatory matters. 4. Specialized Training for PEN Program Personnel. In addition to ---------------------------------------------- the compliance training described in paragraphs (2) and (3), all Covered Persons assigned to the PEN program who are nurses, dietitians, pharmacists, or other clinical personnel who (i) provide educational and nutrition consulting services to dialysis facilities relating to PEN therapy; (ii) assess the eligibility of patients for PEN therapy, or (iii) monitor the provision of PEN therapy to beneficiaries of Federal health care programs shall receive at least two (2) additional hours of training relating to legal and regulatory issues affecting their responsibilities. This training shall cover relevant Federal Rules, the general and substantive area policies and procedures, including those addressed in the Business Segment Compliance Guidelines, as well as other relevant regulatory matters relating to coverage and medical necessity requirements for PEN therapy. 5. Specialized Training for Sales and Marketing Personnel. In ------------------------------------------------------ addition to the compliance training described in paragraphs (2) and (3), all Covered Persons involved directly in sales or marketing activities relating to items or services furnished to beneficiaries of Federal health care programs shall receive at least two (2) additional hours of training relating to legal and regulatory issues affecting their responsibilities. This training shall cover relevant Federal Rules, the general and substantive area policies and procedures, including those addressed in the Business Segment Compliance Guidelines, as well as other relevant regulatory matters relating to illegal kickbacks and prohibitions on physician self-referral arrangements. 6. Specialized Training for Billing Personnel. In addition to the ------------------------------------------ compliance training described in paragraphs (2) and (3), all Covered Persons who participate in the preparation or submission of bills, claims, or cost reports (either in paper or electronic format) to any Federal health care program shall receive at least six (6) hours additional training relating to legal and regulatory issues specifically affecting their billing-related responsibilities. This training shall cover relevant Federal Rules, the general and substantive area policies and procedures, including those addressed in the Business Segment Compliance Guidelines, as well as other relevant regulatory matters. Specifically, the training shall address: a. the submission of correct and accurate bills for services rendered to all Federal health care program beneficiaries; b. the personal obligation of each individual to make reasonable efforts to ensure that information provided in support of a submission for reimbursement for items or services furnished to beneficiaries of the Federal health care programs is accurate; c. applicable Federal Rules; d. examples of improper billing and documentation practices; and e. the legal, regulatory, and internal Fresenius sanctions for improper billings. 7. Timeframes. The training required by paragraph III.C.2 shall be ---------- provided to all Covered Persons who have not already received such training within 60 days of the effective date of the CIA. The training required by paragraphs III.C.3, C.4 and C.5 shall be provided to all applicable Covered Persons within 9 months of the effective date of this CIA. The training required by paragraph III.C.6 shall be provided within 90 days of the effective date of this CIA with respect to personnel responsible for PEN, diagnostic testing and clinical laboratory claims, and within 6 months of the effective date of this CIA with respect to personnel responsible for dialysis services billing. Training of any type provided to applicable Covered Persons within 6 months prior to the effective date of this CIA which meets the requirements of paragraph C shall be deemed to meet the timeframe obligation imposed by this paragraph. 8. New Covered Persons. Affected new Covered Persons shall receive ------------------- the applicable training required by this CIA within the following time frames: General Compliance Training pursuant to paragraph III.C.2 within 30 days of commencing work or within 150 days of the effective date of this CIA, whichever is later; Functional Compliance Training pursuant to paragraph III.C.3 within 60 days of commencing work or within 9 months of the effective date of this CIA, whichever is later; Specialized Training pursuant to paragraphs III.C.4 or C.5 within 60 days of commencing work or within 9 months of the effective date of this CIA, whichever is later; and Specialized Training pursuant to paragraph III.C.6 within 30 days of commencing work or within 90 days of the effective date of the CIA, whichever is later. If a new Covered Person is in a position for which training is required under this CIA and begins to perform his/her position responsibilities prior to receiving all the training required for that position, a Fresenius employee who has completed all the necessary training shall take appropriate steps to supervise that untrained person's work related to that substantive area in such a manner as to ensure that the person's work is performed in accordance with the applicable Federal Rules, this CIA, and Fresenius' own policies and procedures. 9. Medical Director Training. Within 6 months of the effective date ------------------------- of this CIA, Fresenius shall develop and implement a special training and education program for physicians with whom it contracts to furnish administrative services as Medical Directors of its dialysis facilities. Medical Directors shall only be required to receive the training delineated in this subsection III.C.9. Such program shall consist of at least two elements: a. baseline training of at least 2 hours duration covering (i) the purpose and elements of the Fresenius corporate compliance program and this CIA; (ii) requirements for determining and documenting that services furnished to beneficiaries of Federal health care programs meet applicable medical necessity and coverage requirements, and (iii) the application of other Federal Rules and Fresenius policies and procedures directly related to the duties and responsibilities of medical directors; and b. annual supplemental compliance training covering material changes in Federal Rules, changes in Fresenius policies and procedures, or changes in the Fresenius corporate compliance program. All new contracts or contract amendments between Fresenius and its Medical Directors executed following the effective date of this CIA shall include a specific obligation on the part of the Medical Director to receive at least 2 hours of baseline compliance training within 6 months of the effective date of this CIA or within 30 days of first providing medical director services for Fresenius, whichever is later; and thereafter the annual supplemental compliance training. For all other contracts between Fresenius and its Medical Directors which are in force on the effective date of this CIA, Fresenius shall make a reasonable good faith effort to provide the baseline compliance training and annual supplemental compliance training to the Medical Directors as set forth in this paragraph, encourage attendance by the Medical Directors, and report to the OIG on the percentage of participation. 10. Annual Supplemental Training. Beginning 12 months following the ---------------------------- effective date of this CIA, Covered Persons shall receive at least one hour of supplemental compliance training on an annual basis. Such training shall address material changes in Federal Rules, changes in Fresenius policies and procedures relating to such rules, or other changes in Fresenius's corporate compliance program. It shall also review and reemphasize the obligations of Fresenius and Covered Persons to comply with Federal Rules. 11. Annual Compliance Training Plan. Fresenius shall prepare an ------------------------------- annual compliance training plan which shall outline specific actions and schedules to be undertaken to meet the requirements of this section. An initial compliance training plan shall be provided to OIG within 60 days of the effective date of this CIA. Subsequent annual compliance training plans shall be provided to the OIG not later than October 30 for the following calendar year. 12. Certification and Retention. Fresenius shall ensure that each --------------------------- Covered Person who is required to receive training certifies that he or she has received the required training. The certification shall specify the type of training received and the date received. The Compliance Officer shall retain the certification, along with specific course materials. These shall be made available to OIG upon request. D. Application of CIA Obligations to Affiliates -------------------------------------------- If Fresenius enters a new contract or arrangement to form an Affiliate after the effective date of this CIA, Fresenius shall ensure, by including as terms of the contract or arrangement, that the Affiliate: (1) has a Compliance Officer; (2) adopts a Code of Conduct that meets the requirements of section III.B.1 of this CIA, subject to appropriate modifications to address the particular circumstances of the Affiliate; (3) has written policies and procedures that incorporate, to the extent relevant to the Affiliate, the policies and procedures identified in section III.B.3 of this CIA; (4) provides training to Affiliate employees consistent with the requirements of section III.C of this CIA, other than section III.C.11 (which requires the submission of an annual training plan to the OIG); (5) permits the Independent Review Organization named under section III.F of this CIA (the "IRO") access to records necessary to include the Affiliate in the IRO review required under section III.F of this CIA; and (6) screens for ineligible persons under section III.H of this CIA. Notwithstanding the requirements of this section, no Affiliate may be subject to the Breach and Default provisions contained in section X of this CIA; however, the OIG can apply those provisions to Fresenius for any failure by Fresenius to comply with its obligations under the provisions of this section. With respect to any Affiliate that was established prior to the effective date of this CIA, Fresenius shall, within 90 days of the execution of this CIA, communicate the requirements of this section to the Affiliate, and attempt in good faith to obtain agreement by the Affiliate to submit to all the terms of this section; or if agreement cannot be reached to include all the terms, then as many as possible. E. Application of CIA Obligations to Contractors. --------------------------------------------- Fresenius shall take the following steps with respect to a Contractor: (1) require in its contract with the Contractor that the Contractor acknowledge Fresenius's compliance program and Code of Conduct; and (2) ensure that the Code of Conduct, the Business Segment Compliance Guidelines and relevant portions of the Substantive Area policies and procedures described in section III.B above, and a description of the Confidential Disclosure Program are provided to the Contractor. Fresenius shall require future contracts with such Contractors to include the above- described provisions. F. Review Procedures. ----------------- 1. Retention of Independent Review Organization. Fresenius shall retain an entity, such as an accounting, auditing or consulting firm (hereinafter "Independent Review Organization" or "IRO") to perform review procedures to assist Fresenius in assessing the adequacy of its policies and procedures and compliance practices pursuant to this CIA. The reviews will be performed annually and cover each of the one-year periods beginning on the effective date of this CIA or the anniversary of that date. The Independent Review Organization must have expertise in the billing, coding, reporting and other requirements of the Federal health care programs from which Fresenius seeks reimbursement. The Independent Review Organization must be retained to conduct the audit of the first year within 90 days of the effective date of this CIA. 2. Types of Reviews. The Independent Review Organization will conduct the reviews consistent with the IRO workplan attached as Schedule B, and made part of this Agreement. 3. Statistical Sampling and Appraisal. All matters related to this CIA that involve statistical sampling or appraisal shall be conducted using the OIG's Office of Audit Services Statistical Sampling Software, also known as "RAT-STATS," available on the Internet at www.hhs.gov/oas/ratstat.html. Wherever the CIA requires the use of a random sample, the sample shall be selected and appraised using RAT-STATS and Fresenius or its IRO shall retain all of the supporting documentation related to the selection and appraisal of the samples. Whenever the IRO workplan requires a "Statistically Valid Sample Audit," the following requirements will apply. The sample size for each review shall be determined through the use of a probe sample. The probe sample must contain at least 30 sample units and cannot be used as part of the full sample. The full sample must contain a sufficient number of units so that when the sample results are projected to the population of claims for that review, the projection provides a minimum 90% confidence level and a maximum precision of plus or minus 25% of the point estimate (i.e., the upper and lower bounds of the 90% confidence interval shall not exceed 125% and shall not fall below 75% of the midpoint of the confidence interval, respectively). Both the probe sample and the full sample must be selected through random number sampling. 4. Billing Reviews Methodology. Each of the annual billing reviews shall include the following components in its methodology: a. Billing Review Objective: a clear statement of the objective intended to be achieved by the billing review and the procedure or combination of procedures that will be applied to achieve the objective. b. Billing Review Population: the identity of the population, which is the group about which information is needed and an explanation of the methodology used to develop the population and provide the basis for this determination. c. Sources of Data: a full description of the source of the information upon which the billing review conclusions will be based, including the legal or other standards applied, documents relied upon, payment data, and/or any contractual obligations. d. Sampling Unit: a definition of the sampling unit, which is any of the designated elements that comprise the population of interest. e. Sampling Frame: the identity of the sampling frame, which is the totality of the sampling units from which the sample will be selected. 5. Billing Reviews Findings. Each of the annual billing reviews shall provide findings regarding the following as they relate to the billings covered by that review: a. Fresenius's billing and coding operation (including, but not limited to, the operation of the billing system, strengths and weaknesses of this system, internal controls, effectiveness of the system); b. whether Fresenius is submitting accurate claims and/or cost reports for services billed to the Federal health care programs. c. Fresenius's procedures to correct inaccurate billing, coding or reporting to Federal health care programs; d. whether Fresenius has complied with its obligation under the Settlement Agreements: (a) not to resubmit any previously denied claims related to the conduct addressed in the Settlement Agreements, and its obligation not to appeal any such denials of claims, and (b) not to charge to or otherwise seek payment for unallowable costs (as defined in the Settlement Agreements) and its obligation to identify and adjust any past charges of unallowable costs; and e. the steps Fresenius is taking to bring its operations into compliance or to correct problems identified by the audit. 6. Contract Review. The IRO shall review a sample of at least 30 of Fresenius's contracts and other financial relationships that Fresenius has with physicians, dialysis providers, and other persons who may be in a position to refer or otherwise generate business for which Fresenius may submit claims to or be reimbursed by any Federal health care program to determine whether these contracts comply with applicable Federal Rules and the obligations of this CIA. 7. Credit Balance Review. The IRO shall review whether Fresenius is complying with its obligations under Federal Rules and the obligations of this CIA to identify and report credit balances to Federal health care programs. 8. Compliance Review. The compliance review shall provide findings regarding whether Fresenius's program, policies, procedures, and operations comply with the terms of this CIA. This review shall include section by section findings regarding the requirements of this CIA. 9. Review Reports. The IRO shall annually produce reports corresponding to all of the required reviews and including all of the information required by this section of the CIA. A complete copy of all of the IRO's review reports with respect to each year shall be included in each of Fresenius's Annual Reports to OIG. 10. Verification/Validation. In the event that the OIG has reason to believe that any of Fresenius's Billing Reviews conducted by the IRO fail to conform to its obligations under the CIA or indicate improper billings not otherwise adequately addressed in the annual review report(s), and thus determines that it is necessary to conduct an independent review to determine whether or the extent to which Fresenius is complying with its obligations under this CIA, Fresenius agrees to pay for the reasonable cost of any such review by the OIG or any of its designated agents. Prior to proceeding with such an independent review, the OIG shall notify Fresenius of its intent to do so and its reasons for believing such a review is necessary, and shall in good faith attempt to resolve any Billing Review issues without proceeding with an independent review. However, it shall remain in the sole discretion of the OIG to proceed with an independent review as described above. 11. Fresenius shall require that the IRO provide annual certifications that no IRO members or other employees who are involved in the IRO engagements with Fresenius hold direct or material indirect financial interests or other arrangements that would be considered to impair their independence under the standards of the AICPA Code of Professional Conduct and Security and Exchange Commission regulations and policies. The annual certifications shall be included in the IRO's report to Fresenius and in the Annual Reports submitted by Fresenius to the OIG. G. Confidential Disclosure Program. For the duration of this CIA, -------------------------------- Fresenius shall maintain its "Compliance Action Line" or similar hotline however denominated (hereinafter referred to as the "Confidential Disclosure Program"). The Confidential Disclosure Program must include measures (e.g., a toll-free ---- compliance telephone line) to enable Covered Persons and other individuals to disclose, to the Compliance Officer or some other person who is not in the disclosing individual's chain of command, any identified issues or questions associated with Fresenius's policies, practices or procedures with respect to a Federal health care program, believed by the individual to be inappropriate (hereinafter "compliance disclosure"). Fresenius shall publicize the existence of the Confidential Disclosure Program to Covered Persons. The Confidential Disclosure Program shall include a non-retribution, non- retaliation policy, and shall include a reporting mechanism for anonymous, confidential communication. Upon receipt of a compliance disclosure, the Compliance Officer (or designee) shall gather all relevant information from the disclosing individual. The Compliance Officer (or designee) shall make a preliminary good faith inquiry into the allegations set forth in every compliance disclosure to ensure that he or she has obtained all of the information necessary to determine whether a further review should be conducted. For any compliance disclosure that is sufficiently specific so that it reasonably: (1) permits a determination of the appropriateness of the alleged improper practice, and (2) provides an opportunity for taking corrective action, Fresenius shall conduct an internal review of the allegations set forth in such a compliance disclosure and ensure that proper follow-up is conducted. The Compliance Officer shall maintain a confidential compliance disclosure log, which shall include a record and summary of each allegation received, the status of the respective investigations, and any corrective action taken in response to the investigation. H. Ineligible Persons. ------------------ 1. Definition. For purposes of this CIA, an "Ineligible Person" shall be any individual or entity who: (i) is currently excluded, suspended, debarred or otherwise ineligible to participate in the Federal health care programs; or (ii) has been convicted of a criminal offense related to the provision of health care items or services and has not been reinstated in the Federal health care programs after a period of exclusion, suspension, debarment, or ineligibility. 2. Screening Requirements. Fresenius shall not hire as employees or engage as contractors any Ineligible Persons. To prevent hiring or contracting with any Ineligible Persons, Fresenius shall screen all prospective employees and prospective contractors prior to engaging their services by (i) requiring applicants to disclose whether they are Ineligible Persons, and (ii) reviewing General Services Administration's List of Parties Excluded from Federal Programs (available through the Internet at and the HHS/OIG List of Excluded Individuals/Entities (available through the Internet at (these lists shall ------------------ hereinafter be referred to as the "Exclusion Lists"). The employment or - ------------------------------------------------------------------------ retention of all employees or contractors shall be contingent upon confirmation - ------------------------------------------------------------------------------- that the individual or entity is not an Ineligible Person. - ---------------------------------------------------------- 3. Review and Removal Requirement. Within 90 days of the effective ---------------------------------------------------------------- date of this CIA, Fresenius will review its list of current Covered Persons and - ------------------------------------------------------------------------------- Contractors against the Exclusion Lists. Thereafter, Fresenius will review the - ------------------------------------------------------------------------------- lists once semi-annually. If Fresenius has notice that a Covered Person or - --------------------------------------------------------------------------- Contractor has become an Ineligible Person, Fresenius will remove such person - ----------------------------------------------------------------------------- from responsibility for, or involvement with, Fresenius's business operations - ----------------------------------------------------------------------------- related to the Federal health care - ---------------------------------- programs and shall remove such person from any position for which the person's - ------------------------------------------------------------------------------ salary or the items or services rendered, ordered, or prescribed by the person - ------------------------------------------------------------------------------ are paid in whole or part, directly or indirectly, by Federal health care - ------------------------------------------------------------------------- programs or otherwise with Federal funds at least until such time as the person - ------------------------------------------------------------------------------- is reinstated into participation in the Federal health care programs. - -------------------------------------------------------------------- 4. Pending Charges and Proposed Exclusions. If Fresenius has notice ----------------------------------------------------------------- that a Covered Person is charged with a criminal offense related to any Federal - ------------------------------------------------------------------------------- health care program, or is proposed for exclusion during his or her employment - ------------------------------------------------------------------------------ or contract, Fresenius shall take all appropriate actions to ensure that the - ---------------------------------------------------------------------------- responsibilities of that Covered Person do not adversely affect the quality of - ------------------------------------------------------------------------------ care rendered to any patient or resident, or the accuracy of any claims - ----------------------------------------------------------------------- submitted to any Federal health care program. - ----------------------------------------------- I. Notification of Proceedings. Within 30 days of discovery, Fresenius --------------------------- shall notify OIG, in writing, of any ongoing investigation or legal proceeding conducted or brought by a governmental entity or its agents involving an allegation that Fresenius has committed a crime or has engaged in fraudulent activities. This notification shall be made within 30 days of the date that Fresenius receives notice of the investigation or proceeding and shall (to the extent known to Fresenius) include a description of the allegation, the identity of the investigating or prosecuting agency, and the status of such investigation or legal proceeding. Fresenius shall also provide written notice to OIG within 30 days of the resolution of the matter, and shall provide OIG with a description of the findings and/or results of the proceedings, if any. J. Reporting. --------- 1. Reporting of Overpayments. If, at any time, Fresenius determines that it has received an overpayment from a Federal health care program, Fresenius shall notify the payor (e.g., Medicare fiscal intermediary or carrier) ---- within 30 days of discovering the overpayment and take remedial steps within 60 days of discovery (or such additional time as may be agreed to by the payor) to correct any operational or policy deficiencies on Fresenius's part which may have caused the overpayments to occur, including preventing the underlying problem and the overpayments from recurring. 2. Reporting to OIG. If Fresenius determines that there is a Reportable Event, Fresenius shall notify the OIG within 30 days of such determination. Fresenius's notification to the OIG shall include the following information; provided however, that if the Reportable Event does not involve an overpayment, the requirements of a and b below do not apply: a. all of the information provided to the payor in returning the overpayment; b. the name and the address of the payor to whom the overpayment was returned; c. a complete description of the Reportable Event, including the relevant facts, persons involved, and legal and program authorities; d. Fresenius's actions to correct any operational or policy deficiency; and e. any further steps Fresenius plans to take to address such operational or policy deficiency and prevent it from recurring. 3. Definition of "Overpayment." For purposes of this CIA, an "overpayment" means the amount of money the provider has received in excess of the amount due and payable under the Federal Rules. 4. Definition of "Reportable Event." For purposes of this CIA, a "Reportable Event" means anything that involves: (i) a substantial overpayment; (ii) a matter that a reasonable person would consider a potential violation of criminal, civil or administrative laws applicable to any Federal health care program for which penalties or exclusion are authorized; or (iii) a violation of the obligation to provide items or services of a quality that meet professionally recognized standards of health care where such violation has occurred in one or more instances that presents an imminent danger to the health, safety, or well-being of a Federal health care program beneficiary or places the beneficiary unnecessarily in a high-risk situation. A Reportable Event may be the result of an isolated event or a series of occurrences. IV. New Locations -------------- In the event, after the effective date of this CIA, that Fresenius purchases or establishes new locations or business units, which furnish health care items or services to beneficiaries of the Federal health care programs and are required by Federal Rules to obtain or maintain a separate provider or supplier number, Fresenius shall notify OIG of this fact through a report on a quarterly basis. This notification shall include the location of the new operation(s), phone number, fax number, Federal health care program provider number(s) (if any), and the corresponding payor(s) (contractor specific) that has issued each provider number. All Covered Persons at such locations shall be subject to the requirements in this CIA that apply to new Covered Persons e.g., training - ----- requirements). In the case of acquired facilities, the obligations of this CIA shall apply only to services or activities occurring after the effective date of the acquisition. V. Implementation and Annual Reports --------------------------------- A. Implementation Report. Within 180 days after the effective date of --------------------- this CIA, Fresenius shall submit a written report to OIG summarizing the status of its implementation of the requirements of this CIA. This Implementation Report shall include: 1. the name, address, phone number and position description of the Corporate Compliance Officer and the Business Unit Compliance Officers required by section III.A; 2. the names and positions of the members of the Compliance Committees required by section III.A; 3. a copy of Fresenius's Code of Conduct required by section III.B.1; 4. A copy of the Business Segment Compliance Guidelines required by section III.B.2; 5. a description of the training programs required by section III.C, including a description of the targeted audiences and a schedule of when the training sessions have been or will be held; 6. a certification by the Compliance Officer that, except as otherwise described in the Report: a. the Business Segment Compliance Guidelines required by section III.B.2 have been completed and distributed to all pertinent Covered Persons; b. new Covered Persons have completed the Code of Conduct certification required by section III.B.1; and c. for training required under III.C.2 and C.6, all Covered Persons have completed the training and executed the certification required by section III.C; and for any other training under III.C, implementation steps are being taken consistent with the CIA. 7. a description of the Confidential Disclosure Program required by section III.G; 8. the identity of the Independent Review Organization(s) and the proposed start and completion date of the first audit; and 9. a summary of actions taken pursuant to section III.H. B. Annual Reports. Fresenius shall submit to OIG Annual Reports with -------------- respect to the status and findings of Fresenius's compliance activities. Each Annual Report shall include: 1. any change in the identity or position description of the Corporate Compliance Officer, the Business Unit Compliance Officer, members of the Compliance Committees described in section III.A or any other material change in the organization or management of the Company's corporate compliance program; 2. a certification by the Compliance Officer that, except as otherwise described in the Report: a. all Covered Persons have completed the annual Code of Conduct certification required by section III.B.1; b. all Covered Persons have completed the applicable training and executed the certification as required by section III.C; and c. Fresenius has complied with its obligations under the Settlement Agreements: (i) not to resubmit any previously denied claims related to the conduct addressed in the Settlement Agreements, and its obligation not to appeal any such denials of claims, and (ii) not to charge to or otherwise seek payment for unallowable costs (as defined in the Settlement Agreements) and its obligation to identify and adjust any past charges of unallowable costs; and d. Fresenius has complied with its obligations regarding Affiliates as required by section III.D. 3. notification of any material changes or amendments to the Business Segment Compliance Guidelines required by section III.B and the reasons for such changes (e.g., change in contractor policy); ---- 4. a complete copy of the report prepared pursuant to the Independent Review Organization's billing and compliance reviews, including a copy of the methodologies used and a copy of the certification of IRO financial independence required under section III.F; 5. Fresenius's response/corrective action plan to any issues raised by the Independent Review Organization; 6. a summary of Reportable Events identified and reported throughout the course of the previous 12 months pursuant to III.J; 7. a report of the aggregate overpayments that have been returned to the Federal health care programs that were discovered as a direct or indirect result of implementing this CIA. Overpayment amounts should be broken down into the following categories: Medicare, Medicaid (report each applicable state separately), and other Federal health care programs; 8. a copy of the confidential compliance disclosure log required by section III.G; 9. a description of any personnel action (other than hiring) taken by Fresenius as a result of the obligations in section III.H, and the name, title, and responsibilities of any person that falls within the ambit of section III.H.4, and the actions taken in response to the obligations set forth in that section; 10. a summary describing any ongoing investigation or legal proceeding that was required to have been reported pursuant to section III.I. The statement shall include a description of the allegation, the identity of the investigating or prosecuting agency, and the status of such investigation, legal proceeding or requests for information; 11. a corrective action plan to address all Reportable Events (as defined in section III.J) identified over the previous 12 months; 12. a listing of all of Fresenius's locations or business units, which furnish health care items or services to beneficiaries of Federal health care programs and are required by Federal Rules to obtain or maintain a separate provider or supplier number (including locations and mailing addresses), the corresponding name under which each location is doing business, the corresponding phone numbers and fax numbers, each location's Federal health care program provider identification number(s) and the payor (specific contractor) that issued each provider identification number; and 13. A copy of the annual review and analysis of the fair market value of the laboratory testing composite rate as required by section III.B.3.c.(5). The first Annual Report shall be received by the OIG not later than April 1, 2001. The Reporting Periods for this CIA shall be as follows: January 1, 2000 - December 31, 2000 January 1, 2001 - December 31, 2001 January 1, 2002 - December 31, 2002 January 1, 2003 - December 31, 2003 January 1, 2004 - December 31, 2004 January 1, 2005 - December 31, 2005 January 1, 2006 - December 31, 2006 January 1, 2007 - December 31, 2007 Subsequent Annual Reports shall be received by the OIG no later than the anniversary date of the due date of the first Annual Report. C. Certifications. The Implementation Report and Annual Reports shall -------------- include a certification by the Compliance Officer under penalty of law, that: (1) except as otherwise described in the Report, Fresenius is in compliance with all the requirements of this CIA, to the best of his or her knowledge; and (2) the Compliance Officer has reviewed the Report and has made reasonable inquiry regarding its content and believes that, upon such inquiry, the information is accurate and truthful. VI. Notifications and Submission of Reports --------------------------------------- Unless otherwise stated in writing subsequent to the effective date of this CIA, all notifications and reports required under this CIA shall be submitted to the entities listed below: OIG: - --- Civil Recoveries Branch - Compliance Unit Office of Counsel to the Inspector General Office of Inspector General U.S. Department of Health and Human Services Cohen Building, Room 5527 330 Independence Avenue, SW Washington, DC 20201 Phone 202.619.2078 Fax 202.205.0604 Fresenius: - --------- John Markus Senior Vice President - Corporate Compliance Fresenius Medical Care North America Two Ledgemont Center 95 Hayden Drive Lexington, MA 02420 Phone: (781) 402-9359 Fax: (781) 402-9777 VII. OIG Inspection, Audit and Review Rights --------------------------------------- In addition to any other rights OIG may have by statute, regulation, or contract, OIG or its duly authorized representative(s), may examine Fresenius's books, records, and other documents and supporting materials and/or conduct an onsite review of any of Fresenius's facilities, units, or locations for the purpose of verifying and evaluating: (a) Fresenius's compliance with the terms of this CIA; and (b) Fresenius's compliance with the requirements of the Federal health care programs in which it participates. The documentation described above shall be made available by Fresenius to OIG or its duly authorized representative(s) at all reasonable times for inspection, audit or reproduction. Furthermore, for purposes of this provision, OIG or its duly authorized representative(s) may interview any of Fresenius's employees, contractors, or agents who consent to be interviewed at the individual's place of business during normal business hours or at such other place and time as may be mutually agreed upon between the individual and OIG. Fresenius agrees to assist OIG in contacting and arranging interviews with such individuals upon OIG's request. Fresenius's employees may elect to be interviewed with or without a representative of Fresenius present. VIII. Document and Record Retention ----------------------------- Fresenius shall maintain for inspection all documents and records: (1) relating to reimbursement from the Federal health care programs for at least 7 years after the submission of the request for reimbursement; and (2) necessary to establishing Fresenius's compliance with this CIA for at least three years following the submission of the Annual Report covering the relevant year. IX. Disclosures and Privileges -------------------------- Subject to HHS's Freedom of Information Act ("FOIA") procedures, set forth in 45 C.F.R. Part 5, the OIG shall make a reasonable effort to notify Fresenius prior to any release by OIG of information submitted by Fresenius pursuant to its obligations under this CIA and identified upon submission by Fresenius as trade secrets, commercial or financial information and privileged and confidential under the FOIA rules. With respect to the disclosure of such information, Fresenius shall have the rights set forth in 45 C.F.R. (S) 5.65(d). Fresenius shall refrain from identifying any information as trade secrets, commercial or financial information and privileged and confidential that does not meet the criteria for exemption from disclosure under FOIA. Nothing in this CIA, or any communication or report made pursuant to this CIA, shall constitute a waiver of, or be construed to require Fresenius to waive its attorney-client, work product or other applicable privileges. Notwithstanding that fact, the existence of any such privilege does not affect Fresenius's obligation to comply with the provisions of this CIA. X. Breach and Default Provisions ----------------------------- Fresenius is expected to fully and timely comply with all of the obligations herein throughout the term of this CIA or other time frames herein agreed to. A. Stipulated Penalties for Failure to Comply with Certain Obligations. ------------------------------------------------------------------- As a contractual remedy, Fresenius and OIG hereby agree that failure to comply with certain obligations set forth in this CIA may lead to the imposition of the following monetary penalties (hereinafter referred to as "Stipulated Penalties") in accordance with the following provisions. 1. A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after the date the obligation became due) for each day, beginning 120 days after the effective date of this CIA and concluding at the end of the term of this CIA, Fresenius fails to have in place any of the following: a. a Compliance Officer; b. a Business Unit Compliance Officer for each Business Unit identified in Schedule A; c. a Corporate Compliance Committee and Business Unit Compliance Committee for each Business Unit identified in Schedule A; d. a written Code of Conduct; e. written Business Segment Compliance Guidelines; f. a training program; or g. a Confidential Disclosure Program; 2. A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after the date the obligation became due) for each day Fresenius fails meet any of the deadlines to submit the Implementation Report or the Annual Reports to the OIG. 3. A Stipulated Penalty of $2,000 (which shall begin to accrue on the date the failure to comply began) for each day Fresenius: a. hires or enters into a contract with an Ineligible Person at the time when that person is listed by a federal agency as excluded, debarred, suspended or otherwise ineligible for participation in the Federal health care programs (this Stipulated Penalty shall not be demanded for any time period during which Fresenius can demonstrate that it did not discover the person's exclusion or other ineligibility after making a reasonable inquiry (as described in section III.H) as to the status of the person); b. employs or contracts with an Ineligible Person and that person: (i) has responsibility for, or involvement with, Fresenius's business operations related to the Federal health care programs or (ii) is in a position for which the person's salary or the items or services rendered, ordered, or prescribed by the person are paid in whole or part, directly or indirectly, by Federal health care programs or otherwise with Federal funds (this Stipulated Penalty shall not be demanded for any time period during which Fresenius can demonstrate that it did not discover the person's exclusion or other ineligibility after making a reasonable inquiry (as described in section III.H) as to the status of the person). 4. A Stipulated Penalty of $1,500 (which shall begin to accrue on the date the Fresenius fails to grant access) for each day Fresenius fails to grant access to the information or documentation as required in section VII of this CIA. 5. A Stipulated Penalty of $1,000 (which shall begin to accrue 10 days after the date that OIG provides notice to Fresenius of the failure to comply) for each day Fresenius fails to comply fully and adequately with any obligation of this CIA, where the failure to comply does not form the basis for Stipulated Penalties under the provisions of section X.A.1 through X.A.4. In its notice to Fresenius, OIG shall state the specific grounds for its determination that the Fresenius has failed to comply fully and adequately with the CIA obligation(s) at issue. With respect to the Stipulated Penalty provision described in this section X.A.5 only, the OIG shall not seek a Stipulated Penalty if Fresenius demonstrates to the OIG's satisfaction that the alleged failure to comply could not be cured within the 10-day period, but that: (i) Fresenius has begun to take action to cure the failure to comply, (ii) Fresenius is pursuing such action with due diligence, and (iii) Fresenius has provided to OIG a reasonable timetable for curing the failure to comply. B. Payment of Stipulated Penalties. ------------------------------- 1. Demand Letter. Upon a finding that Fresenius has failed to comply with any of the obligations described in section X.A and determining that Stipulated Penalties are appropriate, OIG shall notify Fresenius by personal service or certified mail of (a) Fresenius's failure to comply; and (b) the OIG's exercise of its contractual right to demand payment of the Stipulated Penalties (this notification is hereinafter referred to as the "Demand Letter"). Within ten (10) days of receiving the Demand Letter, Fresenius shall either (a) cure the breach to the OIG's satisfaction and pay the applicable stipulated penalties; or (b) request a hearing before an HHS administrative law judge ("ALJ") to dispute the OIG's determination of noncompliance, pursuant to the agreed upon provisions set forth below in section X.D. In the event Fresenius elects to request an ALJ hearing, the Stipulated Penalties shall continue to accrue until Fresenius cures, to the OIG's satisfaction, the alleged breach in dispute; however, the payment of such accrued Stipulated Penalties shall remain pending until the ALJ determination. Failure to respond to the Demand Letter in one of these two manners within the allowed time period shall be considered a material breach of this CIA and shall be grounds for exclusion under section X.C. 2. Timely Written Requests for Extensions. Fresenius may submit a timely written request for an extension of time to perform any act or file any notification or report required by this CIA. Notwithstanding any other provision in this section, if OIG grants the timely written request with respect to an act, notification, or report, Stipulated Penalties for failure to perform the act or file the notification or report shall not begin to accrue until one day after Fresenius fails to meet the revised deadline set by the OIG. Notwithstanding any other provision in this section, if OIG denies such a timely written request, Stipulated Penalties for failure to perform the act or file the notification or report shall not begin to accrue until two business days after Fresenius receives OIG's written denial of such request. A "timely written request" is defined as a request in writing received by OIG at least five business days prior to the date by which any act is due to be performed or any notification or report is due to be filed. 3. Form of Payment. Payment of the Stipulated Penalties shall be made by certified or cashier's check, payable to "Secretary of the Department of Health and Human Services," and submitted to OIG at the address set forth in section VI. 4. Independence from Material Breach Determination. Except as otherwise noted, these provisions for payment of Stipulated Penalties shall not affect or otherwise set a standard for the OIG's determination that Fresenius has materially breached this CIA, which decision shall be made at the OIG's discretion and governed by the provisions in section X.C, below. C. Exclusion for Material Breach of this CIA ----------------------------------------- 1. Notice of Material Breach and Intent to Exclude. The parties agree that a material breach of this CIA by Fresenius constitutes an independent basis for Fresenius's exclusion from participation in the Federal health care programs (as defined in 42 U.S.C. (S) 1320a-7b(f)). Upon a determination by OIG that Fresenius has materially breached this CIA and that exclusion should be imposed, the OIG shall notify Fresenius by certified mail of (a) Fresenius's material breach; and (b) OIG's intent to exercise its contractual right to impose exclusion (this notification is hereinafter referred to as the "Notice of Material Breach and Intent to Exclude"). 2. Opportunity to cure. Fresenius shall have 30 days from the date it receives the Notice of Material Breach and Intent to Exclude to demonstrate to the OIG's satisfaction that: a. Fresenius is in full compliance with this CIA; b. the alleged material breach has been cured; or c. the alleged material breach cannot be cured within the 30- day period, but that: (i) Fresenius has begun to take action to cure the material breach, (ii) Fresenius is pursuing such action with due diligence, and (iii) Fresenius has provided to OIG a reasonable timetable for curing the material breach. 3. Exclusion Letter. If at the conclusion of the 30-day period, Fresenius fails to satisfy the requirements of section X.C.2, OIG may exclude Fresenius from participation in the Federal health care programs. OIG will notify Fresenius in writing of its determination to exclude Fresenius (this letter shall be referred to hereinafter as the "Exclusion Letter"). Subject to the Dispute Resolution provisions in section X.D below, the exclusion shall go into effect 30 days after the date of the Exclusion Letter. The exclusion shall have national effect and will also apply to all other federal procurement and non-procurement programs. If Fresenius is excluded under the provisions of this CIA, Fresenius may seek reinstatement pursuant to the provisions at 42 C.F.R. (S)(S) 1001.3001-3004. 4. Material Breach. A material breach of this CIA means: a. a failure by Fresenius to report a Reportable Event, take corrective action and pay the appropriate refunds, as provided in section III.J; b. repeated or flagrant violations of the obligations under this CIA, including, but not limited to, the obligations addressed in section X.A of this CIA; c. a failure to respond to a Demand Letter concerning the payment of Stipulated Penalties in accordance with section X.B above; or d. a failure to retain and use an Independent Review Organization for review purposes in accordance with section III.F. D. Dispute Resolution ------------------ 1. Review Rights. Upon the OIG's delivery to Fresenius of its Demand Letter or of its Exclusion Letter, and as an agreed-upon contractual remedy for the resolution of disputes arising under the obligation of this CIA, Fresenius shall be afforded certain review rights comparable to the ones that are provided in 42 U.S.C. (S) 1320a-7(f) and 42 C.F.R. Part 1005 as if they applied to the Stipulated Penalties or exclusion sought pursuant to this CIA. Specifically, the OIG's determination to demand payment of Stipulated Penalties or to seek exclusion shall be subject to review by an ALJ and, in the event of an appeal, the Departmental Appeals Board ("DAB"), in a manner consistent with the provisions in 42 C.F.R. (S)(S) 1005.2-1005.21. Notwithstanding the language in 42 C.F.R. (S) 1005.2(c), the request for a hearing involving Stipulated Penalties shall be made within 10 days of the receiving the Demand Letter and the request for a hearing involving exclusion shall be made within 30 days of the date of the Exclusion Letter. 2. Stipulated Penalties Review. Notwithstanding any provision of Title 42 of the United States Code or Chapter 42 of the Code of Federal Regulations, the only issues in a proceeding for Stipulated Penalties under this CIA shall be (a) whether Fresenius was in full and timely compliance with the obligations of this CIA for which OIG demands payment; (b) the period of noncompliance and (c) with respect to a Stipulated Penalty authorized under section X.A.5 only, whether the failure to comply could not be cured within the 10-day period, but that by the end of that period (i) Fresenius had begun to take action to cure the failure to comply, (ii) Fresenius was and is pursuing such action with due diligence, and (iii) Fresenius had provided to OIG a reasonable timetable for curing the material breach which is being followed. Fresenius shall have the burden of proving its full and timely compliance and the steps taken to cure the noncompliance, if any. If the ALJ finds for OIG with regard to a finding of a breach of this CIA and orders Fresenius to pay Stipulated Penalties, such Stipulated Penalties shall become due and payable 20 days after the ALJ issues such a decision notwithstanding that Fresenius may request review of the ALJ decision by the DAB. 3. Exclusion Review. Notwithstanding any provision of Title 42 of the United States Code or Chapter 42 of the Code of Federal Regulations, the only issues in a proceeding for exclusion based on a material breach of this CIA shall be (a) whether Fresenius was in material breach of this CIA; (b) whether such breach was continuing on the date of the Exclusion Letter; and (c) whether the alleged material breach could not have been cured within the 30 day period, but that (i) Fresenius had begun to take action to cure the material breach within that period, (ii) Fresenius has pursued and is pursuing such action with due diligence, and (iii) Fresenius provided to OIG within that period a reasonable timetable for curing the material breach. For purposes of the exclusion herein, exclusion shall take effect only after an ALJ decision that is favorable to the OIG. Fresenius's election of its contractual right to appeal to the DAB shall not abrogate the OIG's authority to exclude Fresenius upon the issuance of the ALJ's decision. If the ALJ sustains the determination of the OIG and determines that exclusion is authorized, such exclusion shall take effect 20 days after the ALJ issues such a decision, notwithstanding that Fresenius may request review of the ALJ decision by the DAB. 4. Finality of Decision. The review by an ALJ or DAB provided for above shall not be considered to be an appeal right arising under any statutes or regulations. Consequently, the parties to this CIA agree that the DAB's decision (or the ALJ's decision if not appealed) shall be considered final for all purposes under this CIA. XI. Effective and Binding Agreement ------------------------------- Consistent with the provisions in the Settlement Agreement pursuant to which this CIA is entered, and into which this CIA is incorporated, Fresenius and OIG agree as follows: A. This CIA shall be binding on the successors, assigns, and transferees of Fresenius; B. This CIA shall become final and binding on the date the final signature is obtained on the CIA; C. No modifications to this CIA shall be made without the prior written consent of the parties to this CIA; D. This CIA supersedes the CIA entered into between the OIG and Spectra Laboratories, Inc. executed on December 10, 1996 rendering the Spectra CIA no longer in effect. E. The undersigned Fresenius signatories represent and warrant that they are authorized to execute this CIA. The undersigned OIG signatory represents that he is signing this CIA in his official capacity and that he is authorized to execute this CIA. On Behalf of Fresenius ____________________________________________ BEN J. LIPPS DATE -------- President Fresenius Medical Care Holdings, Inc. /s/ John Markus - -------------------------------------------- JOHN MARKUS DATE 1/18/00 -------- Senior Vice President - Corporate Compliance Fresenius Medical Care North America On behalf of the Office of Inspector General of the Department of Health and Human Services /s/ Lewis Morris 1/18/00 - --------------------------------------------- ----------- LEWIS MORRIS DATE Assistant Inspector General for Legal Affairs Office of Inspector General U. S. Department of Health and Human Services Schedule A List of Corporate Business Units for purposes of section III.A.2: Fresenius Dialysis Services - North Fresenius Dialysis Services - East Fresenius Dialysis Services - South Fresenius Dialysis Services - West Dialysis Products Spectra Renal Management SCHEDULE B FRESENIUS CIA IRO WORKPLAN LABORATORY SERVICES AUDIT (SPECTRA EAST AND SPECTRA WEST ONLY) - -------------------------------------------------------------- A. LABORATORY INTERNAL MONITORING AND AUDITING PROCESSES 1. Conduct interviews with key administrators and staff to assess current operations and controls related to laboratory billing, coding, documentation and audit and monitoring practices (the inquiry will include, but may not be limited to, an overview of the revenue cycle, including registration, patient encounters, charge capture and documentation, claim submission and follow-up); 2. Document and review each laboratory's current policies and procedures related to laboratory billing, coding and documentation and monitoring and auditing practices, including those that address: [_] Charge capture, documentation and submission processes; [_] Medical documentation; [_] Test requisition form design and content; [_] Physician notices and acknowledgements; [_] Advance beneficiary notices utilization; [_] Test utilization monitoring; [_] Selection of CPT-4 procedural codes, translation of ICD-9 diagnosis codes; [_] Billing for calculations; [_] Reflex testing; [_] Use of standing orders; [_] Specimen collection fees and travel allowances; [_] Composite rate billing; [_] 50/50 billing; and [_] Record retention. 3. Review all current outpatient laboratory encounter superbill forms (e.g., encounter form) and other pertinent forms (e.g., an advanced beneficiary notice) to verify that they have been updated to address current regulatory requirements; 4. Identify independent consultant reports related to compliance activities and compliance related training materials; 5. Document and review all processes associated with internal monitoring and auditing activities (e.g., test utilization monitoring, standing order reviews, prospective/retrospective testing, etc.) as well as the protocols for corrective action; 1 SCHEDULE B FRESENIUS CIA IRO WORKPLAN 6. Report on compliance and internal audit activities conducted by Fresenius through interviews with respective compliance representatives and internal audit personnel; and 7. With respect to Federal health care programs other than Medicare perform the following procedures: a. Select specific policies and procedures and test for compliance with respect to all Federal health care programs except Medicare (e.g., if there is a test utilization and monitoring policy and procedure, test that the lab is running the reports as indicated and that there is appropriate communications based upon the results of these reports); b. Test that each laboratory is receiving, maintaining and communicating government and payer communications by requesting all compilations and reviewing the processes for communicating regulatory information to employees (e.g., review regulatory compendiums). c. Document information system controls (e.g., missing data reports and test the main control points to verify these are being utilized appropriately by running "dummy" tests through the system. NOTE - With respect to all reviews described below in paragraph B and C, the IRO will review the medical documentation of the test ordered for Fresenius owned or managed facilities ("Fresenius facilities") and, as such, will request medical records from the facilities. In testing medical documentation for those tests where Medicare limits payment to certain diagnoses, the IRO will verify that the medical record documentation indicates that the patient's condition at the time of the test being ordered is consistent with the selected diagnosis or ICD-9 code used to support the medical necessity of the test (e.g., test subject to local medical review policies) (hereinafter referred to as "medical record documentation test"). The medical record documentation test shall be performed by clinical personnel with ESRD expertise. If the physician has stated the diagnosis in the medical record, the IRO will not question that determination by the physician. For facilities not owned or managed by Fresenius ("non-Fresenius facilities"), the IRO will only conduct an audit of medical documentation to the extent of an evaluation of the presence of an appropriate diagnosis on the applicable requisition forms where required, and that it matches the diagnosis submitted on the claim form (hereinafter referred to as "diagnosis confirmation test"). 2 SCHEDULE B FRESENIUS CIA IRO WORKPLAN B. TEST FOR COMPLIANCE WITH FREQUENCY RELATED ISSUES FOR MEDICARE CLAIMS ONLY (FOR BOTH SPECTRA WEST AND SPECTRA EAST ONLY). 1. The IRO will request that Spectra East and Spectra West generate a frequency and utilization report for 100 randomly selected patients each for a period of three months that details all frequency based tests performed for each patient for the quarter. 2. The IRO will request that Spectra East and Spectra West generate all Medicare related billing data for each of the 100 patients for the audit quarter. 3. The IRO will conduct an analysis of these reports (i.e., categorize and count the number of tests for the audit period for each patient and compare the results against the regulatory mandates for each test). The analysis will specifically include a review of the utilization and frequency reports for the following: [_] All tests included in the composite rate; [_] All tests billed outside the composite rate subject to Medicare frequency limits; and [_] Appropriateness of 50/50 rule billing. 4. The IRO will document as part of the IRO report any instances that indicate that FMC billed for tests outside the frequency mandated by regulatory requirements. 5. For any instances that indicate that FMC billed for tests outside the frequency mandated by regulatory requirements, the IRO will perform the clinical medical documentation and the diagnosis confirmation test. 6. A Statistically Valid Sample Frequency Issue Audit shall be performed for the laboratory if the medical record documentation test review results in an error rate in terms of gross dollar overpayments that equals or exceeds 5%. This review shall follow the statistically valid sample audit requirements set forth in the CIA. Nothing in this section shall relieve Fresenius of its responsibility to correct inaccuracies noted in its original sample. The 5% financial error threshold only applies to criteria for sample expansion, not for extrapolation of an error rate; 7. In the event that a statistically valid sample audit is required under paragraph 6 above, the population will consist of Medicare laboratory claims grouped by quarter for each beneficiary (i.e., beneficiary quarter) that were processed for payment during the period of audit; the sample unit shall be a beneficiary quarter represented by all laboratory claims and related services contained in that beneficiary quarter. 3 SCHEDULE B FRESENIUS CIA IRO WORKPLAN 8. If the IRO can illustrate through an information system and/or management report analysis that the frequency issues resulted from a systemic or operation controls gap, then the IRO will quantify the extent of the issue and make the appropriate report to FMC. C. CONDUCT A STATISTICALLY VALID SAMPLE AUDIT, INCLUDING PROBE AUDIT OF MEDICARE CLAIMS ONLY (FOR BOTH SPECTRA WEST AND SPECTRA EAST ONLY). 1. The IRO will conduct a statistical review of claims by both laboratories to review the following issues (as the frequency issues have been carved out as indicated above): [_] Appropriateness of billing for bundled tests; [_] Incidence of duplicate billing; [_] Presence of CPT-4 procedural and/or ICD-9 diagnosis coding (see note below); [_] Incidence of billing for services not performed; [_] Incidence of billing for tests performed, but not ordered; [_] Inclusion of dates of services; and [_] Incidence of failure to bill for tests performed. 2. This review will follow the statistically valid sample audit requirements set forth in the CIA. The sample unit will be defined as one claim submitted and all the tests associated with that claim. 3. If the IRO can illustrate through an information system and/or management report analysis that an issue or an error resulted from systemic or operational control gap, then the IRO will report the issue to FMC to remit all overpayments associated with that issue. 4. For any claims and services that have been identified as being an error, the IRO will report to Fresenius and develop an estimate of any possible overpayment. D. AFTER THE FIRST YEAR UNDER THE CIA, FRESENIUS MAY REQUEST THE OIG TO ALLOW THE LABORATORY SERVICES AUDIT REQUIRED BY THE CIA AND DETAILED IN THIS WORKPLAN TO BE PEFORMED BY FRESENIUS INTERNAL AUDIT PERSONNEL. THE OIG WILL DECIDE SUCH REQUESTS IN ITS SOLE DISCRETION. THE IRO WILL REVIEW THE METHODOLOGY AND RESULTS OF THE AUDITS PERFORMED BY FRESENIUS INTERNAL AUDIT STAFF. THE REVIEW WILL INCLUDE RE-PERFORMING ALL AUDIT STEPS ON AT LEAST 10% OF CLAIMS REVIEWED BY FRESENIUS. 4 SCHEDULE B FRESENIUS CIA IRO WORKPLAN CREDIT BALANCE AUDIT - -------------------- 1. Review procedures established for the identification and resolution of credit balances. Include a review, including a detailed analysis, of the items that were written off the accounting records during the audit period to determine, where appropriate, if there were any Medicare overpayments that should have been reported on Form HCFA 838 and refunded upon request to the fiscal intermediary; 2. Identify and document control points for resolving and reporting credit balances (e.g., refund to payer, correction of posting error, corrected billing); 3. Identify individuals responsible for accurately identifying, compiling and reporting credit balances and for identifying, monitoring and processing refunds; 4. Determine whether the billing system has the ability to print out the individual patient accounts by payer class and whether Federal health care program credit balances are properly identified; 5. Perform an analysis of a limited sample from the credit balances data obtained in step 4 and identify and review any adjustments that are inconsistent with existing policies and procedures; 6. Obtain the most current listing of all credit balances and select a sample of at least 10 dates of service and test for the following: [_] Federal health care program credit balances were identified within a reasonable time once payment was received and posted; [_] Credit balance status was analyzed, documented and appropriately refunded; [_] All credit balances for Federal health care programs are refunded or otherwise resolved upon request of the fiscal intermediary in a timely manner; and [_] Controller or accountant, on a monthly or quarterly basis, reviews the credit balance reports and associated adjustments. 7. From the selected sample tie to the HCFA 838, where appropriate, and confirm the following: [_] The credit balance was reported on form HCFA 838 and that Medicare guidelines were followed (e.g., documenting the reason for the credit balance); and [_] The appropriate signatures exist on the form HCFA 838 per Medicare guidelines. 8. Where appropriate, assess that the form HCFA 838 is completed, signed and submitted according to Medicare guidelines on a quarterly basis even if no credits exist. 5 SCHEDULE B FRESENIUS CIA IRO WORKPLAN COMPLIANCE PROGRAM IMPLEMENTATION - --------------------------------- 1. Perform procedures to review and document the mandated terms and conditions of the CIA with respect to the implementation of a Corporate Integrity Agreement ("CIA") and verify Fresenius' compliance. Specifically, the IRO will note the following: [_] Identify if Fresenius has an appointed compliance oversight structure, including the Compliance Officer and a Compliance Committee (i.e., functional area representation), and the communication within the oversight structure (e.g., Board of Director communications, reporting to the CEO, etc.) and between key senior management and employees (e.g., action plans, follow-up reports, etc.); [_] Confirm training and education programs were conducted in accordance with the terms of the CIA; [_] Confirm the level of participation in the training and educational program are in accordance with the terms of the CIA; [_] Confirm that the internal process for obtaining, disseminating and maintaining pertinent regulatory communications, bulletins, updates, alerts, etc. from government agencies, regulatory bodies and third- party payers is in accordance with the terms of the CIA; [_] Review and record that the confidential disclosure program (i.e., hotline), including the process to identify and track reports, investigate and resolve (i.e., internal corrective action and/or resubmission of claims) issues and communicate important information back the employees has been implemented and is functioning in accordance with the terms of the CIA; [_] Identify and record all internal compliance audit reports; [_] Review and record all internal (e.g., Board of Directors) and external compliance reports. 2. Conduct interviews with management and employees as well as conduct a review of policies, reports, hotline logs and training schedules, etc. 3. The IRO will review Fresenius' procedures and documentation to verify that Fresenius has processes to ensure that they have not submitted claims and they have not sought payment for unallowable costs where specifically prohibited by the Settlement Agreement or Federal health care program requirements; 6 SCHEDULE B FRESENIUS CIA IRO WORKPLAN CONTRACT REVIEW - --------------- 1. In Year 1, identify 30 randomly selected contracts with potential referral sources from the total population of Fresenius contracts; 2. Obtain from Fresenius Office of General Counsel ("OGC") a copy of all the "standard" contracts utilized and compare the 30 randomly selected contracts against the standard language to verify consistency; 3. Verify that OGC and/or external counsel have reviewed and approved the form contracts and any exceptions made; 4. The IRO shall raise any discrepancies to OGC and/or external counsel for reconciliation; and 5. For the remaining duration of the CIA, IRO shall review a random sample of new contracts following the same processes. 