DaVita Healthcare Partners, Inc. is a Fortune 500® company that offers a variety of health care services throughout the U.S., but is best known for its DaVita Kidney Care division, which operates 2,200 outpatient kidney dialysis clinics in the U.S. and nearly 100 others globally. DaVita treats about 174,000 U.S. patients for chronic kidney failure and end-stage renal disease, meaning that it bills Medicare, Medicaid, and other government health insurance programs for hundreds of millions of dollars in reimbursement claims every year.
According to its 2014 annual report, 58 percent of DaVita’s revenue came from Medicare, with an additional eight percent coming from Medicaid and other taxpayer-funded healthcare programs. Recent whistleblower lawsuits and subsequent settlements, however, indicate that instead of handling Medicare and other programs as vital customers, the company has devised ways to maximize its profits by defrauding government health care programs.
In fact, within just the last nine months, DaVita has agreed to pay the U.S. nearly $1 billion in settlements stemming from False Claims Act lawsuits filed by whistleblowers, and more than $1 billion since 2012.
Setting records for settlements
The most recent settlement was reached on May 5, 2015 when DaVita agreed to pay the U.S. $450 million to resolve allegations that it systematically discarded expensive prescription drugs so that it could bill the U.S. government for them.
Two former DaVita employees, Dr. Alon Vainer and nurse Daniel Barbir sued DaVita in a federal court in Atlanta in 2011, accusing the Denver-based company of wasting massive quantities of Zemplar, a synthetic vitamin D drug and Venofer, an iron supplement and billing the government for the unused, discarded quantities.
For example, if a patient required 25 milligrams of Venofer, DaVita directed the physician to take that much from a 100-milligram vial, discard the unused portion, and bill Medicare for the full 100 mg., even when smaller doses could have been administered with little or no waste.
According to the complaint, DaVita’s scheme to “to purposefully create and maximize their waste and receive significantly higher reimbursements and revenue” occurred between 2003 and 2010.
The federal government reviewed the case but refrained from intervening in it. The $450-million settlement is the largest recovery ever made under the False Claims Act for an un-joined case.
All whistleblowers whose False Claims Act lawsuits result in a recovery are awarded 15 to 25 percent, and in some cases up to 30 percent, of the total recovery. Dr. Vaine and Mr. Barbir could share an award of more than $110 million for their role in the DaVita case.
On October 22, DaVita agreed to pay $350 million to settle another lawsuit filed in 2009 by a former employee-turned-whistleblower who accused the company of operating a massive kickback scheme designed to drive dialysis patients to DaVita clinics for treatment.
David Barbetta, who once worked for DaVita’s mergers and acquisitions department, alleged that the company strategically identified physicians and physician groups across the U.S. that had significant numbers of patients suffering from kidney disease. According to the complaint, the ideal physicians or physician groups were labeled as a “winning practice,” and in at least one transaction, a practice was targeted because its physicians were “young and in debt.”
The company then offered those physicians highly lucrative opportunities to partner with DaVita by acquiring or selling an interest in dialysis clinics to which their patients in need of dialysis would be referred.
To further ensure referrals of these patients to its clinics, DaVita required the physicians to enter no-compete and non-disparagement agreements that prevented them from competing with DaVita clinics and referring their patients to other dialysis providers.
After investigating the claims, the U.S. government determined that DaVita’s illegal kickback arrangements continued for nearly a decade, starting in March 2005 and ending in February 2014.
“This case involved a sophisticated scheme to compensate doctors illegally for referring patients to DaVita’s dialysis centers. Federal law protects patients by making buying and selling patient referrals illegal, so as to ensure that the interest of the patient is the exclusive factor in the referral decision,” U.S. Attorney John Walsh said in a statement about the case. “When a company pays doctors and/or their practice groups for patient referrals, the company’s focus is not on the patient, but on the profit to be extracted from providing services to the patient.”
DaVita’s $350-million settlement was the largest settlement ever in the U.S. of a case solely involving health care industry kickbacks.
In July 2012, DaVita settled a False Claims Act lawsuit filed by a whistleblower in Texas, agreeing to pay $55 million to resolve allegations that it fraudulently billed the U.S. government for free supplies of Epogen, an anemia drug made by Amgen.
According to the complaint, Amgen provided quantities of Epogen to DaVita to meet the federal requirement that health care providers overfill vials with an extra quantity to ensure full doses are administered to patients.
Former Amgen employee Ivey Woodard filed his original complaint in 2002, alleging DaVita fraudulently billed the federal government for the overfills, which amounted to millions of dollars in false claims to Medicare and other government health care programs. She also alleged that DaVita gave higher, medically unnecessary doses of Epogen to its patients and submitted false cost reports to Medicare and Medicaid.
DaVita and its subsidiaries are currently under investigation by the Health and Human Services Department in connection with possibly improper diagnosis coding used for its Medicare Advantage billing. Federal authorities have subpoenaed DaVita, and the company says it is complying with the investigation.
Coming Up Next:
Next week’s installment of The Fraud List will feature another repeat offender of the False Claims Act, Omnicare, Inc. A new story in this series will be published each Thursday. Follow #thefraudlist on Google+, Facebook and Twitter.