The Justice Department plans to announce today that it has settled a health care fraud case involving a national chain of kidney dialysis centers for nearly $500 million, the largest health care settlement in the department's history.

The settlement includes a criminal fine of $101 million for wide-ranging wrongdoing by National Medical Care Inc., people familiar with the matter said yesterday. The Massachusetts-based firm is owned by a German company that is the world's largest provider of dialysis products and services. The settlement also includes civil fines, restitution and penalties for wrongdoing related to a variety of government health care programs, including Medicare, the federal health care program for the elderly.

The agreement includes allegations that company officials caused Medicare to pay for hundreds of thousands of needless tests for patients suffering from renal disease, a condition that frequently requires patients to receive kidney dialysis, people familiar with the case said. In addition, the company executives allegedly paid kickbacks to obtain referrals of lab business, a violation of anti-kickback statutes.

The case is part of a larger effort by the Clinton administration to go after companies and individuals engaging in health care fraud. That effort has been underway since 1993, with a heavy emphasis on wrongdoing in the Medicare program. Unnecessary Medicare expenditures were estimated in 1998 at $12.6 billion, a decline from the $23.2 billion in estimated overpayments in 1996, a sign that increased enforcement is paying off, a Justice report concludes.

The German parent company, Fresenius Medicare Care AG, bought National Medical Care from W.R. Grace & Co. in the mid-1990s. The German company and its top executive said recently that under the terms of a preliminary settlement agreement Fresenius was negotiating, it may be forced to pay civil and criminal payments of about $485 million.

"Fresenius Medicare Care has achieved an important step toward putting these issues behind us and allowing us to focus all our resources on what really matters: the health of our patients," Ben Lipps, chief executive officer of Fresenius, said recently. "The settlement means that we can concentrate on our position as the world's leader in dialysis and provides us a clear platform going forward.

"None of the conduct involved in this agreement relates to the quality of care provided to our patients. At no time did the company compromise its goal of providing the very best care available to . . . patients with chronic kidney failure."

According to industry records, the company operates kidney dialysis centers in the Washington area.

"Health care fraud in the United States remains a serious problem that has an impact on all health care payers and affects every person in this country," the Justice Department said. "Health care fraud cheats taxpayers out of billions of dollars every year."

The settlement and the complex schemes of which the company was accused are scheduled to be disclosed in Boston this morning, with Deputy Attorney General Eric H. Holder Jr., David W. Ogden, acting head of the civil division, and other officials from Washington appearing at a news briefing along with lawyers from the U.S. attorney's office in Boston, which has been working on the case for years. During that time, company officials have pleaded guilty to conspiring to defraud the Medicare program and other violations.

Before the record settlement with National Medical Care--a company with hundreds of kidney dialysis and treatment centers around the country--the Justice Department's largest health care fraud settlement was in 1994 with National Medical Enterprises, a California-based hospital chain, for $379 million. Ironically, that case also involved the payment of kickbacks and bribes so that doctors and others would refer patients to the company's hospitals. It also included fraudulent billing of Medicare and other federal health care programs.

Attorney General Janet Reno warned at the time that Justice had "made health care fraud a major law enforcement priority, and we're going to pursue it as vigorously as we possibly can."

Some doctors and medical industry executives have complained that the government, in its zeal to halt fraud, has criminalized honest mistakes, misunderstandings and standard industry billing practices.

Staff writer David Hilzenrath and staff researcher Lynn Davis contributed to this report.