7 SCHEDULE B FRESENIUS CIA IRO WORKPLAN COST REPORT REVIEW - ------------------ 1. For each year of the CIA, the IRO will randomly select 15 Medicare facility cost reports and select the home office cost report and review the related processes, including any policies and procedures, for determining the appropriateness of allowable and non-allowable costs, accounting for prior year adjustments, and the mechanism and process for rolling up to the Fresenius corporate cost report. Procedures to be performed will include: [_] Read the cost report and related working papers prepared and filed for the audit year; [_] Interview Fresenius representatives responsible for reporting information to be included in the cost reports to evaluate the processes of data collection and submission; [_] Interview Fresenius representatives responsible for preparing the cost report and related working papers to determine the communication process within Fresenius and to evaluate cost reporting procedures and the development of supporting documentation; [_] Analyze general ledger accounts to verify that unallowable expenses are being handled according to Fresenius policy and Medicare program requirements; [_] Analyze existing system that accumulates Medicare bad debts for inclusion in the Medicare cost report, including a review of the A/R collection process to ensure due diligence requirements are being followed ("bad debt review"); [_] and analyze the HCFA Cost Report Form 339 for purposes of cost reporting compliance; [_] Read and analyze the IRS Form 990 for purposes of determining consistency in federal reporting activities; [_] Read and analyze the cost report working papers and other documentation supporting the information reported in the cost report; and [_] Evaluating past cost report intermediary audit findings. 2. The IRO will review the cost report for the following potential unallowable expenses, to confirm that they are reported appropriately: [_] Lobbying expenses; [_] Political contributions; [_] Medical office buildings; [_] Non-reimbursable cost Centers; and [_] Special event costs. 3. For each year of the CIA, the IRO will randomly select an additional 15 Medicare facility cost reports for purposes of performing the bad debt review only. 8 SCHEDULE B FRESENIUS CIA IRO WORKPLAN 4. After the first year under the CIA, Fresenius may request the OIG to allow: (1) less than 15 facility cost reports to be audited for all issues (however, there shall always be a minimum of 10 cost reports audited for all issues and an additional minimum of 15 facility cost reports for purposes of bad debt review only); (2) Fresenius internal audit staff to perform more of the audits (however, the IRO shall always perform at least 50% of the audits). The OIG will decide such request in its sole discretion. The IRO will review the methodology and results of the audits performed by Fresenius internal audit staff. The review will include re- performing all audit steps on at least 10% of cost reports reviewed by Fresenius. 9 SCHEDULE B FRESENIUS CIA IRO WORKPLAN DIALYSIS SERVICES AUDIT: BILLING CENTERS - ---------------------------------------- A. INTERNAL MONITORING AND AUDITING PROCESSES - HEMODIALYSIS MODALITY The IRO shall select a random sample of at least 6 billing centers pursuant to section B below. In addition, Fresenius internal audit staff shall perform audits on 6 additional randomly selected billing centers following this methodology. For each dialysis billing center selected: 1. Create an inventory of current policies and procedures related to dialysis service billing, coding and documentation, and monitoring and auditing practices; 2. Conduct site visits and perform interviews at the selected billing centers with key administrators, clinical supervisors or directors and staff to assess current operations and controls related to dialysis billing, coding, documentation and audit and monitoring practices; 3. Test that identified policies and procedures are followed by reviewing: (a) attendance records of employee training programs related to billing compliance; (b) reports used to evaluate compliance; and (c) results of internal audits used to measure billing accuracy and compliance with policies and procedures; 4. Review current documentation forms and electronic record keeping methodology, as well as the interface between electronic and paper records, for compliance with HCFA regulatory requirements; 5. Review the procedures of billing centers for obtaining and distributing government and payer communications; 6. Identify and review independent consultant reports related to compliance activities and training materials for compliance with regulatory requirements; 7. Obtain and review processes associated with internal monitoring and auditing activities (e.g., adequacy of monitoring, utilization monitoring, physician orders) as well as protocols for corrective action; and 8. Identify information system controls (e.g., missing data reports) and test that these are being utilized and reviewed by appropriate personnel. 10 SCHEDULE B FRESENIUS CIA IRO WORKPLAN B. CONDUCT A PROBE AUDIT OF 30 SAMPLE UNITS AT 6 RANDOMLY SELECTED BILLING CENTERS FOR ALL HEMODIALYSIS MODALITY BILLING ACTIVITY 1. Obtain a complete listing of all claims reimbursed by the Federal health care programs during the audit period; 2. For purposes of Dialysis Services Audit, all billing centers shall be included within the random selection. The selection process shall be designed so that the probability of a billing center being selected is proportional to its dollar volume of claims submitted to the Federal health care programs; 3. Randomly select a probe sample of 30 sample units from each of the six randomly selected billing centers; 4. For purposes of the Dialysis Services Audit, the sample unit shall be a claim submitted to the Federal health care programs during the audit period; 5. Request all billing activity (e.g., claims submitted, account history, EOMBs) related to the test period for all members of the sample; 6. Request medical records supporting the charges represented in the billing activity for the test period; 7. Analyze each unit of the sample according to procedures to evaluate potential issues, including, but not limited to, the following (i.e., review the medical record for the following steps and indicate the criteria in the appropriate field): [_] Informed consent; [_] Completeness of medical record; [_] Long term program documentation; [_] Patient care plan; and [_] Bill data testing for accuracy of charges including dialysis encounters, pharmacy and diagnostic services. 7. A Statistically Valid Sample Audit shall be performed for each billing center for which the error rate in terms of gross dollar overpayments equals or exceeds 5%. This review shall follow the statistically valid sample audit requirements set forth in the CIA. Nothing in this section shall relieve Fresenius of its responsibility to correct inaccuracies noted in its probe sample. The 5% financial error threshold only applies to criteria for sample expansion, not for extrapolation of an error rate; and 11 SCHEDULE B FRESENIUS CIA IRO WORKPLAN 8. Summarize findings for sample. C. SUBSEQUENT YEAR PROBE AUDIT OF 30 SAMPLE UNITS 1. For each year under the CIA, the IRO and Fresenius internal audit shall conduct the audits described in this section for at least 12 randomly selected billing centers. After the first year under the CIA, Fresenius may request the OIG to allow: (1) less than 12 billing centers to be audited (however, there shall always be a minimum of 6 billing centers audited); and (2) Fresenius internal audit staff to perform more of the audits (however, the IRO shall always perform at least 3 of the audits). The OIG will decide such request in its sole discretion. The IRO will review the methodology and results of the audits performed by Fresenius internal audit staff. The review will include re-performing all audit steps on at least 10% of claims reviewed by Fresenius. D. CONTINGENT UPON THE RESULTS OF THE PROBE AUDIT - CONDUCT A STATISTICALLY VALID SAMPLE AUDIT AS REQUIRED IN B.8 ABOVE. THE STATISTICALLY VALID SAMPLE AUDIT SHALL BE CONDUCTED USING STEPS B.4-6, AND 8 ABOVE E. CONDUCT PROBE AUDIT OF 30 SAMPLE UNITS FOR METHOD II BILLING OF PERITONEAL MODALITY BILLING ACTIVITY. 1. Obtain a complete listing of all claims reimbursed by Federal health care programs during the audit period; 2. Randomly select a probe sample of 30 sample units from the billing center; 3. For purposes of the Method II Audit, the sample unit shall be a claim submitted to the Federal health care programs during the audit period; 4. Request all billing activity (e.g., claims submitted, account history, EOMBs) related to the test period for all members of the sample; 5. Request medical records supporting the charges represented in the billing activity for the test period; 6. Test each claim according to procedures to determine potential issues, including, but not limited to, the following (i.e., review the medical record and billing data for the following steps and indicate the criteria in the appropriate field): [_] Intake process; [_] Charge entry process; 12 SCHEDULE B FRESENIUS CIA IRO WORKPLAN [_] Billing process; [_] Assignment of codes; [_] Incidence of billing for services not performed; [_] Incidence of billing for tests performed, but not ordered; [_] Inclusion of dates of services; [_] Incidence of failure to bill for tests performed; and [_] Incidence of duplicate billing. 7. A Statistically Valid Sample Audit shall be performed for each billing center for which the error rate in terms of gross dollar overpayments equals or exceeds 5%. This review shall follow the statistically valid sample audit requirements set forth in the CIA. Nothing in this section shall relieve Fresenius of its responsibility to correct inaccuracies noted in its probe sample. The 5% financial error threshold only applies to criteria for sample expansion, not for extrapolation of an error rate; 8. The statistically valid sample audit shall be conducted using steps (B- 4 through B-9) E.1-5 above, except that the random sample referred to in E.2 shall be a full sample rather than a probe sample; and 9. Summarize findings for the sample. 13 SCHEDULE B FRESENIUS CIA IRO WORKPLAN IDPN SERVICES AUDIT - ------------------- A. Internal Monitoring and Auditing Process 1. Through interviews with key personnel, verify the existence of controls and/or policies and procedures related to the following issues and/or activities: [_] Documentation verifying that the patient meets HCFA coverage criteria; [_] Clinical Nutrition Summary Form and/or IDPN Information Sheet to the extent utilized [_] Certificate of medical necessity; and [_] Identify and record internal and compliance audits conducted by Fresenius. B. CONDUCT PROBE AUDIT OF 30 SAMPLE UNITS AT THE IDPN BILLING CENTER 1. Obtain a complete listing of all claims reimbursed by the Medicare and Medicaid programs during the audit period; 2. Randomly select a probe sample of 30 sample units (for the purpose of this audit, the sample unit will be a claim and the sample universe will specifically exclude claims submitted with a denial modifier); 3. Request all billing activity (e.g., claims submitted, account history, EOMBs) related to the test period for all members of the sample; 4. Request medical records supporting the charges represented in the billing activity for the test period; 5. Test each sampling unit according to procedures to determine if patients receiving IDPN meet the applicable parenteral nutrition coverage criteria; 6. A Statistically Valid Sample Audit shall be performed for the IDPN billing center if the error rate in terms of gross dollar overpayment equals or exceeds 5%. This review shall follow the statistically valid sample audit requirements set forth in the CIA. Nothing in this section shall relieve Fresenius of its responsibility to correct inaccuracies noted in its probe sample. The 5% financial error threshold only applies to criteria for sample expansion, not for extrapolation of an error rate; 7. Conduct the full sample audit following the same processes referenced in B1-B5 herein, except that the random sample referred to in B.2 shall be a full sample rather than a probe sample; and 8. Summarize findings for aggregate analysis. 14 SCHEDULE B FRESENIUS CIA IRO WORKPLAN CLINICAL DIAGNOSTIC SERVICES - ---------------------------- A. INTERNAL MONITORING AND AUDITING PROCESS 1. Through interviews with key personnel, verify the existence of controls and/or policies and procedures related to the following issues and/or activities: [_] Documentation verifying that the patient meets HCFA coverage criteria; [_] Documentation of medical necessity; and [_] Identify and record internal and compliance audits conducted by Fresenius. B. CONDUCT PROBE AUDIT OF 30 SAMPLE UNITS AT THE CLINICAL DIAGNOSTIC BILLING CENTER 1. Obtain a complete listing of all claims reimbursed by the Federal health care programs during the audit period; 2. Randomly select a probe sample of 30 sample units (for the purpose of this audit, the sample unit will be a claim and the sample universe will specifically exclude claims submitted with a denial modifier); 3. Request all billing activity (e.g., claims submitted, account history, EOMBs) related to the test period for all members of the sample; 4. Request medical records supporting the charges represented in the billing activity for the test period; 5. Test each sampling unit according to procedures to determine if patients receiving clinical diagnostic services meet the applicable coverage criteria; 6. A Statistically Valid Sample Audit shall be performed for the clinical diagnostic services billing center if the error rate in terms of gross dollar overpayment equals or exceeds 5%. This review shall follow the statistically valid sample audit requirements set forth in the CIA. Nothing in this section shall relieve Fresenius of its responsibility to correct inaccuracies noted in its probe sample. The 5% financial error threshold only applies to criteria for sample expansion, not for extrapolation of an error rate; 7. Conduct the full sample audit following the same processes referenced in B1-B5 herein, except that the random sample referred to in B.2 shall be a full sample rather than a probe sample; and 8. Summarize findings for aggregate analysis. 15 EX-10.2 3 SETTLEMENT AGREEMENT/LIFECHEM, INC. EXHIBIT 10.2 SETTLEMENT AGREEMENT AND RELEASE -------------------------------- I. PARTIES ------- This Settlement Agreement ("Agreement") is entered into by and among: A. The United States of America, acting through its Department of Justice and the United States Attorney's Office for the District of Massachusetts, on behalf of the United States Department of Health and Human Services through its Office of Inspector General ("HHS-OIG"); the United States Department of Defense through its TRICARE Support Office ("TSO")(formerly the Office of the Civilian Health and Medical Program of the Uniformed Services), a field activity of the Office of the Secretary of Defense, through counsel; the United States Office of Personnel Management ("OPM"), through the Director of Programs; and the United States Department of Veteran Affairs ("VA"), through counsel; (collectively the preceeding will be referred to as the "United States"); and B. LIFECHEM, INC. ("LIFECHEM") a Delaware corporation and wholly owned subsidiary of National Medical Care, Inc.; NMC Medical Products, Inc. ("MPD")(formerly known as National Medical Care, Medical Products Division, Inc., and before that as Erika, Inc.), a Delaware corporation and wholly owned indirect subsidiary of National Medical Care, Inc.; National Medical Care, Inc. ("NMC"), a Delaware corporation and a wholly owned subsidiary of Fresenius Medical Care Holdings, Inc.; and Fresenius Medical Care Holdings, Inc. (d/b/a Fresenius Medical Care North America), a New York corporation ("FMCH"); and C. Jay A. Buford, individually; Russell J. Davis, individually; and William L. Schoff, individually (collectively the "Relators"). Collectively, all of the above will be referred to as "the Parties." II. PREAMBLE -------- A. WHEREAS, this Agreement addresses the United States' civil claims against LIFECHEM, MPD, NMC, and FMCH under the federal statutes and common law doctrines set forth in Paragraph 8 below, for the conduct described in Preamble Paragraphs K through Y below, the conduct described in public filings in United ------ States of America v. NMC Homecare, Inc., LIFECHEM, INC., and NMC Medical - ------------------------------------------------------------------------ Products, Inc., Criminal Action No. [to be assigned](District of - -------------- Massachusetts)(the "Criminal Action"), and the conduct alleged in the Relators' Complaint and Amended Complaint in United States ex rel. Jay A. Buford, Russell -------------------------------------------- J. Davis and William L. Schoff v. Lifechem, Inc.; Erika, Inc. (d/b/a National - ----------------------------------------------------------------------------- Medical Care, Medical Products Division); National Medical Care, Inc.; Fresenius - -------------------------------------------------------------------------------- Medical Care AG; Fresenius National Medical Care Holdings, Inc. (d/b/a Fresenius - -------------------------------------------------------------------------------- Medical Care--North America); and Spectra Laboratories, Inc., Civil Action No. - ------------------------------------------------------------ 95-10706-NG (District of Massachusetts)(originally filed December 15, 1994 in the Middle District of Tennessee, Civil No. 3-94-1105 and transferred to District of Massachusetts in 1995)(the "Civil Action"); B. WHEREAS, at all relevant times, NMC was a national provider of outpatient dialysis services to patients with end stage renal disease. One of NMC's subsidiaries was LIFECHEM which owned and operated independent clinical laboratories in Northvale, New Jersey (later, Rockleigh, New Jersey), and Woodland Hills, California, and which specialized in providing laboratory blood testing services for dialysis patients. Another one of NMC's subsidiaries was MPD, which manufactured, distributed, marketed and sold products for use in the dialysis setting, including laboratory blood testing services from LIFECHEM; C. WHEREAS, LIFECHEM has entered into an agreement (the "LIFECHEM Plea Agreement") to plead guilty on or before January 19, 2000, or on such other date as may be determined by the Court, to Count Two of the Information in the Criminal Action alleging a violation of Title 18, United States Code, Section 286, namely, a conspiracy to defraud the United States through the submission of false and fraudulent claims for payment for certain laboratory blood tests conducted for dialysis patients; D. WHEREAS, MPD has entered into an agreement (the "MPD Plea Agreement") to plead guilty on or before January 19, 2000, or on such other date as may be determined by the Court, to Count Three of the Information in the Criminal Action alleging a violation of Title 18, United States Code, Section 371, namely, a conspiracy to commit an offense against the United States, to wit, to offer and pay remuneration to induce dialysis facilities to order and arrange for the ordering from LIFECHEM of clinical laboratory blood testing services conducted for dialysis patients, and paid for in whole or in part by Medicare, in violation of Title 42, United States Code, Section 1320a-7b(b)(2)(B); E. WHEREAS, LIFECHEM submitted or caused to be submitted claims for payment to the Medicare program, Title XVIII of the Social Security Act, 42 U.S.C. (S)(S) 1395-1395ddd (1997), which is administered by the United States Department of Health and Human Services; F. WHEREAS, LIFECHEM submitted or caused to be submitted claims for payment to the TRICARE Program (also known as the Civilian Health and Medical Program of the Uniformed Services), 10 U.S.C. (S)(S) 1071-1106, which is administered by the Department of Defense through the TSO; G. WHEREAS, LIFECHEM submitted or caused to be submitted claims for payment to the Federal Employees Health Benefit Program ("FEHBP"), 5 U.S.C. (S)(S) 8901-8914, which is administered by OPM; H. WHEREAS, LIFECHEM submitted or caused to be submitted claims for payment to the Railroad Retirement Medicare program ("Railroad Retirement Medicare"), established under the Railroad Retirement Act of 1974, 45 U.S.C. (S)(S) 231-231v, which is paid from the Medicare Trust Fund, and administered by the United States Railroad Retirement Board ("RRB"); I. WHEREAS, LIFECHEM submitted or caused to be submitted claims for payment to the Veteran Affairs Program, 38 U.S.C. (S)(S) 1701-1743, which is administered by the VA; J. WHEREAS, LIFECHEM submitted or caused to be submitted claims for payment to the Medicaid programs, 42 U.S.C. (S)(S) 1396-1396v (1997), of the states of Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, and the District of Columbia (the "Participating States"); K. WHEREAS, the United States alleges that at various times from August 1, 1991 through November 1, 1999, LIFECHEM and MPD violated federal statutes and/or common law doctrines specified in Paragraph 9 below in connection with the marketing, sale, pricing and billing of testing for Hepatitis B IgM core (designated by Current Procedural Terminology ("CPT") Code 86290) both individually and as part of LIFECHEM's Hepatitis Panels (LIFECHEM 011 and 031) and Profiles III and IV (LIFECHEM 003 and 004), by submitting or causing to be submitted false and fraudulent claims for these tests that LIFECHEM and MPD knew were not specifically ordered by physicians, and further knew were not reasonable and necessary for the diagnosis or treatment of illness or injury, and these tests were billed by and paid to LIFECHEM; L. WHEREAS, the United States alleges that at various times from August 1, 1991 through November 1, 1999, LIFECHEM and MPD violated federal statutes and/or common law doctrines specified in Paragraph 9 below in connection with the marketing, sale, pricing and billing of testing for Hepatitis C antibody (CPT Code 86302) both individually and as a part of LIFECHEM's Hepatitis Panels (LIFECHEM 011 and 031) and Profiles III and IV (LIFECHEM 003 and 004), by submitting or causing to be submitted false and fraudulent claims for these tests that LIFECHEM and MPD knew were not specifically ordered by physicians, and further knew were not reasonable and necessary for the diagnosis or treatment of illness or injury at the frequency provided, and these tests were billed by and paid to LIFECHEM; M. WHEREAS, the United States alleges that at various times from August 1, 1991 through November 1, 1999, LIFECHEM and MPD violated federal statutes and/or common law doctrines specified in Paragraph 9 below in connection with the marketing, sale, pricing and billing of testing for Hepatitis B surface antibody (CPT 86291) and Hepatitis B surface antigen (CPT 86287) both individually and as part of LIFECHEM's Hepatitis Panels (LIFECHEM 011 and 031) and Profiles III and IV (LIFECHEM 003 and 004), by submitting or causing to be submitted false and fraudulent claims for these tests that LIFECHEM and MPD knew were not reasonable and necessary for the diagnosis or treatment of illness or injury at the frequency provided, and these tests were billed by and paid to LIFECHEM; N. WHEREAS, the United States alleges that at various times from March 1, 1991 through November 1, 1999, LIFECHEM and MPD violated federal statutes and/or common law doctrines specified in Paragraph 9 below in connection with the marketing, sale, pricing and billing of testing for magnesium (CPT 83735 and 83750) both individually and as part of LIFECHEM's CA/PHOS Product Panel (LIFECHEM 019), by submitting or causing to be submitted false and fraudulent claims for these tests that LIFECHEM and MPD knew were not specifically ordered by physicians, and further knew were not reasonable and necessary for the diagnosis or treatment of illness or injury, and these tests were billed by and paid to LIFECHEM; O. WHEREAS, the United States alleges that at various times from January 1, 1991 through November 1, 1999, LIFECHEM and MPD violated federal statutes and/or common law doctrines specified in Paragraph 9 below in connection with the marketing, sale, pricing and billing of tests for apolipoprotein (CPT 82172) both individually and as part of LIFECHEM's Lipid Panel (LIFECHEM 009), by submitting or causing to be submitted false and fraudulent claims for these tests that LIFECHEM and MPD knew were not specifically ordered by physicians, and further knew were not reasonable and necessary for the diagnosis or treatment of illness or injury, and these tests were billed by and paid to LIFECHEM; P. WHEREAS, the United States alleges that at various times from January 1, 1991 through November 1, 1999, LIFECHEM violated federal statutes and/or common law doctrines specified in Paragraph 9 below in connection with the marketing, sale, pricing and billing of automated testing for platelets (CPT 85595) performed on the same day as a composite rate test for a Complete Blood Count ("CBC")(CPT 85025), by submitting false and fraudulent claims for these tests that LIFECHEM knew were not separately ordered by physicians, and further knew were not separately billable under applicable Medicare rules because they were included as part of the CBC for which Medicare had already paid, and these tests were billed by and paid to LIFECHEM; Q. WHEREAS, the United States alleges that at various times from January 1, 1994 through November 1, 1999, LIFECHEM and MPD violated federal statutes and/or common law doctrines specified in Paragraph 9 below in connection with the marketing, sale, pricing and billing of tests for prealbumin (CPT 84134), by submitting or causing to be submitted false and fraudulent claims for these tests that LIFECHEM and MPD knew were not reasonable and necessary for the diagnosis or treatment of illness or injury at the frequency provided, and these tests were billed by and paid to LIFECHEM; R. WHEREAS, the United States alleges that at various times from January 1, 1995 through November 1, 1999, LIFECHEM violated federal statutes and/or common law doctrines specified in Paragraph 9 below in connection with the marketing and billing of individual chemistry tests ordered and performed on the same day as automated chemistry panels, known as LIFECHEM's "Chem Composite" and "CAPD Chem Composite" panels (LIFECHEM 120H and 120P), by submitting false and fraudulent claims for these tests that LIFECHEM knew were not separately billable under applicable Medicare rules, and these tests were billed by and paid to LIFECHEM; S. WHEREAS, the United States alleges that at various times from June 1, 1990 through November 1, 1999, LIFECHEM and MPD violated federal statutes and/or common law doctrines specified in Paragraph 9 below in connection with the billing of automated chemistry tests ordered and performed on the same day as the composite rate "Chem 20" (LIFECHEM 120), by submitting or causing to be submitted false and fraudulent claims for these tests that LIFECHEM and MPD knew were not billable under applicable Medicare rules because they were included in the Chem 20 for which Medicare had already paid, and these tests were billed by and paid to LIFECHEM; T. WHEREAS, the United States alleges that at various times from June 1, 1990 through November 1, 1999, LIFECHEM violated federal statutes and/or common law doctrines as specified in Paragraph 9 below in connection with the billing of composite rate tests when the LIFECHEM computer periodically failed to identify them, by submitting or causing to be submitted false and fraudulent claims for these tests that LIFECHEM knew were not separately billable under applicable Medicare rules because they were already reimbursed by Medicare through the composite rate payment to the dialysis facility, and these tests were billed by and paid to LIFECHEM; U. WHEREAS, the United States alleges that at various times from June 1, 1990 through November 1, 1999, LIFECHEM violated federal statutes and/or common law doctrines as specified in Paragraph 9 below by performing and billing a CBC (CPT 85025) when a hematocrit (CPT 85013 and 85014) or a hemoglobin (CPT 85018) was ordered by a physician, by submitting false and fraudulent claims for these tests that LIFECHEM knew were not ordered by physicians, and further knew were not lawfully billable under CPT 85025, and these tests were billed by and paid to LIFECHEM; V. WHEREAS, the United States alleges that at various times from June 1, 1990 through November 1, 1999, LIFECHEM violated federal statutes and/or common law doctrines as specified in Paragraph 9 below by performing and billing a CBC with differential (CPT 85025) when a CBC without differential was ordered by a physician, by submitting false and fraudulent claims for these tests that LIFECHEM knew were not ordered by physicians, and further knew were not lawfully billable under CPT 85025, and these tests were billed by and paid to LIFECHEM; W. WHEREAS, the United States alleges that at various times from May, 1987 through November 1, 1999, LIFECHEM and MPD violated federal statutes and/or common law doctrines as specified in Paragraph 9 below in connection with sales and marketing practices that were designed to increase orders for laboratory tests, including medically unnecessary laboratory tests, such practices including compensation of the MPD sales force through commissions and bonuses directly tied to increased laboratory testing, use of the Lifeline computer system to assign tests and diagnosis codes to multiple patients without regard to the patients' individual medical condition, use of permanent standing orders for laboratory tests for patients without regard to the patients' individual medical condition, misrepresentations to some physicians that NMC medical policy supported use of certain panels and tests when it did not, misrepresentations to some physicians that paneled tests were cheaper or more economical than individual tests when they were not, and insertion of certain laboratory tests and diagnosis codes into the Lifeline computer system without a physician's order; X. WHEREAS, the United States alleges that at various times from May, 1987 through November 1, 1999, LIFECHEM and MPD violated federal statutes and/or common law doctrines as specified in Paragraph 9 below in connection with their willful, knowing and deliberate payment of illegal remuneration to dialysis facilities and their owners, officers, directors, employees, representatives, or agents, in the form of lavish entertainment; hunting trips; payment for full time employees; grants; up-front rebate checks; discounts and special pricing on products; free or low cost laboratory testing for indigent patients, facility staff, and HMO patients; free or low cost environmental and machine testing; profit sharing with medical directors pursuant to contracts effective through December 31, 1991; composite rate tests below fair market value; and computer hardware and software, all to obtain unlawful referrals of laboratory business to LIFECHEM, and that LIFECHEM and MPD submitted or caused to be submitted false and fraudulent claims for payment to the United States for laboratory test business, including tests that LIFECHEM and MPD knew were not reasonable or necessary in the diagnosis or treatment of illness or injury, that were generated by illegal kickbacks, which laboratory tests were billed by and paid to LIFECHEM; Y. WHEREAS, the United States alleges that the practices described in Preamble Paragraphs K through X above resulted in the submission of false or fraudulent claims actionable under the False Claims Act, 31 U.S.C. (S)(S) 3729- 3733, to the Medicare, Railroad Retirement Medicare, TRICARE, FEHBP, the VA, and the Medicaid programs of the Participating States; Z. WHEREAS, the United States contends that it has certain administrative claims against LIFECHEM and MPD, and against NMC and FMCH as parents of LIFECHEM and MPD, under the provisions for permissive exclusion from Medicare, Medicaid, and other federal health care programs, 42 U.S.C. (S) 1320a-7(b), and the provisions for civil monetary penalties, 42 U.S.C. (S) 1320a-7a, for the conduct described in Preamble Paragraphs K through Y; AA. WHEREAS, with the sole exception of the guilty pleas entered by LIFECHEM and MPD in the Criminal Action, LIFECHEM, MPD, NMC and FMCH contend that LIFECHEM and MPD's marketing, sales, pricing, paneling and billing practices were appropriate and lawful and did not result in any violations of federal or state law or common law doctrines; and further specifically deny and affirmatively contest the allegations of the Relators in the Civil Action; and BB. WHEREAS, to avoid the delay, expense, inconvenience and uncertainty of protracted litigation of these claims, the Parties mutually desire to reach a full and final compromise of claims that the United States has against LIFECHEM, MPD, NMC and FMCH for the conduct described in Preamble Paragraphs K through Y above, pursuant to Terms and Conditions set forth below: III. TERMS AND CONDITIONS -------------------- NOW, THEREFORE, in reliance on the representations contained herein and in consideration of the mutual promises, covenants, and obligations in this Agreement, and for good and valuable consideration, receipt of which is hereby acknowledged, the Parties agree as follows: 1. NMC and FMCH, collectively, shall pay to the United States and the Participating States, collectively, the sum of one hundred twelve million one hundred sixty thousand dollars ($112,160,000) (the "Settlement Amount"), and this sum shall constitute a debt immediately due and owing to the United States upon the later of the dates on which (a) this Agreement is fully executed by the Parties, (b) the notice of dismissal described in Paragraph 18 of this Agreement is filed and docketed by the Court, or (c) the Court accepts LIFECHEM and MPD's guilty pleas and the sentences set forth in their respective Plea Agreements described in Preamble Paragraphs C and D (the "First Payment Date"). NMC and FMCH shall pay the Settlement Amount to the United States according to the schedule, terms and instructions contained in the Promissory Note executed contemporaneous with this Agreement, attached as Exhibit A, and incorporated by reference. Within a reasonable amount of time after receipt of the first payment from NMC and FMCH pursuant to the terms of the Promissory Note, the United States shall pay to the Participating States, collectively, according to written payment instructions from the Participating States, an amount of two million five hundred twenty seven thousand one hundred thirty three dollars ($2,527,133) as the Participating States' share of the Settlement Amount. 2. As an express condition of the Settlement Agreement, to secure NMC's and FMCH's payment obligations under Paragraph 1 of this Agreement (and the other civil Settlement Agreements and criminal Plea Agreements executed contemporaneously), NMC and FMCH shall: a. procure from the Bank of Nova Scotia and deliver or cause to be delivered to the United States Attorney's Office for the District of Massachusetts, on or before January 19, 2000, an amendment to the unconditional, irrevocable Letter of Credit No. S020/43695/96 issued to the United States of America on September 27, 1996 (the "Letter of Credit") to increase the amount of the Letter of Credit to $189,634,446. The amendment to the Letter of Credit shall be in the form attached as Exhibit B. Within 10 days of receipt by the U.S. Attorney's Office of written confirmation from the transferring bank that a quarterly payment, as described in Paragraphs 1.B. through 1.E of the Promissory Note, or prepayment of such quarterly payments, has been made to the United States, the United States shall provide written permission to the Bank of Nova Scotia to reduce the amount available for drawing under Letter of Credit No. S020/43695/96 by the amount of the principal payment received. In the event that the entire outstanding payment obligation secured by the Letter of Credit is prepaid, then the United States shall provide written permission to reduce the amount available for drawing to zero. The United States shall return the Letter of Credit for cancellation when all obligations secured by it are paid in full or it is determined, by the United States, or pursuant to a final and non- appealable order of a court of competent jurisdiction, that NMC and FMCH have fulfilled all such payment obligations to the United States; and b. on January 19, 2000, NMC and FMCH shall establish an escrow account in an initial amount of $236,401,919 to be held by an independent third party agreeable to the United States, and they shall increase the escrow amount each day in an amount of $48,546 (through accrued interest and/or deposits), beginning on January 20, 2000 and continuing through April 15, 2000, when the escrow amount each day will increase by an additional amount of $7,271 (through accrued interest and/or deposits), for each quarterly payment due before the first payment is due on the First Payment Date under the Promissory Note. On the First Payment Date all funds in the escrow account shall be paid to the United States to satisfy the payment obligation in Paragraph 1.A. of the Promissory Note. The terms and conditions of this escrow account shall in no way limit NMC and FMCH's payment obligations to the United States either pursuant to the Promissory Note or as secured by the Letter of Credit. 3. NMC and FMCH are in default of this Agreement on the date of occurrence of any of the following events ("Events of Default"): a. NMC's and/or FMCH's failure to procure, deliver or maintain the Letter of Credit; b. NMC's and/or FMCH's failure to pay any amount provided for in the Promissory Note within two days of when such payment is due and payable; c. If prior to making the full payment of the amount due under Paragraph 1, (i) NMC and/or FMCH commences any case, proceeding, or other action (A) under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have any order for relief of debtors, or seeking to adjudicate NMC and/or FMCH as bankrupt or insolvent, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for NMC and/or FMCH or for all or any substantial part of NMC's and/or FMCH's assets; or (ii) there shall be commenced against NMC and/or FMCH any such case, proceeding or other action referred to in clause (i) which results in the entry of an order for relief and any such order remains undismissed, or undischarged or unbonded for a period of thirty (30) days; or (iii) NMC and/or FMCH takes any action authorizing, or in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth above in sub-Paragraph 3.c.(ii); or d. NMC's and/or FMCH's failure to establish, maintain, or make the required payments to the escrow account described in Paragraph 2.b. 4. If payments due under the Promissory Note are received late, but within the two-day grace period provided in Paragraph 3.b., interest incurred during such grace period will be assessed at two times the daily amount in effect on the date the payment was due. 5. NMC and FMCH shall provide the United States written notice of an Event of Default within two (2) business days of such event by overnight mail, or facsimile followed by overnight delivery, to the United States Attorney's Office, District of Massachusetts, One Courthouse Way, Suite 9200, Boston, MA 02210, Attention: Susan G. Winkler, Assistant U.S. Attorney (or to the attention of such other person as may be designated in writing by the United States Attorney's Office). 6. Immediately upon the occurrence of an Event of Default, without further notice or presentment and demand by the United States: a. The Settlement Amount plus accrued interest through the end of the applicable quarter as set forth in Paragraph 1 of the Promissory Note (minus any payments to date of principal and interest) shall become immediately due and payable ("Settlement Default Amount"). Interest shall be calculated on the Settlement Default Amount at the Prime Rate as published in the Wall Street ----------- Journal on the Effective Date of the Promissory Note plus 5% from the date of - ------- the Event of Default. b. In addition, NMC and FMCH will pay the United States all reasonable costs of collection and enforcement of the Settlement Default Amount, including attorneys' fees and expenses, plus interest as described in Paragraph 6.a. The Settlement Default Amount, plus interest, described in Paragraph 6.a., together with the costs of collection and enforcement described in this sub-paragraph, will be referred to as the "Default Obligation." 7. Upon occurrence of an Event of Default, the United States may exercise, at its sole option, one or more of the following rights: a. The United States may draw the full amount available for drawing under the Letter of Credit and retain all proceeds thereof. b. The United States may enforce the terms of the Guarantee Agreement between the United States of America, Fresenius Medical Care GMBH, a German corporation and the predecessor of Fresenius Medical Care AG, W.R. Grace & Co., a New York corporation, and National Medical Care, Inc., dated July 31, 1996, attached as Exhibit C. c. The United States retains any and all other rights and remedies it has or may have under law and equity. d. No failure or delay on the part of the United States to exercise any right or remedy shall operate as a waiver of the United States' rights. No single or partial exercise by the United States of any right or remedy shall operate as a waiver of the United States' rights. 8. In an Event of Default under Paragraph 3.c. above (Commencement of Bankruptcy or Reorganization Proceeding): a. NMC and FMCH agree not to contest or oppose any motion filed by the United States seeking relief from or modification of the automatic stay of 11 U.S.C. (S) 362(a); not to seek relief under 11 U.S.C. (S) 105 to enjoin or restrain the United States from recovering monies owed by NMC and FMCH arising out of this Agreement or the attached Promissory Note, or from recovering monies through presentment against the Letter of Credit. NMC and FMCH recognize that this express waiver is in consideration for the settlement of claims by the United States described in Preamble Paragraphs K through Y above, under the terms and conditions contained in this Settlement Agreement. b. By expressly waiving the automatic stay provision, NMC and FMCH agree not to oppose or interfere with any motion made in federal court (including bankruptcy courts) by the United States to exclude LIFECHEM and MPD from participation in the Title XVIII (Medicare), Title XIX (Medicaid) programs, and other federal health care programs; c. This Agreement shall be voidable at the sole option of the United States; d. If any term(s) of this Agreement are set aside for any reason, including as a result of a preference action brought pursuant to 11 U.S.C. (S) 547, the United States, at its sole option and in its discretion, may rescind all terms of this Agreement and seek recovery of the full amount of claims and allegations identified herein and in the Civil Action, or, in the alternative, enforce the remaining terms of this Agreement. In the event of rescission of this Agreement, all Parties reserve all rights, claims, and defenses that are available under law and equity as of the Effective Date of this Agreement; and e. In addition to the rights enumerated in Paragraph 8.a. through 8.d. above, the United States and all other Parties shall retain all rights and claims they have or may have under law and equity. 9. Subject to the exceptions and limitations in Paragraph 10 below, in consideration of the obligations of LIFECHEM, MPD, NMC and FMCH set forth in this Agreement, conditioned upon payment in full of the Settlement Amount, subject to Paragraph 29 below (concerning bankruptcy proceedings commenced within 91 days of any payment under this Agreement), and subject to the acceptance by the United States District Court for the District of Massachusetts of LIFECHEM and MPD's guilty pleas as described in Preamble Paragraphs C and D, the United States, on behalf of itself, and its officers, agents, agencies, and departments, will release and will be deemed to have released LIFECHEM, MPD, their parents, including NMC and FMCH, and the subsidiaries of NMC and FMCH listed on the attached Exhibit D (collectively, the parents and subsidiaries of NMC and FMCH listed on Exhibit D will be referred to as the "NMC Companies," and the corporate entities listed on Exhibit D comprise the only entities which constitute the "NMC Companies" within the meaning of this Agreement), and the current directors, officers, employees, and agents of the NMC Companies who were not employed by or in any way affiliated with LIFECHEM, MPD, NMC, or NMC's parents, subsidiaries, divisions, or affiliates at any time prior to September 30, 1996, from any civil or administrative monetary claim (including recoupment claims) that the United States has or may have under the False Claims Act, 31 U.S.C. (S)(S) 3729-3733; the Program Fraud Civil Remedies Act, 31 U.S.C. (S)(S) 3801-3812; the Civil Monetary Penalties Law, 42 U.S.C. (S) 1320a-7a; or common law claims for fraud, payment by mistake of fact, breach of contract or unjust enrichment for the conduct described in Preamble Paragraphs K through Y above with respect to claims submitted or caused to be submitted to Medicare, Railroad Retirement Medicare, TRICARE, FEHBP, the VA, and/or the Medicaid programs of the Participating States. 10. Notwithstanding any term of this Agreement, the United States specifically does not release LIFECHEM, MPD, the NMC Companies, or any individual from any and all of the following: (a) any potential criminal, civil or administrative claims arising under Title 26, U.S. Code (Internal Revenue Code); (b) any criminal liability; (c) any potential liability to the United States (or any agencies thereof) for any conduct other than that identified in Preamble Paragraphs K through Y above, including but not limited to any allegations in the Civil Action not encompassed by Preamble Paragraphs K through Y; (d) any entities not specifically included on the list of NMC Companies set forth in Exhibit D, such omitted entities specifically including Spectra Laboratories, Inc., SRC Holding Company, Inc. and their subsidiaries; (e) any claims based upon such obligations as are created by this Agreement; (f) except as explicitly stated in this Agreement, any administrative liability, including mandatory exclusion from Federal health care programs; (g) any express or implied warranty claims or other claims for defective or deficient products and services provided by LIFECHEM or MPD, including quality of testing or product claims; (h) any claims for personal injury or property damage or for other consequential damages arising from the conduct described in Paragraphs K through Y above; (i) any claims based upon failure to deliver items or services; (j) any civil or administrative claims against any individual who was an officer, director, trustee, agent, employee, or was in any way affiliated with LIFECHEM, MPD, NMC, or NMC's parents, subsidiaries, divisions, or affiliates at any time prior to September 30, 1996; or (k) any civil or administrative claims against any individual, including current directors, officers, employees and agents who is criminally indicted or convicted of an offense, or who enters a criminal plea related to the conduct alleged in Preamble Paragraphs K through Y above. 11. In compromise and settlement of the rights of OIG-HHS to exclude LIFECHEM and MPD pursuant to 42 U.S.C. (S) 1320a-7(a)(1), both LIFECHEM and MPD agree to be permanently excluded under this statutory provision from participation in Medicare, Medicaid, and all other federal health care programs as defined in 42 U.S.C. (S) 1320a-7b(f). Such exclusion will have national effect and will also apply to all other Federal procurement and non-procurement programs. Federal health care programs will not reimburse LIFECHEM and/or MPD or any one else for items or services, including administrative and management services, furnished, ordered or prescribed by LIFECHEM and MPD in any capacity. Both LIFECHEM and MPD waive any further notice of this exclusion, other than the notice described in the last sentence of this paragraph, and agree not to contest such exclusion either administratively or in any State or Federal court. If LIFECHEM or MPD submits or causes claims to be submitted for services provided while excluded, LIFECHEM and MPD are subject to the imposition of additional civil monetary penalties and assessments. LIFECHEM and MPD further agree to hold the federal programs, and all the federal programs' beneficiaries and/or sponsors, harmless from any financial responsibility for services furnished, ordered or prescribed to such beneficiaries or sponsors after the effective date of this exclusion. LIFECHEM and MPD specifically waive their rights under any statute or regulation to payment from the Medicare, Railroad Retirement Medicare, TRICARE, VA, FEHBP or Medicaid programs for services rendered after the effective date of this exclusion. This exclusion will be effective upon the date that LIFECHEM and MPD receive the notice of exclusion from OIG-HHS. 12. FMCH, on behalf of itself and its parents, affiliates, subsidiaries, and divisions, including but not limited to NMC, has entered into a Corporate Integrity Agreement with HHS-OIG, which is incorporated into this Agreement by reference. FMCH will immediately upon execution of this Agreement implement its obligations under the Corporate Integrity Agreement. 13. In consideration of the obligations of LIFECHEM, MPD, NMC and FMCH set forth in this Agreement, conditioned upon payment in full of the Settlement Amount, subject to Paragraph 29 below (concerning bankruptcy proceedings commenced within 91 days of any payment under this Agreement), and conditioned upon FMCH's entering into the Corporate Integrity Agreement, the OIG-HHS agrees to release and refrain from instituting, directing, or maintaining any administrative claim or any action seeking exclusion from the Medicare, Medicaid or other Federal health care programs (as defined in 42 U.S.C. (S) 1320a-7b(f)) against the NMC Companies and the current directors, officers, employees, and agents of the NMC Companies who were not employed by or in any way affiliated with LIFECHEM, MPD, NMC, or any of NMC's parents, subsidiaries, divisions, or affiliates at any time prior to September 30, 1996, under 42 U.S.C. (S) 1320a-7a (Civil Monetary Penalties Law) or 42 U.S.C. (S) 1320a-7(b) (permissive exclusion) for the conduct described in Preamble Paragraphs K through Y, except as reserved in Paragraph 10 above and as reserved in this Paragraph. The OIG-HHS expressly reserves all rights to comply with any statutory obligations to exclude the NMC Companies from the Medicare, Medicaid, or other Federal health care programs under 42 U.S.C. (S) 1320a-7(a)(mandatory exclusion). Nothing in this Paragraph precludes the OIG-HHS from taking action against entities or individuals for conduct and practices for which civil claims have been reserved in Paragraph 10 above. 14. In consideration of the obligations of LIFECHEM, MPD, NMC and FMCH set forth in this Agreement, conditioned upon payment in full of the Settlement Amount, and subject to Paragraph 29 below (concerning bankruptcy proceedings commenced within 91 days of any payment under this Agreement), TSO agrees to release and refrain from instituting, directing, or maintaining any administrative claim or any action seeking exclusion from the TRICARE program against the NMC Companies and the current directors, officers, employees, and agents of the NMC Companies who were not employed by or in any way affiliated with LIFECHEM, MPD, NMC or NMC's subsidiaries, divisions, and affiliates at any time prior to September 30, 1996, under 32 C.F.R. (S) 199.9 for the conduct described in Preamble Paragraphs K through Y, except as reserved in Paragraph 10 above and as reserved in this Paragraph. The TSO expressly reserves all rights to comply with any statutory obligations to exclude the NMC Companies from the TRICARE program under 32 C.F.R. (S)(S) 199.9(f)(1)(i)(A), (f)(1)(i)(B), (f)(1)(i)(D), and (f)(1)(iii). Nothing in this Paragraph precludes the TSO from taking action against entities or persons, or for conduct or practices, for which civil claims have been reserved in Paragraph 10 above. 15. In consideration of the obligations of LIFECHEM, MPD, NMC and FMCH as set forth in this Agreement, conditioned upon payment in full of the Settlement Amount, and subject to Paragraph 29 below (concerning bankruptcy proceedings commenced within 91 days of any payment under this Agreement), OPM agrees to release and refrain from instituting, directing, or maintaining any administrative claim or any action seeking exclusion from FEHBP against the NMC Companies and the current directors, officers, employees, and agents of the NMC Companies who were not employed by or in any way affiliated with LIFECHEM, MPD, NMC or NMC's subsidiaries, divisions, or affiliates at any time prior to September 30, 1996, under 5 U.S.C. (S) 8902a or 5 C.F.R. Part 970 for the conduct described in Preamble Paragraphs K through Y including that in the Civil Action, except as reserved in Paragraph 10 above, and except if the NMC Companies or any individuals are excluded by the Office of Inspector General of HHS pursuant to 42 U.S.C. (S) 1320a-7(a). Nothing in this paragraph precludes OPM from taking action against entities or persons, or for conduct and practice for which civil claims have been reserved in Paragraph 10 above. 16. Jay A. Buford, William L. Schoff and Russell J. Davis each agree that the settlement of the claims set forth in their Civil Action to the extent encompassed by Preamble Paragraphs K through Y is fair, adequate and reasonable under all the circumstances, pursuant to 31 U.S.C. (S) 3730(c)(2)(B). 17. The United States agrees to pay Jay A. Buford, William L. Schoff and Russell L. Davis (the "Relators") collectively 16.5% of the federal share of the Settlement Amount ($109,632,867) in a total principal amount of eighteen million eighty-nine thousand four hundred twenty-three dollars ($18,089,423), plus 16.5% of the interest paid by NMC and FMCH, if any. To satisfy this obligation, the United States will pay the Relators collectively 16.5% of the federal share of the payments made by NMC and FMCH as they are received under the terms of the Promissory Note, as more particularly set forth in Exhibit A to the Promissory Note as those payments relate to this Agreement. The first payment to Relators will be made within 21 days after the First Payment Date, and subsequent payments to the Relators will be made within 21 days after each additional payment is received by the United States, by wire transfer to each of the Relators in accordance with instructions to be provided by Relators' counsel. Jay A. Buford, William L. Schoff, and Russell Davis, for themselves individually, and for their respective heirs, successors, and assigns, will release and will be deemed to have released and forever discharged the United States from any claims pursuant to 31 U.S.C. (S) 3730, including 31 U.S.C. (S)(S) 3730(b), (c), (d) and (d)(1), for a share of the proceeds of the Civil Action, from any claims for a share of the Settlement Amount, and from any claims arising from the filing of their Civil Action, and in full settlement of claims under this Agreement. This Agreement does not resolve or in any manner affect any claims the United States has or may have against the Relators Jay A. Buford, William L. Schoff, or Russell L. Davis arising under Title 26, U.S. Code (Internal Revenue Code), or any claims arising under this Agreement. 18. After this Agreement is fully executed, the United States and the Relators will notify the Court that all pertinent Parties have stipulated that, to the extent alleged in Paragraphs K through Y only, the Civil Action shall be dismissed with prejudice effective upon receipt by the United States and the Participating States of the payments described in Paragraph 1 above, pursuant to and consistent with the terms of this Agreement. The United States will notify the Court that it declines to intervene in the remaining claims by the Relators in the Civil Action, to the extent not alleged in Preamble Paragraphs K through Y, and that the Relators intend to proceed on those claims. The Parties agree that the United States District Court for the District of Massachusetts shall maintain jurisdiction of the unresolved claims in the Civil Action, all claims in the Civil Action in the event that the Plea Agreements referenced in Preamble Paragraphs C and D are not accepted by the Court, in an Event of Default, in the event of disputes under this Agreement, and for purposes of resolving any disputes regarding the Relators' claim against LIFECHEM, MPD, and the NMC Companies for reasonable attorneys' fees, expenses and costs pursuant to 31 U.S.C. (S) 3730(d), arising from the filing of the Civil Action. 19. LIFECHEM, MPD, and the NMC Companies waive and will not assert any defenses these entities may have to any criminal prosecution or administrative action relating to the conduct described in Preamble Paragraphs K through Y, which defenses may be based in whole or in part on a contention that, under the Double Jeopardy Clause of the Fifth Amendment of the Constitution or Excessive Fines Clause of the Eighth Amendment of the Constitution, this Settlement Agreement bars a remedy sought in such criminal prosecution or administrative action. LIFECHEM, MPD, and the NMC Companies further agree that nothing in this Agreement is punitive in purpose or effect. 20. Effective on the date of acceptance by the Court of the Plea Agreements referenced in Preamble Paragraphs C and D, LIFECHEM, MPD, and the NMC Companies release and will be deemed to have released the United States, its agencies, employees, servants, and agents from any claims (including attorneys fees, costs, and expenses of every kind and however denominated) which LIFECHEM, MPD, and the NMC Companies have or may have against the United States, its agencies, employees, servants, and agents, related to or arising from the United States' civil, criminal and administrative investigation and prosecution of LIFECHEM, MPD, NMC and FMCH. 21. The Settlement Amount that NMC and FMCH must pay pursuant to this Agreement by electronic wire transfer pursuant to Paragraph 1 above will not be decreased as a result of the denial of claims for payment now being withheld from payment by any Medicare carrier or intermediary, Railroad Retirement Medicare carrier, TRICARE, FEHBP, VA, or any Medicaid payer, related to the conduct described in Preamble Paragraphs K through Y; and LIFECHEM, MPD and the NMC Companies agree not to resubmit to any Medicare carrier or intermediary, Railroad Retirement Medicare carrier, TRICARE, FEHBP, VA, or any Medicaid payer any previously denied claims related to the conduct described in Preamble Paragraphs K through Y, and agree not to appeal any such denials of claims. 22. The NMC Companies agree that all costs (as defined in the Federal Acquisition Regulations ("FAR") (S) 31.205-47 and in Titles XVIII and XIX of the Social Security Act, 42 U.S.C. (S)(S) 1395-1395ddd (1997) and 1396-1396v(1997), and the regulations promulgated thereunder) incurred by or on behalf of LIFECHEM, MPD, and the NMC Companies, and their divisions, subsidiaries and affiliates, and their present and former officers, directors, employees, shareholders and agents in connection with: (a) the matters covered by this Agreement and the related Plea Agreements described in Preamble Paragraphs C and D; (b) the Government's administrative, civil and criminal investigation and prosecution of LIFECHEM, MPD, NMC, and FMCH; (c) these corporate entities' investigation, defense, and corrective actions undertaken in response to the Government's administrative, civil and criminal investigations, and in connection with the matters covered by this Agreement, the Plea Agreements, and including the obligations undertaken pursuant to the Corporate Integrity Agreement (including attorneys fees); (d) the negotiation and performance of this Agreement, the Plea Agreements, and the Corporate Integrity Agreement; and (e) the payments made to the United States provided for in this Agreement and the Plea Agreements, and to Relators for attorney's fees and costs, are unallowable costs on Government contracts and under Medicare, Railroad Retirement Medicare, Medicaid, TRICARE, FEHBP, and the VA programs (hereafter, "unallowable costs"). These unallowable costs will be separately estimated and accounted for by LIFECHEM, MPD, and the NMC Companies and these entities will not charge such unallowable costs directly or indirectly to any contracts with the United States or any Medicaid program, or seek payment for such unallowable costs through any cost report, cost statement, information statement or payment request submitted by the NMC Companies or any of their divisions, subsidiaries or affiliates to the Medicare, Railroad Retirement Medicare, Medicaid, TRICARE, VA or FEHBP programs. LIFECHEM, MPD, and the NMC Companies further agree that within 270 days of the effective date of this Agreement these entities will identify to applicable Medicare, Railroad Retirement Medicare, and TRICARE fiscal intermediaries, carriers and/or contractors, and Medicaid, VA and FEHBP fiscal agents, any unallowable costs (as defined above) included in payments previously sought from the United States, or any Medicaid Program, including, but not limited to, payments sought in any cost reports, cost statements, information reports, or payment requests already submitted by the NMC Companies or any of their subsidiaries, affiliates, or divisions and will request, and agree, that such cost reports, cost statements, information reports or payment requests, even if already settled, be adjusted to account for the effect of the inclusion of the unallowable costs. LIFECHEM, MPD, and the NMC Companies agree that the United States will be entitled to recoup from the NMC Companies any overpayment as a result of the inclusion of such unallowable costs on previously-submitted cost reports, information reports, cost statements or requests for payment. Any payments due after the adjustments have been made shall be paid to the United States pursuant to the direction of the Department of Justice, and/or the affected agencies. The United States reserves its rights to disagree with any calculations submitted by LIFECHEM, MPD, the NMC Companies, or any of their subsidiaries, affiliates or divisions, on the effect of inclusion of unallowable costs (as defined above) on the NMC Companies or any of their subsidiaries, affiliates or divisions' cost reports, cost statements or information reports. Nothing in this Agreement shall constitute a waiver of the rights of the United States to examine or reexamine the unallowable costs described above. 23. This Agreement is intended to be for the benefit of the Parties only, and by this instrument the Parties do not release any claims against any other person or entity except as specifically identified in Paragraph 9, 13, 14, 15, and 17 above. 24. LIFECHEM, MPD and the NMC Companies agree that they will not seek payment for any of the health care billings covered by this Agreement from any health care beneficiaries or their parents, sponsors, estates, heirs, successors or assigns. LIFECHEM, MPD and the NMC Companies waive any causes of action against these beneficiaries or their parents, sponsors, estates, heirs, successors, or assigns based upon the claims for payment covered by this Agreement. 25. The NMC Companies covenant to cooperate fully and truthfully with the United States' civil investigation of individuals not specifically released in this Agreement. The NMC Companies will make reasonable efforts to facilitate access to, and encourage the cooperation of, its directors, officers and employees for interviews and testimony, consistent with the rights and privileges of such individuals, and will furnish to the Untied States, upon reasonable request, all non-privileged documents and records in its possession, custody or control. 26. Nothing in this Agreement constitutes an agreement by the United States concerning the characterization of the amounts paid hereunder for purposes of any proceeding under Title 26 of the Internal Revenue Code. 27. Except as provided in Paragraph 6.b., and except for Relators' unresolved claim against LIFECHEM, MPD, and the NMC Companies for reasonable attorneys' fees, expenses and costs pursuant to 31 U.S.C. (S) 3730(d), each party to this Agreement will bear his or its own legal and other costs incurred in connection with this matter, including by way of example only, all costs incurred in the investigation and defense of this matter, the preparation and performance of this Agreement, and all corrective actions taken in response to the investigation and resolution of this matter. 28. NMC and FMCH expressly warrant that they have reviewed their financial condition and that they currently are solvent on a consolidated basis within the meaning of 11 U.S.C. Section 547(b)(3), and expect to remain solvent on a consolidated basis following payment to the United States hereunder. Further, the Parties expressly warrant that, in evaluating whether to execute this Agreement, the Parties (a) have intended that the mutual promises, covenants and obligations set forth herein constitute a contemporaneous exchange for new value given to LIFECHEM, MPD, NMC and FMCH within the meaning of 11 U.S.C. Section 547(c)(1), and (b) have concluded that these mutual promises, covenants, and obligations do, in fact, constitute such a contemporaneous exchange. 29. In the event NMC or FMCH commences, or a thirty party commences, within 91 days of any payment under of this Agreement, any case, proceeding, or other action (i) under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have any order for relief of NMC and/or FMCH's debts, or seeking to adjudicate NMC and/or FMCH as bankrupt or insolvent, or (ii) seeking appointment of a receiver, trustee, custodian or other similar official for NMC and/or FMCH or for all or any substantial part of NMC and/or FMCH's assets, NMC and FMCH agree as follows: a. NMC and FMCH's obligations under this Agreement may not be avoided pursuant to 11 U.S.C. Section 547, and NMC and FMCH will not argue or otherwise take the position in any such case, proceeding or action that: (i) NMC and/or FMCH's obligations under this Agreement may be avoided under 11 U.S.C. Section 547; (ii) NMC and FMCH were insolvent on a consolidated basis at the time this Agreement was entered into, or became insolvent on a consolidated basis as a result of the payment made to the United States hereunder; or (iii) the mutual promises, covenants and obligations set forth in this Agreement do not constitute a contemporaneous exchange for new value given to NMC and/or FMCH. b. In the event that NMC and/or FMCH's obligations hereunder are avoided pursuant to 11 U.S.C. Section 547, the United States, at its sole option, may rescind the releases in this Agreement, and bring any civil and/or administrative claim, action or proceeding against LIFECHEM, MPD, NMC, and/or FMCH for the claims that would otherwise be covered by the releases provided in Paragraph 9, 13, 14 and 15 above. If the United States chooses to do so, LIFECHEM, MPD, NMC and FMCH agree that (i) any such claims, actions or proceedings brought by the United States (including any proceedings to exclude LIFECHEM and/or MPD from participation in Medicare, Medicaid, or other federal health care programs) are not subject to an "automatic stay" pursuant to 11 U.S.C. Section 362(a) as a result of the action, case or proceeding described in the first clause of this Paragraph, and that LIFECHEM, MPD, NMC and FMCH will not argue or otherwise contend that the United States' claims, actions or proceedings are subject to an automatic stay; (ii) that LIFECHEM, MPD, NMC and FMCH will not plead, argue or otherwise raise any defenses under the theories of statute of limitations, laches, estoppel or similar theories, to any such civil or administrative claims, actions or proceeding which are brought by the United States within 90 calendar days of written notification to NMC and FMCH that the releases herein have been rescinded pursuant to this Paragraph, except to the extent such defenses were available on December 15, 1994; and (iii) the United States has a valid claim against NMC and FMCH in the amount of the Default Obligation, and the United States may pursue its claim, inter alia, in the case, action or proceeding referenced in the first clause of this Paragraph, as well as in any other case, action, or proceeding. c. LIFECHEM, MPD, NMC and FMCH acknowledge that its agreements in this Paragraph are provided in exchange for valuable consideration provided in this Agreement. 