Company owes the state $7M, lawsuit claims

Liberty Dialysis, a company that operates kidney dialysis facilities throughout the state, owesHawaii $7 million that the company allegedly overbilled in Medicaid payments from 2006 to 2010, a state lawsuit says.

A hearings officer with the Administrative Appeals Office of the state Department of Human Services found that the state overpaid Liberty Dialysis $7.5 million and the company still owes the state $7 million, the lawsuit says.

The hearings officer made the decision Friday, according to the state Attorney General’s Office.

On Tuesday, the state sued Liberty Dialysis in Circuit Court under several counts including violating the state’s False Claims Act, unjust enrichment and breach of contract.

State Attorney General Doug Chin said in a statement: "A hearings officer has ordered Liberty Dialysis to pay back the state for millions of dollars in overpayments. We expect to prove in this new lawsuit that Liberty gamed the system to keep being overpaid."

The lawsuit says Liberty received excessive payments for the drug Epogen by taking advantage of a programming error in the state’s computer system. Epogen is used for the treatment of anemia associated with chronic renal failure.

Liberty was supposed to enter one unit for each administration of the drug in the computer system, but entered multiple units and inflated its total charges. The state paid the inflated charges, resulting in the defendants receiving a "windfall reimbursement from DHS-Medicaid," the suit said.

Defendants also named in the suit are M Group Consulting, M4 Consultants and Xerox State Healthcare.

The state claims Liberty knew about being overpaid as early as September 2006, but continued to submit claims to receive overpayments.

M4, one of Liberty’s billing consultants, told Liberty there may be a "system problem" with Hawaii Medicaid, and in February 2007 M4 told Liberty that it "will need to request a programming change," the suit said. Liberty, however, continued to disregard the advice of the billing consultants and submit claims in a way that allowed the company to be overpaid, the suit alleged.

The state remained unaware of the programming error until 2009.

Xerox State Healthcare, another defendant, was contracted by the state to monitor and collect any overpayments made to Liberty. The company still has not reimbursed the state.

The state is seeking triple the $7 million owed and civil penalties. Attorneys for Liberty Dialysis could not be reached for comment.