SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Sections 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 13, 2002
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FRESENIUS MEDICAL CARE HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
New York
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(State or other jurisdiction of incorporation)
1-3720 13-3461988
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(Commission File Number) (IRS Employer Identification No.)
95 Hayden Avenue Lexington, Massachusetts 02420
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(Address or principal executive offices) (Zip Code)
Registrant's telephone number, including area codes: (781) 402-9000
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Not Applicable
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(Former name or former address, if changed since last report)
ITEM 5. Other Events
On May 13, 2002, the U.S. District Court for the District of Columbia
confirmed its earlier holding in favor of the Company's wholly-owned subsidiary,
National Medical Care, Inc. ("NMC"), and granted summary judgment in favor of
the U.S. Government in the Company's longstanding lawsuit challenging the
Government's interpretation of certain provisions of the Omnibus Budget
Reconciliation Act of 1993 ("OBRA 93") relating to the coordination of benefits
for certain end stage renal disease patients. The following discussion of the
OBRA 93 proceedings updates and supersedes the discussion of this matter
appearing in the Company's Quarterly Report on Form 10-Q dated May 15, 2002.
The Omnibus Budget Reconciliation Act of 1993 affected the payment of
benefits under Medicare and employer health plans for dual-eligible ESRD
patients. In July 1994, the Centers for Medicare and Medicaid Services (CMS)
(formerly known as the Health Care Financing Administration, or HCFA) issued an
instruction to Medicare claims processors to the effect that Medicare benefits
for the patients affected by that act would be subject to a new 18-month
"coordination of benefits" period. This instruction had a positive impact on the
dialysis revenues of NMC because, during the 18-month coordination of benefits
period, patients' employer health plans were responsible for payment, which was
generally at rates higher than those provided under Medicare.
In April 1995, CMS issued a new instruction, reversing its original
instruction in a manner that would substantially diminish the positive effect of
the original instruction on NMC's dialysis business. CMS further proposed that
its new instruction be effective retroactive to August 1993, the effective date
of the Omnibus Budget Reconciliation Act of 1993.
NMC ceased to recognize the incremental revenue realized under the
original instruction as of July 1, 1995 and subsequently commenced billing
Medicare as primary payor for dual eligible ESRD patients affected by the act.
On May 5, 1995, NMC filed a complaint in the U.S. District Court for
the District of Columbia (National Medical Care, Inc. and Bio-Medical
Applications of Colorado, Inc. d/b/a Northern Colorado Kidney Center v. Shalala,
C.A. No.95-0860 (WBB)) seeking to preclude CMS from retroactively enforcing its
April 24, 1995 interpretation of the Omnibus Budget Reconciliation Act of 1993
provision relating to the coordination of benefits for dual eligible ESRD
patients. On May 9, 1995, NMC moved for a preliminary injunction to preclude CMS
from enforcing its new policy retroactively, that is, to billing for services
provided between August 10, 1993 and April 23, 1995. On June 6, 1995, the court
granted NMC's request for a preliminary injunction and in December of 1996, NMC
moved for partial summary judgment seeking a declaration from the Court that
CMS' retroactive application of the April 1995 rule was legally invalid. CMS
cross-moved for summary judgment on the grounds that the April 1995 rule was
validly applied prospectively. In January 1998, the court granted NMC's motion
for partial summary judgment and entered a declaratory judgment in favor of NMC,
holding CMS' retroactive application of the April 1995 rule legally invalid.
Based on its finding, the Court also permanently enjoined CMS from enforcing and
applying the April 1995 rule retroactively against NMC. The Court took no action
on CMS' motion for summary judgment pending completion of the outstanding
discovery.
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On October 5, 1998, NMC filed its own motion for summary judgment
requesting that the Court declare CMS' prospective application of the April 1995
rule invalid and permanently enjoin CMS from prospectively enforcing and
applying the April 1995 rule. On May 13, 2002, the Court affirmed the
prospective enforcement of the April 1995 rule. The Court's May 2002 ruling
confirms by reference its earlier holding that the April 1995 rule could not be
enforced retroactively. The Court's decision will require no change in the
Company's billing operations.
In July, 2000, NMC filed a complaint in the U.S. District Court for the
Eastern District of Virginia (National Medical Care, Inc. and Bio-Medical
Applications of Virginia, Inc. v. Aetna Life Insurance Co., Inc., Aetna U.S.
Healthcare, Inc. and John Does 1-10) seeking recovery against Aetna U.S.
Healthcare and health plans administered by Aetna U.S. Healthcare for claims
related to primary payor liability for dual eligible ESRD patients under the
Omnibus Budget Reconciliation Act of 1993. On January 16, 2001, the Court stayed
the action pending resolution of the District of Columbia Court action. The
Virginia District Court has not yet acted in response to the Court's ruling in
the District of Columbia action. The Company's agreement in principle with Aetna
establishes a process for resolving these claims.
SIGNATURES
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.
/s/ RONALD J. KUERBITZ
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DATE: May 29, 2002 Name: Ronald J. Kuerbitz
Title: Senior Vice President
and General Counsel
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