30. LIFECHEM, MPD, NMC, FMCH, and each of the Relators represent that this Agreement is freely and voluntarily entered into without any degree of duress or compulsion whatsoever. 31. This Agreement is governed by the laws of the United States. The Parties agree that the exclusive jurisdiction and venue for any disputes arising between and among the Parties under this Agreement will be the United States District Court for the District of Massachusetts, except that disputes rising under the Corporate Integrity Agreement shall be resolved exclusively upon the dispute resolution provisions set forth in the Corporate Integrity Agreement. 32. The undersigned LIFECHEM, MPD, NMC and FMCH signatories represent and warrant that they are authorized by their respective Board of Directors to execute this Agreement. The undersigned United States signatories represent that they are signing this Agreement in their respective official capacities and that they are authorized to execute this Agreement. 33. Except for the guilty pleas by LIFECHEM and MPD, and the representations in Paragraphs 28 (regarding solvency), and Paragraph 29 (concerning bankruptcy proceedings commenced within 91 days of any payments under this Agreement), the Parties agree that nothing in this Agreement constitutes an admission by any person or entity with respect to any issue of law or fact. 34. This Agreement is effective on the date of signature of the last signatory to the Agreement (the "Effective Date"). 35. This Agreement shall be binding on all successors, transferees, heirs and assigns. 36. This Agreement, together with attachments A through D, the Plea Agreements described in Preamble Paragraphs C and D, and the Corporate Integrity Agreement, constitute the complete agreement among the Parties with regard to the conduct described in Preamble Paragraphs K through Y. This Agreement may not be amended except by written consent of the Parties, except that only FMCH and OIG-HHS must agree in writing to modification of the Corporate Integrity Agreement. 37. This Agreement may be executed in counterparts, each of which shall constitute an original and all of which shall constitute one and the same Agreement. UNITED STATES OF AMERICA By: /s/ Susan G. Winkler Dated: 1/19/00 -------------------- -------- SUSAN G. WINKLER Assistant United States Attorney District of Massachusetts By: /s/ Maya S. Guerra Dated: 1-19-00 ------------------- -------- LAURENCE J. FREEDMAN MAYA S. GUERRA Civil Division United States Department of Justice By: /s/ Lewis Morris Dated: 1/18/00 ---------------- -------- LEWIS MORRIS Assistant Inspector General Office of Inspector General U.S. Department of Health and Human Services By: /s/ Frank D. Titus Dated:Jan. 18, 2000 --------------------------- ------------- FRANK D. TITUS Assistant Director for Insurance Programs U.S. Office of Personnel Management By: /s/ Robert D. Seaman Dated: 1-18-00 ---------------------- --------- ROBERT D. SEAMAN General Counsel TRICARE Support Office United States Department of Defense By: /s/ Lewis Morris Dated:1/18/00 --------------------------- --------- LEWIS MORRIS Assistant Inspector General, HHS-OIG For the Railroad Retirement Medicare Program LIFECHEM, INC., NMC MEDICAL PRODUCTS, INC., NATIONAL MEDICAL CARE, INC. and FRESENIUS MEDICAL CARE HOLDINGS, INC. By: /s/ Ben. J. Lipps January 18, 2000 -------------------------------------------- Dated:---------------- BEN J. LIPPS President, LIFECHEM, INC. By: /s/ Ben J. Lipps January 18, 2000 -------------------------------------------- Dated:---------------- BEN J. LIPPS President, NMC Medical Products, Inc. By: /s/ Ben J. Lipps January 18, 2000 -------------------------------------------- Dated:---------------- BEN J. LIPPS President, National Medical Care, Inc. By: /s/ Ben J. Lipps January 18, 2000 -------------------------------------------- Dated:---------------- BEN J. LIPPS President, Fresenius Medical Care Holdings, Inc. Acknowledged: By: /s/ Jonathan Chiel January 18, 2000 -------------------------------------------- Dated:---------------- JONATHAN CHIEL By: /s/ Breckinridge L. Wilcox 1/18/00 -------------------------------------------- Dated:---------------- BRECKINRIDGE L. WILLCOX By: /s/ Alan E. Reider 1/18/00 -------------------------------------------- Dated:---------------- ALAN E. REIDER By: /s/ Harold Damelin 1/12/2000 -------------------------------------------- Dated:---------------- HAROLD DAMELIN By: /s/ Jeffrey Stone January 18, 2000 -------------------------------------------- Dated:---------------- JEFFREY E. STONE Attorneys for LIFECHEM, INC., NMC Medical Products, Inc., National Medical Care, Inc., and Fresenius Medical Care Holdings, Inc. RELATORS JAY A. BUFORD, WILLIAM L. SCHOFF and RUSSELL L. DAVIS By: /s/ Jay A. Buford 01/18/00 -------------------------------------------- Dated:--------------- JAY A. BUFORD By: /s/ William L. Schoff 01/18/00 -------------------------------------------- Dated:--------------- WILLIAM L. SCHOFF By: /s/ Russell J. Davis 1/18/00 -------------------------------------------- Dated:--------------- RUSSELL J. DAVIS Acknowledged: By: /s/ John Rankin 01/18/2000 -------------------------------------------- Dated:--------------- JOHN RANKIN Counsel to Messrs. Buford, Schoff and Davis January 20, 2000. EXHIBIT A PROMISSORY NOTE --------------- AMOUNT: $371,549,253 Lexington, Massachusetts January 19, 2000 FOR VALUE RECEIVED the undersigned, Fresenius Medical Care Holdings, Inc. and National Medical Care, Inc., which will be referred to as "Makers", hereby jointly and severally promise to pay the principal sum of three hundred seventy one million five hundred forty nine thousand two hundred fifty three dollars ($371,549,253.00) to the United States ("Payee"), in lawful money of the United States according to the terms set forth below. This principal sum represents the "Settlement Amount(s)," to the extent not already paid to Payees by Makers, as defined in the four civil Settlement Agreements entered into between Makers and others and the United States on January 19, 2000 (the "Effective Date"). Said principal sum shall be paid as follows: 1. Makers agree jointly and severally to pay to the United States to resolve civil liabilities, the sum of three hundred seventy one million five hundred forty nine thousand two hundred fifty three dollars ($371,549,253.00), and this sum shall constitute a debt immediately due and owing to the United States on the "First Payment Date," which is the later of the dates on which (a) the four civil Settlement Agreements are fully executed by the Parties, (b) all notices of dismissal described in the civil Settlement Agreements are docketed by the Court, or (c) the Court accepts LIFECHEM, INC.'s, NMC Medical Products, Inc.'s, and NMC Homecare, Inc.'s guilty pleas and imposes the sentences set forth in their respective Plea Agreements, on the following terms and conditions, as further allocated among the four civil Settlement Agreements as set forth on Attachment A: A. On the First Payment Date, Makers shall pay to the United States the principal amount of $236,401,919, plus interest in an amount of $48,576 for each day from January 20, 2000 through April 15, 2000, when the interest amount will increase by an additional amount of $7,271 for each day, for each quarterly payment due before this first payment is due; B. On April 14, 2000, Makers shall pay the principal amount of $32,851,287 and the interest amount of $2,534,013 to the United States; C. On July 14, 2000, Makers shall pay the principal amount of $33,467,249 and the interest amount of $1,918,051 to the United States; D. On October 16, 2000, Makers shall pay the principal amount of $34,094,760 and the interest amount of $1,290,540 to the United States; E. On January 15, 2001, Makers shall pay the principal amount of $34,734,037 and the interest amount of $651,263 to the United States. The payments to the United States described above shall be electronically transferred by noon 1 (Boston, Massachusetts time) on the date the payment is due pursuant to instructions provided by the United States Attorney's Office for the District of Massachusetts. 2. On January 19, 2000, Makers shall establish an escrow account in an initial amount of $236,401,919, to be held by an independent third party agreeable to the United States, and Makers shall increase the escrow amount each day in an amount of $48,546 (through accrued interest and/or deposits), beginning on January 20, 2000 and continuing through April 15, 2000, when Makers shall increase the escrow amount by an additional amount each day of $7,271 (through accrued interest and/or deposits), for each quarterly payment due before the first payment is due on the First Payment Date. On the First Payment Date, all funds in the escrow account shall be paid to the United States to satisfy the payment obligation in Paragraph 1.A. The terms and conditions of this escrow account shall in no way limit the Makers' payment obligations to the United States pursuant to this Promissory Note. 3. There will be no penalty for prepayment of the amounts in Paragraph 1. All prepayments, if any, shall be applied first to accrued interest on the Settlement Amount, with any remainder to be applied to unpaid principal. Makers shall provide a written prepayment notice delivered to the United States Attorney's Office for the District of Massachusetts one week prior to prepayment. 4. Makers shall procure from the Bank of Nova Scotia and deliver or cause to be delivered to the United States Attorney's Office for the District of Massachusetts, on or before January 19, 2000, an amendment to the unconditional, irrevocable Letter of Credit No. S020/43695/96 issued to the United States of America on September 27, 1996 (the "Letter of Credit") to increase the amount of the Letter of Credit to $189,634,446.00. Such amendment shall be in the form attached as Attachment B. Within 10 days of receipt by the U.S. Attorney's Office of written confirmation from the transferring bank that a quarterly payment, as described in Paragraphs 1.B. through 1.E. above, or prepayment of such quarterly payments, has been made to the United States, the United States shall provide written permission to the Bank of Nova Scotia to reduce the amount available for drawing under Letter of Credit No. S020/43695/96 by the amount of the principal payment received. In the event that the entire outstanding payment obligation secured by the Letter of Credit is prepaid, then the United States shall provide written permission to reduce the amount available for drawing to zero. The United States shall return this Letter of Credit for cancellation when all obligations secured by it are paid in full or it is determined, by the United States, or pursuant to a final and non-appealable order of a court of competent jurisdiction, that Makers have fulfilled all such payment obligations. 5. Makers are in default of this Promissory Note on the date of occurrence of any of the following events ("Events of Default"): a. Makers' failure to procure, deliver or maintain the Letter of Credit; b. Makers' failure to pay any amount provided for in this Promissory Note within two days of when such payment is due and payable; c. If prior to making the full payment of the amount due under this Promissory Note: (i) NMC and/or FMCH commences any case, proceeding, or other 2 action (A) under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have any order for relief of debtors, or seeking to adjudicate NMC and/or FMCH as bankrupt or insolvent, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for NMC and/or FMCH or for all or any substantial part of NMC's and/or FMCH's assets; or (ii) there shall be commenced against NMC and/or FMCH any such case, proceeding or other action referred to in clause (i) which results in the entry of an order for relief and any such order remains undismissed, or undischarged or unbonded for a period of thirty (30) days; or (iii) NMC and/or FMCH takes any action authorizing, or in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth above in sub- Paragraph 5.c.(ii); or d. Makers' failure to establish, maintain, or make the required payments to the escrow account described in Paragraph 2. 6. If payments due under Paragraph 1 are received late, but within the two-day grace period provided in Paragraph 5.b., interest incurred during such grace period will be assessed at two times the daily amount in effect on the date the payment was due. 7. Makers shall provide the United States written notice of an Event of Default within two (2) business days of such event by overnight mail, or facsimile followed by overnight delivery, to the United States Attorney's Office, District of Massachusetts, One Courthouse Way, Suite 9200, Boston, MA 02210. 8. Immediately upon the occurrence of an Event of Default, without further notice or presentment and demand by the United States: a. The Settlement Amount plus accrued interest through the end of the applicable quarter as set forth in Paragraph 1 (minus any payments to date of principal and accrued interest) shall become immediately due and payable ("Settlement Default Amount"). Interest shall be calculated on the Settlement Default Amount at the Prime Rate as published in the Wall Street Journal on the ------------------- Effective Date of this Promissory Note plus 5% from the date of the Event of Default. a. In addition, Makers will pay the United States all reasonable costs of collection and enforcement of this Promissory Note, including attorneys' fees and expenses, plus interest as described in Paragraph 8.a. The Settlement Default Amount, plus interest, described in 3 Paragraph 8.a., together with the costs of collection and enforcement described in this sub-paragraph, will be referred to as the "Default Obligation." 9. Upon the occurrence of an Event of Default, the United States may exercise, at its sole option, one or more of the following rights: a. The United States may draw the full amount available for drawing under the Letter of Credit and retain all proceeds thereof. b. The United States may enforce the terms of the Guarantee Agreement between the United States of America, Fresenius Medical Care GMBH, a German corporation and the predecessor of Fresenius Medical Care AG, W.R. Grace & Co., a New York corporation, and National Medical Care, Inc., dated July 31, 1996. c. The United States retains any and all other rights and remedies it has or may have under law and equity. d. No failure or delay on the part of the United States to exercise any right or remedy shall operate as a waiver of the United States' rights. No single or partial exercise by the United States of any right or remedy shall operate as a waiver of the United States' rights. 10. This Promissory Note shall be binding upon Makers, their successors and assigns, and shall inure to the benefit of the Payee, its successors and assigns. This Promissory Note shall be governed and construed according to the laws of the United States of America. 11. Makers acknowledge that they are entering into this agreement freely, voluntarily and with no degree of compulsion whatsoever. 12. Makers shall provide to the United States Attorney for the District of Massachusetts a certified copy of a resolution of their respective Board of Directors affirming that each of their Board of Directors has authority to enter into this Promissory Note, and has (1) 4 reviewed this Promissory Note, the attached Letter of Credit, and the four civil Settlement Agreements entered into between Makers, the United States, and others on January 19, 2000; (2) consulted with legal counsel in connection with the matter; (3) voted to enter into this Promissory Note; and (4) voted to authorize the corporate officer identified below to execute this Promissory Note and to take such further steps as necessary to carry out the terms of this Promissory Note. 13. When the indebtedness represented by this Note is satisfied, the United States will return a copy of the note to Makers, through counsel, marked "paid in full" and endorsed by an authorized representative of the United States. IN WITNESS WHEREOF, Makers intending to be legally bound hereby and to so bind their successors and assigns, have caused this Note to be executed by its proper corporate officers and their corporate seals hereunto affixed, duly attested, the day and year first above written. NATIONAL MEDICAL CARE, INC. By: ____________________________ BEN J. LIPPS Director and President National Medical Care, Inc. Corporate Seal: Corporate Acknowledgment: Commonwealth of Massachusetts Middlesex County On January 19, 2000, before me personally came Ben J. Lipps, to me known who, being duly sworn, did depose and state that he resides in Boston, Massachusetts; that he is a Director and the President of National Medical Care, Inc., the corporation described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. ____________________________ Notary Public 5 FRESENIUS MEDICAL CARE HOLDINGS, INC. By: ____________________________________ Ben J. Lipps Director and President Fresenius Medical Care Holdings, Inc. Corporate Seal: Corporate Acknowledgment: Commonwealth of Massachusetts Middlesex County On January 19, 2000, before me personally came Ben J. Lipps, to me known who, being duly sworn, did depose and state that he resides in Boston, Massachusetts; that he is a Director and the President of Fresenius Medical Care Holdings, Inc., the corporation described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. ____________________________ Notary Public 6 EXHIBIT B AMENDMENT TO IRREVOCABLE NONTRANSFERABLE LETTER OF CREDIT THE BANK OF NOVA SCOTIA, ATLANTA AGENCY Letter of Credit No. Issue Date Expiration Date Maximum Amount - -------------------------------------------------------------------------- S020/43695/96 January 19, 2000 September 15, 2001 $189,634,446.00 United States of America U.S. Attorney for the District of Massachusetts One Courthouse Way, Suite 9200 Boston, Massachusetts 02210 United States of America Department of Justice Civil Division, Commercial Litigation Branch P.O. Box 261, Ben Franklin Station Washington, DC 20044 Ladies and Gentlemen: At the request of NATIONAL MEDICAL CARE, INC., a Delaware corporation (the "Account Party"), we hereby amend our Irrevocable Nontransferable Letter of Credit No. S020/43695/96 (the "Letter of Credit") issued in your favor as follows: 1. Effective January 19, 2000, the amount available for drawing under the Letter of Credit is increased to a new maximum of $189,634,446.00 (One Hundred Eighty Nine Million Six Hundred Thirty Four Thousand Four Hundred Forty Six United States Dollars). 2. This amount is now available for payment upon presentation of your sight draft(s) drawn on us in the form of Exhibit I attached hereto, together with your draw certificate(s) in the form of Exhibit II attached hereto. 3. Presentation of the sight draft(s) and draw certificate(s) shall be made at the address shown below: The Bank of Nova Scotia, Atlanta Agency 600 Peachtree Street, N.E., Suite2700 Atlanta, Georgia 30308 Attn: Loan Operations Department Telephone: (404) 877-1500; Telecopy: (404) 888-8998 or at such other office located in the United States as may be designated by us. A sight draft and draw certificate hereunder may be submitted via hand delivery or overnight courier to the address above or by facsimile transmission to the address and telecopy number shown above. If the sight draft and drawing certificate are submitted by facsimile transmission, you must confirm our receipt of your sight draft and drawing certificate to the telephone number shown above. 4. If the United States, through its U.S. Attorney's Office for the District of Massachusetts, provides written notice of permission to reduce the balance of this Letter of Credit to the Bank of Nova Scotia at the address above, such reduction in the amount available for drawing under this Letter of Credit shall be effective upon receipt. 5. This Letter of Credit shall now expire at 5:00 P.M. (Atlanta, Georgia time) on the Expiration Date shown above. Where demand for payment is made prior to 12:00 Noon (Atlanta, Georgia time) in conformity with the requirements hereof, then payment under the Letter of Credit shall be made by us by 12:00 Noon (Atlanta, Georgia time) on the next succeeding business day, or if notice is received after such time then by 12:00 Noon (Atlanta, Georgia time) on the second succeeding business day. The Letter of Credit and this amendment set forth in full the terms of our undertaking, and such undertaking shall not in any way be modified or amended by reference to any documents, instruments, or agreements referred to herein or in which this Letter of Credit is referred to or to which this Letter of Credit relates, and any such reference shall not be deemed to incorporate herein by reference any document, instrument, or agreement. Multiple drawings are permitted. This Letter of Credit is not transferable. The Letter of Credit and this amendment are subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500 (the "UCP") and, as to matters not covered by the UCP, shall be governed by the laws of the State of Georgia. Very truly yours, THE BANK OF NOVA SCOTIA, ATLANTA AGENCY By___________________________ Title: EXHIBIT I SIGHT DRAFT Date: ____________________________ At sight, pay to the order of the UNITED STATES OF AMERICA by wire transfer to: Bank Name: Routing Number: Account Number: Attn: the amount of ___________________________ Dollars ($___________________) drawn on THE BANK OF NOVA SCOTIA, ATLANTA AGENCY, as issuer of its Irrevocable Nontransferable Letter of Credit No. S020/43695/96. UNITED STATES OF AMERICA By:________________________________ Title: EXHIBIT II DRAW CERTIFICATEDate: ______________ The Bank of Nova Scotia, Atlanta Agency 600 Peachtree Street, N.E., Suite2700 Atlanta, Georgia 30308 Attn: Letter of Credit Department Re: Letter of Credit S020/43695/96 Ladies and Gentlemen: The undersigned duly authorized official of the Beneficiary hereby certifies that the Beneficiary is entitled to draw under the Letter of Credit because (one or more of the following blanks will be checked): __ (i) an Event of Default has occurred under one or more of the four civil settlement agreements between the United States and Fresenius Medical Care Holdings, Inc. effective January 19, 2000; __ (ii) a payment due under one or more of the criminal Plea Agreements between the United States and NMC Homecare, Inc., LIFECHEM, INC., and NMC Medical Products, Inc. effective January 19, 2000 was not made when due; __ (iii) a payment due from National Medicare Care, Inc. and Fresenius Medical Care Holdings, Inc. to the United States of America under the Promissory Note effective January 19, 2000 was not made when due. Demand for payment under the above referenced Letter of Credit is hereby made for the following amount: US $_____________________________________ Payment should be made in accordance with the instructions provided in the draft which accompanies this certificate. UNITED STATES OF AMERICA Beneficiary By: ________________________________ Title: EXHIBIT C (Guarantee) The Guarantee Agreement dated as of July 31, 1996 among Fresenius Medical Care GmbH, the predecessor to Fresenius Medical Care AG, National Medical Care, Inc., W.R. Grace & Co. and the United States of America, is incorporated by reference to the Registrant's Registration Statement on Form S-4 (Registration No. 333-09497) dated August 2, 1996 and the exhibits thereto. EXHIBIT D
CORPORATION STATE PARENT Advanced Integrated Medical Services, Inc NJ HNS-NJ Amasi Medical Group, Inc. CA BMA-CA Ambulatory Care Associates, Inc. DE HIC American Home Therapies, Inc. MD HIC American Homecare Equipment, Inc. VA NMC Biotrax Connecticut, Inc. CT BIOTXINT Bio-Trax International, Inc. DE NMCDIAG BMA Home Dialysis Services, Inc. DE BMAMC BMA Management Company, Inc DE NMC BMA of Alabama, Inc. DE BMAMC BMA of Alameda County, Inc. DE BMAMC BMA of Anacostia, Inc. DE BMAMC BMA of Aquadilla, Inc. DE BMAMC BMA of Arecibo, Inc. DE BMAMC BMA of Arizona, Inc. DE BMAMC BMA of Arkansas, Inc. DE BMAMC BMA of Bakersfield, Inc. DE BMAMC BMA of Bayamon, Inc. DE BMAMC BMA of Blue Springs, Inc. DE BMAMC BMA of Caguas, Inc. DE BMAMC BMA of California, Inc. DE BMAMC BMA of Camarillo, Inc. DE BMAMC BMA of Capitol Hill, Inc. DE BMAMC BMA of Carolina, Inc. DE BMAMC BMA of Carson, Inc. DE BMAMC BMA of Chula Vista, Inc. DE BMAMC BMA of Clinton, Inc. DE BMAMC BMA of Colorado, Inc. DE BMAMC BMA of Columbia Heights, Inc. DE BMAMC BMA of Connecticut, Inc. DE BMAMC BMA of Corpus Christie, Inc. DE BMAMC BMA of Delaware, Inc. DE BMAMC BMA of District of Columbia, Inc. DE BMAMC BMA of Dover, Inc. DE BMAMC BMA of Dublin, Inc. DE BMAMC BMA of East Orange, Inc. DE BMAMC BMA of Essex, Inc. DE BMAMC BMA of Eureka, Inc. DE BMAMC BMA of Fajardo, Inc. DE BMAMC BMA of Fayetteville, Inc. DE BMAMC BMA of Florida, Inc. DE BMAMC BMA of Fremont, Inc. DE BMAMC BMA of Fresno, Inc. DE BMAMC BMA of Georgia, Inc. DE BMAMC BMA of Glendora, Inc. DE BMAMC BMA of Guayama, Inc. DE BMAMC BMA of Hayward, Inc. DE BMAMC BMA of Hillside, Inc. DE BMAMC
BMA of Hoboken, Inc. DE BMAMC BMA of Humacao, Inc. DE BMAMC BMA of Illinois, Inc. DE BMAMC BMA of Indiana, Inc. DE BMAMC BMA of Irvington, Inc. DE BMAMC BMA of Jersey City, Inc. DE BMAMC BMA of Kansas, Inc. DE BMAMC BMA of Kentucky, Inc. DE BMAMC BMA of La Mesa, Inc. DE BMAMC BMA of Las Americas, Inc. DE BMAMC BMA of Long Beach, Inc. DE BMAMC BMA of Los Angeles, Inc. DE BMAMC BMA of Los Gatos, Inc. DE BMAMC BMA of Louisiana, Inc. DE BMAMC BMA of Maine, Inc. DE BMAMC BMA of Manchester, Inc. DE BMAMC BMA of Maryland, Inc. DE BMAMC BMA of Massachusetts, Inc. DE BMAMC BMA of Mayaguez, Inc. DE BMAMC BMA of Michigan, Inc. DE BMAMC BMA of Minnesota, Inc. DE BMAMC BMA of Mission Hills, Inc. DE BMAMC BMA of Mississippi, Inc. DE BMAMC BMA of Missouri, Inc. DE BMAMC BMA of MLK, Inc. DE BMAMC BMA of National City, Inc. DE BMAMC BMA of Nevada, Inc. NV BMAMC BMA of New Hampshire, Inc. DE BMAMC BMA of New Jersey, Inc. DE BMAMC BMA of New Mexico, Inc. DE BMAMC BMA of New York, Inc. DE BMAMC BMA of North Carolina, Inc. DE BMAMC BMA of North City, Inc. DE BMAMC BMA of Northeast D.C., Inc. DE BMAMC BMA of Oakland, Inc. DE BMAMC BMA of Ohio, Inc. DE BMAMC BMA of Oklahoma, Inc. DE BMAMC BMA of Pennsylvania, Inc. DE BMAMC BMA of Pine Brook, Inc. DE BMAMC BMA of Ponce, Inc. DE BMAMC BMA of Port Orange, Inc. DE BMAMC BMA of Puerto Rico, Inc. DE BMAMC BMA of Rhode Island, Inc. DE BMAMC BMA of Rio Piedras, Inc. DE BMAMC BMA of San Antonio, Inc. DE BMAMC BMA of San German, Inc. DE BMAMC BMA of San Juan, Inc. DE BMAMC BMA of South Carolina, Inc. DE BMAMC BMA of South Queens, Inc. DE BMAMC BMA of Southeast San Diego, Inc. DE BMAMC BMA of Southeast Washington, Inc. DE BMAMC
BMA of Tarpon Springs,Inc. (changed name to DE BMAMC Fresenius Management Services) BMA of Tennessee, Inc. DE BMAMC BMA of Texas, Inc. DE BMAMC BMA of Torrance, Inc. DE BMAMC BMA of Trenton, Inc. DE BMAMC BMA of Ukiah, Inc. DE BMAMC BMA of Union City, Inc. DE BMAMC BMA of Virginia, Inc. DE BMAMC BMA of West Virginia, Inc. DE BMAMC BMA of Whittier, Inc. DE BMAMC BMA of Wisconsin, Inc. DE BMAMC BMA of Woonsocket, Inc. DE BMAMC Bradley Dialysis Clinic, Inc. TN BMA-TN Clinical Diagnostic Systems, Inc. FL NMC-DIAL Conejo Valley Dialysis, Inc. CA BMAMC Continue Care of Wyoming, Inc. WY HNSQHC Continue Care Pharmaceuticals, Inc. WY HNSQHC D Interim, Inc. GA HNS Diagnostic Management Services, Inc. MA PML,Inc. Dialysis America Alabama, LLC DE NMC Dialysis America Georgia, LLC DE FMCH Dialysis Associates West, Inc. TN BMA-TN Dialysis Management Group, Inc. TN BMA-TN Dialysis Services, Inc. TX BMAMC Dialysis Supply Company DE RRI(NY) Erika de Reynosa S.A. Mexico ERIKA TX Erika International Sales Corp. DE NMCMPD Erika Laboratories, Inc. DE NMCMPD Erika of Texas, Inc. DE FMCH FMC A Acquisition Corp. DE NMC FMC Dialysis Services - Oregon, LLC (f/k/a OR NMC Willamette Valley Kidney Center, LLC) FMC Dialysis Services Colorado LLC DE BMAMC Fresenius Canada Dialysis, Inc. DE NMC Fresenius de Mexico S.A. Mexico FUSA Fresenius Hemotechnology, Inc. Fresenius Management Services LLC DE BMAMC Fresenius Management Services, Inc. (f/k/a BMA DE BMAMC Tarpon Springs) Fresenius Medical Care AG Germany Fresenius Medical Care Canada, Inc. DE FUSA Fresenius Medical Care Pharmacy Services, Inc. DE FMCH Fresenius Securities, Inc. CA FMCH Fresenius USA Home Dialysis, Inc. DE FMCH Fresenius USA Manufacturing, Inc. DE FMCH Fresenius USA Marketing, Inc. DE FMCH Fresenius USA of Puerto Rico, Inc. DE FMCH Fresenius USA Sales, Inc. MA NMCMP Fresenius USA, Inc. MA FMCH/FSEC Greater Southeast Community Center for Renal DC BMAMC Disease, Inc. Gulf Region Mobile Dialysis, Inc. DE BMAMC Gynesis Healthcare for Women of Florida, Inc. FL GHC Gynesis Healthcare of Maryland, Inc. MD GHC Gynesis Healthcare of New Jersey, Inc. NJ GHC Gynesis Healthcare of New York, Inc. NY GHC Gynesis Healthcare of Oklahoma, Inc. OK GHC Gynesis Healthcare of Pennsylvania, Inc. PA GHC Gynesis Healthcare of South Carolina, Inc. SC GHC Gynesis Healthcare, Inc. DE HIC Gynesis Resources, Inc. DE GHC Haemo-Stat, Inc. CA NMC Healthdyne Home Infusion Therapy, Inc. CA HNS Healthy Options for Personal Enrichment, Inc. GA HNS HIC of Arizona, Inc. AZ HIC HIC of California, Inc. CA HIC HIC of Colorado, Inc. CO HIC HIC of Connecticut, Inc. CT HIC HIC of Florida, Inc. FL HIC HIC of Georgia, Inc. GA HIC HIC of Illinois, Inc. IL HIC HIC of Kansas, Inc. KS HIC HIC of Las Vegas, Inc. NV HIC HIC of Louisiana, Inc. LA HIC HIC of Maryland, Inc. MD HIC HIC of Massachusetts, Inc. MA HIC HIC of Michigan, Inc. MI HIC HIC of Missouri, Inc. MO HIC HIC of New Jersey, Inc. NJ HIC HIC of New York, Inc. NY HIC HIC of Northern Ohio, Inc. OH HIC HIC of Ohio, Inc. OH HIC HIC of Pennsylvania, Inc. PA HIC HIC of Rhode Island, Inc. RI HIC HIC of Tampa, Inc. FL HIC HIC of Virginia, Inc. VA HIC HNS Accucare, Inc. GA HNS HNS Integrated Care Centers, Inc. GA HNS HNS Medical Technology Services, Inc. GA HNS HNS Michigan, Inc. GA HNS HNS New York, Inc. NY HNS HNS Quality Home Care, Inc. GA HNS HNS UP Home Care, Inc. GA HNS Home Dialysis Care, Inc. TX HIC Home Intensive Care, Inc. DE NMC Home Nutritional Services, Inc. NJ NMCHC Home Nutritional Services,Inc. CA HNS(NJ) Home Pharmacy Care of Michigan, Inc. MI HIC Homestead Artificial Kidney Center, Inc. FL BMA-FL I.V. Solutions, LTD (a LLC) TX HNS Infusions Innovations of Jacksonville, Inc. FL HIC Infusions Innovations of Tampa, Inc. FL HIC Interamerican Acute Dialysis Services, Inc. FL BMA-FL International Medical Care, Inc. DE BMAMC KDNY, Inc. DE HIC Kentucky Indiana Nephrology, Inc. KY QCInc. Kidney Disease and Hypertension Center, Ltd. AZ BMA-AZ LaFollette Dialysis Center, TN BMA-TN LC Laboratory Services, Inc. (dissolved) DE LIFECHEM LC Laboratory Services, LLC DE LCM Life Assist Medical Products Corp. PR FMCH Lifechem, Inc. DE NMC Lifeline Medical Supplies, Inc. FL HIC Lifeline Medical Systems, Inc. CA HIC Lifeline Medical Systems, Inc. FL HIC Medical Supply Company, Inc. VA SECURITY Medi-Sure Testing, Inc. VA HIC Med-X-Press, Inc. DE NMCMPD Metro Dialysis Center - Kirkwood, Inc. MO MDC-NO Metro Dialysis Center - Normandy, Inc. MO MDC-NO Metro Dialysis Center-North, Inc. MO BMA-MO National Medical Care Canada, Inc. DE IMC National Medical Care Home Care Service Agency, Inc. NY NMCHC National Medical Care of Taiwan, Inc. DE IMC National Medical Care, Inc. DE FMCH Neomedica, Inc. DE NMC Nephrology Applications of Mobile, Inc. AL BMA-AL NMC Asia-Pacific, Inc. (f/k/a NMC Dialysis Services Taiwan, Inc.) DE IMC NMC China, Inc. DE IMC NMC Diabetic Foot Care Centers Orthotics, Inc. DE BMAMC NMC Diabetic Foot Care, Inc. DE BMAMC NMC Diagnostic Services, Inc. DE NMCDIAL NMC Dialysis Service (Romania), Inc DE IMC NMC Dialysis Services, Inc. DE BMAMC NMC Funding Corporation DE NMC NMC Homecare of Michigan, Inc. DE NMCHC NMC International Inc. DE IMC NMC Latin America, Inc. FL IMC NMC Management Services, Inc. DE NMC NMC Medical Products, Inc. DE BMAMC NMC Medical Services, Inc. PA PII-MA NMC Services (Romania), Inc. DE IMC NMC Services, Inc. DE NMC NMC Ventures, Inc. DE NMCHC Norlab, Inc. MA PMLInc. Northern Suburban Dialysis MA BMAMC North Knoxville Dialysis Center, Inc. TN BMA-TN Park Diagnostic Imaging Center, Inc. FL PII-FL Park Imaging, Inc. MA PMLInc. Park Imaging, Inc. FL PII-MA Park Portable X-Ray, Inc. MA PII-MA
PD Solutions of Arizona, Inc. AZ PDSolns PD Solutions of Georgia, Inc. GA PDSolns PD Solutions of Illinois, Inc. IL PDSolns PD Solutions of Louisiana,Inc. LA PDSolns PD Solutions of Maryland, Inc. MD PDSolns PD Solutions of Michigan, Inc. MI PDSolns PD Solutions of Missouri, Inc. MO PDSolns PD Solutions of Nevada, Inc. NV PDSolns PD Solutions of New Jersey, Inc. NJ PDSolns PD Solutions of New York, Inc. NY PDSolns PD Solutions of Ohio, Inc. OH PDSolns PD Solutions of Pennsylvania, Inc. PA PDSolns PD Solutions of Texas, Inc. TX PDSolns PD Solutions of Virginia, Inc. VA PDSolns PD Solutions, Inc. DE HIC Personal Care Health Services, Inc. DE NMCHC Phoenix Consulting Services, Inc. FL HIC PML, Inc. MA NMCDIAG Preferred Homecare of Florida, Inc. FL NMCHC Preferred Homecare of New Jersey, Inc. NJ NMCHC Preferred Pharmacy Services, Inc. FL HIC Prime Medical, Inc. MA NMC QCDC of Baltimore, Inc. MD HIC QCDC of Creve Coeur, Inc. MO QCDC QCDC of Dallas, Inc. TX QCDC QCDC of Greensburg, Inc. LA QCDC QCDC of Hammond, Inc. DE QCDC QCDC of Houston, Inc. TX QCDC QCDC of Las Vegas, Inc. NV KDNY QCDC of Margate, Inc. FL QCDC QCDC of Mt. Vernon, Inc. VA QCDC QCDC of New Orleans, Inc. LA QCDC QCDC of North County, Inc. MO QCDC QCDC of Patapsco, Inc. MD QCDC QCDC of San Antonio, Inc. TX QCDC QCDC of Southern Maryland, Inc. MD QCDC QCDC of St. Augustine, Inc. FL QCDC QCDC of St. Claire Shores, Inc. MI QCDC QCDC of St. Louis, Inc. MO QCDC QCDC of University City, Inc. MO QCDC QCDC of Vega Baja, Inc. PR QCDC80%/CSV20% QCDC of Vista, Inc. CA QCDC QCI Holdings, Inc. DE NMC QCI Limited Liability Company CO QCInc.(97%)/QCIHold(3%) QualiCenters Albany, Ltd. CO QCInc.(99%)/QCILLC(1%) QualiCenters Bend, LLC CO QCInc.(99%)/QCILLC(1%) QualiCenters Coos Bay, Ltd. CO QCInc.(70%)/QCIHold(30%) QualiCenters Eugene-Springfield Ltd. CO QCInc.(51%)/NMC(49%) QualiCenters Inland Northwest LLC CO QCInc.(70%)/NMC(30%) QualiCenters Louisville LLC CO QCInc.(80%)/NMC(20%) QualiCenters Pueblo, LLC CO QCInc.(70%)/QCIHold(30%) QualiCenters Salem, LLC CO QCInc.(60%)/NMC(40%)
QualiCenters Sioux City LLC CO QCInc.(51%)/NMC(49%) QualiCenters, Inc. CO QCIHold QualiServ, Ltd. CO QCInc.(99%)/QCILLC(1%) Quality Care Dialysis Centers, Inc. FL KDNY Renal Integrated Health Service Network LLC AZ BMA-AZ/50% Renal Research Institute of Michigan, Inc. DE RRI(NY) Renal Research Institute, LLC NY NMC/80% Renal Scientific Service of Texas, Inc. DE NMC Renal Scientific Service, Inc. DE NMC Renal Supply (Tenn) Corp. NJ BMAMC Retaw, Inc. FL HIC Rockwood Dialysis Center, Inc. VA SECURITY S.A.K.D.C., Inc. TX BMA-TX San Diego Dialysis Services, Inc. DE BMAMC Santa Barbara Community Dialysis Center, Inc. CA BMAMC Security Health Services, Inc. NV BMA-VA Sherlof, Inc. SC FUSA Spectra East, Inc. DE SRC Spectra Renal Research, LLC DE NMC100% St. Louis Regional Dialysis Center, Inc. MO BMA-MO Tappahanock Dialysis Ctr., Inc. VA SECURITY Target Health Care, L.L.C. NY NMCMgmt/50% The Medical Accountability Group, Inc. TX NMCMPD U.S. Renal, LLC DE RHC 100% U.S. Vascular Access Centers Of Texas, LLC TX USVASLLC U.S. Vascular Access Centers, LLC DE RHC UKC-North, Inc. TX QCDC United Dialysis Corporation CA BMA-CA University Kidney Center, Inc. TX QCDC US Renal-Texas, Inc. TX RHC US Vascular Access Centers, Inc DE RHC VMS, Ltd. AZ BMA-AZ Warrenton Dialysis Facility, Inc. VA SECURITY West End Dialysis Center, Inc. VA SECURITY Zenex Capital Corp. FL HIC
"BMA" means "Bio-Medical Applications" in all instances. "HIC" means "Home Intensive Care" in all instances. EX-10.3 4 SETTLEMENT AGREEMENT/NMC HOMECARE, INC. EXHIBIT 10.3 SETTLEMENT AGREEMENT AND RELEASE -------------------------------- I. PARTIES ------- This Settlement Agreement ("Agreement") is entered into by and among: A. The United States of America, acting through the United States Department of Justice and the United States Attorney's Offices for the Districts of Massachusetts and the Southern District of Florida("DOJ") and on behalf of (1)the Department of Health and Human Services ("HHS") through its Office of Inspector General ("OIG-HHS") (2) the United States Department of Defense through its TRICARE Support Office ("TSO") (formerly the Office of Civilian Health and Medical Program of the Uniformed Services ("OCHAMPUS")), a field activity of the Office of the Secretary of Defense, through counsel, (3) the Office of Personnel Management ("OPM"), acting through the Director of Programs, and (4) the United States Department of Veteran Affairs ("VA"), through counsel (collectively the "United States"); B. Fresenius Medical Care Holdings, Inc. (d/b/a Fresenius Medical Care North America) ("FMCH"), NMC Homecare, Inc., formerly known as National Medical Care Home Care Division, Inc. ("NMC Homecare"), and National Medical Care, Inc. ("NMC"); and C. Ven-A-Care of the Florida Keys, Inc., of Key West, Florida, by and through its principal directors and officers Zachary T. Bentley, Luis E. Cobo, and T. Mark Jones, (collectively "Ven-A-Care"), and Dana R. Austin ("Austin") (collectively the "Relator" or the "Relators"). Collectively all of the above will be referred to as "the Parties." II. PREAMBLE -------- A. WHEREAS, at all relevant times, NMC was in the business of providing dialysis and related services to patients with End-Stage Renal Disease ("ESRD") throughout the United States. Medicare coverage was available to certain persons without regard to their age, who had ESRD, an irreversible and permanent impairment of kidney function requiring dialysis or kidney transplantation to sustain life. NMC, through NMC Homecare, provided, among other services, infusion therapies to patients of dialysis facilities owned or operated by NMC (hereafter "BMAs") and patients of independent dialysis facilities not owned or operated by NMC (hereafter "non BMAs"). Among the infusion therapies provided were parenteral and enteral nutrition ("PEN"), including: (i) intradialytic parenteral nutrition ("IDPN"), a form of parenteral nutrition administered to dialysis patients during their hemodialysis sessions, i.e., typically three times per week as part of the dialysis process without the need for insertion of an additional catheter; and (ii) intraperitoneal parenteral nutrition ("IPN"), a form of parenteral nutrition administered to patients during peritoneal dialysis. IDPN and IPN will be referred to collectively herein as IDPN. B. WHEREAS, the United States contends that NMC and NMC Homecare submitted or caused to be submitted claims for payment for IDPN solutions, equipment and supplies to: (1) the Medicare Program ("Medicare"), Title XVIII of the Social Security Act, 42 U.S.C. (S)(S) 1395-1395ddd (1997), which is administered by HHS; (2) the TRICARE Program (also known as the Civilian Health and Medical Program of the Uniformed Services ("CHAMPUS")), 10 U.S.C. (S)(S) 1071-1106, which is administered by the Department of Defense through TSO; (3) the Federal Employees Health Benefits Program ("FEHBP"), 5 U.S.C. (S)(S) 8901-8914, which is administered by OPM; (4) the VA Program, 38 U.S.C. (S)(S) 1701-1743, which is administered by the VA; (5) the Railroad Retirement Medicare Program ("Railroad Medicare"), established under the Railroad Retirement Act of 1974, 45 U.S.C. (S)(S) 231- 231v, which is paid from the Medicare Trust Fund and administered by the United States Railroad Retirement Board ("RRB"); and (6) the Medicaid programs, 42 U.S.C. (S)(S) 1396-1396v (1997), of all 50 States and of the District of Columbia ("the Participating States") and of the Territory of Puerto Rico ("the Participating Territory"). C. WHEREAS, the United States alleges that: (1) Medicare (and Railroad Medicare) covered IDPN under certain conditions as part of Medicare's PEN program under the prosthetic device benefit of the Social Security Act by virtue of and pursuant to a 1984 National Coverage Determination by HCFA, known as Section 65-10; (2) IDPN was a covered service only if the patient suffered from a severe pathology of the alimentary tract which did not allow absorption of sufficient nutrients to maintain weight and strength commensurate with the patient's general condition; (3) for IDPN to be a covered service, Medicare required that a physician order or prescribe the IDPN in writing and that the claim be supported by sufficient medical documentation to permit an independent conclusion that the requirements of Medicare's prosthetic device benefit were met; (4) Coverage of IDPN had to be approved on an individual case-by-case basis initially and at periodic intervals by the designated Medicare carrier's medical consultant or specially trained staff relying on such medical or other documentation as the carrier may require; (5) Medicare did not provide coverage for IDPN prescribed by a physician to treat malnutrition unless such malnutrition resulted from a severe and permanent pathology of the alimentary tract satisfying the standards of the Medicare prosthetic device benefit. Medicare also did not permit coverage if IDPN was a nutritional "supplement;" (6) if these coverage criteria were met, then the related supplies and equipment to administer the parenteral nutrition solutions were also covered so long as they were reasonable and medically necessary; (7) NMC Homecare usually submitted a claim for reimbursement to the designated Medicare carrier each month for each Medicare beneficiary on IDPN and on the claim NMC Homecare sought separate reimbursement for the IDPN solutions, and for some but not necessarily all times in the period May, 1988 through December 31, 1998, also sought reimbursement for: (a) rental of a pole from which to hang the bag containing the solution; (b) rental of an infusion pump; and (c) an administration kit, which was to cover the disposable supplies used to administer IDPN; and (8) NMC Homecare provided IDPN to patients both in BMAs and in non BMAs. D. WHEREAS, the United States alleges that when Medicare (or Railroad Medicare) covered IDPN claims for ESRD patients, Medicare in general paid 80% of the Medicare allowed amount on a given patient. Where a patient was also entitled to secondary coverage under FEHBP or the Medicaid programs, those programs typically paid amounts in addition to the amounts paid by Medicare. E. WHEREAS, the United States alleges that for ESRD patients covered by CHAMPUS using the Medicare coverage criteria for IDPN, CHAMPUS typically paid 80% of the CHAMPUS allowed amount for IDPN, and for ESRD patients covered by the VA, the VA typically paid the VA allowed amount for IDPN. F. WHEREAS, NMC Homecare has entered into an agreement (the "Homecare Plea Agreement") to plead guilty on or before January 19, 2000, or such other date as may be determined by the Court, to Count One of an Information in United States of America v. NMC Homecare, ----------------------------------------- Inc., LIFECHEM, INC., and NMC Medical Products Division, Inc., Criminal Action - ------------------------------------------------------------- No. [to be assigned] (District of Massachusetts) (the "Criminal Action"). That Count alleges a violation of Title 18, United States Code, Section 371, namely a conspiracy to defraud the United States by impeding, impairing, obstructing and defeating the lawful governmental function of various departments and agencies of the United States in the execution and administration of various federal health care and health insurance programs, including Medicare's PEN benefit program. G. WHEREAS, the United States contends that it has certain civil claims against NMC Homecare and NMC, and against FMCH as parent, for violating the federal statutes and/or common law doctrines specified in Paragraph 11 below, in connection with the following conduct with respect to their IDPN program for dates of service beginning as early as May, 1988 and continuing through December 31, 1998 (hereinafter referred to as the "Covered Conduct"). (1) For dates of service beginning as early as May, 1988, NMC Homecare submitted claims for IDPN under Medicare. Of these submitted claims, and varying in proportion by time period, some for dates of service through December 31, 1998 were paid for by Medicare through its designated carrier(s) (the "Paid Claims"), and some were denied and not paid by Medicare through such carrier(s). (2) A substantial portion of these submitted claims contained or were based on false, fraudulent, and misleading statements, and/or material omissions, relating to the patient's medical condition and history, eligibility for coverage by Medicare and other federal and state payers, appropriate billing codes, place of service designations, and charges. A substantial portion of the patients on whose behalf these claims were submitted did not, in fact, meet Medicare or other applicable coverage or billing criteria for IDPN. (3) NMC Homecare typically pursued administrative appeals of initial claim denials at the carrier, the Office of Hearings and Appeals of the Social Security Administration ("OHA"), and/or the Departmental Appeals Board of HHS ("Appeals Board or Council"). In connection with those appeals, NMC Homecare made false, fictitious and fraudulent statements, and/or material omissions both in the claim forms and in supporting documents, forms and otherwise. On many occasions, NMC Homecare was successful in its appeal and was paid for the claim. On many other occasions NMC Homecare withdrew claims from appeal because it had concluded the patient did not meet Medicare coverage criteria. When it did so, however, NMC Homecare failed to repay to Medicare or other federal or state payers funds it had received relating to that patient, on other earlier IDPN claims which had been paid. (4) For IDPN dates of service beginning as early as May 1988 and continuing through December 31, 1999, NMC has performed IDPN services and provided supplies and equipment to Medicare beneficiaries and has claims for such services, supplies and equipment, for which it has not been paid by HCFA ("the Unpaid Claims"). (5) The United States contends that a substantial portion of the Paid Claims and the Unpaid Claims contain false or fraudulent statements and/or material omissions. The United States further contends that a substantial portion of the patients at issue in those claims do not in fact meet the Medicare coverage and billing criteria for IDPN. (6) For dates of service beginning as early as May, 1988 and continuing through December 31, 1998, NMC Homecare submitted or caused to be submitted IDPN claims to other federal and state payers (besides Medicare). The United States contends that a substantial portion of those claims contained false or fraudulent statements. The United States further contends that a substantial portion of the patients at issue did not in fact qualify for IDPN coverage under the conditions and criteria required under those respective programs. (7) In addition, from at least May, 1988 through approximately July, 1992, NMC Homecare submitted to Medicare and other federal and state payers, claim forms that were false or fraudulent because they: (a) billed for 30 or 31 administration kits per month for each IDPN patient on service despite the fact that NMC Homecare only used at most 12 to 13 administration kits for each IDPN patient on service throughout the month, and used even fewer kits for patients who were on service only part of the month; and (b) billed using HCPCS codes which were inapplicable to the kits supplied by NMC Homecare and provided higher reimbursement than the applicable HCPCS code. (8) From at least May, 1988 through approximately July, 1992, NMC Homecare submitted to Medicare and other federal and state payers, claims that were false or fraudulent because they billed for an IV pole for each IDPN patient each month in a dialysis facility when such poles were not reasonable and medically necessary to the administration of IDPN since poles adequate for the administration of IDPN were available without additional cost to NMC and the dialysis facilities, and when such poles were not, in fact, always delivered to the facility. (9) From at least May, 1988 through approximately June, 1996, NMC Homecare submitted to Medicare and other federal and state payers, claims that were false or fraudulent because they billed for an infusion pump for each IDPN patient on service each month at the dialysis facility when such pumps were not reasonable and medically necessary to the administration of IDPN since pumps adequate for the administration of IDPN were available without additional cost to NMC and the dialysis facilities, and when such pumps were not, in fact, delivered to the facility. (10) At various times from at least May, 1988 through December 31, 1998, NMC Homecare offered and paid BMAs and nonBMAs an administration fee, bag fee, or hang fee ("hang fee"), which hang fee purported to compensate the dialysis facility for the services and resources it devoted to administering and managing each administration of IDPN. NMC Homecare also offered and paid to facilities or the professional employees, medical directors, officers, and directors, other forms of remuneration, including but not limited to educational grants, in return for the referral of IDPN business. Some or all of these hang fees and/or other forms of remuneration were paid for the purpose of inducing referrals for IDPN services to be paid by Medicare and others within the meaning of the Medicare Anti-Kickback Act, 42 U.S.C. (S) 1320a-7b(b)(1)(A). NMC Homecare and NMC submitted or caused to be submitted claims to the Medicare program and to other federal and state payers for patients at facilities receiving hang fees and/or other forms of remuneration. The United States contends these claim were false or fraudulent because, regardless of whether the patient met Medicare or other applicable coverage criteria for IDPN, the services were unlawfully induced by kickbacks. H. WHEREAS, the United States contends that the practices described in Preamble Paragraph G above resulted in the submission of false and/or fraudulent claims actionable under the False Claims Act, 31 U.S.C. (S)(S) 3729-3733, to the Medicare, Railroad Medicare, TRICARE, FEHBP and VA programs and the Medicaid programs of the Participating States and the Participating Territory. I. WHEREAS, the United States also contends that it has certain administrative claims against NMC Homecare and NMC, and against FMCH as parent, under the provisions for permissive exclusion from the Medicare, Medicaid and other federal health care programs, 42 U.S.C. (S) 1320a-7(b), and the provisions for civil monetary penalties, 42 U.S.C. (S) 1320a-7a, for the Covered Conduct described in Preamble Paragraph G. J. WHEREAS, with the sole exception of the guilty plea entered by NMC Homecare in the Criminal Action, and the statements regarding the Unpaid Claims contained in the Preamble Paragraph G(4) above, NMC Homecare, NMC and FMCH specifically deny and affirmatively contest the allegations of the United States in Preamble Paragraphs G and H and the allegations of the Relators in the Civil Actions referenced in Paragraphs K and L below, and specifically deny any wrongdoing in connection with those claims; and further contend that NMC Homecare's practices referenced in Preamble Paragraph G(10), were appropriate and lawful and did not result in any violations of federal law, state law, or common law doctrines; and further contend that the allegations of the United States in Preamble Paragraph G(10) do not constitute violations of the False Claims Act, 31 U.S.C. (S)(S) 3729-33, as a matter of law, and do not give rise to any civil or administrative cause of action; and further contend that Medicare is required to pay NMC Homecare virtually all of the amount identified with respect to the Unpaid Claims because such services were performed, the supplies and equipment were provided, and the patients at issue in those claims met the Medicare coverage criteria for IDPN. K. WHEREAS, Relator Ven-A-Care has filed under seal two qui tam complaints --- --- on behalf of the United States: United States of America ex rel. Ven-A-Care of ---------------------------------------------- the Florida Keys, Inc. v. National Medical Care, Inc., National Medical Care - ---------------------------------------------------------------------------- Inc. Homecare Division, - ---------------------- Inc., W.R. Grace and Company (a New York corporation), and W.R. Grace and - ------------------------------------------------------------------------- Company-Conn. (a Connecticut corporation), Civil Action No. 97-10962-NG (D. - ------------------------------------------ Mass.), originally filed as Civil Action No. 94-1234 (S.D. Fla.) in June, 1994 and transferred to D. Mass. in April - May, 1997; and United States of America ------------------------ ex rel. Ven-A- Care of the Florida Keys, Inc. v. Fresenius Medical Care - ----------------------------------------------------------------------- Holdings, Inc. (f/k/a W.R. Grace and Company), National Medical Care, Inc., and - ------------------------------------------------------------------------------- National Medical Care Homecare Division, Inc., Civil Action No. 97-11033-NG (D. - -------------------------------------------- Mass.), originally filed as Civil Action No. 94-1897 (S.D. Fla.) in September 1994 and transferred to D. Mass. in April - May 1997. These shall be referred to as the "Ven-A-Care Civil Actions." NMC Homecare, NMC and FMCH specifically deny any and all allegations contained in those qui tam Complaints and/or Amended --- --- Complaints. L. WHEREAS, Relator Austin filed under seal a qui tam action on behalf of --- --- the United States on or about November 1, 1994: United States of America ex rel. -------------------------------- Dana R. Austin and Dana R. Austin v. National Medical Care, Inc., Civil Action - ----------------------------------------------------------------- No. 94-12164- NG (D. Mass.). This shall be referred to as the "Austin Civil Action." NMC Homecare, NMC, and FMCH specifically deny any and all allegations contained in Austin's qui tam Complaint and Amended Complaint. --- --- M. WHEREAS, in order to avoid the delay, uncertainty, inconvenience and expense of protracted litigation of these claims, and the contentions of NMC regarding the Unpaid Claims, the Parties reach a full and final compromise for the Covered Conduct pursuant to the Terms and Conditions set forth below. III. TERMS AND CONDITIONS -------------------- NOW, THEREFORE, in reliance on the representations contained herein and in consideration of the mutual promises, covenants, and obligations in this Agreement, and for good and valuable consideration, receipt of which is hereby acknowledged, the Parties agree as follows: 1. NMC and FMCH, collectively, agree to pay to the United States and the Participating States, collectively, to resolve civil liabilities, the sum of two hundred fifty three million three hundred thirty four thousand five hundred ninety four dollars ($253,334,594)(the "Settlement Amount"), and this sum shall constitute a debt immediately due and owing to the United States on the "First Payment Date," which is the later of the dates on which (a) the four civil Settlement Agreements are fully executed by the Parties, (b) all notices of dismissal described in the civil Settlement Agreements are docketed by the Court, or (c) the Court accepts LIFECHEM, INC.'s, NMC Medical Products, Inc.'s, and NMC Homecare's guilty pleas and imposes the sentences set forth in their respective Plea Agreements. NMC and FMCH, collectively, shall pay the Settlement Amount to the United States according to the schedule terms, and instructions contained in the Promissory Note executed contemporaneous with this Agreement, attached as Exhibit A, and incorporated herein by reference. Within a reasonable time after receipt of the first payment from NMC and FMCH on the First Payment Date, the United States shall pay to the Participating States, collectively, according to written payment instructions from the Participating States, an amount of four million eighty one thousand nine hundred fifty-one dollars ($4,081,951) as their share of the Settlement Amount, and to the Participating Territory, according to written payment instructions from that Territory, an amount of one hundred ninety-four thousand two hundred twenty eight dollars ($194,228) as its share of the Settlement Amount. 2. As an express condition of the Settlement Agreement, to secure NMC's and FMCH's payment obligations under Paragraph 1 of this Agreement (and the other civil Settlement Agreements and criminal Plea Agreements being executed contemporaneously): a. NMC and FMCH shall procure from the Bank of Nova Scotia and deliver or cause to be delivered to the United States Attorney's Office for the District of Massachusetts, on or before January 19, 2000, an amendment to the unconditional, irrevocable Letter of Credit No. S020/43695/96 issued to the United States of America on September 27, 1996 (the "Letter of Credit") to increase the amount of the Letter of Credit to $189,634,446.00. Such amendment shall be in the form attached as Exhibit B. Within 10 days of receipt by the U.S. Attorney's Office of written confirmation from the transferring bank that a quarterly payment, as described in Paragraphs 1.B. through 1.E. of the Promissory Note, or prepayment of such quarterly payments, has been made to the United States, the United States shall provide written permission to the Bank of Nova Scotia to reduce the amount available for drawing under Letter of Credit No. S020/43695/96 by the amount of the principal payment received. In the event that the entire outstanding payment obligation secured by the Letter of Credit is prepaid, then the United States shall provide written permission to reduce the amount available for drawing to zero. The United States shall return this Letter of Credit for cancellation when all obligations are paid in full or it is determined, by the United States, or pursuant to a final and non-appealable order of a court of competent jurisdiction, that NMC and FMCH have fulfilled all payment obligations pursuant to this Agreement. b. On January 19, 2000, NMC and FMCH shall establish an escrow account in an initial amount of $236,401,919.00 to be held by an independent third party agreeable to the United States, and NMC and FMCH shall increase the escrow amount each day in an amount of $48,546.00 (through accrued interest and/or deposits), beginning on January 20, 2000 and continuing through April 15, 2000, when NMC and FMCH shall increase the escrow amount by an additional amount each day of $7,271.00 (through accrued interest and/or deposits), for each quarterly payment due before the first payment is due on the First Payment Date. On the First Payment Date, all funds in the escrow account shall be paid to the United States to satisfy the payment obligation in Paragraph 1. The terms and conditions of this escrow account shall in no way limit NMC's and FMCH's payment obligations to the United States secured by the Letter of Credit. 3. NMC and FMCH are in default of this Agreement on the date of occurrence of any of the following events ("Events of Default"): a. Failure by NMC and FMCH to procure, deliver or maintain the Letter of Credit; b. Failure by NMC and FMCH to pay any amount provided for in the Promissory Note attached as Exhibit A within two days of when such payment is due and payable; c. If prior to making the full payment of the amount due under the Promissory Note (i) NMC and/or FMCH commences any case, proceeding, or other action (A) under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have any order for relief of debtors, or seeking to adjudicate NMC and/or FMCH as bankrupt or insolvent, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for NMC and/or FMCH or for all or any substantial part of NMC and/or FMCH's assets; or (ii) there shall be commenced against NMC and/or FMCH any such case, proceeding or other action referred to in clause (i) which results in the entry of an order for relief and any such order remains undismissed, or undischarged or unbonded for a period of thirty (30) days; or (iii) NMC and/or FMCH takes any action authorizing, or in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth above in this sub-paragraph; d. NMC and FMCH fail to comply with their obligations under Paragraph 9 below; or e. NMC and FMCH fail to establish, maintain, or make the required payments to the escrow account described in Paragraph 2.b. 4. If payments due under Paragraph 1 are received late, but within the two day grace period provided in Paragraph 5.b. of the Promissory Note, interest incurred during such grace period will be assessed at two times the daily amount in effect on the date the payment was due. 5. NMC and FMCH shall provide the United States with written notice of any such Event of Default, within two (2) business days of such event by providing written notice by overnight mail or facsimile followed by overnight delivery, to the United States Attorney's Office, District of Massachusetts, One Courthouse Way, Suite 9200, Boston, MA 02210, Attention: Suzanne E. Durrell, Assistant U.S. Attorney (or to the attention of such other person as may be designated in writing by the United States Attorney's Office). 6. Immediately upon the occurrence of an Event of Default, without further notice or presentment and demand by the United States: a. The Settlement Amount plus accrued interest through the end of the applicable quarter as set forth in Paragraph 1 of the Promissory Note (minus any payments to date of principal and accrued interest) shall become immediately due and payable ("Settlement Default Amount"). Interest shall be calculated on the Settlement Default Amount at the Prime Rate as published in the Wall Street ----------- Journal on the Effective Date of this Agreement (as defined in Paragraph 38), - ------- plus 5% from the date of the Event of Default. b. In addition, NMC and FMCH will pay the United States all reasonable costs of collection and enforcement of this Agreement, including attorneys' fees and expenses, plus interest as described in subparagraph 6.a. above. The Settlement Default Amount, plus interest, described in subparagraph 6.a. above, together with the costs of collection and enforcement described in this subparagraph, will be referred to as the "Default Obligation". 7. Upon the occurrence of an Event of Default, the United States may exercise, at its sole option, one or more of the following rights: a. The United States may draw the full amount available for drawing under the Letter of Credit and retain all proceeds thereof. b. The United States may enforce the terms of the Guarantee Agreement between the United States of America, Fresenius Medical Care GMBH, a German corporation, and the predecessor of Fresenius Medical Care AG, W.R. Grace & Co., a New York corporation, and National Medical Care, Inc., dated July 31, 1996, attached as Exhibit C. c. The United States may withhold any payment due to NMC and FMCH on the Unpaid Claims and credit such payment to the payment obligations of NMC and FMCH in Paragraph l; d. The United States retains any and all other rights and remedies it has or may have under law and equity. e. No failure or delay on the part of the United States to exercise any right or remedy shall operate as a waiver of the United States' rights. No single or partial exercise by the United States of any right or remedy shall operate as a waiver of the United States' rights. 8. In an Event of Default under Paragraph 3.c.(Commencement of Bankruptcy or Reorganization Proceeding): a. NMC and FMCH agree not to contest or oppose any motion filed by the United States seeking relief from or modification of the automatic stay of 11 U.S.C. (S) 362(a); not to seek relief under 11 U.S.C. (S) 105 to enjoin or restrain the United States from recovering monies owed by NMC and FMCH arising out of this Agreement or the attached Promissory Note, or from recovering monies through presentment against the Letter of Credit. NMC and FMCH recognize that this express waiver is in consideration for the settlement of claims by the United States described in Paragraph H above, under the terms and conditions contained in this Settlement Agreement. b. By expressly waiving the automatic stay provision, NMC and FMCH agree not to oppose or interfere with any motion made in federal court (including bankruptcy courts) by the United States to exclude NMC Homecare from participation in the Title XVIII (Medicare), Title XIX (Medicaid) programs, and other federal health care programs; c. This Agreement shall be voidable at the sole option of the United States; d. If any term(s) of this Agreement are set aside for any reason, including as a result of a preference action brought pursuant to 11 U.S.C. (S) 547, the United States, at its sole option and in its discretion, may rescind all terms of this Agreement and seek recovery of the full amount of claims and allegations identified herein and in the Civil Actions, or, in the alternative, enforce the remaining terms of this Agreement. In the event of rescission of this Agreement, all Parties reserve all rights, claims, and defenses that are available under law and equity as of the Effective Date of this Agreement; and e. In addition to the rights enumerated in Paragraph 7.a. through 7.e. above, the United States and all other Parties shall retain all rights and claims they have or may have under law and equity. 9. Within 30 days after the First Payment Date, NMC Homecare, NMC, FMCH, and the NMC Companies shall take all reasonable steps that the United States Attorney's Office for the District of Massachusetts, acting on behalf of OHA, the Appeals Council, HCFA, the DMERCs and HHS-OIG, may deem necessary, to dismiss with prejudice or withdraw with prejudice, or effect the dismissal with prejudice or withdrawal with prejudice, of any of the Unpaid Claims, and any and all other IDPN claims or appeals in which NMC Homecare, NMC, FMCH, or the NMC Companies have an interest, for dates of service through December 31, 1999, including without limitation all claims pending before Administrative Law Judge Stewart. NMC Homecare, NMC, FMCH and the NMC Companies further agree that they shall release and disclaim any further right, interest, or remedy with respect to these Unpaid Claims and to any other unpaid IDPN claims with dates of service through December 31, 1999; that they will use their best efforts to promptly refund to the DMERCs, and notify the United States Attorney's Office for the District of Massachusetts, HCFA, and HHS-OIG of any payments received after December 31, 1999 from HCFA pertaining to the Unpaid Claims; and that they will notify the United States Attorney's Office for the District of Massachusetts, HCFA and HHS- OIG, of any notice or action by the DMERCs, OHA and/or the Medicare Appeals Council concerning any review or consideration of any Unpaid Claims. NMC Homecare, NMC, FMCH, and the NMC Companies further agree to terminate the proceedings currently pending before ALJ Stewart captioned "In the Matter of NMC Homecare, Inc.", and agree not to use the record, evidence and/or testimony from that proceeding in any future appeals or reviews of IDPN Medicare claims or in any judicial or administrative proceeding involving IDPN to which HCFA is a party or in which it has an interest. 10. In consideration for NMC Homecare, NMC, the NMC Companies, and FMCH's obligations under this Agreement, and in compromise of NMC's contentions that HCFA is required to pay to NMC Homecare virtually all of the Unpaid Claims, the United States shall pay to NMC and FMCH collectively the principal sum of $59,150,766 (the "Unpaid Claims Settlement Amount") plus annual interest of 7.5% compounded quarterly from the First Payment Date of this Agreement. The United States' obligation to pay the Unpaid Claims Settlement Amount to NMC and FMCH is contingent upon the United States receiving the Settlement Amount as required by this Agreement and the Promissory Note attached hereto as Exhibit A, and upon NMC Homecare, NMC, FMCH, and the NMC Companies complying with the obligations set forth in Paragraph 9 above. Provided these contingencies are satisfied, the United States will pay the Unpaid Claims Settlement Amount plus interest to NMC and FMCH on the following schedule: $38,394,894 of the principal 30 days after the First Payment Date, plus interest; and four equal principal payments of $5,188,968, plus interest, 30 days after receipt each of the quarterly payments made by NMC and FMCH under the Promissory Note. Any such payments by the United States shall be made upon written payment instructions to be provided to the United States by NMC and FMCH. NMC intends to deem the resolution of the Unpaid Claims to be a pro rata denial by HCFA/Medicare. 11. Subject to the exceptions and limitations in Paragraph 12 below, in consideration of the obligations of NMC Homecare, NMC, FMCH, and the NMC Companies set forth in this Agreement, conditioned upon payment in full of the Settlement Amount, subject to Paragraph 33 below (concerning bankruptcy proceedings commenced within 91 days of any payment under this Agreement), and subject to the acceptance by the United States District Court for the District of Massachusetts of NMC Homecare's guilty plea as described in Preamble Paragraph F, the United States, on behalf of itself, and its officers, agents, agencies, and departments, will release and will be deemed to have released NMC Homecare, its parents, including NMC and FMCH, and the subsidiaries of NMC Homecare, NMC and FMCH listed on the attached Exhibit D (collectively, the parents and subsidiaries of NMC and FMCH listed on Exhibit D will be referred to as the "NMC Companies," and the corporate entities listed on Exhibit D comprise the only entities which constitute the "NMC Companies" within the meaning of this Agreement), and the current directors, officers, employees, and agents of the NMC Companies who were not employed by or in any way affiliated with NMC Homecare, NMC, or NMC's parents, subsidiaries, divisions, or affiliates at any time prior to September 30, 1996, from any civil or administrative monetary claim (including recoupment claims) that the United States has or may have under the False Claims Act, 31 U.S.C. (S)(S) 3729-3733; the Program Fraud Civil Remedies Act, 31 U.S.C. (S)(S) 3801-3812; the Civil Monetary Penalties Law, 42 U.S.C. (S) 1320a-7a; or common law claims for fraud, payment by mistake of fact, breach of contract or unjust enrichment for the Covered Conduct described in Preamble Paragraph G above with respect to IDPN claims submitted or caused to be submitted to Medicare, Railroad Retirement Medicare, TRICARE, FEHBP, the VA, and/or the Medicaid programs of the Participating States. 12. Notwithstanding any term of this Agreement, the United States specifically does not release NMC Homecare, the NMC Companies, or any individual from any and all of the following: (a) any potential criminal, civil or administrative claims arising under Title 26, U.S. Code (Internal Revenue Code); (b) any criminal liability; (c) any potential liability to the United States (or any agencies thereof) for any conduct other than that identified in Preamble Paragraph G above, including but not limited to any allegations in the Civil Actions not encompassed by Preamble Paragraph G; (d) any entities not specifically included on the list of NMC Companies set forth in Exhibit D, such omitted entities specifically including, but not limited to, SRC Holdings Company, Inc. (also known as Spectra Renal Management); (e) any claims based upon such obligations as are created by this Agreement; (f) except as explicitly stated in this Agreement, any administrative liability, including mandatory exclusion from Federal health care programs; (g) any express or implied warranty claims or other claims for defective or deficient products and services provided by NMC Homecare or including quality of testing or product claims; (h) any claims for personal injury or property damage or for other consequential damages arising from the conduct described in Preamble Paragraph G above; (i) any claims based upon failure to deliver items or services; (j) any civil or administrative claims against any individual who was an officer, director, trustee, agent, employee, or was in any way affiliated with NMC Homecare, NMC, or NMC's parents, subsidiaries, divisions, or affiliates at any time prior to September 30, 1996; or (k) any civil or administrative claims against any individual, including current directors, officers, employees and agents, who is criminally indicted or convicted of an offense, or who enters a criminal plea related to the conduct alleged in Preamble Paragraph G above. 13. In compromise and settlement of the rights of OIG-HHS to exclude NMC Homecare and pursuant to 42 U.S.C. (S) 1320a-7(a)(1), NMC Homecare agrees to be permanently excluded under this statutory provision from participation in Medicare, Medicaid, and all other federal health care programs as defined in 42 U.S.C. (S) 1320a-7b(f). Such exclusion will have national effect and will also apply to all other Federal procurement and non-procurement programs. Federal health care programs will not reimburse NMC Homecare and/or any one else for items or services, including administrative and management services, furnished, ordered or prescribed by NMC Homecare and in any capacity. NMC Homecare waive any further notice of this exclusion and agree not to contest such exclusion either administratively or in any State or Federal court. If NMC Homecare submits or causes claims to be submitted for services provided while excluded, Homecare is subject to the imposition of additional civil monetary penalties and assessments. NMC Homecare further agrees to hold the federal programs, and all the federal programs' beneficiaries and/or sponsors, harmless from any financial responsibility for services furnished, ordered or prescribed to such beneficiaries or sponsors after the effective date of this exclusion. NMC Homecare specifically waives its rights under any statute or regulation to payment from the Medicare, Railroad Retirement Medicare, TRICARE, VA, FEHBP or Medicaid programs for services rendered after the effective date of this exclusion. This exclusion will be effective upon the date NMC Homecare receives from the OIG the notice of exclusion. 14. FMCH, on behalf of itself and its affiliates, subsidiaries, and divisions, including but not limited to NMC, has entered into a Corporate Integrity Agreement with HHS, which Agreement is incorporated herein by reference. FMCH will immediately upon execution of this Agreement implement its obligations under the Corporate Integrity Agreement. 15. In consideration of the obligations of NMC Homecare, NMC and FMCH set forth in this Agreement, conditioned upon payment in full of the Settlement Amount, subject to Paragraph 33 below (concerning bankruptcy proceedings commenced within 91 days of any payment under this Agreement), and conditioned upon FMCH's entering into the Corporate Integrity Agreement, the OIG-HHS agrees to release and refrain from instituting, directing, or maintaining any administrative claim or any action seeking exclusion from the Medicare, Medicaid or other Federal health care programs (as defined in 42 U.S.C. (S) 1320a-7b(f)) against the NMC Companies and the current directors, officers, employees, and agents of the NMC Companies who were not employed by or in any way affiliated with NMC Homecare, NMC, or any of NMC's parents, subsidiaries, divisions, or affiliates at any time prior to September 30, 1996, under 42 U.S.C. (S) 1320a-7a (Civil Monetary Penalties Law) or 42 U.S.C. (S) 1320a-7(b) (permissive exclusion) for the conduct described in Preamble Paragraph G, except as reserved in Paragraph 12 above and as reserved in this Paragraph. The OIG-HHS expressly reserves all rights to comply with any statutory obligations to exclude the NMC Companies from the Medicare, Medicaid, or other Federal health care programs under 42 U.S.C. (S) 1320a-7(a)(mandatory exclusion). Nothing in this Paragraph precludes the OIG-HHS from taking action against entities or individuals for conduct and practices for which civil claims have been reserved in Paragraph 12 above. 16. In consideration of the obligations of NMC Homecare, NMC and FMCH set forth in this Agreement, conditioned upon payment in full of the Settlement Amount, and subject to Paragraph 33 below (concerning bankruptcy proceedings commenced within 91 days of any payment under this Agreement), TSO agrees to release and refrain from instituting, directing, or maintaining any administrative claim or any action seeking exclusion from the TRICARE program against the NMC Companies and the current directors, officers, employees, and agents of the NMC Companies who were not employed by or in any way affiliated with NMC Homecare, NMC or NMC's subsidiaries, divisions, and affiliates at any time prior to September 30, 1996, under 32 C.F.R. (S) 199.9 for the conduct described in Preamble Paragraph G, except as reserved in Paragraph 12 above and as reserved in this Paragraph. The TSO expressly reserves all rights to comply with any statutory obligations to exclude the NMC Companies from the TRICARE program under 32 C.F.R. (S)(S) 199.9(f)(1)(i)(A), (f)(1)(i)(B), (f)(1)(i)(D), and (f)(1)(iii). Nothing in this Paragraph precludes the TSO from taking action against entities or persons, or for conduct or practices, for which civil claims have been reserved in Paragraph 12 above. 17. In consideration of the obligations of NMC Homecare, NMC and FMCH as set forth in this Agreement, conditioned upon payment in full of the Settlement Amount, and subject to Paragraph 33 below (concerning bankruptcy proceedings commenced within 91 days of any payment under this Agreement), OPM agrees to release and refrain from instituting, directing, or maintaining any administrative claim or any action seeking exclusion from FEHBP against the NMC Companies and the current directors, officers, employees, and agents of the NMC Companies who were not employed by or in any way affiliated with NMC Homecare, NMC or NMC's subsidiaries, divisions, or affiliates at any time prior to September 30, 1996, under 5 U.S.C. (S) 8902a or 5 C.F.R. Part 970 for the conduct described in Preamble Paragraph G including that in the Civil Actions, except as reserved in Paragraph 12 above, and except if the NMC Companies or any individuals are excluded by the Office of Inspector General of HHS pursuant to 42 U.S.C. (S) 1320a-7(a). Nothing in this paragraph precludes OPM from taking action against entities or persons, or for conduct and practice for which civil claims have been reserved in Paragraph 12 above. 18. a. Relator Ven-A-Care agrees that the settlement of the Ven-A-Care Civil Actions is fair, adequate and reasonable under all the circumstances, pursuant to 31 U.S.C. (S) 3730(c)(2)(B). On the United States' receipt of the first payment required by Paragraph 1, Relator Ven-A-Care, for itself, its current and former directors and officers (including, without limitation, Zachary T. Bentley, Luis E. Cobo, and T. Mark Jones), and its heirs, successors and assigns, will release and will be deemed to have released the NMC Companies, NMC Homecare, NMC, and FMCH and Spectra Laboratories, Inc., SRC Holdings Company, Inc., Qix, Inc., Spectra Medical Products, Inc., and Spectra Laboratories Information Services, Inc., and their present and former officers, directors, employees, counsel, agents, representatives, heirs, and assigns, from any and all claims that Relator Ven-A-Care has or may have related to or arising from any and all of the allegations in its Civil Actions, and the conduct described in Preamble Paragraph G, except claims by Relator Ven-A-Care for expenses necessarily incurred and attorney's fees and costs pursuant to 31 U.S.C. (S) 3730(d)(1). If NMC and FMCH default on their payment obligations under Paragraph 1 above, the release given by Relator Ven-A- Care shall, at the sole option and discretion of Ven-A-Care upon written notice to NMC and FMCH, be rescinded. b. On the United States' receipt of the first payment required by Paragraph 1, Zachary T. Bentley ("Bentley"), Luis E. Cobo ("Cobo"), and T. Mark Jones ("Jones"), individually, for themselves, their heirs, successors and assigns, will release and will be deemed to have released the NMC Companies, NMC Homecare, NMC and FMCH and Spectra Laboratories, Inc., SRC Holdings Company, Inc., Qix, Inc., Spectra Medical Products, Inc., and Spectra Laboratories Information Services, Inc., and their present and former officers, directors, employees, counsel, agents, representatives, heirs, and assigns, from any and all claims that Bentley, Jones and/or Cobo has or may have related to or arising from any and all of the allegations in the Ven-A-Care Civil Actions, and the conduct described in Preamble Paragraph G, except claims by Relator Ven-A-Care for expenses necessarily incurred and attorney's fees and costs pursuant to 31 U.S.C. (S) 3730(d)(1). If NMC and FMCH default on their payment obligations under Paragraph 1 above, the release given by Bentley, Cobo, and Jones shall, at each's sole option and discretion upon written notice to NMC and FMCH, be rescinded. 19. Relator Austin agrees that the settlement of the Austin Civil Action is fair, adequate and reasonable under all the circumstances, pursuant to 31 U.S.C. (S) 3730(c)(2)(B). On the United States' receipt of the first payment required by Paragraph 1, Relator Austin, for himself, his heirs, successors and assigns, will release and will be deemed to have released the NMC Companies, NMC, NMC Homecare, FMCH and Spectra Laboratories, Inc., SRC Holdings Company, Inc., Qix, Inc., Spectra Medical Products, Inc., and Spectra Laboratories Information Services, Inc., and their present and former officers, directors, employees, counsel, agents, representatives, heirs, and assigns from any and all claims that Relator Austin has or may have related to or arising from any and all of the allegations in his Civil Action, and the conduct described in Preamble Paragraph G, with the exception of Relator Austin's claim for expenses necessarily incurred and attorney's fees and costs pursuant to 31 U.S.C. (S) 3730(d)(1). If NMC and FMCH default on their payment obligations under Paragraph 1 above, the release given by Relator Austin shall, at his sole option and discretion, upon written notice to NMC and FMCH, be rescinded. 20. The United States agrees to pay the Relator Ven-A-Care $40,347,463 in principal, plus 16.2% of any interest paid by NMC and FMCH on the federal share of the Settlement Amount. The United States agrees to pay the Relator Austin $4,483,052, in principal, plus 1.8% of any interest paid by NMC and FMCH on the federal share of the Settlement Amount. The United States will make these payments to Relators from the amounts paid by NMC and FMCH, and will make the first payment to each such Relator within 21 days after the First Payment Date, and subsequent payments to the Relators within 21 days after each additional payment is received by the United States, by wire transfer to each of the Relators in accordance with instructions to be provided by each Relator's counsel. Relators Ven-A-Care and Austin, for themselves individually, and for their respective heirs, successors, and assigns, will release and will be deemed to have released and forever discharged the United States from any claims pursuant to 31 U.S.C. (S) 3730, including 31 U.S.C. (S)(S) 3730(b),(c),(d) and (d)(l), for a share of the proceeds of their Civil Actions relating to the Covered Conduct in Preamble Paragraph G above, from any claims for a share of the Settlement Amount, from any claims for a share of the Unpaid Claims amount or other denied claims to be withdrawn or released by the NMC Companies in Paragraph 9 above, and in full settlement of any and all claims that each Relator has or may have that arise from or relate to any and all of the allegations in their respective Civil Actions, except Relator Ven-A-Care's claims regarding Epogen in its Amended Complaint filed in July 1996 in Civil Action No. 94-1234 (S.D. Fla.), transferred to the District of Massachusetts and now pending as Civil Action No. 97-10962-NG (D. Mass.). This Agreement does not resolve or in any manner affect any claims the United States has or may have against any Relators Ven-A-Care or Austin arising under Title 26, U.S. Code (Internal Revenue Code), or any claims arising under this Agreement. 21. After this Agreement is fully executed, the United States and the Relators will notify the Court that all pertinent Parties have stipulated that, to the extent alleged in Paragraph G only, the Civil Actions shall be dismissed with prejudice effective upon receipt by the United States and the Participating States of the payments described in Paragraph 1 above, pursuant to and consistent with the terms of this Agreement. The United States and the Relators will also notify the Court that all pertinent Parties have stipulated that the remaining claims by the Relators in the Civil Actions, to the extent not alleged in Preamble Paragraph G, shall be dismissed with prejudice as to the Relators and without prejudice as to the United States, with the exceptions of: the Relators' claims for expenses necessarily incurred and attorney's fees and costs pursuant to 31 U.S.C. (S) 3730(d)(1); and Relator Ven-A-Care's claims regarding Epogen in its Amended Complaint filed in July 1996 in Civil Action No. 94-1234 (S.D. Fla.), transferred to the District of Massachusetts and now pending as Civil Action No. 97-10962-NG (D. Mass.), none of which shall be dismissed. The Parties agree that the United States District Court for the District of Massachusetts shall maintain jurisdiction of the Civil Actions in the event that the Plea Agreement referenced in Preamble Paragraph F is not accepted by the Court, in any Events of Default, in the event of disputes under this Agreement, and for purposes of the Relators' claims for expenses necessarily incurred and attorneys' fees and costs. NMC and FMCH agree that the Relators are entitled to reasonable expenses necessarily incurred and reasonable attorney's fees and costs and agree to pay the same. 22. Effective upon the filing and docketing of the notices of dismissal described in Paragraph 21, and the acceptance by the Court of the Plea Agreement referenced in Preamble Paragraph F, the NMC Companies, NMC, NMC Homecare and FMCH, and Spectra Laboratories, SRC Holdings Company, Inc., Qix, Inc., Spectra Medical Products, Inc., and Spectra Laboratories Information Services, Inc., release and will be deemed to have released Ven-A-Care and Austin, individually and collectively, and the current and former officers, directors, employees, counsel, agents, representatives, heirs, successors and assigns of Ven-A-Care from any and all claims that these corporations have or may have related to or arising from any of the allegations in the Civil Actions, the conduct described in Preamble Paragraph G, and any matters arising from Relator Austin's employment with the corporate entities referenced in this Paragraph. 23. NMC Homecare, NMC and FMCH, and the NMC Companies waive and will not assert any defenses these entities may have to any criminal prosecution or administrative action relating to the conduct described in Preamble Paragraph G, which defenses may be based in whole or in part on a contention that, under the Double Jeopardy Clause of the Fifth Amendment of the Constitution or Excessive Fines Clause of the Eighth Amendment of the Constitution, this Settlement Agreement bars a remedy sought in such criminal prosecution or administrative action. NMC Homecare, NMC, FMCH, and the NMC Companies further agree that nothing in this Agreement is punitive in purpose or effect. 24. The NMC Companies covenant to cooperate fully and truthfully with the United States' civil investigation of individuals and entities not specifically released in this Agreement. Upon reasonable notice the NMC Companies will make reasonable efforts to facilitate access to, and encourage the cooperation of, its directors, officers, and employees for interviews and testimony, consistent with the rights and privileges of such individuals, and will furnish to the United States, upon reasonable request, all non-privileged documents and records in its possession, custody or control. 25. Effective on the date of acceptance by the Court of the Plea Agreement referenced in Preamble Paragraph F, NMC Homecare, NMC, FMCH, and the NMC Companies release and will be deemed to have released the United States, its agencies, employees, servants, and agents from any claims (including attorneys' fees, costs, and expenses of every kind and however denominated) which Homecare, and the NMC Companies have or may have against the United States, its agencies, employees, servants, and agents, related to or arising from the United States' civil, criminal and administrative investigation and prosecution of Homecare, NMC and FMCH. 26. The Settlement Amount that NMC and FMCH must pay pursuant to Paragraph 1 of this Agreement above will not be decreased as a result of the denial of claims for payment being withheld from payment by any Medicare carrier or intermediary, Railroad Retirement Medicare carrier, TRICARE, FEHBP, VA, or any Medicaid payer on the Effective Date of this Agreement, or pending on appeal for dates of service prior to January 1, 2000 on the Effective Date of this Agreement, related to the conduct described in Preamble Paragraph G; and NMC Homecare, NMC and FMCH, and the NMC Companies agree not to resubmit to any Medicare carrier or intermediary, Railroad Retirement Medicare carrier, TRICARE, FEHBP, VA, or any Medicaid payer any previously denied claims related to the conduct described in Preamble Paragraph G, and agree not to appeal any such denials of claims. 27. The NMC Companies agree that all costs (as defined in the Federal Acquisition Regulations ("FAR") (S) 31.205-47 and in Titles XVIII and XIX of the Social Security Act, 42 U.S.C. (S)(S) 1395-1395ddd (1997) and 1396-1396v(1997), and the regulations promulgated thereunder) incurred by or on behalf of NMC Homecare, and the NMC Companies, and their divisions, subsidiaries and affiliates, and their present and former officers, directors, employees, shareholders and agents in connection with: (a) the matters covered by this Agreement and the related Plea Agreement described in Preamble Paragraph F; (b) the Government's administrative, civil and criminal investigation and prosecution of NMC Homecare, NMC, and FMCH; (c) these corporate entities' investigation, defense, and corrective actions undertaken in response to the Government's administrative, civil and criminal investigations, and in connection with the matters covered by this Agreement, the Plea Agreements, and including the obligations undertaken pursuant to the Corporate Integrity Agreement (including attorneys fees); (d) the negotiation and performance of this Agreement, the Plea Agreements, and the Corporate Integrity Agreement; and (e) the payments made to the United States provided for in this Agreement and the Plea Agreements, and to Relators for expenses necessarily incurred and attorney's fees and costs or wrongful termination claims, are unallowable costs on Government contracts and under Medicare, Railroad Retirement Medicare, Medicaid, TRICARE, FEHBP, and the VA programs (hereafter "unallowable costs"). These unallowable costs will be separately estimated and accounted for by NMC Homecare and the NMC Companies and these entities will not charge such unallowable costs directly or indirectly to any contracts with the United States or any Medicaid program, or seek payment for such unallowable costs through any cost report, cost statement, information statement or payment request submitted by the NMC Companies or any of their divisions, subsidiaries or affiliates to the Medicare, Railroad Retirement Medicare, Medicaid, TRICARE, VA or FEHBP programs. NMC Homecare and the NMC Companies further agree that within 270 days of the effective date of this Agreement these entities will identify to applicable Medicare, Railroad Retirement Medicare, and TRICARE fiscal intermediaries, carriers and/or contractors, and Medicaid, VA and FEHBP fiscal agents, any unallowable costs (as defined above) included in payments previously sought from the United States, or any Medicaid Program, including, but not limited to, payments sought in any cost reports, cost statements, information reports, or payment requests already submitted by the NMC Companies or any of their subsidiaries, affiliates, or divisions and will request, and agree, that such cost reports, cost statements, information reports or payment requests, even if already settled, be adjusted to account for the effect of the inclusion of the unallowable costs. NMC Homecare and the NMC Companies agree that the United States will be entitled to recoup from the NMC Companies any overpayment as a result of the inclusion of such unallowable costs on previously-submitted cost reports, information reports, cost statements or requests for payment. Any payments due after the adjustments have been made shall be paid to the United States pursuant to the direction of the Department of Justice, and/or the affected agencies. The United States reserves its rights to disagree with any calculations submitted by NMC Homecare, the NMC Companies, or any of their subsidiaries, affiliates or divisions, on the effect of inclusion of unallowable costs (as defined above) on the NMC Companies or any of their subsidiaries, affiliates or divisions' cost reports, cost statements or information reports. Nothing in this Agreement shall constitute a waiver of the rights of the United States to examine or reexamine the unallowable costs described above. 28. This Agreement is intended to be for the benefit of the Parties only, and by this instrument the Parties do not release any claims against any other person or entity except as specifically identified in Paragraphs 11, 15, 16, 17, 18, 19, and 22 above. 29. NMC Homecare and the NMC Companies agree that they will not seek payment for any of the health care billings covered by this Agreement from any health care beneficiaries or their parents, sponsors, estates, heirs, successors or assigns. NMC Homecare and the NMC Companies waive any causes of action against these beneficiaries or their parents, sponsors, estates, heirs, successors, or assigns based upon the claims for payment covered by this Agreement. 30. Nothing in this Agreement constitutes an agreement by the United States concerning the characterization of the amounts paid hereunder for purposes of any proceeding under Title 26 of the Internal Revenue Code. 31. Except as provided in Paragraph 6, and except for Relators' claims for expenses necessarily incurred and attorney's fees and costs, each party to this Agreement will bear its own legal and other costs incurred in connection with this matter, including by way of example only, all costs incurred in the investigation and defense of this matter, the preparation and performance of this Agreement, and all corrective actions taken in response to the investigation and resolution of this matter. 32. NMC and FMCH expressly warrant that they have reviewed their financial condition and that they currently are solvent on a consolidated basis within the meaning of 11 U.S.C. Section 547(b)(3), and expect to remain solvent on a consolidated basis following payment to the United States hereunder. Further, the Parties expressly warrant that, in evaluating whether to execute this Agreement, the Parties (a) have intended that the mutual promises, covenants and obligations set forth herein constitute a contemporaneous exchange for new value given to NMC Homecare, NMC and FMCH within the meaning of 11 U.S.C. Section 547(c)(1), and (b) have concluded that these mutual promises, covenants, and obligations do, in fact, constitute such a contemporaneous exchange. 33. In the event NMC or FMCH commences, or a third party commences, within 91 days of any payment under of this Agreement, any case, proceeding, or other action (i) under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have any order for relief of NMC and/or FMCH's debts, or seeking to adjudicate NMC and/or FMCH as bankrupt or insolvent, or (ii) seeking appointment of a receiver, trustee, custodian or other similar official for NMC and/or FMCH or for all or any substantial part of NMC and/or FMCH's assets, NMC and FMCH agree as follows: a. NMC and FMCH's obligations under this Agreement may not be avoided pursuant to 11 U.S.C. Section 547, and NMC and FMCH will not argue or otherwise take the position in any such case, proceeding or action that: (i) NMC and/or FMCH's obligations under this Agreement may be avoided under 11 U.S.C. Section 547; (ii) NMC and FMCH were insolvent on a consolidated basis at the time this Agreement was entered into, or became insolvent on a consolidated basis as a result of the payment made to the United States hereunder; or (iii) the mutual promises, covenants and obligations set forth in this Agreement do not constitute a contemporaneous exchange for new value given to NMC and/or FMCH. b. In the event that NMC and/or FMCH's obligations hereunder are avoided pursuant to 11 U.S.C. Section 547, the United States, at its sole option, may rescind the releases in this Agreement, and bring any civil and/or administrative claim, action or proceeding against NMC Homecare, NMC, and/or FMCH for the claims that would otherwise be covered by the releases provided in Paragraphs 11, 15, 16, and 17 above. If the United States chooses to do so, NMC Homecare, NMC and FMCH agree that (i) any such claims, actions or proceedings brought by the United States (including any proceedings to exclude NMC Homecare from participation in Medicare, Medicaid, or other federal health care programs) are not subject to an "automatic stay" pursuant to 11 U.S.C. Section 362(a) as a result of the action, case or proceeding described in the first clause of this Paragraph, and that NMC Homecare, NMC and FMCH will not argue or otherwise contend that the United States' claims, actions or proceedings are subject to an automatic stay; (ii) that NMC Homecare, NMC and FMCH will not plead, argue or otherwise raise any defenses under the theories of statute of limitations, laches, estoppel or similar theories, to any such civil or administrative claims, actions or proceeding which are brought by the United States within 90 calendar days of written notification to NMC and FMCH that the releases herein have been rescinded pursuant to this Paragraph; and (iii) the United States has a valid claim against NMC and FMCH in the amount of the Default Obligation, and the United States may pursue its claim, inter alia, in the case, action or proceeding referenced in the first clause of this Paragraph, as well as in any other case, action, or proceeding. c. NMC Homecare, NMC and FMCH acknowledge that its agreements in this Paragraph are provided in exchange for valuable consideration provided in this Agreement. 34. NMC Homecare, NMC, FMCH and the Relators represent that this Agreement is freely and voluntarily entered into without any degree of duress or compulsion whatsoever. 35. This Agreement is governed by the laws of the United States. The Parties agree that the exclusive jurisdiction and venue for any disputes arising between and among the Parties under this Agreement will be the United States District Court for the District of Massachusetts, except that disputes rising under the Corporate Integrity Agreement shall be resolved exclusively upon the dispute resolution provisions set forth in the Corporate Integrity Agreement. 36. The undersigned NMC Homecare, NMC and FMCH signatories represent and warrant that they are authorized by their respective Board of Directors to execute this Agreement. The undersigned United States signatories represent that they are signing this Agreement in their respective official capacities and that they are authorized to execute this Agreement. 37. Except for the guilty plea by NMC Homecare and the representations in Paragraph 32 (regarding solvency), and Paragraph 33 (concerning bankruptcy proceedings commenced within 91 days of any payments under this Agreement), the Parties agree that nothing in this Agreement constitutes an admission by any person or entity with respect to any issue of law or fact. 38. This Agreement is effective on the date of signature of the last signatory to the Agreement (the "Effective Date"). 39. This Agreement shall be binding on all successors, transferees, heirs and assigns. 40. This Agreement, together with Exhibits A through D, the Plea Agreement described in Preamble Paragraph F, and the Corporate Integrity Agreement, constitute the complete agreement among the Parties with regard to the conduct described in Preamble Paragraph G and the Civil Actions. This Agreement may not be amended except by written consent of the Parties, except that only FMCH and OIG-HHS must agree in writing to modification of the Corporate Integrity Agreement. 41. This Agreement may be executed in counterparts, each of which shall constitute an original and all of which shall constitute one and the same Agreement. THE UNITED STATES OF AMERICA ---------------------------- By: /s/ Suzanne E. Durrell Dated: January 18, 2000 --------------------------- ------------------ SUZANNE E. DURRELL Assistant U.S. Attorney District of Massachusetts By: /s/ Patricia Connolly Dated: January 18, 2000 --------------------------- ------------------ PATRICIA CONNOLLY Special Assistant U.S. Attorney District of Massachusetts By: /s/ Mark Lavine Dated: January 18, 2000 -------------------------- ------------------ MARK LAVINE Assistant U.S. Attorney Southern District of Florida By: /s/ Maya S. Guerra Dated: January 19, 2000 -------------------------- ------------------ MAYA S. GUERRA Trial Attorney Civil Division U.S. Department of Justice By: /s/ Lewis Morris Dated: 1/18/00 -------------------------- ------------------ LEWIS MORRIS Assistant Inspector General Office of Inspector General U.S. Department of Health and Human Services By: /s/ Frank D. Titus Dated: Jan. 18, 2000 -------------------------- ------------------ FRANK D. TITUS Assistant Director for Insurance Programs U.S. Office of Personnel Management By: /s/ Robert D. Seaman Dated: 1-18-00 -------------------------- ------------------ ROBERT D. SEAMAN General Counsel TRICARE Support Office U.S. Department of Defense NMC HOMECARE, INC., NATIONAL MEDICAL CARE, INC., FRESENIUS MEDICAL CARE HOLDINGS, INC. By: /s/ Ben J. Lipps Dated: 1/18/00 ------------------------ -------------------- BEN J. LIPPS President NMC Homecare, Inc. By: /s/ Ben J. Lipps Dated: 1/18/00 ------------------------ -------------------- BEN J. LIPPS President National Medical Care, Inc. By: /s/ Ben J. Lipps Dated: 1/18/00 ------------------------ -------------------- BEN J. LIPPS President Fresenius Medical Care Holdings, Inc. Acknowledged: - ------------ By: /s/ Jonathan Chiel Dated: January 18, 2000 ------------------------ -------------------- JONATHAN CHIEL By: /s/ Alan E. Reider Dated: 1/18/00 ------------------------ -------------------- ALAN E. REIDER By: /s/ Ronald L. Castle Dated: 1/18/00 ------------------------ -------------------- RONALD L. CASTLE Counsel to NMC Homecare, Inc. National Medical Care, Inc. Fresenius Medical Care Holdings, Inc. RELATOR VEN-A-CARE OF THE FLORIDA KEYS, INC. By: /s/ Zachary T. Bentley Dated: 1/18/00 ----------------------- ------------------- ZACHARY T. BENTLEY, President By: /s/ T. Mark Jones Dated: 1/18/00 ----------------------- ------------------- T. MARK JONES, Vice President and Secretary By: /s/ Luis E. Cobo Dated: 1/18/00 ----------------------- ------------------- LUIS E. COBO, Former President By: /s/ Zachary T. Bentley Dated: 1/18/00 ----------------------- ------------------- ZACHARY T. BENTLEY, Individually, as to Paragraph 18.b. only By: /s/ T. Mark Jones Dated: 1/18/00 ----------------------- ------------------- T. MARK JONES, Individually, as to Paragraph 18.b. only By: /s/ Luis E. Cobo Dated: 1/18/00 ----------------------- ------------------- LUIS E. COBO, Individually, as to Paragraph 18.b. only Acknowledged: - ------------ By: /s/ Atlee W. Wampler III Dated: January 18, 2000 ------------------------ ------------------- ATLEE W. WAMPLER, III By: /s/ James J. Breen Dated: 1/18/00 ----------------------- ------------------- JAMES J. BREEN Counsel to Ven-A-Care of the Florida Keys, Inc. RELATOR DANA R. AUSTIN By: /s/ Dana R. Austin Dated: 1/18/00 ----------------------- -------------------- DANA R. AUSTIN Acknowledged: - ------------ By: /s/ Robert L. Vogel Dated: 1/18/00 ----------------------- -------------------- ROBERT L. VOGEL Counsel to Dana R. Austin EXHIBIT A (Promissory Note) The Promissory Note dated January 19, 2000 from National Medical Care, Inc. and Fresenius Medical Care Holdings, Inc. payable to the order of the United States is incorporated by reference to Exhibit A of Exhibit 10.2 to this Current Report on Form 8-K. EXHIBIT B (Amendment to Irrevocable Nontransferable Letter of Credit) The Amendment to Irrevocable Nontransferable Letter of Credit dated January 19, 2000 issued by the Bank of Nova Scotia, Atlanta Agency to the United States is incorporated by reference to Exhibit B of Exhibit 10.2 to this Current Report on Form 8-K. EXHIBIT C (Guarantee) The Guarantee Agreement dated as of July 31, 1996 among Fresenius Medical Care GmbH, the predecessor to Fresenius Medical Care AG, National Medical Care, Inc., W.R. Grace & Co. and the United States of America, is incorporated by reference to the Company's Registration Statement on Form S-4 (Registration No. 333-09497) dated August 2, 1996 and the exhibits thereto. EXHIBIT D (List of Fresenius Affiliated Entities) The List of Fresenius Affiliated Entities is incorporated by reference to Exhibit D of Exhibit 10.2 to this Current Report on Form 8-K. EX-10.4 5 SETTLEMENT AGREEMENT/CLINICAL DIAGNOSTIC SYSTEMS EXHIBIT 10.4 SETTLEMENT AGREEMENT AND RELEASE -------------------------------- I. PARTIES ------- This Settlement Agreement ("Agreement") is entered by and among: A. The United States of America, acting through its Department of Justice and the United States Attorney's Office for the District of Massachusetts, and on behalf of the United States Department of Health and Human Services ("HHS") through its office of Inspector General ("HHS-OIG") (collectively the "United States"); and B. National Medical Care, Inc. ("NMC"), a Delaware corporation and a wholly owned subsidiary of Fresenius Medical Care Holdings, Inc. including its Dialysis Services Division ("DSD"); Clinical Diagnostic Systems, Inc. ("CDS"), a Florida corporation and wholly owned subsidiary of NMC; NMC Diagnostic Services, Inc. ("DSI"), a Delaware corporation and wholly owned subsidiary of NMC; Bio-Medical Applications Management Company, Inc. ("BMAMC"); NMC's and BMAMC's subsidiary entities that provide dialysis services ("Dialysis Facilities") including those listed on the attached Exhibit E; and Fresenius Medical Care Holdings, Inc. ("FMCH")(d/b/a Fresenius Medical Care North America). Collectively, all of the above will be referred to as "the Parties". II. PREAMBLE -------- A. WHEREAS, at all relevant times, NMC primarily was in the business of providing dialysis and related services to patients with End-Stage Renal Disease ("ESRD") throughout the United States. B. WHEREAS, NMC, CDS, DSI, DSD and the Dialysis Facilities submitted or caused to be submitted ESRD claims for payment to the Medicare program, Title XVIII of the Social Security Act, 42 U.S.C. (S)(S) 1395-1395ddd (1997), which is administered by HHS; C. WHEREAS, the United States contends that it has certain civil claims against NMC, CDS, DSI, DSD and the Dialysis Facilities, and against FMCH as parent, for violations of the federal statutes and/or common law doctrines specified in Paragraph 8 of the Terms and Conditions below, in connection with the following conduct ("the Covered Conduct"): 1. Doppler Flow Test Clinical Study --------------------------------- a. Beginning in 1991, NMC, through DSD, planned and carried out a clinical cohort and intervention study involving color flow doppler ultrasound examination ("Doppler Flow Tests" or "DFTs") of hemodialysis access sites of various patients at the Dialysis Facilities. The purpose of the DFT clinical study included determining if baseline DFTs could be a predictor of access failure, assessing the interrelationships and effects which hematocrit and EPO dose have on the probability of access failure given a specified DFT profile, and determining the correlation of vascular access disease progression. The results of this study were published in 1998 in the American Journal Of Nephrology in an article entitled, Predicting Hemodialysis Access Failure with Color Flow Doppler Ultrasound. The DFTs involved in this study were performed during the period approximately July 1991 to April 1994. b. NMC, DSI, CDS, BMAMC, and the Dialysis Facilities submitted or caused to be submitted claims to the Medicare Program seeking reimbursement for the technical component of the DFTs performed in the DFT clinical study. Such claims/billings were improper because the tests were conducted for research purposes, and/or were not otherwise reasonable and medically necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member for the patient(s) for whom the claim was submitted and the service billed. In addition, NMC, DSI, CDS, DSD, and the Dialysis Facilities caused individual physicians to submit claims to Part B of the Medicare Program seeking reimbursement for the professional or interpretation component of the DFTs performed in the DFT clinical study. Such claims/billing were improper because the underlying technical components were not reimbursable. 2. Bioelectrical Impedance Analysis Test Clinical Study ---------------------------------------------------- a. From approximately January 1, 1995 through June 30, 1995, NMC through DSD, carried out Phase II of a clinical study involving bioelectrical impedance analysis ("BIA") tests. This phase involved providing one or more BIA tests to various patients at the Dialysis Facilities. The purpose of this BIA clinical study was to assess if BIA test results predict mortality and to assess correlations with other nutritional measurements. b. NMC, DSI, CDS, BMAMC, and the Dialysis Facilities submitted or caused to be submitted claims to the Medicare Program seeking reimbursement for the technical component for the BIA tests performed as part of the BIA Clinical Study. Such claims/billings were improper because the tests were conducted for research purposes, and/or were not otherwise reasonable and medically necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member for the patient for whom the claim was submitted and the service billed. Medical Director Compensation ----------------------------- The United States also contends that it has certain civil claims against NMC for violations of the federal statutes and/or common law doctrines enumerated in Paragraph 9 of the Terms and Conditions below, for compensation paid or offered to physicians for serving as the medical directors of BMA dialysis facilities, to the extent that this compensation reflected services rendered for years through 1994, under contracts entered into prior to December 31, 1994. D. WHEREAS, the United States also contends that it has certain administrative claims against CDS, DSI, NMC, DSD, the Dialysis Facilities, and against FMCH, as parent, under the provisions for permissive exclusion from the Medicare, Medicaid and other federal health care programs, 42 U.S.C. (S) 1320a- 7(b), and the provisions for civil monetary penalties, 42 U.S.C. (S) 1320a-7a, for the Covered Conduct. E. WHEREAS, NMC, CDS, DSI, DSD, the Dialysis Facilities, and FMCH specifically deny and affirmatively contest the contentions of the United States as set forth in Preamble Paragraph C, above, and specifically deny any wrongdoing in connection with those claims; and further contend that their practices described in the Covered Conduct, were appropriate and lawful and did not result in any violations of federal law, state law, or common law doctrines, and do not give rise to any civil or administrative cause of action; and F. WHEREAS, in order to avoid the delay, uncertainty, inconvenience and expense of protracted litigation of these claims, the Parties reach a full and final compromise of claims that the United States has against NMC, CDS, DSI, DSD and the Dialysis Facilities and FMCH as parent, for the Covered Conduct, pursuant to the Terms and Conditions set forth below. III. TERMS AND CONDITIONS -------------------- NOW, THEREFORE, in reliance on the representations contained herein and in consideration of the mutual promises, covenants, and obligations in this Agreement, and for good and valuable consideration, receipt of which is hereby acknowledged, the Parties agree as follows: 1. NMC and FMCH, collectively, shall pay to the United States the sum of two million eight hundred thirty five thousand thirty two dollars ($2,835,032) ("the Settlement Amount"), and this sum shall constitute a debt immediately due and owing to the United States on the "First Payment Date", which is the later of the dates on which (a) the four civil Settlement Agreements are fully executed by the Parties, (b) all notices of dismissal described in the civil Settlement Agreements are docketed by the Court, or (c) the Court accepts LIFECHEM, INC.'s, NMC Medical Products, Inc.'s, and NMC Homecare, Inc.'s guilty pleas and imposes the sentences set forth in their respective Plea Agreements. NMC and FMCH, collectively, shall pay the Settlement Amount to the United States according to the schedule, terms and instructions contained in the Promissory Note executed contemporaneously with this Agreement, attached as Exhibit A, and incorporated herein by reference. 2. As an express condition of the Settlement Agreement, to secure NMC's and FMCH's payment obligations under Paragraph 1 of this Agreement (and the other civil Settlement Agreements and criminal Plea Agreements being executed at the same time), NMC and FMCH shall: (a) procure from the Bank of Nova Scotia and deliver or cause to be delivered to the United States Attorney's Office for the District of Massachusetts, on or before January 19, 2000, an amendment to the unconditional, irrevocable Letter of Credit No. S020/43695/96 issued to the United States of America on September 27, 1996 (the "Letter of Credit") to increase the amount of the Letter of Credit to $189,634,446.00. Such amendment shall be in the form attached as Exhibit B. Within 10 days of receipt by the U.S. Attorney's Office of written confirmation from the transferring bank that a quarterly payment or prepayment of such quarterly payments, has been made to the United States, the United States shall provide written permission to the Bank of Nova Scotia to reduce the amount available for drawing under Letter of Credit No. S020/43695/96 by the amount of the principal payment received. In the event that the entire outstanding payment obligation secured by the Letter of Credit is prepaid, then the United States shall provide written permission to reduce the amount available for drawing to zero. The United States shall return this Letter of Credit for cancellation when all obligations are paid in full or it is determined, by the United States, or pursuant to a final and non- appealable order of a court of competent jurisdiction, that NMC and FMCH have fulfilled all payment obligations pursuant to this Agreement. (b) On January 19, 2000, NMC and FMCH shall establish an escrow account in an initial amount of $236,401,919.00 to be held by an independent third party agreeable to the United States, and NMC and FMCH shall increase the escrow amount each day in an amount of $48,546.00 (through accrued interest and/or deposits), beginning on January 20, 2000 and continuing through April 15, 2000, when NMC and FMCH shall increase the escrow amount by an additional amount each day of $7,271.00 (through accrued interest and/or deposits), for each quarterly payment due before the first payment is due on the First Payment Date. On the First Payment Date, all funds in the escrow account shall be paid to the United States to satisfy the payment obligation in Paragraph 1. The terms and conditions of this escrow account shall in no way limit NMC's and FMCH's payment obligations to the United States secured by the Letter of Credit. 3. NMC and FMCH are in default of this Agreement on the date of occurrence of any of the following events ("Events of Default"): a. NMC's and FMCH's failure to procure, deliver or maintain the Letter of Credit; b. Failure by NMC's and FMCH's failure to pay any amount provided for in the Promissory Note attached as Exhibit A within 2 days of when such payment is due and payable; c. If prior to making the full payment of the amount due under the Promissory Note or Paragraph 1 above,(i) NMC and/or FMCH commences any case, proceeding, or other action (A) under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have any order for relief of debtors, or seeking to adjudicate NMC and/or FMCH as bankrupt or insolvent, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for NMC and/or FMCH or for all or any substantial part of NMC's and/or FMCH's assets; or (ii) there shall be commenced against NMC and/or FMCH any such case, proceeding or other action referred to in clause (i) which results in the entry of an order for relief and any such order remains undismissed, or undischarged or unbonded for a period of thirty (30) days; or (iii) NMC and/or FMCH takes any action authorizing, or in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth above in this sub-Paragraph 3.c.; d. NMC's and FMCH's failure to establish, maintain or make the required payments to the escrow account described in Paragraph 2b. 1. If payments due under Paragraph 1 are received late, but within the two-day grace period provided in Paragraph 5.b. of the Promissory Note, interest incurred during such grace period will be assessed at two times the daily amount in effect on the date the payment was due. 5. NMC and FMCH shall provide the United States written notice of an Event of Default within two (2) business days of such event by overnight mail, or facsimile followed by overnight delivery, to the United States Attorney's Office, District of Massachusetts, One Courthouse Way, Suite 9200, Boston, MA 02210, Attention: Suzanne E. Durrell, Assistant U.S. Attorney (or to the attention of such other person as may be designated in writing by the United States Attorney's Office). 6. Immediately upon the occurrence of an Event of Default, without further notice or presentment and demand by the United States: a. The Settlement Amount plus accrued interest through the end of the applicable quarter as set forth in Paragraph 1 of the Promissory Note (minus any payments to date of principle and accrued interest) shall become immediately due and payable ("Settlement Default Amount"). Interest shall be calculated on the Settlement Default Amount at the Prime Rate as published in the Wall Street ----------- Journal on the Effective Date of this Agreement plus 5% from the date ------- of the Event of Default. b. In addition, NMC and FMCH will pay the United States all reasonable costs of collection and enforcement of this Agreement, including attorney's fees and expenses, plus interest described in Paragraph 6.a. above. The Settlement Default Amount, plus interest, described in Paragraph 6.a. above, together with the costs of collection and enforcement described in this sub-paragraph, will be referred to as the "Default Obligation". 7. Upon the occurrence of an Event of Default, the United States may exercise, at its sole option, one or more of the following rights: a. The United States may draw the full amount available for drawing under the Letter of Credit and retain all proceeds thereof. b. The United States may enforce the terms of the Guarantee Agreement between the United States of America, Fresenius Medical Care GMBH, a German corporation and the predecessor of Fresenius Medical Care AG, W.R. Grace & Co., a New York corporation, and National Medical Care, Inc., dated July 31, 1996, attached as Exhibit C. c. The United States retains any and all other rights and remedies it has or may have under law and equity. d. No failure or delay on the part of the United States to exercise any right or remedy shall operate as a waiver of the United States' rights. No single or partial exercise by the United States of any right or remedy shall operate as a waiver of the United States' rights. 8. In an Event of Default under Paragraph 3.c. above (Commencement of Bankruptcy or Reorganization Proceeding): a. NMC and FMCH agree not to contest or oppose any motion filed by the United States seeking relief from or modification of the automatic stay of 11 U.S.C. (S) 362(a); not to seek relief under 11 U.S.C. (S) 105 to enjoin or restrain the United States from recovering monies owed by NMC and FMCH arising out of this Agreement or the attached Promissory Note, or from recovering monies through presentment against the Letter of Credit. NMC and FMCH recognize that this express waiver is in consideration for the settlement of claims by the United States described in Paragraph C above, under the terms and conditions contained in this Settlement Agreement. b. By expressly waiving the automatic stay provision, NMC and FMCH agree not to oppose or interfere with any motion made in federal court (including bankruptcy courts) by the United States to suspend payments to NMC and DSD from the Title XVIII (Medicare), Title XIX (Medicaid) programs, and other federal health care programs; c. This Agreement shall be voidable at the sole option of the United States; d. If any term(s) of this Agreement are set aside for any reason, including as a result of a preference action brought pursuant to 11 U.S.C. (S) 547, the United States, at its sole option and in its discretion, may rescind all terms of this Agreement and seek recovery of the full amount of claims and allegations identified herein and in the Civil Actions, or, in the alternative, enforce the remaining terms of this Agreement. In the event of rescission of this Agreement, all Parties reserve all rights, claims, and defenses that are available under law and equity as of the Effective Date of this Agreement; and e. In addition to the rights enumerated in Paragraph 8.a. through 8.d. above, the United States and all other Parties shall retain all rights and claims they have or may have under law and equity. 9. Subject to the exceptions and limitations in Paragraph 10 below, in consideration of the obligations of NMC and FMCH set forth in this Agreement, conditioned upon payment in full of the Settlement Amount, subject to Paragraph 23 (concerning bankruptcy proceedings commenced within 91 days of any payment under this Agreement), the United States, on behalf of itself, and its officers, agents, agencies, and departments, will release and will be deemed to have released FMCH, BMAMC, NMC, DSI, CDS, the Dialysis Facilities and their parents, and the affiliates and subsidiaries listed on the attached Exhibit D (collectively, the parties described in Preamble Paragraph B and the corporate entities listed on Exhibit D constitute the NMC Companies within the meaning of this Agreement), and the current directors, officers, employees, and agents of the NMC Companies who were not employed by or in any way affiliated with DSD, NMC, or NMC's parents, subsidiaries, divisions, or affiliates at any time prior to September 30, 1996, from any civil or administrative monetary claim (including recoupment claims) that the United States has or may have under the False Claims Act, 31 U.S.C. (S)(S) 3729- 3733; the Program Fraud Civil Remedies Act, 31 U.S.C. (S)(S) 3801- 3812; the Civil Monetary Penalties Law, 42 U.S.C. (S) 1320a-7a; or common law claims for fraud, payment by mistake of fact, breach of contract or unjust enrichment for the conduct described in Preamble Paragraph C above with respect to Medicare. 10. Notwithstanding any term of this Agreement, the United States specifically does not release the NMC Companies, or any individual from any and all of the following: (a) any potential criminal, civil or administrative claims arising under Title 26, U.S. Code (Internal Revenue Code); (b) any criminal liability; (c) any potential liability to the United States (or any agencies thereof) for any conduct other than that identified in Preamble Paragraph C above; (d) any entities not specifically included on the list of NMC entities set forth in Exhibit D; (e) any claims based upon such obligations as are created by this Agreement; (f) except as explicitly stated in this Agreement, any administrative liability, including mandatory exclusion from Federal health care programs; (g) any express or implied warranty claims or other claims for defective or deficient products and services provided by DSD, DSI, CDS, or the Dialysis Facilities including quality of testing or product claims; (h) any claims for personal injury or property damage or for other consequential damages arising from the conduct described in Paragraph C above; (i) any claims based upon failure to deliver items or services; (j) any civil or administrative claims against any individual who was an officer, director, trustee, agent, employee, or was in any way affiliated with CDS, DSI, DSD, NMC, or NMC's parents, subsidiaries, divisions, or affiliates at any time prior to September 30, 1996; or (k) any civil or administrative claims against any individual, including current directors, officers, employees and agents who receives written notification that he or she is a target of the criminal investigation, who is criminally indicted or convicted of an offense, or who enters a criminal plea related to the conduct alleged in Preamble Paragraph C above. 11. FMCH, on behalf of itself and its parents, affiliates, subsidiaries, and divisions, including but not limited to NMC, has entered into a Corporate Integrity Agreement with HHS-OIG, which is incorporated by reference into this Agreement. FMCH will immediately upon execution of this Agreement implement its obligations under the Corporate Integrity Agreement. 12. In consideration of the obligations of NMC and FMCH set forth in this Agreement, conditioned upon payment in full of the Settlement Amount, subject to Paragraph 23 below (concerning bankruptcy proceedings commenced within 91 days of any payment under this Agreement), and conditioned upon FMCH's entering into the Corporate Integrity Agreement, the OIG-HHS agrees to release and refrain from instituting, directing, or maintaining any administrative claim or any action seeking exclusion from the Medicare, Medicaid or other Federal health care programs (as defined in 42 U.S.C. (S) 1320a- 7b(f)) against the NMC Companies and the current directors, officers, employees, and agents of the NMC Companies who were not employed by or in any way affiliated with CDS, DSI, DSD, the Dialysis Facilities, NMC, or any of NMC's parents, subsidiaries, divisions, or affiliates at any time prior to September 30, 1996, under 42 U.S.C. (S) 1320a-7a (Civil Monetary Penalties Law) or 42 U.S.C. (S) 1320a-7(b) (permissive exclusion) for the conduct described in Preamble Paragraph C, except as reserved in Paragraph 10 above and as reserved in this Paragraph. The OIG-HHS expressly reserves all rights to comply with any statutory obligations to exclude the NMC Companies from the Medicare, Medicaid, or other Federal health care programs under 42 U.S.C. (S) 1320a-7(a)(mandatory exclusion). Nothing in this Paragraph precludes the OIG-HHS from taking action against entities or individuals for conduct and practices for which civil claims have been reserved in Paragraph 10 above. 13. The NMC Companies waive and will not assert any defenses these entities may have to any criminal prosecution or administrative action relating to the conduct described in Preamble Paragraph C, which defenses may be based in whole or in part on a contention that, under the Double Jeopardy Clause of the Fifth Amendment of the Constitution or Excessive Fines Clause of the Eighth Amendment of the Constitution, this Settlement Agreement bars a remedy sought in such criminal prosecution or administrative action. The NMC Companies further agree that nothing in this Agreement is punitive in purpose or effect. 14. The NMC Companies covenant to cooperate fully and truthfully with the United States' civil investigation of individuals and entities not specifically released in this Agreement. Upon reasonable notice, the NMC Companies will make reasonable efforts to facilitate access to, and encourage the cooperation of, its directors, officers, and employees for interviews and testimony, consistent with the rights and privileges of such individuals, and will furnish to the United States, upon reasonable request, all non-privileged documents and records in its possession, custody or control. 15. On the effective date of this Agreement, the NMC Companies release and will be deemed to have released the United States, its agencies, employees, servants, and agents from any claims (including attorneys fees, costs, and expenses of every kind and however denominated) which the NMC Companies have or may have against the United States, its agencies, employees, servants, and agents, related to or arising from the United States' civil, criminal and administrative investigation and prosecution of DSD, DSI, CDS, the Dialysis Facilities, NMC and FMCH involving the conduct specified in Paragraph C of the Preamble. 16. The Settlement Amount that NMC and FMCH must pay pursuant to Paragraph 1 of this Agreement will not be decreased as a result of the denial of claims for payment now being withheld from payment by any Medicare carrier or intermediary, Railroad Retirement Medicare carrier, TRICARE, Federal Employees Health Benefits Program ("FEHBP"), or Veteran's Administration ("VA"), or any Medicaid payor, related to the conduct described in Preamble Paragraph C; and the NMC Companies agree not to resubmit to any Medicare carrier or intermediary, Railroad Retirement Medicare carrier, TRICARE, FEHBP, VA, or any Medicaid payor any previously denied claims related to the conduct described in Preamble Paragraph C, and agree not to appeal any such denials of claims. 17. The NMC Companies agree that all costs (as defined in the Federal Acquisition Regulations ("FAR") (S) 31.205-47 and in Titles XVIII and XIX of the Social Security Act, 42 U.S.C. (S)(S) 1395- 1395ddd (1997) and 1396-1396v(1997), and the regulations promulgated thereunder) incurred by or on behalf of the NMC Companies, and their divisions, subsidiaries and affiliates, and their present and former officers, directors, employees, shareholders and agents in connection with: (a) the matters covered by this Agreement; (b) the Government's audits, administrative, civil and criminal investigation and prosecution of CDS, DSI, DSD, the Dialysis Facilities, NMC, and FMCH; (c) these corporate entities' investigation, defense, and corrective actions undertaken in response to the Government's administrative, civil and criminal investigations, and in connection with the matters covered by this Agreement, and including the obligations undertaken pursuant to the Corporate Integrity Agreement (including attorney's fees); (d) the negotiation and performance of this Agreement, and the Corporate Integrity Agreement; and (e) the payments made to the United States provided for in this Agreement, are unallowable costs on Government contracts and under Medicare, Railroad Retirement Medicare, Medicaid, TRICARE, FEHBP, and the VA programs (hereafter, "unallowable costs"). These unallowable costs will be separately estimated and accounted for by the NMC Companies and these entities will not charge such unallowable costs directly or indirectly to any contracts with the United States or any Medicaid program, or seek payment for such unallowable costs through any cost report, cost statement, information statement or payment request submitted by the NMC Companies or any of their divisions, subsidiaries or affiliates to the Medicare, Railroad Retirement Medicare, Medicaid, TRICARE, VA or FEHBP programs. The NMC Companies further agree that within 270 days of the effective date of this Agreement these entities will identify to applicable Medicare, Railroad Retirement Medicare, and TRICARE fiscal intermediaries, carriers and/or contractors, and Medicaid, VA and FEHBP fiscal agents, any unallowable costs (as defined above) included in payments previously sought from the United States, or any Medicaid Program, including, but not limited to, payments sought in any cost reports, cost statements, information reports, or payment requests already submitted by the NMC Companies or any of their subsidiaries, affiliates, or divisions and will request, and agree, that such cost reports, cost statements, information reports or payment requests, even if already settled, be adjusted to account for the effect of the inclusion of the unallowable costs. The NMC Companies agree that the United States will be entitled to recoup from the NMC Companies any overpayment as a result of the inclusion of such unallowable costs on previously- submitted cost reports, information reports, cost statements or requests for payment. Any payments due after the adjustments have been made shall be paid to the United States pursuant to the direction of the Department of Justice, and/or the affected agencies. The United States reserves its rights to disagree with any calculations submitted by the NMC Companies, or any of their subsidiaries, affiliates or divisions, on the effect of inclusion of unallowable costs (as defined above) on the NMC Companies or any of their subsidiaries, affiliates or divisions' cost reports, cost statements or information reports. Nothing in this Agreement shall constitute a waiver of the rights of the United States to examine or reexamine the unallowable costs described above. 18. This Agreement is intended to be for the benefit of the Parties only, and by this instrument the Parties do not release any claims against any other person or entity except as specifically identified in Paragraphs 9 and 11, above. 19. The NMC Companies agree that they will not seek payment for any of the health care billings covered by this Agreement from any health care beneficiaries or their parents, sponsors, estates, heirs, successors or assigns. The NMC Companies waive any causes of action against these beneficiaries or their parents, sponsors, estates, heirs, successors, or assigns based upon the claims for payment covered by this Agreement. 20. Nothing in this Agreement constitutes an agreement by the United States concerning the characterization of the amounts paid hereunder for purposes of any proceeding under Title 26 of the Internal Revenue Code. 21. Except as provided in Paragraph 6, each party to this Agreement will bear its own legal and other costs incurred in connection with this matter, including by way of example only, all costs incurred in the investigation and defense of this matter, the preparation and performance of this Agreement, and all corrective actions taken in response to the investigation and resolution of this matter. 22. NMC and FMCH expressly warrant that they have reviewed their financial condition and that they currently are solvent on a consolidated basis within the meaning of 11 U.S.C. Section 547(b)(3), and expect to remain solvent on a consolidated basis following payment to the United States hereunder. Further, the Parties expressly warrant that, in evaluating whether to execute this Agreement, the Parties (a) have intended that the mutual promises, covenants and obligations set forth herein constitute a contemporaneous exchange for new value given to NMC and FMCH within the meaning of 11 U.S.C. Section 547(c)(1), and (b) have concluded that these mutual promises, covenants, and obligations do, in fact, constitute such a contemporaneous exchange. 23. In the event NMC or FMCH commences, or a third party commences, within 91 days of any payment under of this Agreement, any case, proceeding, or other action (i) under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have any order for relief of NMC and/or FMCH's debts, or seeking to adjudicate NMC and/or FMCH as bankrupt or insolvent, or (ii) seeking appointment of a receiver, trustee, custodian or other similar official for NMC and/or FMCH or for all or any substantial part of NMC and/or FMCH's assets, NMC and FMCH agree as follows: a. NMC and FMCH's obligations under this Agreement may not be avoided pursuant to 11 U.S.C. Section 547, and NMC and FMCH will not argue or otherwise take the position in any such case, proceeding or action that: (i) NMC and/or FMCH's obligations under this Agreement may be avoided under 11 U.S.C. Section 547; (ii) NMC and FMCH were insolvent on a consolidated basis at the time this Agreement was entered into, or became insolvent on a consolidated basis as a result of the payment made to the United States hereunder; or (iii) the mutual promises, covenants and obligations set forth in this Agreement do not constitute a contemporaneous exchange for new value given to NMC and/or FMCH. b. In the event that NMC and/or FMCH's obligations hereunder are avoided pursuant to 11 U.S.C. Section 547, the United States, at its sole option, may rescind the releases in this Agreement, and bring any civil and/or administrative claim, action or proceeding against NMC, CDS, DSI, DSD, the Dialysis Facilities, and the NMC Companies and/or FMCH for the claims that would otherwise be covered by the releases provided in Paragraphs 9 and 11 above. If the United States chooses to do so, CDS, DSI, DSD, the Dialysis Facilities, NMC and FMCH agree that (i) any such claims, actions or proceedings brought by the United States (including any proceedings to exclude any of the NMC Companies from participation in Medicare, Medicaid, or other federal health care programs) are not subject to an "automatic stay" pursuant to 11 U.S.C. Section 362(a) as a result of the action, case or proceeding described in the first clause of this Paragraph, and that CDS, DSI, DSD, the Dialysis Facilities, NMC and FMCH will not argue or otherwise contend that the United States' claims, actions or proceedings are subject to an automatic stay; (ii) that CDS, DSI, DSD, the Dialysis Facilities, NMC and FMCH will not plead, argue or otherwise raise any defenses under the theories of statute of limitations, laches, estoppel or similar theories, to any such civil or administrative claims, actions or proceeding which are brought by the United States within 90 calendar days of written notification to NMC and FMCH that the releases herein have been rescinded pursuant to this Paragraph, and (iii) the United States has a valid claim against CDS, DSI, DSD, the Dialysis Facilities, NMC and FMCH in the amount of the Default Obligation and the United States may pursue its claims in any case, action, or proceeding. c. CDS, DSI, DSD, the Dialysis Facilities, NMC and FMCH acknowledge that their agreements in this Paragraph are provided in exchange for valuable consideration provided in this Agreement. 24. CDS, DSI, DSD, the Dialysis Facilities, NMC and FMCH represent that this Agreement is freely and voluntarily entered into without any degree of duress or compulsion whatsoever. 25. This Agreement is governed by the laws of the United States. The Parties agree that the exclusive jurisdiction and venue for any disputes arising between and among the Parties under this Agreement will be the United States District Court for the District of Massachusetts, except that disputes arising under the Corporate Integrity Agreement shall be resolved exclusively upon the dispute resolution provisions set forth in the Corporate Integrity Agreement. 26. The undersigned CDS, DSI, DSD, the Dialysis Facilities, NMC and FMCH signatories represent and warrant that they are authorized by their respective Board of Directors to execute this Agreement. The undersigned United States signatories represent that they are signing this Agreement in their respective official capacities and that they are authorized to execute this Agreement. 27. Except for the representations in Paragraph 21 (regarding solvency), and Paragraph 23 (concerning bankruptcy proceedings commenced within 91 days of any payments under this Agreement), the Parties agree that nothing in this Agreement constitutes an admission by any person or entity with respect to any issue of law or fact. 28. This Agreement is effective on the date of signature of the last signatory to the Agreement (the "Effective Date"). 29. This Agreement shall be binding on all successors, transferees, heirs and assigns. 30. This Agreement, together with Exhibits A through E, and the Corporate Integrity Agreement, constitute the complete agreement among the Parties with regard to the conduct described in Preamble Paragraph C. This Agreement may not be amended except by written consent of the Parties, except that only FMCH and OIG-HHS must agree in writing to modification of the Corporate Integrity Agreement. 31. This Agreement may be executed in counterparts, each of which shall constitute an original and all of which shall constitute one and the same Agreement. THE UNITED STATES OF AMERICA ---------------------------- By: /s/ Suzanne E. Durrell Dated: January 18, 2000 -------------------------- ---------------- SUZANNE E. DURRELL Assistant U.S. Attorney District of Massachusetts By: /s/ Patricia M. Connolly Dated: January 18, 2000 -------------------------- ---------------- PATRICIA M. CONNOLLY Special Assistant U.S. Attorney District of Massachusetts By: /s/ Maya Guerra Dated: January 18, 2000 -------------------------- ---------------- MAYA GUERRA Trial Attorney Civil Division U.S. Department of Justice By: /s/ Lewis Morris Dated: 1/18/00 -------------------------- ------------------ LEWIS MORRIS Assistant Inspector General Office of Inspector General U.S. Department of Health and Human Services CLINICAL DIAGNOSTIC SYSTEMS, INC., NMC DIAGNOSTIC SERVICES, INC., Bio-Medical Applications Management Company, Inc. NATIONAL MEDICAL CARE, INC. FRESENIUS MEDICAL CARE HOLDINGS, INC. By: /s/ Ben J. Lipps Dated: 1/18/00 ------------------------ -------------------- Ben J. Lipps President Clinical Diagnostic Systems, Inc. By: /s/ Ben J. Lipps Dated: 1/18/00 ------------------------ -------------------- Ben J. Lipps President NMC Diagnostic Services, Inc. By: /s/ Ben J. Lipps Dated: 1/18/00 ------------------------ -------------------- Ben J. Lipps President Bio-Medical Applications Management Company, Inc. By: /s/ Ben J. Lipps Dated: 1/18/00 ------------------------ -------------------- Ben J. Lipps President National Medical Care, Inc. By: /s/ Ben J. Lipps Dated: 1/18/00 ------------------------ -------------------- Ben J. Lipps President Fresenius Medical Care Holdings, Inc. Acknowledged: ------------- By: /s/ Jonathan E. Chiel Dated: January 18, 2000 -------------------------- ------------------- JONATHAN CHIEL Counsel to Clinical Diagnostic Systems, Inc., NMC BMA Management Co., NMC Diagnostic Services, Inc. National Medical Care, Inc. Fresenius Medical Care Holdings, Inc. By: /s/ Alan E. Reider Dated: 1/18/00 -------------------------- ------------------- ALAN E. REIDER Counsel to Clinical Diagnostic Systems, Inc., NMC Diagnostic Services, Inc., NMC BMA Management Co., National Medical Care, Inc. Fresenius Medical Care Holdings, Inc. EXHIBIT A (Promissory Note) The Promissory Note dated January 19, 2000 from National Medical Care, Inc. and Fresenius Medical Care Holdings, Inc. payable to the order of the United States is incorporated by reference to Exhibit A of Exhibit 10.2 to this Current Report on Form 8-K. EXHIBIT B (Amendment to Irrevocable Nontransferable Letter of Credit) The Amendment to Irrevocable Nontransferable Letter of Credit dated January 19, 2000 issued by the Bank of Nova Scotia, Atlanta Agency to the United States is incorporated by reference to Exhibit B of Exhibit 10.2 to this Current Report on Form 8-K. EXHIBIT C (Guarantee) The Guarantee Agreement dated as of July 31, 1996 among Fresenius Medical Care GmbH, the predecessor of Fresenius Medical Care AG, National Medical Care, Inc., W.R. Grace & Co. and the United States of America, is incorporated by reference to the Company's Registration Statement on Form S-4 (Registration No. 333-09497) dated August 2, 1996 and the exhibits thereto. EXHIBIT D (List of Fresenius Affiliated Entities) The List of Fresenius Affiliated Entities is incorporated by reference to Exhibit D of Exhibit 10.2 to this Current Report on Form 8-K. EXHIBIT E
FACILITIES IN BIA STUDY LOCATION CORPORATE NAME FACILITY 1629 BIO-MEDICAL APPLICATIONS OF MA.,INC. WALTHAM 1110 BIO-MEDICAL APPLICATIONS OF MA.,INC. BOSTON - TKC 1109 BIO-MEDICAL APPLICATIONS OF MA.,INC. FRAMINGHAM 1654 BIO-MEDICAL APPLICATIONS OF NORTH CAROLINA, INC. SMITHFIELD 1656 BIO-MEDICAL APPLICATIONS OF NORTH CAROLINA, INC. ROANOKE RAPIDS 1688 BIO-MEDICAL APPLICATIONS OF NORTH CAROLINA, INC. CLINTON 1498 BIO-MEDICAL APPLICATIONS OF NORTH CAROLINA, INC. ROCKY MOUNT 1653 BIO-MEDICAL APPLICATIONS OF NORTH CAROLINA, INC. RALEIGH 1358 BIO-MEDICAL APPLICATIONS OF NORTH CAROLINA, INC. KINSTON 1652 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. PARKVIEW 1087 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. HARRISBURG 1380 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. NW PHILADELPHIA 1176 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. GREENSBURG 1175 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. PITTSBURGH 1122 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. SW PENN 1726 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. MOUNT PLEASANT 1683 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. UNIONTOWN 1209 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. HAZELTON 1123 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. POTTSVILLE 1395 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. FAIRMOUNT
FACILITIES IN DFT COHORT STUDY LOCATION CORPORATE NAME FACILITY NAME 1605 BIO-MEDICAL APPLICATIONS OF MICHIGAN, INC. ADRIAN 1273 BIO-MEDICAL APPLICATIONS OF OHIO, INC. AKRON 1481 BIO-MEDICAL APPLICATIONS OF INDIANA, INC. ANDERSON 1253 BIO-MEDICAL APPLICATIONS OF MICHIGAN, INC. ANN ARBOR 1181 BIO-MEDICAL APPLICATIONS OF MARYLAND, INC. ANNAPOLIS 1277 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. ARLINGTON 1178 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. BUTLER 1356 BIO-MEDICAL APPLICATIONS OF MARYLAND, INC. CAMP SPRINGS 1112 BIO-MEDICAL APPLICATIONS OF MA.,INC. CAPE COD 1272 BIO-MEDICAL APPLICATIONS OF OHIO, INC. CENTRAL OHIO \ COLUMBUS 1639 BIO-MEDICAL APPLICATIONS OF OHIO, INC. CENTRAL OHIO EAST 1389 BIO-MEDICAL APPLICATIONS OF MA.,INC. CHICOPEE 1224 BIO-MEDICAL APPLICATIONS OF FLORIDA, INC. DELTONA 1265 BIO-MEDICAL APPLICATIONS OF MICHIGAN, INC. DETROIT 1119 BIO-MEDICAL APPLICATIONS OF DC, INC. DUPONT CIRCLE 1441 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. EASTERN VIRGINIA 1682 BIO-MEDICAL APPLICATIONS OF WEST VIRGINIA, INC. ELKINS 1667 BIO-MEDICAL APPLICATIONS OF MICHIGAN, INC. FLINT 1433 BIO-MEDICAL APPLICATIONS OF OHIO, INC. GRANT PARK 1176 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. GREENSBURG 1300 BIO-MEDICAL APPLICATIONS OF INDIANA, INC. INDIANAPOLIS 1298 BIO-MEDICAL APPLICATIONS OF JERSEY CITY, INC. JERSEY CITY 1418 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. KITTANNING 1625 BIO-MEDICAL APPLICATIONS OF MARYLAND, INC. LA PLATA 1108 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. LATROBE 1354 BIO-MEDICAL APPLICATIONS OF MARYLAND, INC. LAUREL
FACILITIES IN DFT COHORT STUDY LOCATION CORPORATE NAME FACILITY NAME 1355 BIO-MEDICAL APPLICATIONS OF MARYLAND, INC. LEONARDTOWN 1263 BIO-MEDICAL APPLICATIONS OF MICHIGAN, INC. LIVONIA 1250 BIO-MEDICAL APPLICATIONS OF KENTUCKY, INC. LOUISVILLE 1487 BIO-MEDICAL APPLICATIONS OF MANCHESTER, INC. MANCHESTER 1262 BIO-MEDICAL APPLICATIONS OF OHIO, INC. MANSFIELD 1362 BIO-MEDICAL APPLICATIONS OF INDIANA, INC. MARION COUNTY 1606 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. MON VALLEY 1680 BIO-MEDICAL APPLICATIONS OF WEST VIRGINIA, INC. MORGANTOWN 1417 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. NEW CASTLE 1450 BIO-MEDICAL APPLICATIONS OF NEW HAMPSHIRE, INC. NEW HAMPSHIRE 1361 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. NEW RIVER VALLEY 1397 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. NORTH ROANOKE 1466 BIO-MEDICAL APPLICATIONS OF NORTHEAST DC, INC. NORTHEAST D.C. 1132 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. NORTHERN VIRGINIA AT ALEXANDRIA 1663 BIO-MEDICAL APPLICATIONS OF MICHIGAN, INC. OWOSSO 1175 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. PITTSBURGH 1170 BIO-MEDICAL APPLICATIONS OF RHODE ISLAND, INC. PROVIDENCE 1106 BIO-MEDICAL APPLICATIONS OF NEW YORK, INC. QUEENS 1601 ROCKWOOD DIALYSIS CENTER, INC. RICHMOND 1133 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. ROANOKE 1340 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. SMYTH COUNTY 1480 BIO-MEDICAL APPLICATIONS OF KENTUCKY, INC. SOMERSET 1324 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. SOUTH HILLS 1635 BIO-MEDICAL APPLICATIONS OF KENTUCKY, INC. SOUTH LOUISVILLE 1377 BIO-MEDICAL APPLICATIONS OF SOUTH QUEENS, INC. SOUTH QUEENS 1633 BIO-MEDICAL APPLICATIONS OF OHIO, INC. SOUTH SUMMIT 1434 BIO-MEDICAL APPLICATIONS OF INDIANA, INC. SOUTHERN INDIANA
FACILITIES IN DFT COHORT STUDY LOCATION CORPORATE NAME FACILITY NAME 1122 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. SOUTHWESTERN PENN. 1111 BIO-MEDICAL APPLICATIONS OF MA., INC. SPRINGFIELD 1488 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. STERLING 1195 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. SUFFOLK 1604 TAPPAHANNOCK DIALYSIS CENTER, INC. TAPPAHANNOCK 1386 BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. THREE RIVERS 1602 WEST END DIALYSIS CENTER, INC. WEST END 1490 BIO-MEDICAL APPLICATIONS OF KENTUCKY, INC. WEST LOUISVILLE 1307 BIO-MEDICAL APPLICATIONS OF WOONSOCKET, INC. WOONSOCKET
EX-10.5 6 SETTLEMENT AGREEMENT/NATIONAL MEDICAL CARE EXHIBIT 10.5 SETTLEMENT AGREEMENT AND RELEASE -------------------- ----------- I. PARTIES ------- This Settlement Agreement ("Agreement") is entered by and among: A. The United States of America, acting through its Department of Justice and the United States Attorneys' Offices for the Districts of Massachusetts and the Southern District of Florida, and on behalf of (1) the United States Department of Health and Human Services through its Office of Inspector General("HHS-OIG"); (2) the United States Department of Defense through its TRICARE Support Office ("TSO") (formerly the Office of the Civilian Health and Medical Program of the Uniformed Services), a field activity of the Office of the Secretary of Defense, through counsel; (3) the United States Office of Personnel Management ("OPM"), through the Director of Programs; and (4) the United States Department of Veteran Affairs ("VA"), through counsel; (collectively the preceding will be referred to as the "United States"); B. National Medical Care, Inc. ("NMC"), a Delaware corporation, and its affiliate entities listed on Exhibit E hereto that provide or have provided dialysis services (jointly and severally "DSD"); and Fresenius Medical Care Holdings, Inc. ("FMCH") (d/b/a Fresenius Medical Care North America); and C. Gregory S. Price ("Price"), individually, and Richard Bradford ("Bradford"), individually, (collectively the "Relators"), each acting through his authorized representative. Collectively, all of the above will be referred to as "the Parties." II. PREAMBLE -------- A. WHEREAS, at all relevant times, NMC primarily was in the business of providing dialysis and related services to patients with End-Stage Renal Disease ("ESRD") throughout the United States. B. WHEREAS, DSD submitted or caused to be submitted ESRD claims for payment for dialysis, patient care, and related goods and services to the Medicare program, Title XVIII of the Social Security Act, 42 U.S.C. (S)(S) 1395- 1395ddd (1997), which is administered by HHS; C. WHEREAS, DSD submitted or caused to be submitted ESRD claims for payment for dialysis, patient care, and related goods and services to the TRICARE Program (also known as the Civilian Health and Medical Program of the Uniformed Services ("CHAMPUS")), 10 U.S.C. (S)(S) 1071-1106, which is administered by the Department of Defense through the TSO; D. WHEREAS, DSD submitted or caused to be submitted ESRD claims for payment for dialysis, patient care, and related goods and services to the Federal Employees Health Benefit Program ("FEHBP"), 5 U.S.C. (S)(S) 8901-8914, which is administered by OPM; E. WHEREAS, DSD submitted or caused to be submitted ESRD claims for payment for dialysis, patient care, and related goods and services to the Railroad Retirement Medicare program ("Railroad Medicare"), established under the Railroad Retirement Act of 1974, 45 U.S.C. (S)(S) 231- 231v, which is paid from the Medicare Trust Fund, and administered by the United States Railroad Retirement Board ("RRB"); F. WHEREAS, DSD submitted or caused to be submitted ESRD claims for payment for dialysis, patient care, and related goods and services to the Veteran Affairs Program, 38 U.S.C. (S)(S) 1701-1743, which is administered by the VA; G. WHEREAS, DSD submitted or caused to be submitted ESRD claims for payment for dialysis, patient care, and related goods and services to the Medicaid programs, 42 U.S.C. (S)(S) 1396-1396v (1997), of the thirty-three states of Alabama, Arizona, Arkansas, California, Connecticut, Colorado, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Virginia, West Virginia, Wisconsin, and the District of Columbia, (the "Participating States"), and to the Territory of Puerto Rico (the "Participating Territory"); H. WHEREAS, the United States contends that it has certain civil claims against DSD and NMC, and against FMCH, as parent, for violations of the federal statutes and/or common law doctrines, specified in Paragraph 10 below in connection with the following conduct ("the Covered Conduct"): (1) Failing to refund to HCFA or its fiscal intermediaries, overpayments (hereinafter "Unreconciled Payments") received by DSD from Medicare that DSD reported as Unreconciled Payments on HCFA Forms 838; (2) Failing to report on HCFA Forms 838 filed or caused to be filed by DSD from 1991 to the present, Unreconciled Payments it had received from the Medicare program, and recognized as income during the period 1975-1993; (3) In connection with amendments to the Medicare Secondary Payor provisions made by the Omnibus Budget Reconciliation Act ("OBRA") of 1993 ("OBRA `93"), failing to report to HCFA or its fiscal intermediaries on HCFA Forms 838 Unreconciled Payments at the time of billing to employer group health plans and otherwise failing to report in a timely fashion to HCFA or its fiscal intermediaries. (4) Failing to report and/or refund to HCFA or its fiscal intermediaries overpayments that Home Dialysis Services, Inc. ("HDS"), a company established by NMC, had received from the Medicare program resulting from its billing of home dialysis services and equipment in excess of the Method II home dialysis cost cap contained in OBRA `89; (5) Failing to report and/or refund to HCFA and its fiscal intermediaries overpayments received by HDS from the Medicare program resulting from its billing in excess of the reasonable charge for home dialysis prior to OBRA `89; (6) Failing to report and/or refund to the Participating States and Territory Medicaid programs overpayments received during the years 1975-1993; (7) Failing to report and/or refund to TRICARE overpayments received during the years 1975-1993; (8) Failing to report and/or refund to FEHPB overpayments received during the years 1975-1993; and (9) Failing to report and/or refund to the VA overpayments received during the years 1975-1993. I. WHEREAS, the United States also contends that it has certain administrative claims against DSD and FMCH, as parent, under the provisions for permissive exclusion from the Medicare, Medicaid and other federal health care programs, 42 U.S.C. (S) 1320a-7(b), and the provisions for civil monetary penalties, 42 U.S.C. (S) 1320a-7a, for the Covered Conduct. J. WHEREAS, Relator Gregory S. Price has filed under seal a qui tam --- --- complaint on behalf of the United States: United States ex rel. Price v. W.R. ----------------------------------- Grace & Co., National Medical Care, Inc., et al., Civil Action No. 97-11022-NG - ------------------------------------------------ (D. Mass.)(the "Price Civil Action"). K. WHEREAS, Relator Richard Bradford has filed under seal a qui tam --- --- complaint on behalf of the United States: United States ex rel. Bradford v. --------------------------------- National Medical Care, Inc., et al., Civil Action No. 96-3350-Hoeveler (S.D. - ---------------------------------- Fla.)(the "Bradford Civil Action"). L. WHEREAS, DSD, and FMCH specifically deny and affirmatively contest the contentions of the United States as set forth in Paragraph H, above, and the allegations of the Relators in the Price ----- and Bradford Civil Actions, and specifically deny any wrongdoing in connection -------- with those claims; and further contend that DSD's practices described in the Covered Conduct were appropriate and lawful and did not result in any violations of federal law, state law, or common law doctrines, and do not give rise to any civil or administrative cause of action; and M. WHEREAS, over the years, DSD reported Medicare Unreconciled Payments on HCFA Forms 838 through the quarter ended December 31, 1998, of which NMC and FMCH warrant and represent on Exhibit E attached hereto and incorporated herein by reference, that $10,982,885.16 million has not yet been recouped by the fiscal intermediaries as of January 3, 2000 and remains outstanding ("Unrecouped Credit Balances"); and N. WHEREAS, in order to avoid the delay, uncertainty, inconvenience and expense of protracted litigation of these claims and contentions of the Parties, the Parties reach a full and final compromise for the Covered Conduct, pursuant to the Terms and Conditions set forth below. III. TERMS AND CONDITIONS -------------------- NOW, THEREFORE, in reliance on the representations contained herein and in consideration of the mutual promises, covenants, and obligations in this Agreement, and for good and valuable consideration, receipt of which is hereby acknowledged, the Parties agree as follows: 1. NMC and FMCH, collectively, shall pay to the United States and the Participating States and Participating Territory, collectively, the sum of sixteen million eight hundred seventeen thousand seven hundred eight dollars ($16,817,708) (the "Settlement Amount"), and this sum shall constitute a debt immediately due and owing to the United States on the "First Payment Date", which is the later of the dates on which (a) the four civil Settlement Agreements are fully executed by the Parties, (b) all notices of dismissal described in the civil Settlement Agreements are docketed by the Court, or (c) the Court accepts LIFECHEM, INC.'s, NMC Medical Products, Inc.'s, and NMC Homecare, Inc.'s guilty pleas and imposes the sentences set forth in their respective Plea Agreements. NMC and FMCH, collectively, shall pay the Settlement Amount to the United States according to the schedule, terms and instructions contained in the Promissory Note executed contemporaneously with this Agreement, attached as Exhibit A, and incorporated herein by reference. Within a reasonable amount of time after receipt of the first payment from NMC and FMCH pursuant to the terms of the Promissory Note, the United States shall pay to (a) the Participating States, collectively, according to written payment instructions from the Participating States, an amount of seven hundred fifty four thousand one hundred twenty-five dollars ($754,125) as their share of the Settlement Amount and (b) the Participating Territory, according to written payment instructions from the Participating Territory, an amount of sixty thousand one hundred fifty-five dollars ($60,155) as its share of the Settlement Amount. 2. As an express condition of the Settlement Agreement, to secure NMC's and FMCH's payment obligations under Paragraph 1 of this Agreement (and the other civil Settlement Agreements and criminal Plea Agreements being executed at the same time), NMC and FMCH shall: (a) procure from the Bank of Nova Scotia and deliver or cause to be delivered to the United States Attorney's Office for the District of Massachusetts, on or before January 19, 2000, an amendment to the unconditional, irrevocable Letter of Credit No. S020/43695/96 issued to the United States of America on September 27, 1996 (the "Letter of Credit") to increase the amount of the Letter of Credit to $189,634,446.00. Such amendment shall be in the form attached as Exhibit B. Within 10 days of receipt by the U.S. Attorney's Office of written confirmation from the transferring bank that a quarterly payment, as described in Paragraphs 1.B. through 1.E. of the Promissory Note, or prepayment of such quarterly payments, has been made to the United States, the United States shall provide written permission to the Bank of Nova Scotia to reduce the amount available for drawing under Letter of Credit No. S020/43695/96 by the amount of the principal payment received. In the event that the entire outstanding payment obligation secured by the Letter of Credit is prepaid, then the United States shall provide written permission to reduce the amount available for drawing to zero. The United States shall return this Letter of Credit for cancellation when all obligations are paid in full or it is determined, by the United States, or pursuant to a final and non-appealable order of a court of competent jurisdiction, that NMC and FMCH have fulfilled all payment obligations pursuant to this Agreement. (b) On January 19, 2000, NMC and FMCH shall establish an escrow account in an initial amount of $236,401,919.00 to be held by an independent third party agreeable to the United States, and NMC and FMCH shall increase the escrow amount each day in an amount of $48,546.00 (through accrued interest and/or deposits), beginning on January 20, 2000 and continuing through April 15, 2000, when NMC and FMCH shall increase the escrow amount by an additional amount each day of $7,271.00 (through accrued interest and/or deposits), for each quarterly payment due before the first payment is due on the First Payment Date. On the First Payment Date, all funds in the escrow account shall be paid to the United States to satisfy the payment obligation in Paragraph 1. The terms and conditions of this escrow account shall in no way limit NMC's and FMCH's payment obligations to the United States secured by the Letter of Credit. 3. NMC and FMCH, collectively, agree to pay to the Health Care Financing Administration ("HCFA") the Unrecouped Credit Balances, and this sum shall constitute a debt immediately due and owing to the United States upon the later of the date on which (a) this Agreement is fully executed by the Parties, or (b) the notices of dismissal described in Paragraph 18 of this Agreement are filed and docketed by the Court. NMC and FMCH shall pay the Unrecouped Credit Balances in accordance with written payment instructions to be provided by the United States Attorneys's Office for the District of Massachusetts. HCFA shall direct its fiscal intermediaries identified in Exhibit E, in writing, that they should cease any efforts to recoup the Unrecouped Credit Balances received by DSD prior to January 1, 1999 and reported by DSD on Forms 838. NMC and FMCH shall provide HCFA with any additional documentation necessary to this process. In the event that HCFA or any fiscal intermediary initiates a recoupment contrary to such directions, NMC and FMCH shall notify Dara Corrigan, Associate General Counsel of HCFA, and HCFA shall instruct the fiscal intermediary to suspend the recoupment. 4. NMC and FMCH are in default of this Agreement on the date of occurrence of any of the following events ("Events of Default"): a. NMC's and FMCH's failure to procure, deliver or maintain the Letter of Credit; b. NMC's and FMCH's failure to pay any amount provided for in the Promissory Note attached as Exhibit A within two days of when such payment is due and payable; 1. NMC's and FMCH's failure to pay the Unreconciled Credit Balances as provided for in Paragraph 3 above; d. If prior to making the full payment of the amount due under the Promissory Note or Paragraph 3 above,(i) NMC and/or FMCH commences any case, proceeding, or other action (A) under relief of debtors, seeking to have any order for relief of debtors, or seeking to adjudicate NMC and/or FMCH as bankrupt or insolvent, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for NMC and/or FMCH or for all or any substantial part of NMC's and/or FMCH's assets; or (ii) there shall be commenced against NMC and/or FMCH any such case, proceeding or other action referred to in clause (i) which results in the entry of an order for relief and any such order remains undismissed, or undischarged or unbonded for a period of thirty (30) days; or (iii) NMC and/or FMCH takes any action authorizing, or in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth above in this sub-Paragraph 4.d.; 2. Failure by NMC and FMCH to establish, maintain or make the required payments to the escrow account described in Paragraph 2b. If payments due under Paragraph 1 are received late, but within the two-day grace period provided in Paragraph 5 of the Promissory Note, interest incurred during such grace period will be assessed at two times the daily amount in effect on the date the payment was due. 6. NMC and FMCH shall provide the United States written notice of an Event of Default within two (2) business days of such event by overnight mail, or facsimile followed by overnight delivery, to the United States Attorney's Office, District of Massachusetts, One Courthouse Way, Suite 9200, Boston, MA 02210, Attention: Suzanne E. Durrell, Assistant U.S. Attorney (or to the attention of such other person as may be designated in writing by the United States Attorney's Office). 7. Immediately upon the occurrence of an Event of Default, without further notice or presentment and demand by the United States: a. The Settlement Amount plus accrued interest through the end of the applicable quarter as set forth in Paragraph 1 of the Promissory Note and the Unreconciled Credit Balances referenced in Paragraph 3 above (minus any payments to date of principle and accrued interest) shall become immediately due and payable ("Settlement Default Amount"). Interest shall be calculated on the Settlement Default Amount at the Prime Rate as published in the Wall Street ----------- Journal on the Effective Date of this Agreement, plus 5% from the date of the - ------- Event of Default. b. In addition, NMC and FMCH will pay the United States all reasonable costs of collection and enforcement of this Agreement, including attorney's fees and expenses, plus interest described in Paragraph 7.a. above. The Settlement Default Amount, plus interest, described in Paragraph 7.a. above, together with the costs of collection and enforcement described in this sub-paragraph, will be referred to as the "Default Obligation". 8. Upon the occurrence of an Event of Default, the United States may exercise, at its sole option, one or more of the following rights: a. The United States may draw the full amount available for drawing under the Letter of Credit and retain all proceeds thereof. b. The United States may enforce the terms of the Guarantee Agreement between the United States of America, Fresenius Medical Care GMBH, a German corporation and the predecessor of Fresenius Medical Care AG, W.R. Grace & Co., a New York corporation, and National Medical Care, Inc., dated July 31, 1996, attached as Exhibit C. c. The United States retains any and all other rights and remedies it has or may have under law and equity. 3. No failure or delay on the part of the United States to exercise any right or remedy shall operate as a waiver of the United States' rights. No single or partial exercise by the United States of any right or remedy shall operate as a waiver of the United States' rights. 9. In an Event of Default under Paragraph 4.d. above (Commencement of Bankruptcy or Reorganization Proceeding): a. NMC and FMCH agree not to contest or oppose any motion filed by the United States seeking relief from or modification of the automatic stay of 11 U.S.C. (S) 362(a); not to seek relief under 11 U.S.C. (S) 105 to enjoin or restrain the United States from recovering monies owed by NMC and FMCH arising out of this Agreement or the attached Promissory Note, or from recovering monies through presentment against the Letter of Credit. NMC and FMCH recognize that this express waiver is in consideration for the settlement of claims by the United States described in Preamble Paragraph H above, under the terms and conditions contained in this Settlement Agreement. b. By expressly waiving the automatic stay provision, NMC and FMCH agree not to oppose or interfere with any motion made in federal court (including bankruptcy courts) by the United States to suspend payments to NMC and DSD from the Title XVIII (Medicare), Title XIX (Medicaid) programs, and other federal health care programs; c. This Agreement shall be voidable at the sole option of the United States; d. If any term(s) of this Agreement are set aside for any reason, including as a result of a preference action brought pursuant to 11 U.S.C. (S) 547, the United States, at its sole option and in its discretion, may rescind all terms of this Agreement and seek recovery of the full amount of claims and allegations identified herein and in the Civil Actions, or, in the alternative, enforce the remaining terms of this Agreement. In the event of rescission of this Agreement, all Parties reserve all rights, claims, and defenses that are available under law and equity as of the Effective Date of this Agreement; and e. In addition to the rights enumerated in Paragraph 8.a. through 8.d. above, the United States and all other Parties shall retain all rights and claims they have or may have under law and equity. 10. Subject to the exceptions and limitations in Paragraph 11 below, in consideration of the obligations of DSD and FMCH set forth in this Agreement, conditioned upon payment in full of the Settlement Amount and the Unrecouped Credit Balances, subject to Paragraph 30, (concerning bankruptcy proceedings commenced within 91 days of any payment under this Agreement), the United States, on behalf of itself, and its officers, agents, agencies, and departments, will release and will be deemed to have released DSD including NMC, FMCH, and the subsidiaries of NMC and FMCH listed on the attached Exhibit D (collectively, the subsidiaries of NMC and FMCH listed on Exhibit D will be referred to as the "NMC Companies," and the corporate entities listed on Exhibit D comprise the only entities which constitute the "NMC Companies" within the meaning of this Agreement), and the current directors, officers, employees, and agents of the DSD, FMCH and the NMC Companies who were not employed by or in any way affiliated with DSD, FMCH and the NMC companies prior to September 30, 1996, from any civil or administrative monetary claim (including recoupment claims) that the United States has or may have under the False Claims Act, 31 U.S.C. (S)(S) 3729-3733; the Program Fraud Civil Remedies Act, 31 U.S.C. (S)(S) 3801-3812; the Civil Monetary Penalties Law, 42 U.S.C. (S) 1320a-7a; or common law claims for fraud, payment by mistake of fact, breach of contract or unjust enrichment for the conduct described in Preamble Paragraphs H and M above with respect to Medicare, Railroad Retirement Medicare, TRICARE, FEHBP, the VA, and/or the Medicaid programs of the Participating States and the Participating Territory. 11. Notwithstanding any term of this Agreement, the United States specifically does not release DSD, FMCH or the NMC Companies, or any individual from any and all of the following: (a) any potential criminal, civil or administrative claims arising under Title 26, U.S. Code (Internal Revenue Code); (b) any criminal liability; (c) any potential liability to the United States (or any agencies thereof) for any conduct other than that identified in Preamble Paragraphs H and M above, including but not limited to any allegations in the Civil Actions not encompassed by Preamble Paragraphs H and M; (d) any entities not specifically included on the list of NMC Companies set forth in Exhibit D; (e) any claims based upon such obligations as are created by this Agreement; (f) except as explicitly stated in this Agreement, any administrative liability, including mandatory exclusion from Federal health care programs; (g) any express or implied warranty claims or other claims for defective or deficient products and services provided by DSD, including quality of testing or product claims; (h) any claims for personal injury or property damage or for other consequential damages arising from the conduct described in Preamble Paragraphs H and M above; (i) any claims based upon failure to deliver items or services; (j) any civil or administrative claims against any individual who was an officer, director, trustee, agent, employee, or was in any way affiliated with DSD or NMC's parents, subsidiaries, divisions, or affiliates at any time prior to September 30, 1996; or (k) any civil or administrative claims against any individual, including current directors, officers, employees and agents, who is criminally indicted or convicted of an offense, or who enters a criminal plea related to the conduct alleged in Preamble Paragraphs H and M above. 12. FMCH, on behalf of itself and its parents, affiliates, subsidiaries, and divisions, including but not limited to NMC, has entered into a Corporate Integrity Agreement with HHS-OIG, which is incorporated by reference into this Agreement. FMCH will immediately upon execution of this Agreement implement its obligations under the Corporate Integrity Agreement. 13. In consideration of the obligations of DSD and FMCH set forth in this Agreement, conditioned upon payment in full of the Settlement Amount and the Unrecouped Credit Balances, subject to Paragraph 30 below (concerning bankruptcy proceedings commenced within 91 days of any payment under this Agreement), and conditioned upon FMCH's entering into the Corporate Integrity Agreement incorporated by reference, the OIG-HHS agrees to release and refrain from instituting, directing, or maintaining any administrative claim or any action seeking exclusion from the Medicare, Medicaid or other Federal health care programs (as defined in 42 U.S.C. (S) 1320a-7b(f)) against DSD, FMCH or the NMC Companies and their current directors, officers, employees, and agents who were not employed by or in any way affiliated with DSD or any of NMC's parents, subsidiaries, divisions, or affiliates at any time prior to September 30, 1996, under 42 U.S.C. (S) 1320a-7a (Civil Monetary Penalties Law) or 42 U.S.C. (S) 1320a-7(b) (permissive exclusion) for the conduct described in Preamble Paragraphs H and M, except as reserved in Paragraph 11 above and as reserved in this Paragraph. The OIG-HHS expressly reserves all rights to comply with any statutory obligations to exclude the DSD, FMCH and the NMC Companies from the Medicare, Medicaid, or other Federal health care programs under 42 U.S.C. (S) 1320a-7(a) (mandatory exclusion). Nothing in this Paragraph precludes the OIG-HHS from taking action against entities or individuals for conduct and practices for which civil claims have been reserved in Paragraph 11 above. 14. In consideration of the obligations of DSD and FMCH set forth in this Agreement, conditioned upon payment in full of the Settlement Amount and Unrecouped Credit Balances, and subject to Paragraph 30 below (concerning bankruptcy proceedings commenced within 91 days of any payment under this Agreement), TSO agrees to release and refrain from instituting, directing, or maintaining any administrative claim or any action seeking exclusion from the TRICARE program against DSD, FMCH or the NMC Companies and their directors, officers, employees, and agents who were not employed by or in any way affiliated with DSD or NMC's subsidiaries, divisions, and affiliates at any time prior to September 30, 1996, under 32 C.F.R. (S) 199.9 for the conduct described in Preamble Paragraphs H and M, except as reserved in Paragraph 11 above and as reserved in this Paragraph. The TSO expressly reserves all rights to comply with any statutory obligations to exclude DSD, FMCH and the NMC Companies from the TRICARE program under 32 C.F.R. (S)(S) 199.9(f)(1)(i)(A), (f)(1)(i)(B), (f)(1)(i)(D), and (f)(1)(iii). Nothing in this Paragraph precludes the TSO from taking action against entities or persons, or for conduct or practices, for which civil claims have been reserved in Paragraph 11 above. 15. In consideration of the obligations of DSD and FMCH as set forth in this Agreement, conditioned upon payment in full of the Settlement Amount and Unrecouped Credit Balances, and subject to Paragraph 30 below (concerning bankruptcy proceedings commenced within 91 days of any payment under this Agreement), OPM agrees to release and refrain from instituting, directing, or maintaining any administrative claim or any action seeking exclusion from FEHBP against DSD, FMCH and the NMC Companies and their directors, officers, employees, and agents who were not employed by or in any way affiliated with DSD or NMC's subsidiaries, divisions, or affiliates at any time prior to September 30, 1996, under 5 U.S.C. (S) 8902a or 5 C.F.R. Part 970 for the conduct described in Preamble Paragraphs H and M including that in the Civil Action, except as reserved in Paragraph 11 above, and except if the DSD, FMCH or the NMC Companies or any individuals are excluded by the Office of Inspector General of HHS pursuant to 42 U.S.C. (S) 1320a-7(a). Nothing in this paragraph precludes OPM from taking action against entities or persons, or for conduct and practice for which civil claims have been reserved in Paragraph 11 above. 16. Bradford agrees that the settlement of his Civil Action is fair, adequate and reasonable under all the circumstances, pursuant to 31 U.S.C. (S) 3730(c)(2)(B). Price agrees that the settlement of his Civil Action is fair, adequate and reasonable under all the circumstances, pursuant to 31 U.S.C. (S) 3730(c)(2)(B). On the United States' receipt of the First Payment pursuant to Paragraph 1 above, each of Relator Price and Bradford, for himself, his heirs, successors and assigns, will release and will be deemed to have released DSD, FMCH and the NMC Companies and their parents, affiliates, divisions, subsidiaries, predecessors, successors, assigns, and transferees, and any of their current or former directors, officers, employees, counsel, agents, and representatives from any and all claims that he has or may have that arise from or relate to any and all of the allegations in his Civil Action, the conduct described in Preamble Paragraphs H and M, and his employment with any of the corporate entities referenced in this Paragraph, except claims by Relators Price and/or Bradford for attorney's fees and costs pursuant to 31 U.S.C. (S) 3730(d)(1). If NMC and FMCH default on their payment obligations under Paragraph 1 above, the respective releases given by Relator Price and Bradford shall, at the sole option and discretion of each Relator, upon written notice to NMC and FMCH, be rescinded. 17. The United States agrees to pay Relators Bradford and Price according to the terms set forth below: a. The United States agrees to pay Relator Bradford 18% from the Federal Share of the Settlement Amount attributable to the allegations in the Bradford qui tam ($799,194), a total principal amount of one hundred forty three thousand eight hundred fifty five dollars ($143,855) plus 18% of the interest paid by NMC and FMCH on that principal amount, if any. To satisfy this obligation, the United States will pay Relator Bradford as payments by NMC are received under the terms of the Promissory Note, as more particularly set forth in Exhibit A to the Promissory Note as those payments relate to this Agreement. The first payment to Relator Bradford will be made within 21 days after the First Payment Date, and subsequent payments to Relator Bradford will be made within 21 days after each additional payment is received by the United States, by wire transfer to Relator Bradford in accordance with instructions to be provided by Relator's counsel. Relator Bradford, for himself individually, and for his respective heirs, successors, and assigns, will release and will be deemed to have released and forever discharged the United States from any claims pursuant to 31 U.S.C. (S) 3730, including 31 U.S.C. (S)(S) 3730(b), (c), (d) and (d)(1), for a share of the proceeds of the Civil Action, from any claims for a share of the Settlement Amount, and from any claims arising from the filing of his Civil Action, and in full settlement of claims under this Agreement. This Agreement does not resolve or in any manner affect any claims the United States has or may have against Relator Bradford, arising under Title 26, U.S. Code (Internal Revenue Code), or any claims arising under this Agreement. b. The United States agrees to pay Relator Price 18% of the Federal Share of the Settlement Amount attributable to the allegations of the Price qui tam ($15,204,234), a total principal amount of two million seven hundred thirty six thousand seven hundred sixty two dollars ($2,736,762), plus 18% of the interest paid by NMC and FMCH on that principle amount of $15,204,234, if any. To satisfy this obligation, the United States will pay Relator Price as payments by NMC are received under the terms of the Promissory Note, as more particularly set forth in Exhibit A to the Promissory Note as those payments relate to this Agreement. The first payment to Relator Price will be made within 21 days after the First Payment Date, and subsequent payments to Relator Bradford will be made within 21 days after each additional payment is received by the United States, by wire transfer to Relator Price in accordance with instructions to be provided by Relator's counsel. Relator Price, for himself individually, and for his respective heirs, successors, and assigns, will release and will be deemed to have released and forever discharged the United States from any claims pursuant to 31 U.S.C. (S) 3730, including 31 U.S.C. (S)(S) 3730(b), (c), (d) and (d)(1), for a share of the proceeds of the Civil Action, from any claims for a share of the Settlement Amount, and from any claims arising from the filing of his Civil Action, and in full settlement of claims under this Agreement. This Agreement does not resolve or in any manner affect any claims the United States has or may have against Relator Price, arising under Title 26, U.S. Code (Internal Revenue Code), or any claims arising under this Agreement. 18. After this Agreement is fully executed, the United States and the Relators will notify the Court that all pertinent Parties have stipulated that, to the extent alleged in Paragraph H only, the Civil Action shall be dismissed with prejudice effective upon receipt by the United States, the Participating States and Participating Territory of the payments described in Paragraph 1 above, pursuant to and consistent with the terms of this Agreement. The United States and the Relators will also notify the court that all pertinent Parties have stipulated that the remaining claims by the Relators in the Civil Actions, to the extent not alleged in Preamble Paragraph H, shall be dismissed with prejudice as to the respective Relator and without prejudice as to the United States with the exception of Relators' claims for attorney's fees and costs pursuant to 31 U.S.C. (S) 3730(d)(1), which shall not be dismissed. The Parties agree that, except for Relator Bradford's claims for statutory attorney's fees and costs, which will remain in the jurisdiction of the United States District Court for the Southern District of Florida, the United States District Court for the District of Massachusetts shall maintain jurisdiction of any remaining claims in each Civil Action, in any Events of Default as defined in Paragraph 4, or in the event of disputes under this Agreement. 19. Effective upon the filing and docketing of the notices of dismissal described in Paragraph 18, DSD, FMCH and the NMC Companies, and their parent, successor, subsidiary and affiliate corporations release and will be deemed to have released each of Bradford and Price, individually, any and all claims that these corporations have or may have related to or arising from any of the allegations in the Civil Actions, the conduct described in Preamble Paragraph H and any matters arising from either Relator's employment with the corporate entities referenced in this Paragraph. 20. DSD, FMCH and the NMC Companies waive and will not assert any defenses these entities may have to any criminal prosecution or administrative action relating to the conduct described in Preamble Paragraphs H and M, which defenses may be based in whole or in part on a contention that, under the Double Jeopardy Clause of the Fifth Amendment of the Constitution or Excessive Fines Clause of the Eighth Amendment of the Constitution, this Settlement Agreement bars a remedy sought in such criminal prosecution or administrative action. DSD and the NMC Companies further agree that nothing in this Agreement is punitive in purpose or effect. FMCH and the NMC Companies covenant to cooperate fully and truthfully with the United States' civil investigation of individuals and entities not specifically released in this Agreement. Upon reasonable notice, the NMC Companies will make reasonable efforts to facilitate access to, and encourage the cooperation of, its directors, officers, and employees for interviews and testimony, consistent with the rights and privileges of such individuals, and will furnish to the United States, upon reasonable request, all non-privileged documents and records in its possession, custody or control. 22. On the effective date of this Agreement, DSD, FMCH and the NMC Companies release and will be deemed to have released the United States, its agencies, employees, servants, and agents from any claims (including attorneys fees, costs, and expenses of every kind and however denominated) which DSD and the NMC Companies have or may have against the United States, its agencies, employees, servants, and agents, related to or arising from the United States' civil, criminal and administrative investigation and prosecution of DSD, NMC and FMCH. 23. The Settlement Amount and the Unrecouped Credit Balances that NMC and FMCH must pay pursuant to Paragraphs 1 and 3 of this Agreement will not be decreased as a result of the denial of claims for payment now being withheld from payment by any Medicare carrier or intermediary, Railroad Retirement Medicare carrier, TRICARE, FEHBP, VA, or any Medicaid payor, related to the conduct described in Preamble Paragraph H; and DSD and the NMC Companies agree not to resubmit to any Medicare carrier or intermediary, Railroad Retirement Medicare carrier, TRICARE, FEHBP, VA, or any Medicaid payor any previously denied claims related to the conduct described in Preamble Paragraph H, and agree not to appeal any such denials of claims. 24. The FMCH and the NMC Companies agree that all costs (as defined in the Federal Acquisition Regulations ("FAR") (S) 31.205-47 and in Titles XVIII and XIX of the Social Security Act, 42 U.S.C. (S)(S) 1395-1395ddd (1997) and 1396- 1396v(1997), and the regulations promulgated thereunder) incurred by or on behalf of DSD and the NMC Companies, and their divisions, subsidiaries and affiliates, and their present and former officers, directors, employees, shareholders and agents in connection with: (a) the matters covered by this Agreement; (b) the Government's audits, administrative, civil and criminal investigation and prosecution of DSD and FMCH; (c) these corporate entities' investigation, defense, and corrective actions undertaken in response to the Government's administrative, civil and criminal investigations, and in connection with the matters covered by this Agreement, and including the obligations undertaken pursuant to the Corporate Integrity Agreement (including attorneys fees); (d) the negotiation and performance of this Agreement, and the Corporate Integrity Agreement; and (e) the payments made to the United States provided for in this Agreement, and to Relators for attorney's fees and costs, are unallowable costs on Government contracts and under Medicare, Railroad Retirement Medicare, Medicaid, TRICARE, FEHBP, and the VA programs (hereafter, "unallowable costs"). These unallowable costs will be separately estimated and accounted for by DSD and the NMC Companies and these entities will not charge such unallowable costs directly or indirectly to any contracts with the United States or any Medicaid program, or seek payment for such unallowable costs through any cost report, cost statement, information statement or payment request submitted by the NMC Companies or any of their divisions, subsidiaries or affiliates to the Medicare, Railroad Retirement Medicare, Medicaid, TRICARE, VA or FEHBP programs. FMCH and the NMC Companies further agree that within 270 days of the effective date of this Agreement these entities will identify to applicable Medicare, Railroad Retirement Medicare, and TRICARE fiscal intermediaries, carriers and/or contractors, and Medicaid, VA and FEHBP fiscal agents, any unallowable costs (as defined above) included in payments previously sought from the United States, or any Medicaid Program, including, but not limited to, payments sought in any cost reports, cost statements, information reports, or payment requests already submitted by the NMC Companies or any of their subsidiaries, affiliates, or divisions and will request, and agree, that such cost reports, cost statements, information reports or payment requests, even if already settled, be adjusted to account for the effect of the inclusion of the unallowable costs. FMCH and the NMC Companies agree that the United States will be entitled to recoup from the NMC Companies any overpayment as a result of the inclusion of such unallowable costs on previously-submitted cost reports, information reports, cost statements or requests for payment. Any payments due after the adjustments have been made shall be paid to the United States pursuant to the direction of the Department of Justice, and/or the affected agencies. The United States reserves its rights to disagree with any calculations submitted by DSD, FMCH and the NMC Companies, or any of their subsidiaries, affiliates or divisions, on the effect of inclusion of unallowable costs (as defined above) on the NMC Companies or any of their subsidiaries, affiliates or divisions' cost reports, cost statements or information reports. Nothing in this Agreement shall constitute a waiver of the rights of the United States to examine or reexamine the unallowable costs described above. 25. This Agreement is intended to be for the benefit of the Parties only, and by this instrument the Parties do not release any claims against any other person or entity except as specifically identified in Paragraphs 10, 13, 14, 15, 16, 17 and 19 above. 26. FMCH and the NMC Companies agree that they will not seek payment for any of the health care billings covered by this Agreement from any health care beneficiaries or their parents, sponsors, estates, heirs, successors or assigns. DSD and the NMC Companies waive any causes of action against these beneficiaries or their parents, sponsors, estates, heirs, successors, or assigns based upon the claims for payment covered by this Agreement. 27. Nothing in this Agreement constitutes an agreement by the United States concerning the characterization of the amounts paid hereunder for purposes of any proceeding under Title 26 of the Internal Revenue Code. 28. Except as provided in Paragraph 7.b., and except for Relators' claim for statutory attorney's fees and costs, each party to this Agreement will bear its own legal and other costs incurred in connection with this matter, including by way of example only, all costs incurred in the investigation and defense of this matter, the preparation and performance of this Agreement, and all corrective actions taken in response to the investigation and resolution of this matter. 29. NMC and FMCH expressly warrant that they have reviewed their financial condition and that they currently are solvent on a consolidated basis within the meaning of 11 U.S.C. Section 547(b)(3), and expect to remain solvent on a consolidated basis following payment to the United States hereunder. Further, the Parties expressly warrant that, in evaluating whether to execute this Agreement, the Parties (a) have intended that the mutual promises, covenants and obligations set forth herein constitute a contemporaneous exchange for new value given to DSD, NMC and FMCH within the meaning of 11 U.S.C. Section 547(c)(1), and (b) have concluded that these mutual promises, covenants, and obligations do, in fact, constitute such a contemporaneous exchange. 30. In the event NMC or FMCH commences, or a third party commences, within 91 days of any payment under of this Agreement, any case, proceeding, or other action (i) under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have any order for relief of NMC and/or FMCH's debts, or seeking to adjudicate NMC and/or FMCH as bankrupt or insolvent, or (ii) seeking appointment of a receiver, trustee, custodian or other similar official for NMC and/or FMCH or for all or any substantial part of NMC and/or FMCH's assets, NMC and FMCH agree as follows: a. NMC and FMCH's obligations under this Agreement may not be avoided pursuant to 11 U.S.C. Section 547, and NMC and FMCH will not argue or otherwise take the position in any such case, proceeding or action that: (i) NMC and/or FMCH's obligations under this Agreement may be avoided under 11 U.S.C. Section 547; (ii) NMC and FMCH were insolvent on a consolidated basis at the time this Agreement was entered into, or became insolvent on a consolidated basis as a result of the payment made to the United States hereunder; or (iii) the mutual promises, covenants and obligations set forth in this Agreement do not constitute a contemporaneous exchange for new value given to NMC and/or FMCH. b. In the event that NMC and/or FMCH's obligations hereunder are avoided pursuant to 11 U.S.C. Section 547, the United States, at its sole option, may rescind the releases in this Agreement, and bring any civil and/or administrative claim, action or proceeding against DSD, and/or FMCH for the claims that would otherwise be covered by the releases provided in Paragraphs 10,13, 14 and 15 above. If the United States chooses to do so, DSD and FMCH agree that (i) any such claims, actions or proceedings brought by the United States (including any proceedings to suspend payments to NMC and DSD from Medicare, Medicaid, or other federal health care programs) are not subject to an "automatic stay" pursuant to 11 U.S.C. Section 362(a) as a result of the action, case or proceeding described in the first clause of this Paragraph, and that DSD and FMCH will not argue or otherwise contend that the United States' claims, actions or proceedings are subject to an automatic stay; (ii) that DSD and FMCH will not plead, argue or otherwise raise any defenses under the theories of statute of limitations, laches, estoppel or similar theories, to any such civil or administrative claims, actions or proceeding which are brought by the United States within 90 calendar days of written notification to NMC and FMCH that the releases herein have been rescinded pursuant to this Paragraph, except to the extent such defenses were available on the date of this Agreement; and (iii) the United States has a valid claim against NMC and FMCH in the amount of the Default Obligation, and the United States may pursue its claim, inter alia, in the Price and Bradford Civil Actions, as well as in any other case, action, or proceeding. c. DSD and FMCH acknowledge that its agreements in this Paragraph are provided in exchange for valuable consideration provided in this Agreement. 31. DSD and FMCH and the Relators represent that this Agreement is freely and voluntarily entered into without any degree of duress or compulsion whatsoever. 32. This Agreement is governed by the laws of the United States. The Parties agree that the exclusive jurisdiction and venue for any disputes arising between and among the Parties under this Agreement will be the United States District Court for the District of Massachusetts, except that disputes arising under the Corporate Integrity Agreement shall be resolved exclusively upon the dispute resolution provisions set forth in the Corporate Integrity Agreemen t. 33. The undersigned DSD and FMCH signatories represent and warrant that they are authorized by their respective Board of Directors to execute this Agreement. The undersigned United States signatories represent that they are signing this Agreement in their respective official capacities and that they are authorized to execute this Agreement. 34. Except for the representations in Paragraph 29 (regarding solvency), Paragraph 30 (concerning bankruptcy proceedings commenced within 91 days of any payments under this Agreement), and Preamble Paragraph M (express representations by NMC and FMCH upon which the United States relies), the Parties agree that nothing in this Agreement constitutes an admission by any person or entity with respect to any issue of law or fact. 35. This Agreement is effective on the date of signature of the last signatory to the Agreement (the "Effective Date"). 36. This Agreement shall be binding on all successors, transferees, heirs and assigns. 37. This Agreement, together with Exhibits A through E, and the Corporate Integrity Agreement, constitute the complete agreement among the Parties with regard to the conduct described in Preamble Paragraphs H and M and the Civil Actions. This Agreement may not be amended except by written consent of the Parties, except that only FMCH and OIG-HHS must agree in writing to modification of the Corporate Integrity Agreement. 38. This Agreement may be executed in counterparts, each of which shall constitute an original and all of which shall constitute one and the same Agreement. THE UNITED STATES OF AMERICA ---------------------------- /s/ Suzanne E. Durrell January 18, 2000 By: -------------------------- Dated: ------------------ SUZANNE E. DURRELL Assistant U.S. Attorney District of Massachusetts /s/ Mark A. Lavine January 18, 2000 By: -------------------------- Dated: ------------------ MARK LAVINE Assistant U.S. Attorney Southern District of Florida /s/ Patricia M. Connolly January 18, 2000 By: -------------------------- Dated: ------------------ PATRICIA M. CONNOLLY Special Assistant U.S. Attorney District of Massachusetts By: /s/ Maya Guerra January 18, 2000 -------------------------- Dated: ------------------ MAYA GUERRA Trial Attorney Civil Division U.S. Department of Justice /s/ Lewis Morris 1/18/00 By: -------------------------- Dated: ------------------ LEWIS MORRIS Assistant Inspector General Office of Inspector General U.S. Department of Health and Human Services /s/ Frank D. Titus January 18, 2000 By: -------------------------- Dated: ------------------- FRANK D. TITUS Assistant Director for Insurance Programs U.S. Office of Personnel Management /s/ Robert D. Seaman 1-18-00 By: -------------------------- Dated: ------------------- ROBERT D. SEAMAN General Counsel TRICARE Support Office U.S. Department of Defense NATIONAL MEDICAL CARE, INC. FRESENIUS MEDICAL CARE HOLDINGS, INC. By: /s/ Ben J. Lipps Dated: 1/18/00 ------------------------ -------------------- Ben J. Lipps President National Medical Care, Inc. By: /s/ Ben J. Lipps Dated: 1/18/00 ------------------------ -------------------- Ben J. Lipps President Fresenius Medical Care Holdings, Inc. Acknowledged: - ------------- By: /s/ Ronald L. Castle Dated: 1/18/00 ------------------------ ------------------- RONALD L. CASTLE Counsel to NMC Dialysis Services Division, Inc. National Medical Care, Inc. Fresenius Medical Care Holdings, Inc. By: /s/ Alan E. Reider Dated: 1/18/00 ----------------------- ------------------- ALAN E. REIDER Counsel to NMC Dialysis Services Division, Inc. National Medical Care, Inc. Fresenius Medical Care Holdings, Inc. RELATOR GREGORY S. PRICE By: /s/ Gregory S. Price Dated: 1/18/00 ----------------------- ---------------- Gregory S. Price Acknowledged: - ------------- By: /s/ W. Christian Hoyer Dated: 1/18/00 ----------------------- ---------------- W. Christian Hoyer Counsel to Messr. Price RELATOR RICHARD BRADFORD By: /s/ Richard Bradford Dated: 1/18/00 ----------------------- ---------------- Richard Bradford Acknowledged: - ------------- By: /s/ Robert Barnett Dated: 1/18/00 ----------------------- ---------------- Robert Barnett Counsel to Messr. Bradford EXHIBIT A (Promissory Note) The Promissory Note dated January 19, 2000 from National Medical Care, Inc. and Fresenius Medical Care Holdings, Inc. payable to the order of the United States is incorporated by reference to Exhibit A of Exhibit 10.2 to this Current Report on Form 8-K. EXHIBIT B (Amendment to Irrevocable Nontransferable Letter of Credit) The Amendment to Irrevocable Nontransferable Letter of Credit dated January 19, 2000 issued by the Bank of Nova Scotia, Atlanta Agency to the United States is incorporated by reference to Exhibit B of Exhibit 10.2 to this Current Report on Form 8-K. EXHIBIT C (Guarantee) The Guarantee Agreement dated as of July 31, 1996 among Fresenius Medical Care GmbH, the predecessor to Fresenius Medical Care AG, National Medical Care, Inc., W.R. Grace & Co. and the United States of America, is incorporated by reference to the Company's Registration Statement on Form S-4 (Registration No. 333-09497) dated August 2, 1996 and the exhibits thereto. EXHIBIT D (List of Fresenius Affiliated Entities) The List of Fresenius Affiliated Entities is incorporated by reference to Exhibit D of Exhibit 10.2 to this Current Report on Form 8-K. EXHIBIT E [LETTERHEAD OF FRESENIUS MEDICAL CARE] January 4, 2000 Mr. Alan Reider Arent Fox Kintner Plotkin & Kahn 1050 Connecticut Avenue, NW Washington, DC 20036-5339 Dear Alan: I enclose a summary of Medicare credit balances for FMC dialysis facilities which were entered into the 4245 account through December 31, 1998, (Exhibit A). These balances have not been recouped by the Medicare fiscal intermediaries as of January 3, 2000. An explanation of procedures used to develop the summary is also enclosed. (Exhibit B). A listing of all NMC dialysis billing centers and associated provider numbers is being prepared and will be forwarded by separate cover. Please not that the total outstanding credit balance of $10,982,885. 16 excludes funds taken into income prior to 1994 which are addressed in the pending civil settlement. Please do not hesitate to call me if you have any questions. Sincerely, /s/ John Markus John Markus Senior Vice President Corporate Compliance JM/mep Attachments cc: J. Chiel, Esq. D. Kott B. McGorty J. Ramella MEDICARE UNRECONCILED PAYMENTS BY TRANSACTION CODE THROUGH 12/31/98 FOR ALL FACILITIES (QUERY RUN DATE 1/3/00) Transaction Transaction Total Code Name Amount - -------------------------------------------------------------------------------- OPR Unreconciled Payment $74,681,842.81 OPMR Medicare Refund ($1,250,561.72) OPF Refund ($8,604,488.78) OPA Recoupment ($50,302,511.80) OPD Transfer to Corporate ($5,111,380.29) OPCC Debit Correction ($5,490,761.40) OPCD Credit Correction $6,185,324.36 OPMD Medicare Credit $163,526.07 OPG Audited Transaction $618,387.11 ----------- Medicare UP Balance from System: $10,889,366.36 Neomedica UP Balance: $93,518.80 ---------- Total Medicare UP Balance: $10,982,885.16 FRESENIUS MEDICAL CARE'S UNRECONCILED PAYMENT SYSTEM AN OVERVIEW OF ACCOUNT 4245 AND THE OPEN BALANCE CALCULATION FMC, through input to the Medical Manager Cash Management System, posts all payments which represent credit balances to the 4245 account which is the Unreconciled Payment (U/P) account. These credits are posted to the G/L as a liability. All subsequent debit and credit activity is made utilizing transaction codes. All U/P transactions are maintained in a separate database which currently resides on the HP UX10.20 server. There had been no purges to the database and this database is accessed using a SQLPLUS query tool. In preparation for our settlement of U/P issues with the OIG, query Q010200.txt was run in January. The selection criteria was to produce a summary of all transactions for Medicare credit balances by year for all dates through December 31, 1998. The U/P system does not produce an open balance report. We have calculated the U/P balance using the summaries of all the credit and debit transactions. This query report is the basis for determining the U/P balance for all Medicare credit balances recorded in the system through December 31, 1998. The report indicates that $74,681,842.81 (transaction code OPR) in Medicare credits was posted as unreconciled payments. Of this amount $9,855,060.50 (transaction codes OPF and OPMR) was refunded to Medicare and $50,302,511.80 was recouped by Medicare (transaction code OPA). The total of all Medicare refunds and recoupments is $60,157,572.30 through December 31, 1998. The $5,111,380.29 represents monies transferred to Corporate (transaction code OPD) and taken into income. Transaction codes OPCC and OPCD are debit and credit entries used to correct errors and adjustments to U/Ps already keyed into the system. Transaction code OPMD, a Medicare credit of $163,526.07, was occasionally utilized in the past and is an addition to the U/P total. We have not done a detailed research of these entries. Transaction code OPG entitled Audited Transaction $618,387.11 occurred from 1979 through 1981. We have been advised that these were additions made to the U/P account based on account audits. The U/P Medicare Balance on the 4245 account for this time period is $10,889,366.36. In addition we have $93,518.80 in unrefunded and unrecouped Medicare credit balances form Neomedica which maintains separate accounting records and does not appear in our 4245 account.
FRESENIUS MEDICAL CARE, N.A. DIVISION SUMMARY BY FISCAL INTERMEDIARY Facility Name Facility Medicare provider Fiscal Intermediary Number # - ------------------------------------------------------------------------------------------------- Mansfield 1262 36-2508 Administar Federal Central Ohio 1272 36-2501 Administar Federal Akron 1273 36-2503 Administar Federal Indianapolis 1300 15-2500 Administar Federal Marion County 1362 15-2512 Administar Federal Grant Park 1433 36-2514 Administar Federal Southern Indiana 1434 15-2504 Administar Federal Anderson 1481 15-2510 Administar Federal South Summit 1633 36-2521 Administar Federal Central Ohio East 1639 36-2520 Administar Federal Northwest Indianapolis 1697 15-2524 Administar Federal Wooster 1724 36-2531 Administar Federal Ashland 1795 18-2524 Administar Federal Portsmouth 1796 36-2534 Administar Federal Heart Of Ohio 1827 36-2549 Administar Federal Scottsburg 1906 15-2529 Administar Federal Louisville 1250 18-2503 Administar/Kent Somerset 1480 18-2516 Administar/Kent West Louisville 1490 18-2514 Administar/Kent South Louisville 1635 18-2523 Administar/Kent East Louisville 1676 18-2527 Administar/Kent Prestonburg 1791 18-2507 Administar/Kent Hazard 1792 18-2517 Administar/Kent Morehead 1793 18-2509 Administar/Kent Bishop Lane 1794 18-2521 Administar/Kent BMA LEWISTON 1102 20-2501 Assoc. Hosp. Svcs. of ME BMA FRAMINGHAM 1109 22-2504 Assoc. Hosp. Svcs. of ME BMA BOSTON-TKC 1110 22-2500 Assoc. Hosp. Svcs. of ME BMA SPRINGFIELD 1111 22-2502 Assoc. Hosp. Svcs. of ME BMA CAPE COD 1112 22-2501 Assoc. Hosp. Svcs. of ME BMA PROVIDENCE 1170 41-2500 Assoc. Hosp. Svcs. of ME BMA PORTLAND 1190 20-2500 Assoc. Hosp. Svcs. of ME BMA BOSTON (CARNEY) 1211 22-2506 Assoc. Hosp. Svcs. of ME BMA MEDFORD 1246 22-2507 Assoc. Hosp. Svcs. of ME BMA WOONSOCKET 1307 41-2503 Assoc. Hosp. Svcs. of ME BMA CHICOPEE 1389 22-2513 Assoc. Hosp. Svcs. of ME BMA BROCKTON 1392 22-2505 Assoc. Hosp. Svcs. of ME BMA WESTWOOD 1422 22-2511 Assoc. Hosp. Svcs. of ME
BMA DOVER 1449 30-2501 Assoc. Hosp. Svcs. of ME BMA NEW HAMPSHIRE 1450 30-2500 Assoc. Hosp. Svcs. of ME BMA MANCHESTER 1487 30-2502 Assoc. Hosp. Svcs. of ME BMA ROXBURY 1630 22-2525 Assoc. Hosp. Svcs. of ME BMA FALL RIVER 1631 22-2516 Assoc. Hosp. Svcs. of ME BMA SHREWSBURY 1684 22-2521 Assoc. Hosp. Svcs. of ME BMA NORTH PROVIDENCE 1691 41-2506 Assoc. Hosp. Svcs. of ME BMA WARWICK 1692 41-2504 Assoc. Hosp. Svcs. of ME BMA BATH 1761 20-2502 Assoc. Hosp. Svcs. of ME BMA BOSTON 1942 22-2522 Assoc. Hosp. Svcs. of ME BMA STONEHAM 1943 22-2524 Assoc. Hosp. Svcs. of ME BMA WEYMOUTH 1944 22-2519 Assoc. Hosp. Svcs. of ME Ohio Valley 1077 39-2579 BCBS of W. Pennsylvania Jefferson 1081 39-2576 BCBS of W. Pennsylvania Harrisburg 1087 39-2594 BCBS of W. Pennsylvania Latrobe 1108 39-2561 BCBS of W. Pennsylvania Philadelphia 1120 39-2501 BCBS of W. Pennsylvania Southwestern Penna 1122 39-2519 BCBS of W. Pennsylvania Pottsville 1123 39-2518 BCBS of W. Pennsylvania Pittsburgh 1175 39-2503 BCBS of W. Pennsylvania Greensburg 1176 39-2520 BCBS of W. Pennsylvania Butler 1178 39-2525 BCBS of W. Pennsylvania Hazleton 1209 39-2524 BCBS of W. Pennsylvania Northern Philadelphia 1220 39-2509 BCBS of W. Pennsylvania Easton 1222 39-2517 BCBS of W. Pennsylvania Bethlehem 1223 39-2511 BCBS of W. Pennsylvania Wilkes Barre 1271 39-2512 BCBS of W. Pennsylvania East Stroudsburg 1274 39-2547 BCBS of W. Pennsylvania Allentown 1276 39-2505 BCBS of W. Pennsylvania Central Philadelphia 1281 39-2507 BCBS of W. Pennsylvania West Penn 1302 39-2542 BCBS of W. Pennsylvania Northeastern Philadelphia 1314 39-2533 BCBS of W. Pennsylvania South Hills 1324 39-2544 BCBS of W. Pennsylvania Abington 1333 39-2506 BCBS of W. Pennsylvania Temple/Germantown 1342 39-2530 BCBS of W. Pennsylvania Northwest Philadelphia 1380 39-2560 BCBS of W. Pennsylvania Three Rivers 1386 39-2559 BCBS of W. Pennsylvania Fairmount 1395 39-2540 BCBS of W. Pennsylvania New Castle 1417 39-2552 BCBS of W. Pennsylvania Kittanning 1418 39-2554 BCBS of W. Pennsylvania Pittston 1514 39-2621 BCBS of W. Pennsylvania Mon Valley 1606 39-2565 BCBS of W. Pennsylvania Episcopal 1638 39-2568 BCBS of W. Pennsylvania Parkview 1652 39-2569 BCBS of W. Pennsylvania Uniontown 1683 39-2553 BCBS of W. Pennsylvania Ellwood City 1698 39-2578 BCBS of W. Pennsylvania
Fullerton 1766 39-2603 BCBS of W. Pennsylvania Delco 1831 39-2551 BCBS of W. Pennsylvania Manayunk 1852 39-2611 BCBS of W. Pennsylvania South Philadelphia 1936 39-2607 BCBS of W. Pennsylvania Eastern Shore 1066 01-2547 BCBS of Alabama Mobile 1204 01-2507 BCBS of Alabama Huntsville 1437 01-2522 BCBS of Alabama Scottsboro 1438 01-2519 BCBS of Alabama Montgomery 1462 01-2500 BCBS of Alabama East Mobile 1626 01-2524 BCBS of Alabama West Mobile 1627 01-2525 BCBS of Alabama Prichard 1634 01-2537 BCBS of Alabama Univ S. Alabama 1737 01-2559 BCBS of Alabama Calhoun 1050 11-2623 BCBS of Georgia Tucker 1113 11-2563 BCBS of Georgia Dalton 1164 11-2524 BCBS of Georgia Marietta 1212 11-2510 BCBS of Georgia RCC Northern Georgia 1228 11-2551 BCBS of Georgia Augusta 1260 11-2501 BCBS of Georgia Willette Wallace 1268 11-2521 BCBS of Georgia Thomson 1270 11-2540 BCBS of Georgia Carrollton 1304 11-2520 BCBS of Georgia Atlanta 1308 11-2504 BCBS of Georgia Eastman 1309 11-2519 BCBS of Georgia Warner Robbins 1406 11-2531 BCBS of Georgia Sandersville 1407 11-2534 BCBS of Georgia Macon 1440 11-2533 BCBS of Georgia Covington 1442 11-2533 BCBS of Georgia Dekalb-Gwinnett 1443 11-2511 BCBS of Georgia Coastal 1561 11-2507 BCBS of Georgia Washington 1115 21-2503 BCBS of Maryland Capitol Hill 1116 09-2502 BCBS of Maryland SE Washington 1117 09-2505 BCBS of Maryland Columbia Heights 1118 09-2503 BCBS of Maryland District of Columbia 1119 09-2501 BCBS of Maryland Takoma Park 1129 21-2533 BCBS of Maryland Annapolis 1181 21-2509 BCBS of Maryland Baltimore 1245 21-2504 BCBS of Maryland Martin Luther King, Jr. 1306 09-2509 BCBS of Maryland Laurel 1354 21-2506 BCBS of Maryland Leonardtown 1355 21-2510 BCBS of Maryland Camp Springs 1356 21-2501 BCBS of Maryland Anacostia 1375 09-2508 BCBS of Maryland Greater Baltimore 1456 21-2531 BCBS of Maryland Northeast D.C. 1466 09-2515 BCBS of Maryland La Plata 1625 21-2541 BCBS of Maryland
South Annapolis 1730 21-2557 BCBS of Maryland Woodlawn 1768 21-2558 BCBS of Maryland Metropolitan 1837 21-2524 BCBS of Maryland Upper Marlboro 1910 21-2559 BCBS of Maryland QCDC Baltimore 1948 21-2540 BCBS of Maryland HIC Capitol 1964 21-2562 BCBS of Maryland HIC Baltimore 1977 21-2554 BCBS of Maryland BMA TRENTON 1261 31-2504 BCBS of New Jersey BMA JERSEY CITY 1298 31-2502 BCBS of New Jersey BMA PINEBROOK 1330 31-2503 BCBS of New Jersey BMA NEWARK 1332 31-2505 BCBS of New Jersey BMA IRVINGTON 1334 31-2501 BCBS of New Jersey BMA HILLSIDE 1338 31-2506 BCBS of New Jersey BMA HOBOKEN 1716 31-2529 BCBS of New Jersey BMA PRINCETON 1717 31-2516 BCBS of New Jersey BMA PLAINFIELD 1720 31-2515 BCBS of New Jersey BMA COLONIA 1721 31-2518 BCBS of New Jersey Rich Square 1034 34-2586 BCBS of North Carolina Pamlico 1061 34-2561 BCBS of North Carolina Lincolnton 1092 34-2568 BCBS of North Carolina Concord 1126 34-2519 BCBS of North Carolina West Charlotte 1146 34-2554 BCBS of North Carolina Chester 1249 42-2518 BCBS of North Carolina South Greensboro 1269 34-2537 BCBS of North Carolina North Charlotte 1325 34-2549 BCBS of North Carolina Charlotte 1328 34-2503 BCBS of North Carolina Gastonia 1329 34-2513 BCBS of North Carolina Kinston 1358 34-2518 BCBS of North Carolina Greesboro 1366 34-2504 BCBS of North Carolina New Bern 1374 34-2534 BCBS of North Carolina Asheboro 1411 34-2524 BCBS of North Carolina Monroe 1415 34-2525 BCBS of North Carolina Fayetteville 1447 34-2510 BCBS of North Carolina Lumberton 1448 34-2528 BCBS of North Carolina Burlington 1482 34-2533 BCBS of North Carolina Rocky Mount 1498 34-2517 BCBS of North Carolina Zebulon 1520 34-2589 BCBS of North Carolina Laurinburg 1557 34-2540 BCBS of North Carolina Windsor 1607 34-2547 BCBS of North Carolina Lenoir 1608 34-2509 BCBS of North Carolina Hickory 1609 34-2516 BCBS of North Carolina Albermarle 1612 34-2555 BCBS of North Carolina Raleigh 1653 34-2512 BCBS of North Carolina Smithfield 1654 34-2545 BCBS of North Carolina Cary 1655 34-2544 BCBS of North Carolina Roanoke Rapids 1656 34-2542 BCBS of North Carolina
Clinton 1688 34-2559 BCBS of North Carolina Burke Cnty 1699 34-2563 BCBS of North Carolina Beatties Ford 1772 34-2581 BCBS of North Carolina West Pettigrew 2016 34-2590 BCBS of North Carolina Dunn 2123 34-2557 BCBS of North Carolina Wake 2125 34-2522 BCBS of North Carolina Pitt County 1174 34-2502 BCBS of North Carolina Queens QAKC Bal Sheet Acct 1106 33-2517 Empire BCBS NY S.Queens 1377 33-2531 Empire BCBS Medical Center KC 1594 33-3506 Empire BCBS Nephro-Care 2168 33-2534 Empire BCBS RCC Brandywine 1186 08-2501 Empire BCBS RCC Millsboro 1242 08-2503 Empire BCBS RCC Central Delaware 1303 08-2502 Empire BCBS Christiana 1493 08-2506 Empire BCBS Milford 1719 08-2507 Empire BCBS Southern Maryland/QCDC 1950 21-2539 Mutual of Omaha Camden 1254 42-2509 Palmetto Govt. Benefits Admin. Beaufort 1255 42-2514 Palmetto Govt. Benefits Admin. Twin Oaks/Greenville 1279 42-2503 Palmetto Govt. Benefits Admin. Columbia 1294 42-2504 Palmetto Govt. Benefits Admin. Lexington 1379 42-2517 Palmetto Govt. Benefits Admin. Georgetown 1390 42-2519 Palmetto Govt. Benefits Admin. Newberry 1414 42-2531 Palmetto Govt. Benefits Admin. S. Columbia 1468 42-2543 Palmetto Govt. Benefits Admin. Bennettsville 1550 42-2520 Palmetto Govt. Benefits Admin. Chesterfield 1551 42-2551 Palmetto Govt. Benefits Admin. Darlington 1552 42-2530 Palmetto Govt. Benefits Admin. Easley 1554 42-2541 Palmetto Govt. Benefits Admin. Kingstree 1555 42-2521 Palmetto Govt. Benefits Admin. LaurensCnty 1556 42-2544 Palmetto Govt. Benefits Admin. Marion 1558 42-2545 Palmetto Govt. Benefits Admin.
Mid-Town/Nothside 1559 42-2546 Palmetto Govt. Benefits Admin. Rock Hill 1560 42-2538 Palmetto Govt. Benefits Admin. West Columbia 1675 42-2550 Palmetto Govt. Benefits Admin. Lower Richland 1771 42-2564 Palmetto Govt. Benefits Admin. Sumter 1840 42-2510 Palmetto Govt. Benefits Admin. Manning 1841 42-2537 Palmetto Govt. Benefits Admin. Loris 1843 42-2535 Palmetto Govt. Benefits Admin. Myrtle Beach 1844 42-2507 Palmetto Govt. Benefits Admin. Florence 2087 42-2505 Palmetto Govt. Benefits Admin. Bristol 1201 44-2519 Riverbend Govt. Benefits Admin. Eastern Tennessee 1312 44-2522 Riverbend Govt. Benefits Admin. Johnson City 1391 44-2501 Riverbend Govt. Benefits Admin. Kingsport 1693 44-2577 Riverbend Govt. Benefits Admin. Dialysis Assoc West 1974 44-2533 Riverbend Govt. Benefits Admin. N. Knoxville 1978 44-2527 Riverbend Govt. Benefits Admin. BMA Rio Grande City 1021 45-2666 TrailBlazer QCDC-Univ. Kid. Ctr. North 1022 45-2662 TrailBlazer St. John's 1062 10-2684 TrailBlazer Yazoo City 1065 25-2536 TrailBlazer Mesa 1069 03-2539 TrailBlazer Arcadia 1070 03-2542 TrailBlazer North County 1074 26-2509 TrailBlazer Normandy 1075 26-2531 TrailBlazer Central Phoenix 1078 03-2517 TrailBlazer Sun City West 1084 03-2546 TrailBlazer South Mountain 1085 03-2545 TrailBlazer Florida Kidney Center 1095 10-2559 TrailBlazer Northwest Broward 1096 10-2544 TrailBlazer Northeast Broward 1097 10-2570 TrailBlazer Tamarac 1098 10-2629 TrailBlazer
Jacksonville 1104 10-2612 TrailBlazer New Iberia 1107 19-2522 TrailBlazer Belle Glade 1114 10-2571 TrailBlazer Miami 1125 10-2503 TrailBlazer Hialeah 1127 10-2530 TrailBlazer Tampa 1130 10-2506 TrailBlazer Eureka 1137 05-2543 TrailBlazer Los Angeles 1140 05-2508 TrailBlazer Long Beach 1141 05-2523 TrailBlazer Torrance 1142 05-2556 TrailBlazer Irving Dialysis Center 1143 45-2561 TrailBlazer Oakland 1147 05-2534 TrailBlazer Fremont 1149 05-2722 TrailBlazer BMA Forth Worth 1151 45-2502 TrailBlazer BMA West Houston 1154 45-2519 TrailBlazer BMA Houston 1155 45-2500 TrailBlazer BMA Abilene 1157 45-2511 TrailBlazer BMA Amarillo 1158 45-2513 TrailBlazer BMA Corpus Christi 1159 45-2514 TrailBlazer BMA Galveston 1160 45-2520 TrailBlazer Dublin 1167 05-2568 TrailBlazer BMA Santa Fe 1169 32-2501 TrailBlazer Union City 1171 05-2571 TrailBlazer Los Gatos 1172 05-2694 TrailBlazer BMA Alice 1177 45-2537 TrailBlazer Okeechobee 1182 10-2589 TrailBlazer BMA Pasadena 1185 45-2533 TrailBlazer Marrero 1191 19-2521 TrailBlazer Magee 1193 25-2529 TrailBlazer BMA Seguin 1194 45-2545 TrailBlazer Sanford 1196 10-2546 TrailBlazer BMA Rosenberg 1197 45-2542 TrailBlazer BMA Jasper 1199 45-2573 TrailBlazer BMA Laredo 1210 45-2518 TrailBlazer Humacao 1214 40-2514 TrailBlazer Mayaguez 1215 40-2503 TrailBlazer Permian Basin - Midland 1216 45-2512 TrailBlazer Fort Collins 1217 06-2505 TrailBlazer BMA McAllen 1218 45-2508 TrailBlazer BMA Brownsville 1219 45-2517 TrailBlazer Deltona 1224 10-2616 TrailBlazer BMA Wichita Falls 1226 45-2510 TrailBlazer BMA Beaumont 1227 45-2524 TrailBlazer BMA Cypress Creek 1229 45-2539 TrailBlazer Caguas 1231 40-2505 TrailBlazer Bayamon 1232 40-2504 TrailBlazer
Lincoln 1236 03-2510 TrailBlazer Ukiah 1237 05-2548 TrailBlazer BMA Uvalde 1239 45-2540 TrailBlazer Lafayette 1240 19-2504 TrailBlazer BMA S. San Antonio 1241 45-2544 TrailBlazer South Phoenix 1244 03-2508 TrailBlazer Sarasota 1252 10-2515 TrailBlazer BMA Baytown 1256 45-2575 TrailBlazer Carbondale 1258 14-2514 TrailBlazer Gainsville 1264 10-2512 TrailBlazer Ponce 1267 40-2502 TrailBlazer BMA Albuquerque 1278 32-2500 TrailBlazer Santa Barbara 1282 05-2513 TrailBlazer BMA Bexar County 1283 45-2527 TrailBlazer San Juan 1284 40-2501 TrailBlazer BMA San Antonio 1285 45-2507 TrailBlazer Baton Rouge 1286 19-2501 TrailBlazer BMA West Ft. Worth 1287 45-2594 TrailBlazer Bakersfield 1288 05-2518 TrailBlazer Whittier 1289 05-2519 TrailBlazer Treasure Coast North 1290 10-2525 TrailBlazer Orlando 1291 10-2511 TrailBlazer St Petersburg 1293 10-2519 TrailBlazer Clearwater 1297 10-2542 TrailBlazer Sebring 1301 10-2564 TrailBlazer BMA N.E. San Antonio 1305 45-2565 TrailBlazer BMA N. Houston 1310 45-2574 TrailBlazer Glendora 1311 05-2681 TrailBlazer BMA W. San Antonio 1316 45-2616 TrailBlazer Vero Beach 1317 10-2597 TrailBlazer Phoenix 1318 03-2503 TrailBlazer BMA S. Plains 1319 45-2506 TrailBlazer BMA Bedford 1321 45-2583 TrailBlazer BMA Eagle Pass 1322 45-2541 TrailBlazer Wellington 1337 10-2594 TrailBlazer Inverness 1339 10-2579 TrailBlazer South St.Petersburg 1343 10-2547 TrailBlazer Carolina 1344 40-2507 TrailBlazer Guayama 1345 40-2509 TrailBlazer Crystal River 1346 10-2661 TrailBlazer Lake City 1347 10-2548 TrailBlazer BMA N.E. Albuquerque 1349 32-2504 TrailBlazer Alameda County 1353 05-2586 TrailBlazer Fresno 1359 05-2677 TrailBlazer Lantana 1364 10-2539 TrailBlazer Hollywood 1367 10-2508 TrailBlazer
BMA S.W. Houston 1373 45-2576 TrailBlazer Thousand Oaks 1383 05-2579 TrailBlazer Ocala 1385 10-2537 TrailBlazer Natchitoches 1387 19-2525 TrailBlazer San German 1393 40-2506 TrailBlazer Arecibo 1394 40-2508 TrailBlazer Minden 1400 19-2541 TrailBlazer BMA Weslaco 1401 45-2585 TrailBlazer Chula Visata 1402 05-2563 TrailBlazer BMA Ennis 1404 45-2582 TrailBlazer Aguadilla 1410 40-2513 TrailBlazer Brandon 1413 10-2584 TrailBlazer Bradenton 1419 10-2538 TrailBlazer Palmetto 1420 10-2562 TrailBlazer Camarillo 1423 05-2668 TrailBlazer Greeley 1424 06-2510 TrailBlazer BMA S. Arlington 1426 45-2592 TrailBlazer BMA Central San Antonio 1427 45-2595 TrailBlazer Jackson 1435 25-2505 TrailBlazer BMA Lubbock 1444 45-2568 TrailBlazer BMA Victoria 1445 45-2567 TrailBlazer Kendall 1451 10-2522 TrailBlazer Metropolitan Miami 1452 10-2566 TrailBlazer Canton 1454 25-2522 TrailBlazer Glendale 1455 03-2521 TrailBlazer St. Augustine 1461 10-2557 TrailBlazer Gainsville East 1467 10-2613 TrailBlazer Rio Piedras 1471 40-2515 TrailBlazer Las Americas 1472 40-2512 TrailBlazer Port.St Lucie 1473 10-2609 TrailBlazer Apopka 1474 10-2592 TrailBlazer BMA Corsicana 1477 45-2553 TrailBlazer Southwest Jackson 1483 25-2524 TrailBlazer Carson 1485 05-2687 TrailBlazer BMA Clear Lake 1489 45-2609 TrailBlazer East Orlando 1492 10-2619 TrailBlazer Kansas City 1494 26-2501 TrailBlazer Blue Springs 1495 26-2511 TrailBlazer Desert Valley 1496 03-2530 TrailBlazer Belmont 1565 14-2531 TrailBlazer Bridgeport 1566 14-2524 TrailBlazer Loop/E. Delaware 1567 14-2502 TrailBlazer Evergreen 1568 14-2545 TrailBlazer Gurnee 1569 14-2549 TrailBlazer Hoffman Estates 1570 14-2547 TrailBlazer Lutheran General 1571 14-2559 TrailBlazer
Melrose Pk 1572 14-2554 TrailBlazer Marquette 1573 14-2566 TrailBlazer Cumberland/Norridge 1574 14-2521 TrailBlazer Rolling Meadows 1576 14-2525 TrailBlazer South 1577 14-2519 TrailBlazer South Holland 1578 14-2542 TrailBlazer South Shore 1579 14-2572 TrailBlazer Mission Hills 1614 05-2633 TrailBlazer Midwest City 1615 37-2510 TrailBlazer BMA New Braunfels 1618 45-2626 TrailBlazer Madison Cty 1619 44-2550 TrailBlazer Souwest Tennessee 1620 44-2544 TrailBlazer Memphis 1624 44-2569 TrailBlazer East Mobile 1626 01-2524 TrailBlazer East Arkansas 1644 04-2528 TrailBlazer St. Louis 1645 26-2507 TrailBlazer St Charles 1646 26-2521 TrailBlazer Southwest Illinois 1647 14-2535 TrailBlazer BMA N.W. Bexar Cnty 1648 45-2631 TrailBlazer Jupiter 1649 10-2657 TrailBlazer BMA Texas City 1651 45-2635 TrailBlazer BMA Mission 1657 45-2636 TrailBlazer Estrella 1659 03-2537 TrailBlazer West Ponce 1662 40-2517 TrailBlazer BMA S.E. San Antonio 1664 45-2638 TrailBlazer Live Oak 1669 10-2652 TrailBlazer Duval 1670 10-2662 TrailBlazer Petaluma 1677 05-2624 TrailBlazer Santa Rosa 1678 05-2524 TrailBlazer BMA Cleburne 1679 45-2644 TrailBlazer Culver City 1690 05-2544 TrailBlazer Penn Valley 1695 26-2538 TrailBlazer Homestead 1705 10-2565 TrailBlazer West Kendall 1706 10-2595 TrailBlazer Ventura County 1711 05-2656 TrailBlazer Las Posas 1712 05-2692 TrailBlazer South Miami 1713 10-2502 TrailBlazer Coconut Grove 1714 10-2653 TrailBlazer Bastrop 1735 19-2594 TrailBlazer Univ of S. Alabama 1737 01-2559 TrailBlazer BMA W. Bexar Cnty 1738 45-2668 TrailBlazer BMA Jourdanton 1739 45-2673 TrailBlazer BMA N.W. Houston 1740 45-2671 TrailBlazer BMA Liberty 1742 45-2669 TrailBlazer BMA Dallas South 1746 45-2679 TrailBlazer BMA S. Central Dallas II 1748 45-2680 TrailBlazer
BMA Dallas Central 1749 45-2684 TrailBlazer BMA N.W. Dallas II 1750 45-2683 TrailBlazer Avon Park 1753 10-2694 TrailBlazer East Memphis 1775 44-2524 TrailBlazer BMA Central Ft. Worth 1784 45-2689 TrailBlazer Woodward 1790 37-3506 TrailBlazer BMA Westminster 1801 45-2709 TrailBlazer Concord 1802 05-2759 TrailBlazer Walnut Creek 1803 05-2758 TrailBlazer Pittsburg 1804 05-2757 TrailBlazer Carrollwood 1805 10-2681 TrailBlazer Naples 1806 10-2534 TrailBlazer Bonita Springs 1807 10-2650 TrailBlazer BMA Dallas II 1812 45-2698 TrailBlazer BMA Dallas East 1813 45-2700 TrailBlazer BMA Garland II 1817 45-2701 TrailBlazer BMA S. Dallas County 1818 45-2697 TrailBlazer Gulfport 1822 25-2540 TrailBlazer Graceland 1838 44-2591 TrailBlazer N.E. Tx Dialysis Center 1872 45-2694 TrailBlazer Swiss Ave. Dialysis Ctr. 1874 45-2693 TrailBlazer Village II Dialysis Ctr. 1875 45-2688 TrailBlazer Oak Cliff Dialysis Ctr. 1876 45-2691 TrailBlazer Redbird Dialysis Ctr. 1877 45-2699 TrailBlazer S. Oak Cliff Dialysis Ctr. 1878 45-2687 TrailBlazer Town Gate Dialysis Ctr. 1879 45-2690 TrailBlazer Mockingbird Dialysis Ctr. 1881 45-2501 TrailBlazer North Memphis 1891 44-2593 TrailBlazer Preferred Dialysis Mgmt. 1893 29-2507 TrailBlazer West Boca 1908 10-2582 TrailBlazer BMA Cliffview 1909 45-2674 TrailBlazer Palatka 1912 10-2676 TrailBlazer El Centro 1917 05-2690 TrailBlazer Berkeley 1920 05-2651 TrailBlazer BMA West Texas 1921 45-2604 TrailBlazer North Phx 1923 03-2550 TrailBlazer Starke 1924 10-2668 TrailBlazer Parker 1926 03-2522 TrailBlazer Flagstaff 1927 03-2524 TrailBlazer Salt River 1928 03-2529 TrailBlazer Winslow 1929 03-2536 TrailBlazer QCDC St Louis 1947 26-2528 TrailBlazer Dallas/QCDC 1952 45-2621 TrailBlazer University Kidney Ctr. 1953 45-2603 TrailBlazer North Coast 1954 05-2708 TrailBlazer Florida Ins.for Peritoneal 1973 10-2643 TrailBlazer
Hillcrest 1981 05-2500 TrailBlazer National City 1982 05-2536 TrailBlazer Chula Vista South 1984 05-2653 TrailBlazer N. Chicago/W. Belmont 2022 14-2523 TrailBlazer Evanston 2044 14-2511 TrailBlazer Niles 2052 14-2500 TrailBlazer Morningstar 2295 37-2537 TrailBlazer Milwaukee South 1082 52-2516 United Government Svcs. Kempsville 1083 49-2567 United Government Svcs. Alexandria 1132 49-2505 United Government Svcs. Roanoke 1133 49-2513 United Government Svcs. Norfolk 1135 49-2502 United Government Svcs. Suffolk 1195 49-2530 United Government Svcs. Ann Arbor 1253 23-2502 United Government Svcs. Northeast Wisconsin 1257 52-2500 United Government Svcs. Livonia 1263 23-2501 United Government Svcs. Detroit 1265 23-2500 United Government Svcs. North Arlington 1275 49-2515 United Government Svcs. Fairfax 1277 49-2504 United Government Svcs. Fredericksburg 1311 49-2508 United Government Svcs. Martinsburg 1331 51-2502 United Government Svcs. Smyth County 1340 49-2510 United Government Svcs. New River Valley 1361 49-2532 United Government Svcs. North Roanoke 1397 49-2548 United Government Svcs. Charleston 1398 51-2503 United Government Svcs. Eastern Virginia 1441 49-2538 United Government Svcs. Bluefield 1458 51-2501 United Government Svcs. Dulles 1488 49-2540 United Government Svcs. Richmond 1601 49-2519 United Government Svcs. West End 1602 49-2503 United Government Svcs. Warrenton 1603 49-2525 United Government Svcs. Tappahanock 1604 49-2536 United Government Svcs. Adrian 1605 23-2514 United Government Svcs. Madison Heights 1637 23-2525 United Government Svcs. Owosso 1663 23-2522 United Government Svcs. Flint 1667 23-2521 United Government Svcs. Morgantown 1680 51-2506 United Government Svcs. Milwaukee South 1685 52-2510 United Government Svcs. Northwest Indianapolis 1686 23-2526 United Government Svcs. Appleton 1689 52-2514 United Government Svcs. Oshkosh 1696 52-2518 United Government Svcs. Great Lakes 1727 23-2533 United Government Svcs. Farmville 1797 49-2526 United Government Svcs. St. Clair Shores 1946 23-2517 United Government Svcs. Mt. Vernon/QCDC 1949 49-2557 United Government Svcs. Norfolk Community Hosp. 1995 49-2585 United Government Svcs. Crystal Springs 2091 49-2570 United Government Svcs.
EX-10.6 7 PLEA AGREEMENT/LIFECHEM, INC. EXHIBIT 10.6 U.S. Department of Justice United States Attorney District of Massachusetts Main Reception: (617) 748-3100 United States Courthouse, Suite 9200 1 Courthouse Way Boston, Massachusetts 02210 January 13, 2000 BY HAND Jonathan Chiel Jeffrey E. Stone Choate, Hall & Stewart McDermott, Will & Emery Exchange Place 227 West Monroe Street 53 State Street Chicago, IL 60606-5096 Boston, MA 02109-2891 Alan E. Reider, Esq. Harold Damelin Breckinridge L. Willcox Powers, Pyles, Sutter & Verville Arent, Fox, Kintner, Plotkin & Kahn Twelfth Floor 1050 Connecticut Avenue, NW 1875 Eye Street, NW Washington, D.C. 20036 Washington, DC 20006-5409 Re: LIFECHEM, INC. -------------- Dear Gentlemen: This letter sets forth the Agreement between the United States Department of Justice and the United States Attorney for the District of Massachusetts (collectively the "United States"), and your client, LIFECHEM, INC., ("LIFECHEM"), a Delaware corporation, (collectively referred to as "the Parties") as follows: 1. Guilty Plea ----------- On or before January 19, 2000, or such other date as the Court may set, LIFECHEM shall waive indictment and plead guilty to Count Two of the Information attached hereto as Exhibit A, which charges LIFECHEM with a conspiracy to defraud the United States and one of its agencies, the Health Care Financing Administration, through the submission of false, fictitious and fraudulent claims to the Medicare Program, in violation of 18 U.S.C. Section 286. 1 2. Sentencing Guidelines --------------------- The United States and LIFECHEM agree that the following provisions of the United States Sentencing Guidelines ("U.S.S.G.") apply to sentencing of LIFECHEM with respect to Count Two of the Information: (a) pursuant to U.S.S.G. (S) 8C2.4(a), the loss to the United States from this offense for criminal sentencing purposes is $22,900,000; (b) pursuant to U.S.S.G. (S) 8C2.5, the culpability score is 7, calculated as follows: (1) base score of 5 pursuant to (S) 8C2.5(a); (1) add 4 points pursuant to (S) 8C2.5(b)(2)(A)(i) and (ii); (1) deduct 2 points pursuant to (S) 8C2.5(g)(2). (c) pursuant to (S) 8C2.6, the applicable range for a multiplier is 1.4 to 2.8, and the appropriate multiplier to be applied as to LIFECHEM is 1.6. (d) the Parties agree that there is no basis for a departure under the Sentencing Guidelines, either upward or downward. 3. Agreed Disposition ------------------ The United States and LIFECHEM agree pursuant to Fed. R. Crim. P. 11(e)(1)(C) that the following sentence is the appropriate disposition of Count Two of the Information: (a) a criminal fine in the amount of thirty six million six hundred forty thousand dollars, ($36,640,000) to be paid as follows: (1) an amount of eighteen million one hundred five thousand dollars ($18,105,000) shall be paid within 15 days of sentencing; (2) an amount of nine million two hundred sixty seven thousand dollars ($9,267,000) shall be paid on or before April 16, 2001; and (3) an amount of nine million two hundred sixty seven thousand dollars ($9,267,000) shall be paid on or before July 16, 2001. 2 (b) a mandatory special assessment of $400 pursuant to 18 U.S.C. (S) 3013, which shall be paid to the Clerk of Court on or before the date of sentencing. LIFECHEM acknowledges that it is obligated, pursuant to 18 U.S.C. (S) 3612(f), to pay interest on that portion of the fine which is not paid on or before the fifteenth day after the Court enters judgment in this matter. In light of the pending civil action, United States ex rel. Jay A. Buford, ------------------------------------ et al. v. LIFECHEM, Inc., et al., Civil Action No. 95-10742-NG (D. Mass.), and - -------------------------------- the settlement agreement between LIFECHEM, INC. and others and the United States relating to the civil action which is being signed contemporaneous with this Plea Agreement (the "civil Settlement Agreement"), the parties agree the complication and prolongation of the sentencing process that would result from an attempt to fashion a proper restitution order outweighs the need to provide restitution to the victims in this case, where, as here, the loss suffered by each of the federal health care programs will be recompensed from amounts paid as part of the civil Settlement Agreement. See, 18 U.S.C. (S) --- 3663(a)(1)(B)(ii). Therefore, the United States agrees that it will not seek a separate restitution order as to LIFECHEM as part of the resolution of Count Two of the Information. 4. No Further Prosecution of Defendant ----------------------------------- The United States agrees that, other than the charge in Count Two of the attached Information, it shall not further prosecute LIFECHEM for conduct which (a) falls within the scope of the conspiracy which is charged in Count Two of the Information; (b) was within the scope of the grand jury investigation conducted by the U.S. Attorney; or (c) was known to the U.S. Attorney prior to the date of execution of this letter. The U.S. Attorney expressly reserves the right to prosecute any individual, including but not limited to present and former officers, directors, employees and agents of LIFECHEM, in connection with the conduct encompassed by this Plea Agreement or within the scope of the grand jury investigation. 5. Probation Department Not Bound By Agreement ------------------------------------------- The Parties acknowledge that the disposition agreed upon by the Parties and their calculations under the Sentencing Guidelines are not binding upon the United States Probation Office. 6. Fed. R. Crim. P. 11(e)(1)(C) Agreement -------------------------------------- LIFECHEM's plea shall be tendered pursuant to Fed. R. Crim. P. 11(e)(1)(C). LIFECHEM cannot withdraw its plea of guilty unless the sentencing judge rejects this Plea Agreement. If the sentencing judge rejects the guilty plea, this Plea Agreement shall be null and void at the option of either the United States or LIFECHEM, except as set forth in Paragraph 8 3 below. If LIFECHEM's guilty plea is withdrawn on LIFECHEM's motion for any reason, this Plea Agreement shall be null and void at the option of the U.S. Attorney, except as set forth in Paragraph 8 below. 7. Civil and Administrative Liability ---------------------------------- By entering into this Plea Agreement, the United States does not compromise any civil or administrative liability, including but not limited to any False Claims Act or tax liability, which LIFECHEM may have incurred or may incur as a result of its conduct and its plea of guilty to Count Two of the Information. 8. Waiver of Defenses ------------------ In the event that LIFECHEM's guilty plea is not accepted by the Court for whatever reason, or is later withdrawn for whatever reason, LIFECHEM hereby waives, and agrees not to interpose, any defense to any charges brought against it which it might otherwise have under any statute of limitations or the Speedy Trial Act, except any such defense that LIFECHEM may already have for conduct occurring before March 1, 1994, if charges are filed within 90 days of the date on which such guilty plea is rejected or withdrawn. 9. Breach of Agreement ------------------- If the United States Attorney determines that LIFECHEM has failed to comply with any provision of this Plea Agreement, or has committed any crime between the date of this letter and the date of sentencing in this matter, the United States may, at its sole option, be released from its commitments under this Plea Agreement in their entirety by notifying LIFECHEM, through counsel or otherwise, in writing. The United States may also pursue all remedies available under the law, irrespective of whether it elects to be released from its commitments under this Plea Agreement. LIFECHEM recognizes that no such breach by LIFECHEM of any obligation under this Plea Agreement shall give rise to grounds for withdrawal of its guilty plea. LIFECHEM understands that, should it breach any provision of this Plea Agreement, the United States will have the right to use against LIFECHEM before any grand jury, at any trial or hearing, or for sentencing purposes, any statements which may be made by LIFECHEM, and any information, materials, documents or objects which may be provided by it to the government subsequent to this Plea Agreement, without any limitation. 10. Corporate Authorization ----------------------- LIFECHEM shall provide to the United States and the Court a certified copy of a resolution of the Board of Directors of LIFECHEM, affirming that the Board of Directors has authority to enter into the Plea Agreement and has (1) reviewed the Information in this case and the proposed Plea Agreement; (2) consulted with legal counsel of LIFECHEM's choice in connection with the matter; (3) voted to enter into the proposed Plea Agreement; (4) voted to authorize LIFECHEM to plead guilty to Count Two of the attached Information; and (5) voted to authorize the corporate officer identified below to execute the Plea Agreement and all other documents necessary to carry out the provisions of the Plea Agreement. LIFECHEM agrees that 4 counsel identified below will appear on behalf of LIFECHEM and enter the guilty plea and will also appear for the imposition of sentence. 11. Who Is Bound By Agreement ------------------------- This Plea Agreement binds LIFECHEM and the United States Department of Justice, including each of its United States Attorney's Offices, and can not and does not bind the Tax Division of the U.S. Department of Justice, the Internal Revenue Service of the U.S. Department of Treasury, or any other federal, state or local prosecutive authority. 12. Complete Agreement ------------------ With regard to the disposition of Count Two of the attached Information, this Plea Agreement is the complete and only agreement between the Parties. No promises, representations, agreements or conditions have been entered into other than those set forth in this letter in connection with Count Two. This Plea Agreement supersedes prior understandings, if any, of the parties, whether written or oral in connection with the disposition of Count Two. This Plea Agreement can be modified or supplemented only in a written memorandum signed by the Parties or on the record in court. If this letter accurately reflects the Agreement entered into between the United States and your client LIFECHEM, INC., please sign the Acknowledgment of Plea Agreement below, provide evidence of the requisite authorization to enter into this Plea Agreement, and return the original of this letter to Assistant U.S. Attorneys Susan G. Winkler and Susan Hanson-Philbrick. Very truly yours, By: /s/ Mark W. Pearlstein ------------------------------------- MARK W. PEARLSTEIN Acting United States Attorney District of Massachusetts By: /s/ John Keeney (mwp) ------------------------------ JOHN C. KEENEY Deputy Assistant Attorney General Criminal Division Department of Justice 5 CORPORATE ACKNOWLEDGMENT OF PLEA AGREEMENT ------------------------------------------ The Directors of LIFECHEM, INC. have read this Plea Agreement and the attached criminal Information, in their entirety, and have discussed this matter with legal counsel of the corporation's choosing, including undersigned counsel. As set forth in the attached resolution, the Board of Directors has authorized me, as an officer of the corporation, to enter into this Plea Agreement on behalf of the corporation. I hereby acknowledge, on behalf of LIFECHEM, INC., that this letter fully sets forth LIFECHEM's agreement with the U.S. Attorney relating to the disposition of Count Two of the attached Information, and that no additional promises or representations have been made to the corporation by any official of the United States in connection with the disposition of that charge. LIFECHEM, Inc. is entering into this Agreement freely, voluntarily and knowingly because it is guilty of the offense set forth in Count Two of the Information and it believes this Plea Agreement is in its best interest. Dated: 1/18/00 /s/ Ben J. Lipps ---------------------------- Ben J. Lipps President, LIFECHEM, INC. Dated: January 18, 2000 /s/ Jonathan Chiel ---------------------------- Jonathan Chiel Choate, Hall & Stewart Dated: 1/18/000 /s/ Alan E. Reider ----------------------------- Alan E. Reider Arent, Fox, Kintner, Plotkin & Kahn Dated: 1/18/000 /s/ Breckinridge L. Willcox ----------------------------- Breckinridge L. Willcox Arent, Fox, Kintner, Plotkin & Kahn Dated: January 18, 2000 /s/ Jeffrey E. Stone ----------------------------- Jeffrey E. Stone McDermott, Will & Emery Dated: 1/18/2000 /s/ Harold Damelin ----------------------------- Harold Damelin Powers, Pyles, Sutter & Verville Attorneys for LIFECHEM, INC. 6 EXHIBIT A --------- UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS UNITED STATES OF AMERICA ) ) No. v. ) ) 18 U.S.C. (S)371 (Conspiracy) NMC HOMECARE, INC.; ) 18 U.S.C. (S)286 (Conspiracy) LIFECHEM, INC.; and ) NMC MEDICAL PRODUCTS, INC. ) ) Defendants. ) INFORMATION ----------- The United States Attorney alleges that: General Allegations ------------------- At all times material to this Information, unless otherwise alleged: 1. National Medical Care, Inc. (NMC) was a Delaware corporation engaged in the kidnedialysis business throughout the United States. From prior to 1990 to October 1, 1996 NMC was headquartered in Waltham, MA, and a wholly-owned subsidiary of W.R. Grace & Co. On or about October 1, 1996 NMC, W.R. Grace & Co. and Fresenius AG, a German corporation, underwent a reorganization in which NMC became a wholly-owned subsidiary of Fresenius Medical Care Holdings, Inc., an indirect subsidiary of Fresenius AG. Thereafter, the business of NMC was conducted under the name Fresenius Medical Care, North America, from offices headquartered in Lexington, MA. 1. During most of the period charged in this Information, NMC conducted its business through three principal divisions. Dialysis Services Division ("DSD") operated over 300 kidney dialysis centers located throughout the United States and provided dialysis services to over 30,000 patients. Medical Products Division manufactured and distributed kidney dialysis products, including dialyzers, bloodlines and dialysis solutions, to NMC owned dialysis facilities and independent dialysis facilities. Medical Products Division also operated a clinical blood testing laboratory, known as LIFECHEM, which specialized in blood testing for kidney dialysis patients. The Homecare Division sold infusion therapies, respiratory therapies and durable medical equipment, primarily to patients in the home setting. 1. NMC owned and operated dialysis facilities which were often named "Bio-Medical Applications of (the name of the community where the facility was located)," and were frequently referred to as "BMAs." Within NMC, independent dialysis facilities, not owned or operated by NMC, were frequently referred to as "non-BMAs." 1. NMC Homecare, Inc., ("NMC Homecare"), a defendant herein, was a Delaware corporation and a wholly owned subsidiary of NMC, with a principal place of business of Waltham, MA. 1. NMC Medical Products, Inc. ("MPD"), a defendant herein, was a Delaware corporation and a wholly owned subsidiary of NMC, with a principal place of business of Rockleigh, New Jersey. MPD was formerly known as National Medical Care Medical Products Division, Inc., and before that, as Erika, Inc. 6. LIFECHEM, INC. ("LIFECHEM"), a defendant herein, was a Delaware corporation, headquartered in Northvale, N.J. and a subsidiary of NMC, which operated clinical blood testing laboratories in Northvale, N.J. and Woodland Hills, CA. The Medicare Program -------------------- 7. The Medicare program ("Medicare") was a United States government benefit program, created by Title XVIII of the Social Security Act of 1965, that paid for certain medical services for persons 65 years of age and older and certain other persons. 8. The Health Care Financing Administration ("HCFA") was an agency of the United States Department of Health and Human Services ("HHS"), which was responsible for the administration of the Medicare program. 9. Medicare was divided into two parts, A and B. In general, Part A paid for covered medical services provided to eligible beneficiaries in hospitals. Part B, in general, paid for covered physician services, and other covered goods and services, provided to eligible beneficiaries outside of the hospital setting. 10. HCFA designated certain health insurance companies, known as Fiscal Intermediaries ("FIs"), to process claims for Medicare Part A benefits. HCFA designated certain other health insurance companies, known as carriers, to process claims for Medicare Part B benefits. 11. It was a basic tenet of Medicare coverage that Medicare would reimburse only for covered goods or services, provided to 3 an eligible beneficiary, which were medically necessary for the diagnosis or treatment of illness or injury. The Medicare ESRD Program ------------------------- 12. End Stage Renal Disease (ESRD) was an irreversible and permanent impairment of kidney function requiring dialysis or kidney transplantation to sustain life. The most common form of dialysis, hemodialysis, typically involved treatments three times per week, in which the patient's blood was removed from the body, passed through a dialysis machine to remove impurities and toxins, and then returned to the patient's body. 13. In or about July 1, 1973 Medicare coverage was extended to certain persons suffering from ESRD, without regard to their age. In general, Medicare paid eighty percent (80%) of the Medicare allowable amount for covered services needed by ESRD patients. 14. Medicare established a composite rate to cover the costs of equipment, supplies, certain blood laboratory tests and other services associated with dialysis treatments at independent dialysis facilities. Medicare paid 80 percent of the composite rate directly to the facility for each dialysis treatment provided to an eligible ESRD patient. 15. Medicare also established a monthly capitation rate to cover the cost of physician outpatient services relating to the care of an eligible patient for ESRD. Medicare paid 80 percent of the capitation rate for the physician's services relating to eligible dialysis patients. CHAMPUS ------- 4 16. The Civilian Health and Medical Program of the Uniform Service ("CHAMPUS") was a health insurance program, administered by the United States Department of Defense, to provide health insurance to retired military personnel and the civilian dependents of active duty, retired and deceased military personnel. 5 COUNT ONE (18 U.S.C. (S)371 Conspiracy to Defraud the United States relating - --------- to IDPN) 17. The allegations contained in paragraphs 1 to 4 and 7 to 15 are incorporated herein and realleged as if set forth in full. 18. One of the products which NMC Homecare sold was intradialytic parenteral nutrition ("IDPN"), a nutrition therapy which was provided intravenously to dialysis patients during their dialysis treatments. IDPN was one of the most profitable products which NMC Homecare sold and in some of the years IDPN accounted for virtually all of the profits of NMC Homecare. Medicare was NMC Homecare's principal source of reimbursement for IDPN. 19. Medicare reimbursed for IDPN under the prosthetic device benefit provision of the Social Security Act. Pursuant to a 1984 National Coverage Determination, parenteral and enteral nutrition (PEN) therapies, including IDPN, were a covered Medicare service only if the patient suffered from a severe pathology of the alimentary tract which did not allow absorption of sufficient nutrients to maintain weight and strength commensurate with the patient's general condition. For IDPN to be a covered service, Medicare also required that (1) the patient's impairment be permanent, meaning it was expected to last for at least 90 consecutive days; (2) the therapy be ordered, by a physician, in writing; and (3) the claim be supported by sufficient medical documentation to permit an independent conclusion that the requirements of Medicare's prosthetic device benefit were satisfied. 6 19. Medicare did not cover IDPN if it was supplemental nutrition, even if it was prescribed by a physician to treat malnutrition. 19. NMC Homecare provided IDPN to patients in both BMAs and non-BMAs. NMC Homecare was the exclusive supplier of IDPN to patients in BMAs, but had to compete with other IDPN suppliers to provide IDPN to patients at non-BMAs. 19. NMC Homecare employed IDPN Coordinators to market IDPN. IDPN Coordinators were usually Registered Nurses ("RNs") or Renal Dieticians who were assigned a designated geographic territory. IDPN Coordinators called on dialysis facilities within their territory, both BMAs and non-BMAs; promoted the use of IDPN; assessed whether patients were candidates for IDPN; prepared paperwork relating to the billing for IDPN; and negotiated IDPN contracts with non-BMAs. IDPN Coordinators were paid a base salary, plus a commission for each patient they put on service for IDPN. 19. NMC Homecare maintained a Clinical Reimbursement Department which was responsible for training IDPN Coordinators, reviewing documentation relating to IDPN billing, monitoring Medicare policies and practices relating to IDPN reimbursement, and appealing denied IDPN claims. 19. NMC Homecare usually paid an administration fee, bag fee or hang fee ("hang fee") to the dialysis facility in 7 connection with the administration of IDPN. This hang fee purported to compensate the dialysis facility for the services and resources it devoted to managing and administering IDPN. NMC Homecare's standard hang fee rate was $30 for each bag of IDPN administered. NMC Homecare paid its standard hang fee to the BMAs, and a majority of the non-BMAs, throughout the conspiratorial period alleged in this count. NMC Homecare paid hang fees in excess of $30 per bag to 80 non-BMAs, more or less, for various portions of the conspiratorial period alleged in this count. 19. Beginning in or about February, 1992 and continuing until at least in or about November, 1995 NMC Homecare purported to use an IDPN Administration Fee Calculation Tool ("calculation tool") to justify hang fees in excess of $30 per bag. The calculation tool purported to calculate the amount of time, on average, which various members of the dialysis facility staff spent on managing or administering IDPN, and then multiplied the time, by average wage rates, to calculate an average cost per IDPN treatment. 19. Throughout the period charged in this Information, calculation tools were not, in fact, used to determine the amount of the hang fee which NMC Homecare would pay to a non-BMA. Those amounts were determined primarily by the level of competition which existed for the IDPN business of the non-BMA, the potential volume of IDPN business at issue, and the amount NMC Homecare believed was necessary to obtain or maintain the non-BMA's IDPN 8 business. In many instances, when NMC Homecare paid a hang fee to a non-BMA in excess of $30 per bag, NMC Homecare simply ignored its purported calculation tool requirement, or it obtained a sham calculation tool which did not reflect the non-BMA's true costs. NMC Homecare did not establish procedures to review calculation tools to insure they reflected a non-BMA's true costs. 19. NMC Homecare usually submitted a claim for reimbursement to Medicare monthly for each Medicare beneficiary on IDPN. Claims were submitted on form HCFA 1500, or its electronic equivalent, and separate reimbursement was provided for (1) the IDPN solution; (2) lipids, if administered; (3) rental of a pole; (4) rental of an infusion pump; and (5) an administration kit, which covered the disposable supplies used to administer IDPN. 19. Blue Cross Blue Shield of South Carolina ("BC/BS of SC") was the carrier that processed virtually all of NMC Homecare's IDPN claims during the period May, 1988 to December, 1993. Beginning in or about January, 1994 Medicare transferred responsibility for processing IDPN claims to four Durable Medical Equipment Regional Carriers ("DMERCs"), known as DMERCs A, B, C and D. 19. Medicare required that each IDPN claim be supported by a Certificate of Medical Necessity ("CMN"), signed by physician, indicating that in the physician's opinion the supplies and 9 equipment were medically necessary and the physician would be supervising the patient's treatment. Medicare required an initial certification, for a three month period, followed by subsequent recertifications for varying periods of time. Medicare also required a recertification whenever there was a change in the patient's IDPN prescription. 19. Medicare also required that each IDPN claim be supported by sufficient medical documentation to demonstrate that the prosthetic device benefit was satisfied. In or about the Fall of 1988 NMC Homecare developed the IDPN Information Sheet ("IIS form") to document the medical condition of Medicare beneficiaries. The format of the IIS form was approved by BC/BS of SC. In 1994, when Medicare transferred IDPN claims processing to the DMERCs, NMC Homecare renamed the IIS form the Clinical Nutrition Summary ("CNS"). IIS and CNS forms were used to meet Medicare's medical documentation requirement relating to IDPN. 19. Throughout the period charged in this Information, NMC Homecare's IDPN Coordinators typically drafted an IIS or CNS form for each new Medicare IDPN patient and submitted it to the Clinical Reimbursement Department for review and comment. Thereafter, the IIS or CNS form was typed in final form and a CMN was prepared, using the IIS or CNS form. Both the IIS/CNS form and the CMN were submitted to the patient's physician for signature. Most physicians signed IIS/CNS and CMN forms without making any changes in them. Thereafter, the IIS/CNS and CMN forms were returned to NMC Homecare and used as the basis for 10 billing IDPN to Medicare. On some occasions the IIS/CNS form was submitted to Medicare to substantiate a patient's medical condition. On other occasions, the IIS/CNS form served as the source document for an electronic claim summary which was transmitted to Medicare in support of the IDPN claim. 19. If a Medicare IDPN claim was denied, there were three levels of review available to NMC Homecare. The first level, known as Informal Review, was conducted by carrier personnel, who essentially gave the claim a second look. The next level, known as a carrier Fair Hearing ("FH"), was conducted either in person or by phone, and resulted in a formal written decision. The third level of review involved the submission of the disputed claim to an independent Administrative Law Judge ("ALJ"). The Conspiracy -------------- 33. Beginning in or about May 1988, and continuing until at least June 1996, the exact dates being unknown to the United States Attorney, in the District of Massachusetts and elsewhere, the defendant herein, NMC HOMECARE, INC., did knowingly, willfully and unlawfully combine, conspire, confederate and agree with others, known and unknown, to defraud the United States, by impeding, impairing, obstructing and defeating the lawful governmental function of various departments and agencies of the United States, including particularly HHS and HCFA, in the implementation, execution and administration of the Medicare program, including particularly Medicare's PEN benefit. 11 34. The conspiracy consisted essentially of an unlawful agreement and understanding among the defendant and the co-conspirators: (a) to submit claims to Medicare for reimbursement for IDPN, based on false, fraudulent and misleading statements and material omissions, relating to the beneficiary's medical condition and eligibility for coverage; (b) to submit claims to Medicare for reimbursement for IDPN administration kits, based on false statements relating to the number of kits actually used; and (c) to offer and pay hang fees, educational grants and other remuneration to dialysis facilities and others, for the purpose of inducing IDPN referrals which were paid for, in part, by Medicare. 35. Pursuant to this unlawful conspiracy, the United States paid NMC Homecare in excess of $110 million for improper Medicare IDPN claims. Manner and Means ---------------- The manner and means by which NMC Homecare and the co-conspirators formed and carried out the conspiracy included, among other things, the following: False and Misleading Statements and Material Omissions ------------------------------------------------------ 35. In or about 1989, NMC Homecare organized an IDPN Task Force to prepare paperwork required to bill old, previously unbilled or denied, IDPN claims. Many of the patients to whom 12 these claims related were placed on IDPN without the clinical indications mandated by Medicare. When it was discovered that documentation relating to the medical condition of many of these patients was missing, NMC Homecare instructed the Task Force to use "clinical creativity" in preparing IIS and CMN forms for these patients. Pursuant to these instructions, IIS and CMN forms were prepared and filed with Medicare, which contained false, fictitious and misleading information, material omissions and statements which were not supported in the patient's medical records. 35. It was the policy and practice of NMC Homecare to prepare IIS, CNS and CMN forms which contained false, misleading, unsupported and inaccurate information relating to the patient's medical condition. IDPN Coordinators were instructed to list GI diagnoses which were historical, as opposed to currently active conditions, without indicating that the condition was historical. IDPN Coordinators were told to list weight loss and low serum albumin scores as evidence of GI malabsorption problems, and omit other causes of weight loss and low albumin, such as alcoholism, AIDS, depression, anorexia, lack of appetite and recent hospitalizations. IDPN Coordinators were instructed to list GI symptoms, such as nausea, vomiting or diarrhea, as indications of malabsorption, while omitting and concealing other causes for these symptoms, such as uremia due to inadequate dialysis or the side effects of medications. 35. It was the policy and practice of NMC Homecare to instruct its IDPN Coordinators that when no GI diagnosis existed 13 in a patient's medical records, the IDPN Coordinator could infer, from symptoms, the diagnoses of Malabsorption Syndrome, Uremic Malabsorption, Protein Calorie Malabsorption, or Gastroparesis, without disclosing to Medicare that these diagnoses had been inferred by NMC Homecare. 35. IDPN Coordinators listed false and fictitious information on IIS, CNS, and CMN forms submitted to Medicare, including diagnoses and GI symptoms the patient did not have, medications the patient was not taking, weight losses the patient had not suffered and blood lab values which were not accurate. 35. It was the policy and practice of NMC Homecare to always assert on IIS/CNS forms that the patient's GI impairment was expected to be of permanent duration (at least 90 days), that all medications taken to treat GI symptoms had been unsuccessful, and that IDPN would be life sustaining, even when these statements were false. 35. It was the policy and practice of NMC Homecare to exaggerate, embellish and misrepresent patients' GI symptoms, such as nausea, vomiting and diarrhea. IDPN Coordinators were encouraged by the Clinical Reimbursement Department to use adjectives, such as chronic, persistent, or intractable, when these terms did not accurately reflect the patient's condition and to list frequencies and durations for symptoms which were false. 35. It was the policy and practice of NMC Homecare to misrepresent the medications which patients had received to control GI symptoms, including listing medications which had not 14 been prescribed; listing medications which were prescribed as PRN (as needed) but had not in fact been used; and misrepresenting the time period medications had been tried and the medication's effect on the symptom. 35. It was the policy and practice of NMC Homecare to misrepresent the patient's blood laboratory values relating to nutrition, including serum albumin and total protein. IDPN Coordinators were instructed that the IIS/CNS forms should show declining lab values, with scores below the normal range. The Clinical Reimbursement Department told IDPN Coordinators they should omit lab values which showed an improving nutritional state. IDPN Coordinators listed false and fictitious lab values on IIS, CNS and CMN forms, transposed lab values to make them appear to be in a declining pattern, and omitted lab values to conceal a patient's improved nutritional status. 35. It was the policy and practice of NMC Homecare to misrepresent the patient's weight and weight history on IIS, CNS and CMN forms. IDPN Coordinators sometimes listed false weight losses and false usual body weights ("UBWs"). IDPN Coordinators were encouraged to show declining weights over time and to ignore and conceal weight gain. IDPN Coordinators asserted on IIS/CNS forms that weight loss was due to nausea, vomiting or diarrhea, or the inability to ingest, retain or absorb nutrients, and concealed and failed to disclose that the weight loss was due to amputations, hospitalizations, depression, infections, other catabolic stresses, failure to eat or lack of someone to prepare 15 food. 35. It was NMC Homecare's policy and practice to make false, fictitious, misleading and unsupported statements on IIS, CNS and CMN forms regarding patient's dietary intake and fluid restrictions. IDPN Coordinators listed dietary intake and fluid restrictions which were false, fictitious, unsupported in the patient's medical records or not representative of the patient's usual condition. IDPN Coordinators also falsely asserted patients were unable to maintain dietary intake due to nausea or vomiting, when, in fact, their medical records showed they were not eating due to depression, lack of appetite or the dislike of hospital food. 35. It was NMC Homecare's policy and practice to list false, fictitious and misleading information on IIS, CNS and CMN forms relating to enteral trials. IDPN Coordinators falsely listed specific enteral supplements as having been tried, when they had not been used; and listed supplements as having been tried and been unsuccessful, when the supplement was not prescribed until at or about the time the IDPN was ordered. IDPN Coordinators were told never to list on IIS/CNS forms that the reason why enteral supplements were unsuccessful was because the patient disliked the taste, or could not afford to purchase the supplement, even if these reasons were the true cause. 35. NMC Homecare often put false, fictitious and misleading information on CMN forms including information about the patient's weight, whether the patient was on other therapies or 16 treatments that may affect the patient's nutritional needs, diagnoses, GI symptoms, weight loss and GI impairment. NMC Homecare often prepared CMN forms for re-certification periods using outdated and inaccurate information, but nonetheless representing to Medicare that this information applied to the re- certification period. 35. In connection with appeals of denied IDPN claims, NMC Homecare made false, fictitious and fraudulent statements and material omissions to carrier personnel, in connection with Informal Reviews and Fair Hearings, and to Administrative Law Judges, in connection with ALJ appeals. In appealing denied IDPN claims, NMC Homecare would typically continue to rely on IIS, CNS and CMN forms which contained false, fictitious and fraudulent statements, and material omissions. It would also attempt to supplement the record with selective portions of the patient's medical records which purported to support findings of GI impairment and malabsorption, while ignoring, and not submitting, other portions of the medical record which contradicted or undercut such findings. On some occasions NMC Homecare would withdraw claims from appeal at the FH or ALJ level, because it had concluded the patient did not meet Medicare coverage criteria. When it did so, NMC Homecare would fail to repay to Medicare funds it had received relating to that patient, on other IDPN claims for other dates of service. False Billing of IDPN Administration Kits ----------------------------------------- 35. In or about February 1991 BC/BS of SC issued a 17 Medicare Advisory to NMC Homecare and other IDPN suppliers indicating that when billing for IDPN administration kits, procedure code B 4224, suppliers must bill for the total number of actual days used, instead of a one month supply kit. NMC Homecare had been billing for a one month supply kit, even though IDPN was administered only 12 or 13 times per month to patients who received IDPN throughout the month. Upon receiving the Medicare Advisory, NMC Homecare's billing center personnel initiated steps to comply with this Medicare Advisory. 35. NMC Homecare's senior officers realized that this Medicare Advisory would reduce NMC Homecare's revenue on IDPN administration kits by $360 per patient per month. NMC Homecare's senior officers instructed the billing center not to implement the February 1991 Medicare Advisory relating to administration kits. 35. Thereafter, on monthly HCFA 1500 claim forms for IDPN patients, for dates of service between March 1, 1991 and April 30, 1992, NMC Homecare falsely and fraudulently listed on the claim form either that it had supplied a one month administration kit or that it had provided 30 or 31 administration kits. In the case of patients who received IDPN for only part of the month, NMC Homecare falsely and fraudulently listed the number of days between the patient's first and last IDPN treatment during the month. These false and fraudulent claims were paid by BC/BS of SC. 18 35. In or about May 1992 BC/BS of SC issued a second Medicare Advisory to NMC Homecare and other IDPN suppliers regarding procedure code B 4224, administration kits. This Advisory expressly stated that IDPN suppliers should not bill for 31 administration kits, if the patient only received IDPN 12-13 times per month. Upon receipt of this Advisory NMC Homecare's billing center personnel again initiated steps to comply with this Advisory. 35. NMC Homecare's senior officers at Waltham, MA realized that implementing this Advisory would reduce NMC Homecare's IDPN revenues and profits by nine (9) percent, or approximately $400,000 per month. NMC Homecare's senior officers instructed the billing center personnel not to implement the May 1992 Medicare Advisory relating to IDPN administration kits and to continue billing as they had been doing. 35. Thereafter, on monthly HCFA 1500 claim forms for IDPN patients, for dates of service between May 1, 1992 and June 30, 1992, NMC Homecare falsely and fraudulently listed on the claim forms that it had provided 30 or 31 administration kits, when, in fact, it had only provided 12 or 13 administration kits. In the case of patients who received IDPN for only part of the month, NMC Homecare falsely and fraudulently listed the number of days between the patient's first and last IDPN treatment during the month. These false and fraudulent claims were paid by BC/BS of SC. 19 Hang Fees, Education Grants and Other Inducements ------------------------------------------------- 35. It was the policy and practice of NMC Homecare to offer and pay hang fees in excess of $30 per bag, educational grants, and other remuneration to non-BMAs in order to induce IDPN referrals and to maintain existing IDPN customers. Such inducements were provided to non-BMAs when NMC Homecare was faced with competing IDPN suppliers and NMC Homecare believed that higher hang fees and other inducements were necessary to obtain or maintain the non-BMA's IDPN business. 35. IDPN Coordinators, General Manager, Regional Directors and other NMC Homecare staff were instructed to consider the IDPN referral potential of the non-BMA and the degree of competition from other IDPN providers, in deciding how high the hang fees and other inducements should be. In competitive situations, NMC Homecare regularly determined what it was willing to offer and pay a non-BMA for its IDPN business without regard to what the non-BMA's actual cost was in administering IDPN. 35. In or about February 1992 NMC Homecare introduced the calculation tool as a marketing device designed to respond to competitors who were offering inflated hang fees. Although the written policy of NMC Homecare, beginning in February 1992, was to require a calculation tool from a non-BMA before NMC Homecare would pay a hang fee in excess of $30 per bag, that policy was often ignored and the practice of NMC Homecare was to pay hang 20 fees in excess of $30 per bag, without obtaining a calculation tool, when such payments were needed to obtain or maintain IDPN business. 35. In or about the summer of 1993 NMC Homecare became aware that the Inspector General of the U.S. Department of Health and Human Services had issued a report stating that hang fees in the $25 to $60 per bag range were legally questionable and apparent violations of the Medicare Anti-kickback Act. NMC Homecare's senior management directed that a sample calculation tool be prepared which purported to justify NMC Homecare's standard $30 hang fee. NMC Homecare knew that the true incremental cost to a dialysis facility of administering IDPN was less than $30 a bag and that it was illegal to pay a non-BMA more than its actual cost of administering IDPN. 35. In or about October 1993 NMC Homecare directed its IDPN Coordinators to take its new sample calculation tool to their existing customers who were receiving hang fees of $40 or more, but for whom NMC Homecare did not have a calculation tool. IDPN Coordinators were instructed to complete the tool with the facility to ensure that the cost reported on the calculation tool matched or was close to the hang fee amount NMC Homecare was already paying that non-BMA. 35. NMC Homecare regularly "backed into" the numbers on calculation tools. It was the practice of NMC Homecare personnel to complete the tool by starting with the final number desired, 21 and fill in the time estimates needed to reach that final number. 61. NMC Homecare's IDPN Coordinators prepared sample calculation tools at specified levels, such as $40, $45 and $50 per bag, exchanged these calculation tools among themselves, provided these sample calculation tools to customers so they could fill out their own tool and sometimes submitted calculation tools to NMC Homecare headquarters without any input from the customer. 62. It was the policy and practice of NMC Homecare that no efforts were made to ensure that the costs reported on calculation tools were the true, actual costs of the non-BMAs in administering IDPN. Non-BMAs were not required to submit back-up documentation to substantiate purported costs greatly in excess of NMC Homecare's standard $30 hang fee, most calculation tools were not signed by the non-BMA, and most calculation tools received no review for accuracy or reasonableness. 62. It was the policy and practice of NMC Homecare to provide purported educational grants to non-BMAs as inducements to obtain IDPN referrals. Following the HHS Inspector General's 1993 report on hang fees, some non-BMAs preferred education grants, rather than higher hang fees, in return for their IDPN business. In awarding educational grants to non-BMAs, NMC Homecare instructed its General Managers to weigh the anticipated benefit of the grant (i.e. IDPN referrals) against its cost in deciding whether to pay an educational grant. OVERT ACTS ---------- 22 In furtherance of the conspiracy, and to effect the objects thereof, NMC Homecare and the co-conspirators, performed the following overt acts, among others, in the District of Massachusetts and elsewhere: 64. In or about November 1988, NMC Homecare began using the IIS form in connection with the preparation of IDPN claims to Medicare. This form allowed NMC Homecare to pick and choose the information it would present to Medicare in support its IDPN claims. 65. On or about December 1, 1988, NMC Homecare issued check No. 113 in the amount of ten thousand dollars ($10,000) payable to Florida Kidney Center for a purported education grant. 65. In or about March 1989, NMC Homecare's Clinical Reimbursement Department submitted 102 claims to Medicare for IDPN for dates of service in the period 10/1/87 to 4/30/88, in which it purposely deleted medical documentation which would tend to show the patient did not meet Medicare's coverage criteria. 65. In or about August 1989, NMC Homecare created an IDPN Task Force to clean-up previously unbilled IDPN claims from 1987 and 1988. These claims were unbilled because there was insufficient documentation that the patient met Medicare's coverage criteria for IDPN. 65. In or about November 1989, members of the IDPN Task Force visited dialysis units in Mississippi, Florida, Maryland, 23 Puerto Rico and Massachusetts to prepare IIS forms relating to the IDPN clean-up project. 65. In or about November 1989, NMC Homecare's Cincinnati/Columbus, Ohio branch wrote 14 IIS forms in one day, as part of the IDPN clean-up project, with assistance from an IDPN Coordinator assigned to the IDPN Task Force. 65. On or about November 30, 1989, NMC Homecare's Midwest Regional Director notified the President of NMC Homecare that a non-BMA in his territory had been approached by a competitor who offered a $50 hang fee and NMC Homecare decided that it would match that fee in order to be certain it would keep the account. 65. On or about March 2, 1990, the President of NMC Homecare signed a purported Research Agreement between NMC Homecare and Florida Kidney Center which required NMC Homecare to pay Florida Kidney Center one hundred thousand ($100,000) dollars. 65. On or about April 2, 1990, NMC Homecare signed an IDPN contract with Florida Kidney Center which provided that NMC Homecare would pay Florida Kidney Center a $35 per bag hang fee, a $35 per month per patient nutritional assessment fee, and provide Florida Kidney Center with five (5) cases of enteral supplements, per month. 65. In or about June 1990, NMC Homecare agreed to increase the hang fee paid to Houston Kidney Center from $30 to $50 per 24 bag, in response to competitive pressures from another IDPN supplier. 65. In or about November 1990, NMC Homecare executives met in Ontario, California to discuss IDPN scale-up efforts in the Pacific Region. 65. In or about December 1990, the Manager of the Clinical Reimbursement Department traveled to Waltham, Massachusetts to meet with various NMC Homecare executives in preparation for the first meeting of the IDPN Special Interest Group. 65. On or about December 18, 1990, NMC Homecare increased its hang fee payments to L.E. Cox Medical Center in Springfield, Missouri in response to competition from another IDPN provider. 65. On or about January 10, 1991, the IDPN Special Interest Group met in Waltham, Massachusetts to discuss expanding NMC Homecare's IDPN business. 65. In or about February 1991, NMC Homecare's V.P. of Finance caused a copy of the Medicare Advisory relating to billing for IDPN administration kits to be faxed to NMC Homecare's headquarters in Waltham, Massachusetts. 65. In or about February and March 1991, senior executives at NMC Homecare's headquarters held a series of meetings relating to billing Medicare of IDPN administration kits and decided not 25 to bill for the number of kits actually used, in direct contravention of Medicare's requirements. 65. In or about early March 1991, at the request of the V.P. of Operations, the Clinical Reimbursement Department analyzed the Medicare payment history on patients from Florida Kidney Centers, in preparation for a hang fee offer NMC Homecare was contemplating in response to competitive pressures. 65. On or about March 15, 1991, NMC Homecare's V.P. of Operations made a financial offer to Florida Kidney Centers for the purpose of securing its IDPN business. The offer included the following incentives: (1) a $65 hang fee; (2) a weekly $50 payment per patient for dietary consultations; (3) a $30,000 annual educational grant; (4) a $20,000 annual indigent patient drug fund; and (5) $15,000 worth of computer equipment. 65. On or about June 14, 1991, NMC Homecare issued an IDPN Clinical Manual which authorized IDPN Coordinators to infer the existence of certain GI diagnoses in potential IDPN patients, when no other GI diagnosis was available. 65. In or about September 1991, NMC Homecare agreed with Houston Kidney Center to increase its hang fee from $50 to $60 per bag, in response to competitive pressure. 65. In or about October 1991, the Clinical Reimbursement Department reported to NMC Homecare headquarters that the quality 26 of clinical documentation supporting IDPN claims had decreased as the volume of IDPN patients had increased. 65. In or about February 1992, NMC Homecare held a national sales meeting in Phoenix, Arizona in which the Clinical Reimbursement Department made a presentation to the IDPN Coordinators regarding the preparation of IIS forms. 65. On or about February 10, 1992, NMC Homecare provided its sales staff with a sample calculation tool to use when negotiating IDPN contracts. 65. On or about February 28, 1992, NMC Homecare issued a policy memorandum to the field authorizing General Managers to award a non-BMA an education grant of up to $4,000 per year. 65. In or about May 1992, NMC Homecare's Lenexa, Kansas billing center notified NMC Homecare headquarters staff that a Medicare Advisory had been received stating that an IDPN provider could not bill for 31 administration kits if the patient received IDPN only 12-13 times in that month. 65. In or about June 1992, a series of meetings were held among NMC Homecare senior executives to discuss billing for IDPN administrative kits. 65. On or about July 4, 1992, the President of NMC directed 27 the V.P. of Finance of NMC Homecare not to make any change in how NMC Homecare billed IDPN administration kits without talking with him. 65. On or about July 27, 1992, NMC Homecare entered into an IDPN contract with Lourdes Hospital in Paducah, Kentucky in which NMC Homecare agreed to pay a $50 hang fee. 65. On or about August 11 to 14, 1992, a group of NMC Homecare executives met in Lenexa, Kansas with the recently resigned head of the BC/BS of SC PEN unit to discuss processing of IDPN claims. 65. On or about September 11, 1992, NMC Homecare entered into an IDPN contract with Clark County Dialysis in Cincinnati, Ohio in which NMC Homecare agreed to pay a hang fee of $50. 65. On or about December 5, 1992, in response to competition from another IDPN provider, NMC Homecare entered into an IDPN contract with Bon Secours Dialysis Center in Baltimore, Maryland to pay a $40 hang fee for each bag of IDPN administered. 95. On or about December 23, 1992, NMC Homecare delivered two checks totaling $37,040 to Woodland Dialysis for hang fee payments covering IDPN therapies provided during the final eight months of 1992. 96. On or about January 26, 1993, NMC Homecare initiated IDPN therapy for Patient No. 1, a patient at BMA El Paso-West. The IIS form for this patient contains numerous false statements 28 and material omissions, including GI symptoms the patient did not have, medications she was not taking, and false assertions she had been hospitalized for diabetic gastroparesis. 96. In or about February 1993, the Clinical Reimbursement Department made a presentation at NMC Homecare's National Managers Meeting. The presentation included a slide marked "Not to be used as a handout," in which it listed certain preferred medications to list on IIS forms, suggested that IIS forms not show alternating symptoms of diarrhea and constipation, and that they not show anorexia, alcohol induced or psychological conditions, senility and phrases such as "avoids eating" or any indication that the patient did not eat. 96. On or about June 18, 1993, NMC Homecare entered into an IDPN contract with Woodland Dialysis in which NMC Homecare agreed to a hang fee of $52 per bag and to provide $17,000 in educational grants. 96. In or about August 1993, NMC Homecare's IDPN Product Manager delivered a memorandum to the V.P. of Marketing, stating that the calculation tool was "developed as a marketing tool" to overcome "competitors offering inflated hang fees . . . when a non-BMA completes the calculation tool, they will be lucky to get $20.00. That was the point . . . sometimes the reps are confused and think they can't pay a certain amount unless the facility can justify it using the hang fee tool, that was not the intent." 29 96. On or about August 30, 1993, NMC Homecare executed an IDPN contract with the Hortense & Louis Rubin Dialysis Center in Albany, New York in which NMC Homecare agreed to pay a hang fee of $45 per bag. 96. On or about September 1, 1993, NMC Homecare senior executives held the first of a series of meetings at corporate headquarters in Waltham, Massachusetts to discuss IDPN hang fees, among other things. 96. On or about September 20, 1993, NMC Homecare entered into an IDPN contract with Good Samaritan Hospital in Portland, Oregon in which NMC Homecare agreed to pay a hang fee of $41 per bag. 96. On or about September 22, 1993, NMC Homecare entered into an IDPN contract with Lexington Clinic Kidney Center in Lexington, Kentucky in which it agreed to pay a hang fee of $45. 96. On or about October 13, 1993, the IDPN Product Manager sent a memo to the President of NMC Homecare in which she stated that only 80% of NMC Homecare's IDPN patients have "real" justified GI dysfunction. 96. On or about October 15, 1993, NMC Homecare issued a memorandum to its sales staff requiring that calculation tools be submitted within 30 days for all non-BMAs receiving hang fee 30 payments of $40 or more for which no calculation tool was on file. In this memorandum, NMC Homecare instructed its employees to work with the non-BMAs to ensure that the cost reported on the calculation tool is consistent with (or close to) the hang fee currently being paid to that facility. 96. On or about October 18, 1993, NMC Homecare executed an IDPN contract with Dialysis Center of Middle Georgia in Macon, Georgia in which it agreed to pay a $40 hang fee. 96. On or about October 28 and 29, 1993, NMC Homecare held a national meeting of IDPN Coordinators in Waltham, Massachusetts, to discuss its hang fee policies, among other things. 96. On or about November 8, 1993, NMC Homecare's San Diego branch General Manager approved the payment of a $1,560 invoice submitted by San Diego Dialysis Services for IDPN treatments provided in October 1993 at the rate of $60 per bag. 96. On or about November 13, 1993, NMC Homecare signed an IDPN contract with Houston Kidney Center-Southeast in which NMC Homecare agreed to pay a hang fee of $50 per bag. 96. On or about January 4, 1994, NMC Homecare executed an addendum to its IDPN contract with Ozarks Dialysis Services in Springfield, Missouri in which NMC Homecare agreed to pay a hang 31 fee of $50 per bag. 96. On or about January 26, 1994, NMC Homecare sent a memo to its field staff authorizing General Manager to give annual educational grants to non-BMAs of up to $4,000. 96. On or about February 7, 1994, NMC Homecare participated in a telephone Fair Hearing relating to the appeal of denied IDPN claims relating to Patient No. 2, a patient at BMA Chicopee. NMC Homecare failed to advise the FH officer that there were numerous false statements and material omissions on the IIS form it submitted in support of this hearing, including false statements relating to symptoms, medications, lab values and enteral supplements. 96. On or about February 9, 1994, NMC Homecare initiated IDPN therapy for Patient No. 3, a patient at the BMA of McAllen, Texas. The IIS form relating to this patient contained numerous false statements and material omissions, including false diagnosis, symptoms, medications, weight loss and enteral supplements, and failure to disclose the patient had been started on IDPN because of two hospitalizations. 96. On or about February 17, 1994, the President of NMC Homecare wrote to the President of NMC, stating that NMC Homecare's IDPN patient census had fallen dramatically in the last several months because in the past NMC Homecare had been 32 able to put patients on IDPN "w/o GI disorder/malabsorption," but the new DMERCs were applying the coverage criteria more strictly. 96. On or about April 22, 1994, NMC Homecare initiated IDPN therapy for Patient No. 4, a patient in the Cincinnati, Ohio area. The IIS form for this patient contains false information and material omissions, including using an albumin lab value of 2.8 to justify IDPN, when a repeat test, one week later, before IDPN therapy started, had a value of 4.2. 96. On or about May 26, 1994, NMC Homecare participated in a telephone Fair Hearing on denied IDPN claims relating to Patient No. 2. It continued to rely on an IIS form containing numerous false statements and material omissions, and also falsely reported to the FH officer that the patient had lost 30 pounds in four months prior to the start of IDPN. 96. Beginning on or about October 10, 1994, and continuing through on or about October 6, 1995, as detailed below, for the patient indicated, NMC Homecare submitted a claim to Medicare for reimbursement for IDPN, which was paid, which was a false claim, because it was based on an IIS form which contained false statements and material omissions: Patient No. 1 Patient No. 3 Patient No. 4 ------------- ------------- ------------- 10/10/94 10/11/94 01/04/95 11/11/94 11/17/94 01/10/95 12/08/94 12/12/94 02/21/95 01/09/95 03/07/95 02/08/95 04/07/95 33 03/09/95 05/08/95 03/17/95 06/13/95 04/11/95 07/07/95 05/11/95 09/07/95 06/09/95 09/12/95 07/12/95 10/06/95 08/11/95 09/08/95 96. In or about November 1994, NMC Homecare paid $1,300 to Bethany Dialysis in Bethany, Oklahoma, representing hang fee payments at $50 per bag for IDPN treatments administered during the month of October 1994. 96. In or about November 1994, NMC Homecare paid $1,600 to Lourdes Dialysis in Paducah, Kentucky, representing hang fee payments at $40 per bag for IDPN treatments administered during the month of October 1994. 96. On or about December 1, 1994, NMC Homecare issued check number 19157 in the amount of $2,385 to Hortense & Louis Rubin Dialysis Center representing hang fee payments at $45 per bag for IDPN treatments administered during the month of September 1994. 96. In or about January 1995, NMC Homecare paid $946 to Angelina Dialysis in Houston, Texas, representing hang fee payments at $43 per bag for IDPN treatments administered during the month of December 1994. 96. On or about January 19, 1995, NMC Homecare issued check 34 number 025273 in the amount of $6,360 to Houston Kidney Center representing hang fee payments at $60 per bag for IDPN treatments administered during the month of December 1994. 96. On or about January 28, 1995, NMC Homecare issued check number 035821 in the amount of $5,160 and check number 035820 in the amount of $1,548 to Woodland Dialysis representing hang fee payments at $52 per bag for IDPN treatments at Woodland during the month of December 1994. 96. On or about March 14, 1995, NMC Homecare executed an amendment to an IDPN contract with AKC Broward, in Pompano Beach, Florida, in which NMC Homecare agreed to pay a hang fee of $40 per bag. 96. On or about June 9, 1995, NMC Homecare decided to withdraw IDPN claims relating to Patient No. 2 from an ALJ Hearing scheduled for June 27, 1995. NMC Homecare knew there was no GI diagnosis. NMC Homecare failed to disclose to the ALJ, however, the numerous false statements and material omissions it had used to get prior claims paid relating to this patient and failed to refund the money to Medicare it had received on those claims. 96. In or about July 1995, NMC Homecare paid $2,650 to Midway Dialysis Center, representing hang fee payments at $50 per bag for IDPN treatments administered during the month of June 1995. 96. On or about July 5, 1995, NMC Homecare executed an 35 IDPN contract with Beverly Hospital in Beverly, Massachusetts in which NMC Homecare agreed to pay a hang fee of $40 per bag. 96. On or about August 28, 1995, NMC Homecare executed an IDPN contract with Jewish Hospital Dialysis Unit in St. Louis, Missouri in which NMC Homecare agreed to pay a hang fee of $40 per bag. 96. In or about September 1995, NMC Homecare paid $5,880 to Charlotte Hungerford Hospital in Torrington, Connecticut, representing hang fee payments at $40 per bag for IDPN treatments administered during the month of August 1995. 96. In or about October 1995, NMC Homecare paid $1,560 to Missouri Delta Community Hospital in Sikeston, Missouri, representing hang fee payments at $40 per bag for IDPN treatments administered during the month of September 1995. 96. In or about November 1995, NMC Homecare paid $1,800 to Nephroplex Service Center in Mount Vernon, Illinois, representing hang fee payments at $40 per bag for IDPN treatments administered during the month of October 1995. 96. In or about November 1995, NMC Homecare paid $2,720 to Quachita Regional Dialysis Center in Kansas, representing hang fee payments at $40 per bag for IDPN treatments administered 36 during the month of October 1995. (All in violation of Title 18, United States Code, Section 371.) 37 COUNT TWO (18 U.S.C. (S) 286 -- Conspiracy to Defraud the - --------- United States by Obtaining Payment of False or Fraudulent Claims) 133. The allegations set forth in paragraphs 1-3 and 5-16 are incorporated herein and realleged as if fully set forth herein. 134. LIFECHEM was a clinical blood testing laboratory which specialized in performing blood tests for ESRD patients. LIFECHEM operated two clinical laboratories, one located in Northvale, New Jersey, and the other in Woodland Hills, California. BMAs were generally required to use LIFECHEM for laboratory blood tests. LIFECHEM had to compete with other blood testing laboratories for the business of non-BMAs. 135. LIFECHEM was an approved supplier of Medicare services under Title XVIII of the Social Security Act of 1965. As an approved supplier, LIFECHEM was authorized to submit directly to the carriers under contract with HCFA lawful claims for reimbursement for clinical laboratory blood tests. At all pertinent times, LIFECHEM submitted its claims for Medicare reimbursement to Pennsylvania Blue Shield of Camp Hill, Pennsylvania, later known as Xact Medicare Services, a carrier under contract with HCFA. LIFECHEM was also authorized to submit directly to CHAMPUS claims for laboratory services provided to individuals covered by CHAMPUS. 136. MPD employed a sales force of Dialysis Services Specialists, who were assigned a designated geographic territory and sold both the dialysis products of MPD and the blood testing services of LIFECHEM. These salespersons called on both BMAs and 38 non-BMAs within their territory and their compensation included salary and commissions. 137. For ESRD patients who received dialysis treatments at a Medicare approved dialysis facility, Medicare established a composite rate payment that was paid directly to the dialysis facility and included payment for certain laboratory blood tests at designated frequencies that were needed in the care and treatment of ESRD patients. These laboratory blood tests covered by the composite rate were known as "Routine Tests," and were not separately billable by LIFECHEM to Medicare. Medicare paid the dialysis facility for the Routine Tests, and it was the responsibility of the dialysis facility to pay the blood testing laboratory, such as LIFECHEM, for its provision of Routine Tests. 138. Frequently ESRD patients suffered from additional medical problems and complications which required medical treatment beyond the process of dialysis. For such persons, additional monitoring of the blood was sometimes medically necessary, and these additional laboratory blood tests were referred to as "Non-Routine Tests." 139. The Medicare Program separately paid for Non-Routine Tests by directly reimbursing the clinical laboratory, such as LIFECHEM, on a fee-for-service basis. The Non-Routine Tests were lawfully reimbursable by the Medicare Program only if they were reasonable and medically necessary for the diagnosis or treatment of signs or symptoms of illness or injury in ESRD patients other than ESRD, except for certain Non-Routine Tests enumerated by HCFA that were allowed at specified frequencies for ESRD patients 39 ("Medicare Allowable Tests"). To obtain reimbursement for Non-Routine Tests provided to ESRD patients, LIFECHEM was required to certify to HCFA, through its Medicare carrier, that the tests were medically necessary. 140. An automated laboratory machine, sometimes known as a sequential multiple analysis computer, was capable of performing a "panel" or "battery" of more than 20 chemistry tests on a single specimen of blood. At LIFECHEM, at all pertinent times, this automated battery of chemistry tests was known as a "Chem 20." For most ESRD patients, once a month, Medicare paid for LIFECHEM's Chem 20 as part of the Composite Rate Payment made directly to the dialysis facilities. The defendant LIFECHEM knew that individual chemistry tests, performed as part of LIFECHEM's monthly Chem 20, were not lawfully separately billable to Medicare on a fee-for-service basis, and that to submit separate bills for such services constituted duplicate bills for services for which Medicare had already paid. 141. From in or about the mid-1980's, LIFECHEM offered for sale to dialysis physicians, and received reimbursement from Medicare and from CHAMPUS for, a group of tests that LIFECHEM called a Hepatitis panel. The Hepatitis panel consisted of, among other tests, a Hepatitis B surface antigen test ("antigen"), a Hepatitis B surface antibody test ("antibody"), and a Hepatitis B IgM Core test ("IgM Core")(collectively, the "Hepatitis B related tests"). At relevant times, the Hepatitis B related tests were also offered individually. 142. For all ESRD patients, Medicare and CHAMPUS paid for 40 one annual antibody test or one annual IgM Core test, but not both, as a Medicare Allowable Test. Medicare and CHAMPUS paid for additional antibody and IgM Core tests so long as the tests were medically necessary for the treatment or diagnosis of the patient's medical condition other than ESRD. 143. Prior to August, 1991, LIFECHEM knew that IgM Core tests were not routinely medically necessary for any ESRD patient, but were only necessary for ESRD patients in certain limited circumstances such as upon admission or readmission to a dialysis facility or for the rare patient who had active Hepatitis B disease. LIFECHEM further knew, prior to August, 1991, that while the IgM Core test was separately available to physicians, physicians rarely, if ever, individually ordered the IgM Core test for their ESRD patients. 144. Medicare also paid for a clinical laboratory test for the Hepatitis C antibody ("Hepatitis C") so long as the test was ordered by a physician who considered the test to be medically necessary for the treatment or diagnosis of the patient's medical condition other than ESRD. 145. As of August, 1991, LIFECHEM knew that repeat Hepatitis C testing on ESRD patients who were confirmed positive for the Hepatitis C antibody was not medically necessary. LIFECHEM further knew, as of August, 1991, that while LIFECHEM made the Hepatitis C test available to physicians, physicians infrequently ordered the Hepatitis C test for their ESRD patients. The Conspiracy -------------- 41 146. From in or about January, 1991 through in or about June, 1997, the exact dates being unknown to the United States Attorney, in Waltham and elsewhere in the District of Massachusetts, in Northvale and Rockleigh, New Jersey, and elsewhere in the United States, the defendant LIFECHEM, INC., together with others known and unknown to the United States Attorney, did knowingly, intentionally and willfully agree, combine, and conspire to defraud the United States, and its agency the Health Care Financing Administration, in its administration of the Medicare Program, by obtaining and aiding to obtain the payment and allowance of hundreds of thousands of false, fictitious and fraudulent claims for: (1) Hepatitis B IgM Core tests included as part of a Hepatitis panel that LIFECHEM knew were not medically necessary for the diagnosis or treatment of Medicare beneficiaries because the tests were performed on patients who were existing patients in a dialysis facility and who did not suffer from active Hepatitis B disease; (2) Hepatitis C Antibody tests included as part of a Hepatitis panel that LIFECHEM knew were not medically necessary for the diagnosis or treatment of Medicare beneficiaries because they were performed on ESRD patients who had already been confirmed positive for the Hepatitis C antibody; (3) chemistry tests performed by the laboratory as part of LIFECHEM's automated Chem 20 for which Medicare had already paid through the Composite Rate Payment, and which LIFECHEM knew were not lawfully billable a second time to 42 Medicare; and (4) additional medically unnecessary blood laboratory tests generated by LIFECHEM's paneling and marketing activities designed to manipulate physician ordering practices for blood laboratory tests on their ESRD patients, all for the purpose of obtaining a substantial increase in orders for particular laboratory tests that were highly profitable for LIFECHEM, without regard to whether the increased testing was medically necessary for the diagnosis or treatment of Medicare beneficiaries; so that LIFECHEM could unlawfully obtain at least $22,900,000 in reimbursement from the Medicare Program to which it was not entitled. OBJECTIVE OF THE CONSPIRACY --------------------------- 147. LIFECHEM had, as the objective of this conspiracy, increasing the laboratory blood testing conducted on thousands of ESRD patients, without regard to the medical necessity for such blood testing in the diagnosis or treatment of those Medicare beneficiaries, all to obtain unlawful reimbursement from the Medicare program for that additional medically unnecessary testing. LIFECHEM obtained this additional reimbursement by submitting false, fictitious and fraudulent claims for payment to the Medicare Program for these blood tests, which claims falsely certified to Medicare that the laboratory blood tests were medically necessary when LIFECHEM knew that they were not. A further objective of the conspiracy was to submit false, fictitious and fraudulent claims for payment for individual chemistry tests that were being performed in the laboratory on a sequential multi-channel analyzer as part of LIFECHEM's automated 43 Chem 20, for which Medicare had already paid, all to enable LIFECHEM to obtain further unlawful reimbursement from the Medicare program to which LIFECHEM was not entitled. As a consequence of these unlawful objectives, LIFECHEM also submitted claims for medically unnecessary blood testing to other federal health care insurance programs, including CHAMPUS, that sought payment for the performance of medically unnecessary laboratory tests on dialysis patients insured by those programs. 148. As a result of this conspiracy, the defendant LIFECHEM, together with others known and unknown to the United States Attorney, in fact defrauded the United States and the Medicare Program through the submission of false, fictitious and fraudulent claims in an amount of $22,900,000 dollars. MANNER AND MEANS OF THE CONSPIRACY ---------------------------------- 149. It was a part of the manner and means of the conspiracy that the defendant LIFECHEM, together with others known and unknown to the United States Attorney: a. bundled a Hepatitis C antibody test with LIFECHEM's Hepatitis panel, so that each time a doctor ordered a Hepatitis panel, a Hepatitis C antibody test was performed for the same patient, without regard to whether the test was medically necessary in the treatment and diagnosis of the patient's medical condition; b. marketed and promoted the frequent ordering of LIFECHEM's Hepatitis panel for all ESRD patients, so that each time a doctor ordered a Hepatitis panel, the IgM Core test was automatically performed for the same patient without regard to 44 whether the test was medically necessary in the treatment and diagnosis of the patient's medical condition; c. supplied to physicians LIFECHEM's paper requisition or laboratory test order forms which made it difficult for physicians to (1) order LIFECHEM's Hepatitis panel without the bundled Hepatitis C test and IgM Core test; and (2) understand what Hepatitis tests were included on LIFECHEM's Hepatitis panel; and which discouraged physicians from ordering LIFECHEM's Hepatitis panel without the bundled tests; d. misled physicians by falsely suggesting to them that ordering LIFECHEM's laboratory blood tests in a panel or profile such as the Hepatitis panel was cheaper or more economical than selectively ordering individual blood tests, and by failing to disclose to physicians the fact that LIFECHEM was charging the Medicare Program separately for each of the bundled tests at the Medicare fee schedule; e. provided incentives in the form of commissions to MPD's sales force to encourage and promote the sale to the BMAs of LIFECHEM's Hepatitis panels without regard to whether the additional Hepatitis C and IgM Core tests within the Hepatitis panel were medically necessary in the diagnosis and treatment of the patients' conditions other than ESRD; f. supplied to dialysis facilities a computer and computerized test ordering software which encouraged physicians to order LIFECHEM's Hepatitis panels rather than individual tests; which made it difficult to order LIFECHEM's Hepatitis panel without the bundled Hepatitis C test or IgM Core test; and 45 which made it difficult for physicians to understand what tests were included on LIFECHEM's Hepatitis panel; g. utilized certain MPD sales personnel to install a computerized ordering system in the BMAs, and submitted or caused to be submitted claims for payment to Medicare for a sudden increase in orders from the BMAs of LIFECHEM's Hepatitis panels in one sales region, without regard to whether the additional tests were medically necessary in the diagnosis or treatment of the ESRD patients' medical conditions other than ESRD; h. misled physicians in some instances by incorrectly suggesting to them that BMA medical policy required or encouraged the routine ordering of LIFECHEM's Hepatitis panels; i. obtained diagnosis codes, known as ICD-9 codes, for Hepatitis panels from dialysis clinics to enable LIFECHEM to provide medical justification to the Medicare carrier for the Non-Routine Tests, without disclosing to the Medicare carrier that not every test on the Hepatitis panel had been ordered separately by the physician as being medically necessary; j. billed the Medicare Program for these bundled Hepatitis C and IgM Core tests, all the while knowing that the tests had not been ordered knowingly by doctors as medically necessary tests for their patients, and further falsely certified to the Medicare Program and to CHAMPUS that the tests were medically necessary when LIFECHEM knew that many of them were not medically necessary; k. collected from the Medicare Program about $16.00, more or less, for each Hepatitis B IgM Core test; $19.00, more or 46 less, for each Hepatitis C antibody test; and collected from CHAMPUS about $34.00, more or less, for each Hepatitis B IgM Core test; and l. billed the Medicare Program for the same test twice by billing once to the dialysis facility for the entire panel which was reimbursed by Medicare through the composite rate, and again directly to the Medicare Program for certain individual tests included within the panel, knowing that the bills were duplicate bills and were not lawfully reimbursable. OVERT ACTS ---------- 150. In furtherance of the conspiracy, the defendant LIFECHEM, together with others known and unknown to the United States Attorney, committed, among other acts, the following overt acts in the District of Massachusetts and elsewhere: a. In or about May, 1991, the defendant LIFECHEM and others initiated a Profit Recovery Program to offset revenue losses from government regulatory actions in connection with the manufacturing of certain MPD dialysis products by adding the Hepatitis C test to LIFECHEM's Hepatitis panel, and by marketing and causing the substitution of the Hepatitis panel for the individual Hepatitis test ordering practices then in place at the BMAs (the "Hepatitis plan"). b. In or about June 1991, the General Manager of LIFECHEM obtained approval from the President of NMC, and the President and the Vice President of Finance of MPD, among others, to purchase equipment to enable LIFECHEM to perform additional Hepatitis testing that was expected to result from the Hepatitis 47 plan, which, the General Manager informed her superiors, included an estimated additional 55,000 Hepatitis C tests and an additional 94,117 IgM Core tests that she expected would result from the implementation of the Hepatitis plan in the first year alone. c. In or about June, 1991, to justify approval to purchase the laboratory equipment that defendant LIFECHEM needed to perform the additional Hepatitis tests, the General Manager of LIFECHEM informed the President of NMC, and the President and Vice President of Finance of MPD, among others, that LIFECHEM projected an increase in 1991 revenue by $524,000 and profit from operations ("PFO") by $308,000 if the Hepatitis C test could be added to the Hepatitis panel by July 1, 1991, with a five year projected revenue stream of over $6,000,000 and PFO of over $3,300,000; and that LIFECHEM projected an increase in 1991 revenue by $2,083,000 with a PFO of $1,330,000 if Hepatitis panels were substituted for individual Hepatitis test ordering in the BMAs, with a five year projected revenue stream of $27,453,952 with a PFO of $18,989,618. d. In or about June 1991, the LIFECHEM Product Manager notified the MPD sales force about the new plan to market LIFECHEM's Hepatitis panels and explained that the goal was to cause BMA physicians to order the entire Hepatitis panel rather than the separate Hepatitis B antigen and/or antibody tests then being ordered by those physicians. e. On or about July 31, 1991, the LIFECHEM Product Manager announced the addition of the Hepatitis C test to the 48 LIFECHEM Hepatitis panel, without providing customers an option on the pre- printed requisition forms to obtain the LIFECHEM Hepatitis panel without the added Hepatitis C test. f. In or about August 1991, the LIFECHEM General Manager and Product Manager, and the MPD Vice-President of Marketing, rejected a plan to prevent repeated medically unnecessary testing for Hepatitis C on ESRD patients who were previously confirmed positive for the antibody. g. In or about September, 1991, the LIFECHEM General Manager directed that no separate panel would be included on the LIFECHEM pre-printed requisition form to provide doctors the choice of ordering LIFECHEM's Hepatitis panel without the added Hepatitis C blood test, despite complaints about the lack of choice from both physicians and the MPD sales force, and despite requests certain from physicians to delete the Hepatitis C test from the Hepatitis panel. h. In or about January 1992, after an important customer of LIFECHEM threatened to withdraw its entire laboratory business if the Hepatitis C test was not deleted from LIFECHEM's Hepatitis panel, LIFECHEM created a special panel without the Hepatitis C test for that particular customer only, and did not offer that choice to any other LIFECHEM customer. i. LIFECHEM supplied to dialysis clinics preprinted paper LIFECHEM requisition forms that, from August, 1991 through early 1993, did not list the contents of the Hepatitis panel on the front of the form and did not offer physicians the option of ordering LIFECHEM's Hepatitis panel without the Hepatitis C test. 49 j. From in or about 1991 through 1994, certain members of the MPD sales force falsely informed some physicians and others that ordering the LIFECHEM Hepatitis panel was the standard of care at the BMA's, falsely informed physicians and others that ordering the tests in the LIFECHEM Hepatitis panel was more economical than ordering tests separately as needed for individual patients, and failed to provide material information to physicians and others regarding the cost to Medicare for the often medically unnecessary Hepatitis C tests and IgM Core tests included on LIFECHEM's Hepatitis panel. k. In or about June, 1992, MPD announced a new commission program designed to increase sales of LIFECHEM's Hepatitis panel by paying each sales representative $3.00 for each additional Hepatitis panel sold with the Hepatitis C test, and $2.00 per panel for every Hepatitis panel sold without the Hepatitis C test. l. In or about August, 1992, LIFECHEM's General Manager sought and received approval from the President of NMC, and the President and the Vice President of Finance of MPD, and others, to purchase equipment for LIFECHEM to perform the anticipated additional Hepatitis tests resulting from the further sales and marketing efforts, and she informed them that the projected increase in 1992 revenues would be $763,000 with PFO by $465,000 as a result of the additional testing to be performed by LIFECHEM. m. From in or about January, 1993 through June, 1994, LIFECHEM purchased and installed a computerized laboratory test 51 ordering system in both BMA and non-BMA dialysis clinics, which system included software that did not include on the computerized ordering screen the contents of the Hepatitis panel, and that made it difficult to order the Hepatitis panel without the added Hepatitis C test, and that made it difficult to order Hepatitis tests for individual patients based upon their serologic status. n. From in or about January, 1993 through June, 1994, LIFECHEM directed the sales force of MPD, and others, to install the computers and to instruct employees of the dialysis facilities about how to set up standing orders, and how to use an "assign all" function on the LIFECHEM computerized ordering system, that would assign the test for all patients, or a designated group of patients, in a dialysis facility, and would assign for billing purposes and insert into the computer the same ICD-9 diagnosis code as the medical justification for performing a particular laboratory blood test for each and every patient, or group of patients, at a given facility, regardless of each individual patient's medical condition. o. From in or about March, 1994 through June, 1994, LIFECHEM utilized the MPD sales force to install LIFECHEM's computerized ordering system at the BMAs, despite the potential for abuse by a sales force whose commissions were tied directly to the number of BMA orders for particular enumerated laboratory tests, such as Hepatitis panels, and which, in some cases, resulted in increased medically unnecessary laboratory blood testing and caused the addition of tests to orders for individual patients without the physician's knowledge or approval. 51 p. From in or about August, 1991 through June, 1997, the defendant LIFECHEM submitted false, fictitious and fraudulent claims to the Medicare Program for Hepatitis B IgM Core tests that the defendant LIFECHEM knew were not medically necessary for the diagnosis or treatment of a Medicare Program beneficiary, and without disclosing that lack of medical necessity to the Medicare Program, HCFA, or any carriers employed by the Medicare Program for the processing and payment of claims. By this conduct, the defendant LIFECHEM received at least $8,000,000 in payment from Medicare to which LIFECHEM was not entitled. Among many other medically unnecessary Hepatitis B IgM Core tests that LIFECHEM caused to be billed to the Medicare Program were the following tests, conducted on or about the dates set forth below, and billed to the Medicare Program on or about the dates set forth below, using the "HIC" code indicated: - --------------------------------------------------------------------------- HIC No. Date of Service Date Claim Submitted - ----------------- ----------------------- ------------------------------- Patient A 8/15/94 8/23/94 - --------------------------------------------------------------------------- Patient A 9/19/94 9/27/94 - --------------------------------------------------------------------------- Patient A 10/17/94 10/24/94 - --------------------------------------------------------------------------- Patient A 11/14/94 11/22/94 - --------------------------------------------------------------------------- Patient A 12/12/94 12/19/94 - --------------------------------------------------------------------------- Patient A 1/2/95 1/17/95 - --------------------------------------------------------------------------- Patient A 2/6/95 2/16/95 - --------------------------------------------------------------------------- Patient A 3/6/95 3/14/95 - --------------------------------------------------------------------------- Patient A 4/3/95 4/20/95 - --------------------------------------------------------------------------- Patient A 5/1/95 5/8/95 - --------------------------------------------------------------------------- Patient B 8/3/94 8/10/94 - --------------------------------------------------------------------------- Patient B 9/7/94 9/14/94 52 - --------------------------------------------------------------------------- Patient B 10/5/94 10/14/94 - --------------------------------------------------------------------------- Patient B 11/9/94 11/15/94 - --------------------------------------------------------------------------- Patient B 12/7/94 12/13/94 - --------------------------------------------------------------------------- Patient B 1/4/95 1/17/95 - --------------------------------------------------------------------------- Patient B 2/8/95 2/23/95 - --------------------------------------------------------------------------- Patient B 3/8/95 3/14/95 - --------------------------------------------------------------------------- Patient B 5/3/95 5/9/95 - --------------------------------------------------------------------------- Patient B 7/5/95 7/17/95 - --------------------------------------------------------------------------- Patient B 8/9/95 8/15/95 - --------------------------------------------------------------------------- Patient B 9/6/95 9/12/95 - --------------------------------------------------------------------------- Patient C 8/1/94 8/8/94 - --------------------------------------------------------------------------- Patient C 9/12/94 9/22/94 - --------------------------------------------------------------------------- Patient C 10/3/94 10/10/94 - --------------------------------------------------------------------------- Patient C 11/7/94 11/14/94 - --------------------------------------------------------------------------- Patient C 12/5/94 12/19/94 - --------------------------------------------------------------------------- Patient C 1/9/95 1/19/95 - --------------------------------------------------------------------------- Patient C 2/6/95 2/16/95 - --------------------------------------------------------------------------- Patient C 3/6/95 3/16/96 - --------------------------------------------------------------------------- Patient D 8/4/95 8/15/94 - --------------------------------------------------------------------------- Patient D 9/8/94 9/19/94 - --------------------------------------------------------------------------- Patient D 10/6/94 10/12/94 - --------------------------------------------------------------------------- Patient D 11/3/94 11/10/94 - --------------------------------------------------------------------------- Patient D 12/8/94 12/19/94 - --------------------------------------------------------------------------- Patient D 1/5/95 1/17/95 - --------------------------------------------------------------------------- Patient D 2/2/95 2/14/95 - --------------------------------------------------------------------------- Patient D 3/2/95 3/9/95 - --------------------------------------------------------------------------- Patient D 4/7/95 4/21/95 - --------------------------------------------------------------------------- Patient D 5/4/95 5/11/95 - --------------------------------------------------------------------------- Patient D 6/8/95 6/15/95 - --------------------------------------------------------------------------- Patient D 7/6/95 7/14/95 - --------------------------------------------------------------------------- Patient D 8/3/95 8/8/95 53 - --------------------------------------------------------------------------- Patient E 8/8/94 8/15/94 - --------------------------------------------------------------------------- Patient E 9/13/94 9/20/94 - --------------------------------------------------------------------------- Patient E 10/10/94 10/18/94 - --------------------------------------------------------------------------- Patient E 11/14/94 11/21/94 - --------------------------------------------------------------------------- Patient E 12/12/94 12/19/94 - --------------------------------------------------------------------------- Patient E 1/9/95 1/24/95 - --------------------------------------------------------------------------- Patient E 2/13/95 2/28/95 - --------------------------------------------------------------------------- Patient E 3/13/95 3/23/95 - --------------------------------------------------------------------------- Patient E 4/10/95 4/21/95 - --------------------------------------------------------------------------- Patient E 5/8/95 5/15/95 - --------------------------------------------------------------------------- Patient E 7/17/95 7/25/95 - --------------------------------------------------------------------------- Patient E 8/21/95 8/29/95 - --------------------------------------------------------------------------- Patient F 2/8/95 2/27/95 - --------------------------------------------------------------------------- Patient F 4/6/95 4/20/95 - --------------------------------------------------------------------------- Patient F 5/3/95 5/11/95 - --------------------------------------------------------------------------- Patient F 6/7/95 6/15/95 - --------------------------------------------------------------------------- Patient F 7/5/95 7/14/95 - --------------------------------------------------------------------------- Patient F 8/9/95 8/17/95 - --------------------------------------------------------------------------- Patient F 9/6/95 9/12/95 - --------------------------------------------------------------------------- q. From in or about August, 1991 through June, 1997, the defendant LIFECHEM submitted false, fictitious and fraudulent claims for payment to the Medicare Program for Hepatitis C antibody tests that LIFECHEM knew were not medically necessary for the diagnosis or treatment of a Medicare Program beneficiary, and without disclosing that lack of medical necessity to the Medicare Program, HCFA, or any carriers employed by the Medicare Program for the processing and payment of claims. By this conduct, LIFECHEM received at least $1,900,000 in payment to 54 which LIFECHEM was not entitled. Among many other medically unnecessary Hepatitis B IgM Core tests that LIFECHEM caused to be billed to the Medicare Program were the following tests, conducted on or about the dates set forth below, and billed to the Medicare Program on or about the dates set forth below, using the "HIC" code indicated:
- --------------------------------------------------------------------------- HIC No. Date of Service Date Claim Submitted ------- --------------- -------------------- - --------------------------------------------------------------------------- Patient A 8/15/94 8/23/94 - --------------------------------------------------------------------------- Patient A 9/19/94 9/27/94 - --------------------------------------------------------------------------- Patient A 10/17/94 10/24/94 - --------------------------------------------------------------------------- Patient A 11/14/94 11/22/94 - --------------------------------------------------------------------------- Patient A 12/12/94 12/19/94 - --------------------------------------------------------------------------- Patient A 1/2/95 1/17/95 - --------------------------------------------------------------------------- Patient A 2/6/95 2/16/95 - --------------------------------------------------------------------------- Patient A 3/6/95 3/14/95 - --------------------------------------------------------------------------- Patient A 4/3/95 4/20/95 - --------------------------------------------------------------------------- Patient A 5/1/95 5/8/95 - --------------------------------------------------------------------------- Patient B 8/3/94 8/10/94 - --------------------------------------------------------------------------- Patient B 9/7/94 9/14/94 - --------------------------------------------------------------------------- Patient B 10/5/94 10/14/94 - --------------------------------------------------------------------------- Patient B 11/9/94 11/15/94 - --------------------------------------------------------------------------- Patient B 12/7/94 12/13/94 - --------------------------------------------------------------------------- Patient B 1/4/95 1/17/95 - --------------------------------------------------------------------------- Patient B 2/8/95 2/23/95 - --------------------------------------------------------------------------- Patient B 3/8/95 3/14/95 - --------------------------------------------------------------------------- Patient B 5/3/95 5/9/95 - --------------------------------------------------------------------------- Patient B 7/5/95 7/17/95 - --------------------------------------------------------------------------- Patient B 8/9/95 8/15/95 - --------------------------------------------------------------------------- Patient B 9/6/95 9/12/95 - --------------------------------------------------------------------------- Patient C 8/1/94 8/8/94 - ---------------------------------------------------------------------------
- --------------------------------------------------------------------------- Patient C 9/12/94 9/22/94 - --------------------------------------------------------------------------- Patient C 10/3/94 10/10/94 - --------------------------------------------------------------------------- Patient C 11/7/94 11/14/94 - --------------------------------------------------------------------------- Patient C 12/5/94 12/19/94 - --------------------------------------------------------------------------- Patient C 1/9/95 1/19/95 - --------------------------------------------------------------------------- Patient C 2/6/95 2/16/95 - --------------------------------------------------------------------------- Patient C 3/6/95 3/16/96 - --------------------------------------------------------------------------- Patient D 8/4/95 8/15/94 - --------------------------------------------------------------------------- Patient D 9/8/94 9/19/94 - --------------------------------------------------------------------------- Patient D 10/6/94 10/12/94 - --------------------------------------------------------------------------- Patient D 11/3/94 11/10/94 - --------------------------------------------------------------------------- Patient D 12/8/94 12/19/94 - --------------------------------------------------------------------------- Patient D 1/5/95 1/17/95 - --------------------------------------------------------------------------- Patient D 2/2/95 2/14/95 - --------------------------------------------------------------------------- Patient D 3/2/95 3/9/95 - --------------------------------------------------------------------------- Patient D 4/7/95 4/21/95 - --------------------------------------------------------------------------- Patient D 5/4/95 5/11/95 - --------------------------------------------------------------------------- Patient D 6/8/95 6/15/95 - --------------------------------------------------------------------------- Patient D 7/6/95 7/14/95 - --------------------------------------------------------------------------- Patient D 8/3/95 8/8/95 - --------------------------------------------------------------------------- Patient E 8/8/94 8/15/94 - --------------------------------------------------------------------------- Patient E 9/13/94 9/20/94 - --------------------------------------------------------------------------- Patient E 10/10/94 10/18/94 - --------------------------------------------------------------------------- Patient E 11/14/94 11/21/94 - --------------------------------------------------------------------------- Patient E 12/12/94 12/19/94 - --------------------------------------------------------------------------- Patient E 1/9/95 1/24/95 - --------------------------------------------------------------------------- Patient E 2/13/95 2/28/95 - --------------------------------------------------------------------------- Patient E 3/13/95 3/23/95 - --------------------------------------------------------------------------- Patient E 4/10/95 4/21/95 - --------------------------------------------------------------------------- Patient E 5/8/95 5/15/95 - --------------------------------------------------------------------------- Patient E 7/17/95 7/25/95 - ---------------------------------------------------------------------------
_______________________________________________________________________ Patient E 8/21/95 8/29/95 - ----------------------------------------------------------------------- Patient F 2/8/95 2/27/95 - ----------------------------------------------------------------------- Patient F 4/6/95 4/20/95 - ----------------------------------------------------------------------- Patient F 5/3/95 5/11/95 - ----------------------------------------------------------------------- Patient F 6/7/95 6/15/95 - ----------------------------------------------------------------------- Patient F 7/5/95 7/14/95 - ----------------------------------------------------------------------- Patient F 8/9/95 8/17/95 - ----------------------------------------------------------------------- Patient F 9/6/95 9/12/95 - ----------------------------------------------------------------------- r. From in or about August, 1991 through June, 1997, the defendant LIFECHEM submitted false, fictitious and fraudulent claims to CHAMPUS for Hepatitis B IgM Core tests that LIFECHEM knew were not medically necessary for the diagnosis or treatment of the medical condition of a CHAMPUS beneficiary, and without disclosing that lack of medical necessity to the CHAMPUS Program. By this conduct, LIFECHEM received payments for these tests from CHAMPUS to which LIFECHEM was not entitled. Among other medically unnecessary Hepatitis B IgM Core tests that LIFECHEM caused to be billed to CHAMPUS were the following tests, conducted on or about the dates set forth below, and reimbursed by CHAMPUS on or about the dates set forth below: - ---------------------------------------------------------------------- Patient/Test Date of Service Reimbursement Date ------------ --------------- ------------------ - ---------------------------------------------------------------------- Patient X/IgM Core 5/4/95 9/5/95 - ---------------------------------------------------------------------- Patient Y/IgM Core 5/4/95 9/5/95 - ---------------------------------------------------------------------- Patient Y/IgM Core 6/8/95 7/22/95 - ---------------------------------------------------------------------- Patient Y/IgM Core 7/6/95 8/21/95 - ---------------------------------------------------------------------- Patient Y/IgM COre 8/2/95 9/16/95 - ---------------------------------------------------------------------- s. In or about June, 1990, LIFECHEM installed a new 57 computer billing system and began submitting claims for payment to the Medicare program that were generated by that new computer system, despite the fact that the billing computer had not been completely programmed with the Medicare ESRD billing rules, and the billing computer had not been parallel tested to determine whether or not it generated accurate claims for payment. t. By July, 1990, LIFECHEM knew that the new billing computer was generating inaccurate claims for payment for laboratory blood tests conducted on ESRD patients but continued to submit those false claims for payment to the Medicare Program. u. In or about February, 1991, LIFECHEM discovered a computer programming error that caused the new billing computer to generate claims for payment to the Medicare program for individual chemistry tests that were performed in the laboratory on a automated chemistry analyzer as part of LIFECHEM's automated Chem 20, despite the fact that Medicare had already paid for the monthly Chem 20 for most ESRD patients by directly paying the dialysis facilities the Composite Rate Payment. v. From in or about February, 1991 through at least June, 1992, LIFECHEM submitted false, fictitious and fraudulent claims for payment for individual chemistry tests for which LIFECHEM knew Medicare had already paid, without disclosing to the Medicare Program that those claims for payment were duplicate bills to the Medicare Program, HCFA, or any carriers employed by the Medicare Program for the processing and payment of claims. By this conduct, LIFECHEM received at least $5,300,000 in payment to which LIFECHEM was not entitled. 58 All in violation of Title 18, United States Code, Section 286. 59 COUNT THREE (18 U.S.C. (S) 371 -- Conspiracy to Commit an Offense) ----------- 151. The allegations set forth in paragraphs 1-3, 5-16, and 134-145 are realleged as if fully set forth herein and incorporated in full. 152. From in or about May, 1987 through in or about July, 1996, the exact dates being unknown to the United States Attorney, in the Districts of Massachusetts, Florida, North Carolina, and New Jersey, and elsewhere across the United States, the defendant NMC MEDICAL PRODUCTS, INC. together with others known and unknown to the United States Attorney, knowingly, willfully, and intentionally combined, conspired, confederated and agreed to commit an offense against the United States and its agency the Health Care Financing Administration, namely, to knowingly, willfully and intentionally offer and pay remuneration, directly and indirectly, overtly and covertly, in cash and in kind, to induce dialysis facilities to order, and arrange for the ordering, from LIFECHEM of a service and item paid for, in whole or in part, by the Medicare Program, specifically clinical laboratory blood testing conducted for dialysis patients in the facilities, all in violation of Title 42, United States Code, Section 1320a-7b(b)(2)(B). 60 OBJECTIVE OF THE CONSPIRACY --------------------------- 153. The objective of the conspiracy was to offer and give things of value to dialysis clinics, and to their employees, owners, and administrators, for the purpose of inducing dialysis clinics to order, and to arrange for the ordering of LIFECHEM's laboratory blood testing services, including Non-Routine Tests and medically unnecessary laboratory blood tests for dialysis patients, which services were paid for primarily by Medicare. MANNER AND MEANS OF THE CONSPIRACY ---------------------------------- 154. It was a part of the manner and means by which the conspiracy was accomplished that the defendant MPD, together with others known and unknown to the United States Attorney, offered and paid remuneration to certain dialysis facilities in the form of lavish entertainment and hunting trips, payment of salary and benefits for full-time dialysis center staff who were not devoted to spinning and packaging blood tests for shipment to LIFECHEM, payment of study grants for research that was never performed, and payment of up-front rebates on dialysis products based upon commitments to purchase certain volumes of product that were never met, all for the purpose of inducing the referral of orders for laboratory blood testing services to LIFECHEM, including orders for Non-Routine Tests that were not medically necessary for the diagnosis or treatment of Medicare beneficiaries, which services were paid for primarily by Medicare Trust Funds. 155. As a result of MPD's knowing, willful and intentional payment of illegal remuneration to various dialysis facilities to obtain referral of their laboratory blood testing business to 61 LIFECHEM, MPD generated an unlawful pecuniary gain or profit from that laboratory business in an amount of at least $9,500,000. OVERT ACTS ---------- 156. In furtherance of the conspiracy, the defendant MPD, together with others known and unknown to the United States Attorney, committed among other acts the following overt acts in the District of Massachusetts and elsewhere: a. In or about 1992, MPD knowingly, willfully and intentionally offered and paid to the manager/administrator of Dialysis Facility I illegal remuneration in the form of payment for a bear hunting trip to Canada to induce him to refer Dialysis Facilities I's laboratory blood testing business to LIFECHEM. b. At various times between May, 1987 and January, 1995, MPD knowingly, willfully and intentionally offered and paid to Dialysis Facility F illegal remuneration in the form of payment of salary and benefits for two full- time dialysis center personnel whose responsibilities were not limited to spinning and packaging blood for shipment to LIFECHEM but included administrative, clerical and nursing practitioner work, and in the form of grants for studies that were never performed, all to induce referrals of Dialysis Facility F's laboratory blood testing business to LIFECHEM; c. In or about December, 1990, MPD knowingly, willfully and intentionally offered and paid to Dialysis Facility G illegal remuneration in the form of payment for lavish holiday entertainment parties including a yacht rental worth thousands of dollars to induce referrals of dialysis facility G's laboratory blood testing business to LIFECHEM; and d. At various times between 1991 and 1993, MPD knowingly, willfully and intentionally offered and paid to Dialysis Facilities B and J illegal remuneration in the form of an up-front credit on 62 dialysis products based upon a commitment to purchase a specified volume of dialysis products that was not met, to induce referrals of Dialysis Facilities B and J's laboratory blood testing business to LIFECHEM. All in violation of Title 18 United States Code, Section 371. Respectfully submitted, MARK W. PEARLSTEIN Acting United States Attorney /s/ Peter A. Mullin --------------------------- PETER A. MULLIN Assistant U.S. Attorney /s/ Susan Winkler --------------------------- SUSAN G. WINKLER Assistant U.S. Attorney /s/ Susan Hanson-Philbrick --------------------------- SUSAN HANSON-PHILBRICK Assistant U.S. Attorney /s/ Joshua Levy --------------------------- JOSHUA LEVY - ---------------------------- Assistant U.S. Attorney Dated: January 19, 2000 63 EX-10.7 8 PLEA AGREEMENT/NMC MEDICAL PRODUCTS Exhibit 10.7 U.S. Department of Justice United States Attorney District of Massachusetts Main Reception: (617) 748-3100 United States Courthouse, Suite 9200 1 Courthouse Way Boston, Massachusetts 02210 January 13, 2000 BY HAND Jonathan Chiel Jeffrey E. Stone Choate, Hall & Stewart McDermott, Will & Emery Exchange Place 227 West Monroe Street 53 State Street Chicago, IL 60606-5096 Boston, MA 02109-2891 Alan E. Reider, Esq. Harold Damelin Breckinridge L. Willcox Powers, Pyles, Sutter & Verville Arent, Fox, Kintner, Plotkin & Kahn Twelfth Floor 1050 Connecticut Avenue, NW 1875 Eye Street, NW Washington, D.C. 20036 Washington, DC 20006-5409 Re: NMC Medical Products, Inc. -------------------------- Dear Gentlemen: This letter sets forth the Agreement between the United States Department of Justice and the United States Attorney for the District of Massachusetts (collectively referred to as the "United States") and your client, NMC Medical Products, Inc., ("MPD"), a Delaware corporation, formerly known as National Medical Care Medical Products Division, Inc., and before that as Erika, Inc. Collectively, the United States and MPD will be referred to as "the Parties." 1. Guilty Plea ----------- On or before January 19, 2000, or such other date as the Court may set, MPD shall waive indictment and plead guilty to Count Three in the Information attached hereto as Exhibit A, which charges MPD with a violation of 18 U.S.C. (S) 371, a conspiracy to commit an offense 1 against the United States, namely, to offer and pay remuneration to induce dialysis facilities to order and arrange for the ordering from LifeChem, Inc. of a service or item paid for, in whole or in part, by the Medicare Program, specifically clinical laboratory blood testing conducted for dialysis patients, in violation of Title 42, United States Code, Section 1320a-7b(b)(2)(B). 2. Sentencing Guidelines --------------------- The United States and MPD agree that the following provisions of the United States Sentencing Guidelines ("U.S.S.G.") apply to sentencing of MPD with respect to Count Three of the Information: (a) pursuant to U.S.S.G. (S) 8C2.4(a), the loss to the United States from this offense for criminal sentencing purposes is $9,500,000; (b) pursuant to U.S.S.G. (S) 8C2.5, the culpability score is 7, calculated as follows: (1) base score of 5 pursuant to (S) 8C2.5(a); (2) add 4 points pursuant to (S) 8C2.5(b)(2)(A)(i) and (ii); (3) deduct 2 points pursuant to (S) 8C2.5(g)(2). (c) pursuant to (S) 8C2.6, the applicable range for a multiplier is 1.4 to 2.8, and the appropriate multiplier to be applied to MPD is 1.6. (d) the Parties agree that there is no basis for a departure from the Sentencing Guidelines, either upward or downward. 4. Agreed Disposition ------------------ The United States and MPD agree pursuant to Fed. R. Crim. P. 11(e)(1)(C) that the following sentence is the appropriate disposition of Count Three of the Information: (a) a criminal fine in the amount of fifteen million two hundred thousand dollars ($15,200,000) to be paid as follows: (1) the amount of seven million five hundred ten thousand dollars ($7,510,000) shall be paid within fifteen days of sentencing; (2) a amount of three million eight hundred forty five thousand dollars ($3,845,000) shall be paid on or before April 16, 2001; and 2 (2) an amount of three million eight hundred forty five thousand dollars ($3,845,000) shall be paid on or before July 16, 2001. (b) a mandatory special assessment of $400 pursuant to 18 U.S.C. (S) 3013, which shall be paid to the Clerk of Court on or before the date of disposition; MPD acknowledges that it is obligated, pursuant to 18 U.S.C. (S) 3612(f), to pay interest on that portion of the fine which is not paid on or before the fifteenth day after the Court enters judgment in this matter. In light of the pending civil action, United States ex rel. Jay A. Buford, ------------------------------------ et al. v. LifeChem, Inc., Erika, Inc., et al., Civil Action No. 95-10742-NG (D. - --------------------------------------------- Mass.), and the settlement agreement between MPD and others and the United States relating to the civil action which is being signed simultaneously with this Plea Agreement (the "civil Settlement Agreement"), the parties agree the complication and prolongation of the sentencing process that would result from an attempt to fashion a proper restitution order outweighs the need to provide restitution to the victims in this case, where, as here, the loss suffered by the Medicare program will be recompensed from amounts paid in the civil Settlement Agreement. See, 18 U.S.C. (S) 3663(a)(1)(B)(ii). Therefore, the --- United States agrees that it will not seek a separate restitution order as to the defendant MPD as a part of the resolution of Count Three of the Information. 4. No Further Prosecution of Defendant ----------------------------------- The United States agrees that, other than the charge in Count Three of the attached Information and the exception set forth below, it shall not further prosecute MPD for conduct which (a) falls within the scope of the conspiracy which is charged in Count Three of the Information; (b) was within the scope of the grand jury investigation conducted by the U.S. Attorney; or (c) was known to the U.S. Attorney prior to the date of execution of this letter. The United States expressly reserves the right to prosecute any individual, including but not limited to present and former officers, directors, employees and agents of MPD, in connection with the conduct encompassed by this Plea Agreement or within the scope of the grand jury investigation. 5. Probation Department Not Bound By Agreement ------------------------------------------- The Parties acknowledge that the disposition agreed upon by the Parties and their calculations under the Sentencing Guidelines are not binding upon the United States Probation Office. 3 6. Fed. R. Civ. P. 11(e)(1)(C) Agreement ------------------------------------- MPD's plea shall be tendered pursuant to Fed. R. Crim. P. 11(e)(1)(C). MPD cannot withdraw its plea of guilty unless the sentencing judge rejects this Plea Agreement. If the sentencing judge rejects the guilty plea, this Plea Agreement shall be null and void at the option of either the United States or MPD, except as set forth in Paragraph 8 below. If MPD's guilty plea is withdrawn on MPD's motion for any reason, this Plea Agreement shall be null and void at the option of the United States, except as set forth in Paragraph 8 below. 7. Civil and Administrative Liability ---------------------------------- By entering into this Plea Agreement, the United States does not compromise any civil or administrative liability, including but not limited to any False Claims Act or tax liability, which MPD may have incurred or may incur as a result of its conduct and its plea of guilty to Count Three of the attached Information. 8. Waiver of Defenses ------------------ In the event that MPD's guilty plea is not accepted by the Court for whatever reason, or is later withdrawn for whatever reason, MPD waives, and agrees not to interpose, any defense it might otherwise have under any statute of limitations or the Speedy Trial Act, except any such defense that MPD may already have for conduct occurring before March 1, 1994, if charges are filed within 90 days of the date on which such guilty plea is rejected or withdrawn. 9. Breach of Agreement ------------------- If the United States Attorney determines that MPD has failed to comply with any provision of this Plea Agreement, or has committed any crime between the date of this letter and the date of sentencing in this matter, the United States may, at its sole option, be released from its commitments under this Plea Agreement in their entirety by notifying MPD, through counsel or otherwise, in writing. The United States may also pursue all remedies available under the law, irrespective of whether it elects to be released from its commitments under this Plea Agreement. MPD recognizes that no breach by MPD of any obligation under this Plea Agreement shall give rise to grounds for withdrawal of its guilty plea. MPD understands that, should it breach any provision of this Plea Agreement, the United States will have the right to use against MPD before any grand jury, at any trial or hearing, or for sentencing purposes, any statements which may be made by MPD, and any information, materials, documents or objects which may be provided by it to the government subsequent to this Plea Agreement, without any limitation. 10. Corporate Authorization ----------------------- MPD shall provide to the United States and the Court a certified copy of a resolution of the Board of Directors of MPD, affirming that the Board of Directors has authority to enter into the Plea Agreement and has (1) reviewed the Information in this case and the proposed Plea Agreement in their entirety; (2) consulted with legal counsel of MPD's choice in connection with the matter; (3) voted to enter into the proposed Plea Agreement; (4) voted to authorize MPD to 4 plead guilty to Count Three of the Information; and (5) voted to authorize the corporate officer identified below to execute the Plea Agreement and all other documents necessary to carry out the provisions of the Plea Agreement. MPD agrees that counsel identified below will appear on behalf of MPD and enter the guilty plea and will also appear for the imposition of sentence. 11. Who Is Bound By Agreement ------------------------- This Plea Agreement binds MPD and the United States Department of Justice, including each of its United States Attorney's offices, but can not and does not bind the Tax Division of the U.S. Department of Justice, the Internal Revenue Service of the U.S. Department of Treasury, or any other federal, state or local prosecutive authority. 12. Complete Agreement ------------------ With regard to the disposition of Count Three of the attached Information, this Plea Agreement is the complete and only agreement between the Parties. No promises, representations, agreements or conditions have been entered into other than those set forth in this letter in connection with that charge. This Plea Agreement supersedes prior understandings, if any, of the parties, whether written or oral in connection with the disposition of Count Three. This Plea Agreement can be modified or supplemented only in a written memorandum signed by the Parties or on the record in court. If this letter accurately reflects the Agreement entered into between the United States and your client, NMC Medical Products, Inc., please sign the Acknowledgment of Plea Agreement below, provide evidence of the requisite authorization to enter into this Plea Agreement, and return the original of this letter to Assistant U.S. Attorneys Susan G. Winkler and Susan Hanson-Philbrick. Very truly yours, /s/ Mark W. Pearlstein By: --------------------------- MARK W. PEARLSTEIN Acting United States Attorney District of Massachusetts /s/ John C. Keeney (mwp) By: --------------------------- JOHN C. KEENEY Deputy Assistant Attorney General Criminal Division Department of Justice 5 CORPORATE ACKNOWLEDGMENT OF PLEA AGREEMENT ------------------------------------------ The Directors of NMC Medical Products, Inc. have read this Plea Agreement, and the attached criminal Information in their entirety, and have discussed this matter with legal counsel of the corporation's choosing, including undersigned counsel. As set forth in the attached resolution, the Board of Directors has authorized me, as an officer of the corporation, to enter into this Plea Agreement on behalf of the corporation. I hereby acknowledge, on behalf of NMC Medical Products, Inc., that this letter fully sets forth NMC Medical Products, Inc.'s agreement with the U.S. Attorney relating to the disposition of Count Three of the attached Information, and that no additional promises or representations have been made to the corporation by any official of the United States in connection with the disposition of that charge. NMC Medical Products, Inc. is entering into this Agreement freely, voluntarily and knowingly because it is guilty of the offense set forth in Count Three of the Information and it believes this Plea Agreement is in its best interest. /s/ Ben J. Lipps Dated: 1/18/00 ----------------------------------- Ben J. Lipps President, NMC Medical Products, Inc. /s/ Jonathan Chiel Dated: January 18, 2000 ------------------------------------ Jonathan Chiel Choate, Hall & Stewart /s/ Alan E. Reider Dated: 1/18/00 ------------------------------------ Alan E. Reider Arent, Fox, Kintner, Plotkin & Kahn /s/ Breckinridge L. Wilcox Dated: 1/18/00 ------------------------------------ Breckinridge L. Willcox Arent, Fox, Kintner, Plotkin & Kahn /s/ Jeffrey E. Stone Dated: January 18, 2000 ------------------------------------ Jeffrey E. Stone McDermott, Will & Emery /s/ Harold Damelin Dated: 1/18/2000 ------------------------------------ Harold Damelin Powers, Pyles, Sutter & Verville Attorneys for NMC Medical Products, Inc. 6 EXHIBIT A (Information) The Information dated January 19, 2000 is incorporated by reference to Exhibit A of Exhibit 10.6 to this Current Report on Form 8-K. EX-10.8 9 PLEA AGREEMENT/NMC HOMECARE, INC. EXHIBIT 10.8 U.S. Department of Justice United States Attorney District of Massachusetts Main Reception: (617) 748-3100 United States Courthouse, Suite 9200 1 Courthouse Way Boston, Massachusetts 02210 January 13, 2000 By Hand - ------- Jonathan Chiel, Esquire Jeffrey E. Stone, Esquire Choate, Hall & Stewart McDermott, Will & Emery Exchange Place 222 West Monroe Street Boston, MA 02109 Chicago, IL 60606-5096 Alan E. Reider, Esquire Harold Damelin, Esquire Breckinridge L. Willcox, Esquire Powers, Pyles, Sutter & Arent, Fox, Kintner, Plotkin & Verville & Kahn 12th Floor 1050 Connecticut Avenue, N.W. 1875 Eye Street, NW Washington D.C. 20036-5339 Washington, D.C. 20006-55409 Re: United States v. NMC Homecare, Inc. ----------------------------------- Gentlemen: This letter sets forth the agreement between the United States Department of Justice and the United States Attorney for the District of Massachusetts (hereinafter collectively the "United States") and your client, NMC Homecare, Inc., a Delaware corporation ("NMC Homecare" or "the Defendant"), relating to the U.S. Attorney's criminal investigation of NMC Homecare's IntraDialytic Parenteral Nutrition ("IDPN") and Intraperitoneal Nutrition ("IPN") program. The Agreement ("Plea Agreement") is as follows: 1. Guilty Plea ----------- On or before January 19, 2000, or such other date as the Court may set, the Defendant shall waive indictment and plead guilty to Count One of the criminal Information attached hereto as Exhibit A, which charges the Defendant with conspiracy to defraud the United States, in violation of 18 U.S.C. (S) 371. 2. Sentencing Guidelines --------------------- The United States and the Defendant agree that the following provisions of the United States Sentencing Guidelines (8U.S.S.G.") apply to the sentencing of this Defendant on Count One of the Information: a. The loss to the United States from this offense, for criminal sentencing purposes, pursuant to U.S.S.G. (S)8C2.4(a), is (1) IDPN administration kits $ 3,480,000 (2) False statements and material $25,398,103 omissions (3) Hang fees and other inducements $ 6,368,824 Total $35,246,927 b. The culpability score, pursuant to U.S.S.G. (S)8C2.5, is seven (7), calculated as follows: (1) Base score is 5 ((S)8C2.5(a)); (2) Add 4 points pursuant to (S)8C2.5(b)(2)(A)(i) and (ii); (3) Deduct 2 points pursuant to (S)8C2.5(g)(2). c. The applicable multiplier range pursuant to U.S.S.G. (S)8C2.6 is 1.4 to 2.8 and the multiplier to be applied as to this Defendant is 1.4. d. There is no basis under the guidelines for a departure, either upward or downward. 3. Agreed Disposition. ------------------- The United States and the Defendant agree, pursuant to Fed. R. Crim. P. 11(e)(l)(C), that the following sentence is the appropriate disposition of Count One of this case: a. A criminal fine of $49,345,698, payable as follows: 1) $24,385,000 within 15 days of sentencing; 2) $12,480,349 on or before April 16, 2001; and 3) $12,480,349 on or before July 16, 2001; and 2 b. A special assessment of $400, pursuant to 18 U.S.C. (S)3013(a)(2)(B), payable on or before the date of sentencing. The Defendant acknowledges that it is aware that it is obligated, pursuant to 18 U.S.C. (S)3612(f), to pay interest on the portion of the fine which is not paid before the fifteenth day after the date of the judgment of the Court in this case. In light of the pending civil actions United States ex rel. Ven-A-Care of ----------------------------------- the Florida Keys Inc. v. National Medical Care, Inc., et. al., Civil Action No. - --------------------- ------------------------------------- 97-10962-NG (D. Mass.) and United States ex rel. Dana R. Austin et al. v. ------------------------------------------- National Medical Care, Inc., Civil Action No. 94-12164-NG (D. Mass.), and the - --------------------------- settlement agreement between National Medical Care, Inc. et al. and the United -- -- States relating to those civil actions which is being signed contemporaneous with this Plea Agreement, the parties agree the complication and prolongation of the sentencing process that would result from an attempt to fashion a proper restitution order outweighs the need to provide restitution to the victims in this case. See, 18 U.S.C. (S) 3663(a)(1)(B)(ii). Therefore, the United States agrees it will not seek a restitution order as to this Defendant. 4. No Further Prosecution of Defendant ----------------------------------- The United States agrees that, other than the charge in Count One of the attached Information, it shall not further prosecute the Defendant for conduct which (1) falls within the scope of the conspiracy which is charged in Count One of the Information; (2) was within the scope of the grand jury investigation conducted by the U.S. Attorney; or (3) was known by the U.S. Attorney prior to the date of this letter. The United States expressly reserves the right to prosecute any individual with regard to the conduct encompassed by this Plea Agreement and the grand jury investigation, including, but not limited to, present and former officers, directors, employees and agents of the Defendant. 5. Probation Office Not Bound By Agreement --------------------------------------- The parties acknowledge that the disposition agreed upon by the parties and their calculations under the Sentencing Guidelines are not binding upon the United States Probation Office. 6. Fed. R. Crim. P. 11(e)(l)(C) Agreement -------------------------------------- Defendant's plea will be tendered pursuant to Fed. R. Crim. P. 11(e)(l)(C). Defendant cannot withdraw its plea of guilty unless the sentencing judge rejects the Plea Agreement. If the sentencing judge rejects the guilty plea, this Plea Agreement shall be null and void at the option of either the United States or the Defendant except as set forth in paragraph 8 below. If the Defendant's guilty plea is withdrawn on Defendant's motion for any reason, this Plea Agreement shall be null and void at the option of the U.S. Attorney, except as set forth in paragraph 8 below. 7. Civil and Administrative Liability ---------------------------------- 3 By entering into this Plea Agreement, the United States does not compromise any civil or administrative liability, including but not limited to, any False Claims Act, or tax liability, which Defendant may have incurred or may incur as a result of its conduct and its plea of guilty to the charge specified in paragraph l of this Plea Agreement. 8. Waiver of Defenses ------------------ In the event that NMC Homecare's guilty plea is not accepted by the Court for whatever reason, or is later withdrawn for whatever reason, NMC Homecare waives, and agrees not to interpose, any defense it would have under the Speedy Trial Act or any applicable statute os limitations, by virtue of the passage of time subsequent to the date of this letter, as to any criminal charges relating to matters within the scope of the grand jury investigation conducted by the U.S. Attorney, provided such charges are filed within 90 days of the date on which such guilty plea is rejected or withdrawn. In addition, NMC Homecare agrees to be bound by the waiver of the statute of limitations contained in the January 10, 2000 letter from Breckinridge L. Willcox to Peter A. Mullin, and that such waiver shall remain in full force and effect following execution of this Agreement. Notwithstanding paragraph 6 above, this waiver of the defenses shall remain in full force and effect even if Defendant's plea of guilty is not accepted by the court, or is withdrawn for any reason. 9. Breach of Agreement ------------------- If the United States determines that Defendant has failed to comply with any provision of this Plea Agreement, or has committed any crime between the date of this letter and the date of sentencing in this matter, the United States may, at its sole option, be released from its commitments under this Plea Agreement in their entirety by notifying Defendant, through counsel or otherwise, in writing. The United States may also pursue all remedies available to it under the law, irrespective of whether it elects to be released from its commitments under this Plea Agreement. Defendant recognizes that no such breach by it of any obligation under this Plea Agreement shall give rise to grounds for withdrawal of its guilty plea. Defendant understands that should it breach any provision of this Plea Agreement, the United States will have the right to use against Defendant before any grand jury, at any trial, hearing or for sentencing purposes, any statements made by its employees and agents, and any information, materials, documents or objects provided by Defendant to the government pursuant to this Plea Agreement without any limitation. 10. Corporate Authorization ----------------------- NMC Homecare shall provide to the United States and the Court a certified copy of a resolution of the Board of Directors of Defendant, affirming that the Board of Directors has authority to enter into this Plea Agreement and has (1) reviewed the Information in this case and this Plea Agreement; (2) consulted with legal counsel in connection with this matter; (3) voted to enter into this Plea Agreement; (4) voted to authorized NMC Homecare to plead guilty to the charge specified in this Plea Agreement; and (5) voted to authorize the corporate officer identified below to execute the Plea Agreement and all other documents necessary to carry out the provisions of the Plea Agreement. NMC Homecare agrees that the counsel identified below 4 will appear on behalf of NMC Homecare and enter the guilty plea and will also appear for the imposition of sentence. 11. Who Is Bound By Agreement ------------------------- This Plea Agreement binds NMC Homecare and the United States Department of Justice, including each of its United States Attorney's Offices, but cannot and does not bind the Tax Division of the U.S. Department of Justice, the Internal Revenue Service of the United States Department of the Treasury or any other federal, state or local prosecutive authority. 12. Complete Agreement ------------------ This letter contains the complete agreement between the parties relating to the disposition of this case as to this Defendant. No promises, agreements or conditions have been entered into other than those set forth in this letter. This Plea Agreement supersedes prior understandings, if any, of the parties, whether written or oral, relating to the disposition of Count One of the Information in this case. This Plea Agreement cannot be modified other than in a written memorandum signed by the parties or on the record in court. If this letter accurately reflects the agreement between the United States and Defendant, please sign the Acknowledgment of Plea Agreement below, provide evidence of the requisite authorization to enter into this Plea Agreement, and return the original of this letter to Assistant U.S. Attorney Peter A. Mullin or Joshua S. Levy. Sincerely yours, /s/ Mark W. Pearlstein ------------------------------ MARK W. PEARLSTEIN Acting U.S. Attorney District of Massachusetts /s/ John Keeney (mwp) ------------------------------- JOHN C. KEENEY Deputy Assistant Attorney General Criminal Division U.S. Department of Justice 5 Corporate Acknowledgment of Plea Agreement ------------------------------------------ The Directors of NMC Homecare, Inc. have read this Plea Agreement and the attached criminal Information in their entirety, and have discussed this matter with legal counsel of the corporation's choosing, including the undersigned counsel. As set forth in the attached resolution, the Board of Directors has authorized me, as-an officer of the corporation, to enter into this Plea Agreement on behalf of the corporation. I hereby acknowledge, on behalf of NMC Homecare, Inc., that this Plea Agreement fully sets forth the agreement between NMC Homecare, Inc. and the United States relating to the disposition of Count One of the Information in this case and that no additional promises or representations have been made to the corporation, by any official of the United States, relating to the disposition o' that count. NMC Homecare, Inc. is entering into this Plea Agreement freely, voluntarily and knowingly because it is guilty of the offense set forth in Count One of the Information and it believes this Plea Agreement is in its best interest. Dated: 1/18/00 /s/ Ben J. Lipps --------------------------------- BEN J. LIPPS President NMC Homecare, Inc. Dated: January 18, 2000 /s/ Jonathan Chiel -------------------------------- Jonathan Chiel Choate, Hall & Stewart Dated: 1/18/00 /s/ Alan E. Reider -------------------------------- Alan E. Reider Arent, Fox, Kintner, Plotkin & Kahn Dated: 1/18/00 /s/ Breckinridge L. Wilox ------------------------------- Breckinridge L. Willcox Arent, Fox, Kintner, Plotkin & Kahn Dated: January 18, 2000 /s/ Jeffrey Stone --------------------------------- Jeffrey E. Stone McDermott, Will & Emery Dated: 1/18/2000 /s/ Harold Damelin --------------------------------- Harold Damelin Powers, Pyles, Sutter & Verville Attorneys for NMC Homecare, Inc. 6 EXHIBIT A (Information) The Information dated January 19, 2000 is incorporated by reference to Exhibit A of Exhibit 10.6 to this Current Report on Form 8-K. EX-10.9 10 LETTER AGREEMENT EXHIBIT 10.9 U.S. Department of Justice United States Attorney District of Massachusetts Main Reception: (617) 748-3100 United States Courthouse, Suite 9200 1 Courthouse Way Boston, Massachusetts 02210 January 17, 2000 By Hand - ------- Jonathan Chiel, Esq. Jeffrey E. Stone, Esq. Choate, Hall & Stewart McDermott, Will & Emery Exchange Place 222 West Monroe Street 53 State Street Chicago, IL 60606-5096 Boston, MA 02109-2891 Alan E. Reider, Esq. Harold Damelin, Esq. Breckinridge L. Willcox, Esq. Powers, Pyles, Sutter & Arent, Fox, Kintner, Plotkin Verville & Kahn 12/th/ Floor 1050 Connecticut Avenue, NW 1875 Eye Street, NW Washington, D.C. 20036 Washington, D.C. 20006-5409 Re: Fresenius Medical Care Holdings, Inc. ------------------------------------- Gentlemen: This letter sets forth the Agreement between the United States Department of Justice and the United States Attorney for the District of Massachusetts (hereinafter collectively "United States") and your client, Fresenius Medical Care Holdings, Inc., ("FMCH"), a New York corporation, as follows: 1. No Criminal Prosecution of FMCH ------------------------------- Except as set forth below, the United States hereby declines criminal prosecution of FMCH, its wholly owned subsidiary, National Medical Care, Inc. (NMC), and their parent, 1 subsidiary and affiliated corporate entities, except NMC Homecare, Inc. ("NMC Homecare"), LifeChem, Inc. ("LifeChem") and NMC Medical Products, Inc. ("MPD"), for the following conduct: (1) conduct described in the Information attached hereto as Exhibit A; (2) conduct within the scope of the grand jury investigation conducted by the United States Attorney for the District of Massachusetts; and (3) conduct otherwise known to the United States Attorney for the District of Massachusetts as of the date of this letter. Certain allegations regarding Spectra Laboratories, Inc. were recently brought to the attention of the U.S. Attorney for the Northern District of California ("USA-NDCA"). Based upon a preliminary review of those allegations, the USA-NDCA has no present intention to open a criminal investigation into those allegations. However, facts may come to the attention of the USA-NDCA that might lead to a criminal investigation. As a result, the USA-NDCA does not decline prosecution of Spectra Laboratories, Inc., SRC Holding Company, Inc., or any other entity responsible for their conduct. This agreement is not intended to and does not affect the criminal liability of any individual. This declination of criminal prosecution is contingent on (1) the guilty pleas of NMC Homecare, LifeChem, and MPD, as set forth in the Plea Agreements which are being signed contemporaneous with this Agreement, being accepted by the Court, and not withdrawn, and (2) FMCH, NMC and their related entities performing all of their obligations as set forth in this Agreement and the four civil settlement agreements (NMC Homecare, LifeChem, credit balances and Doppler Flow Test/BIA tests) being signed contemporaneous with this Agreement. If such guilty pleas are not accepted by the court or are withdrawn for any reason, or if FMCH, or a related entity, should fail to perform an obligation under one of the civil settlement agreements, this declination of criminal prosecution shall be null and void. 2. Corporate Integrity Agreement ----------------------------- Contemporaneous with the execution of this agreement, FMCH shall enter into a Corporate Integrity Agreement with the Office of Inspector General ("Inspector General") for the United States Department of Health and Human Services. 3. FMCH Guarantee -------------- 2 FMCH hereby acknowledges that, pursuant to the Guarantee Agreement dated July 31, 1996 among Fresenius Medical Care AG, FMCH, NMC, and the United States of America, a copy of which is attached as Exhibit B, FMCH has unconditionally guaranteed to the United States the prompt payment when due of all obligations of NMC to the United States in respect of the Government Claims, as defined in the Guarantee Agreement. FMCH expressly and unequivocally agrees that the obligations of FMCH, NMC, NMC Homecare, LifeChem, and MPD contained in the Plea Agreements and Civil Settlement Agreements being signed contemporaneous with this Agreement constitute obligations of NMC to the United States in respect of the Government Claims within the meaning of the Guarantee Agreement. 4. Waiver of Defenses ------------------ In the event that the guilty pleas of NMC Homecare, LifeChem, or MPD, as contemplated by the Plea Agreements being signed contemporaneous with this Agreement, are not accepted by the Court for whatever reason, or are later withdrawn for whatever reason, FMCH hereby agrees for itself and on behalf of NMC, and their parent, subsidiary and affiliated corporate entities, to waive, and not interpose, any defense it or they would have under any statute of limitations or the Speedy Trial Act, by virtue of the passage of time subsequent to the execution of this Agreement, as to any criminal charges relating to the matters within the scope of the grand jury investigation conducted by the U.S. Attorney, if such charges are filed within 90 days of the date on which such guilty plea is rejected or withdrawn. In addition, FMCH agrees on behalf of itself, NMC and their subsidiary and affiliated corporations to extend and maintain in full force and effect the waivers of the statute of limitations and Speedy Trial Act contained in the letters of January 7, 2000 from Susan G. Winkler to Jonathan Chiel, Esq. and January 10, 2000 from Breckinridge L. Willcox, Esq., et al. to Peter A. Mullin. FMCH agrees to take all steps -- -- necessary to obtain such waivers from NMC, and its subsidiary and affiliated corporate entities, including, but not limited to, obtaining corporate authorization to sign any necessary document. 5. Cooperation of FMCH ------------------- FMCH agrees to cooperate completely and truthfully with the U.S. Attorney in connection with his on-going investigation and prosecution of others for alleged violations of federal criminal law arising out of his investigation. FMCH understands and 3 agrees that such cooperation shall include, without limitation, the following, if requested by the U.S. Attorney: a. prompt production to the U.S. Attorney of any non-privileged document or record in the possession, custody or control of FMCH, NMC or their subsidiary and affiliated corporate entities relating to the subject matter of the investigation; 4 b. taking all reasonable measures available to FMCH to ensure that present and former officers, directors, agents and employees of FMCH, NMC and their subsidiary and affiliated corporate entities cooperate truthfully and completely with the U.S. Attorney in connection with his on-going investigation and prosecutions; and c. taking all reasonable measures available to FMCH to make all present and former officers and employees of FMCH, NMC and their subsidiary and affiliated corporate entities available for interviews by law enforcement personnel, upon reasonable notice. 6. Breach of Agreement ------------------- If the United States determines that FMCH has failed to comply with any provision of this Agreement, the United States may, at its sole option, be released from its commitments under the Agreement in their entirety, by notifying FMCH, through counsel or otherwise, in writing. The United States may also pursue all remedies available to it under the law irrespective of whether the United States elects to be released from its commitments under this Agreement. FMCH understands that should it breach any provision of this Agreement, the United States will have the right to use against FMCH and NMC, before any grand jury, at any trial, hearing or for sentencing purposes, any statements, information, materials, documents or objects provided by FMCH to the United States pursuant to this Agreement, without limitation. 6. Who Is Bound By Agreement ------------------------- This Agreement is binding upon FMCH and the United States Department of Justice, including each of its United States Attorney's Offices, but can not and does not bind the Tax Division of the U.S. Department of Justice, the Internal Revenue Service of the U.S. Department of the Treasury or any other federal, state or local prosecutive authority. 6. Corporate Authorization ----------------------- FMCH shall provide to the U.S. Attorney a certified copy of a resolution of its Board of Directors, affirming that the Board of Directors has authority to enter into this Agreement and has (1) reviewed this Agreement, the attached Information, the three Plea Agreements and four Civil Settlement Agreements being signed contemporaneous with this Agreement and the attached 5 Guarantee Agreement; (2) consulted with legal counsel in connection with the matter; (3) voted to enter into this Agreement; and (4) voted to authorize the corporate officer identified below to execute this Agreement and all other documents necessary to carry out the provisions of the Agreement. 9. Complete Agreement ------------------ This letter, together with the three Plea Agreements and four Civil Settlement Agreements being signed contemporaneous with this Agreement, and the July 31, 1996 Guarantee Agreement, contain the complete agreement between the parties relating to the criminal disposition of this matter. No promises, representations, or conditions have been entered into other than those set forth in this letter and the above-referenced documents. This Agreement supersedes prior understandings, if any, of the parties, whether written or oral, relating to the criminal disposition of this matter. This Agreement can be modified or supplemented only in a written memorandum signed by the parties or on the record in Court. If this letter accurately reflects the Agreement between the United States and your client, Fresenius Medical Care Holdings, Inc., please execute this Agreement in the spaces indicated below, provide the requisite documentation of authorization to enter into this Agreement and return the original of this letter to Assistant U.S. Attorney Peter A. Mullin or Susan G. Winkler. Sincerely yours, /s/ Mark W. Pearlstein -------------------------------- MARK W. PEARLSTEIN Acting United States Attorney District of Massachusetts /s/ John Keeney (wwp) -------------------------------- JOHN C. KEENEY Deputy Assistant Attorney General Criminal Division U.S. Department of Justice 6 The Board of Directors has authorized me to execute this Agreement on behalf of Fresenius Medical Care Holdings, Inc. The Board has read this letter, the attached criminal Information, the three Plea Agreements and four Civil Settlement Agreements being signed contemporaneous herewith, and the Guarantee Agreement, in their entirety, understands them, and has discussed them fully with FMCH's legal counsel. I hereby acknowledge, on behalf of FMCH, that this letter fully sets forth FMCH's agreement with the United States, and that no additional promises or representations have been made to the corporation by any official of the United States in connection with the criminal disposition of this matter. FMCH is entering into this Agreement freely, voluntarily and knowingly because it believes this Agreement is in its best interest. Dated: 1/18/00 /s/ Ben J. Lipps ----------------------------- BEN J. LIPPS President Fresenius Medical Care Holdings, Inc. Dated: January 18, 2000 /s/ Jonathan Chiel ----------------------------- JONATHAN CHIEL Choate, Hall & Stewart Dated: 1/18/00 /s/ Alan E. Reider ----------------------------- ALAN E. REIDER Arent, Fox, Kintner, Plotkin & Kahn Dated: 1/18/00 /s/ Breckinridge L. Willcox ----------------------------- BRECKINRIDGE L. WILLCOX Arent, Fox, Kintner, Plotkin & Kahn Dated: January 18, 2000 /s/ Jeffrey E. Stone -------------------------------- JEFFREY E. STONE McDermott, Will & Emery Dated: 1/18/00 /s/ Harold Damelin -------------------------------- HAROLD DAMELIN Powers, Pyles, Sutter & Verville Attorneys for Fresenius Medical Care Holdings, Inc. 7 EXHIBIT A (Information) The Information dated January 19, 2000 is incorporated by reference to Exhibit A of Exhibit 10.6 to this Current Report on Form 8-K. -----END PRIVACY-ENHANCED MESSAGE-----