DaVita to pay $389 million to settle physician kickback investigations

Dialysis provider DaVita Kidney Care has agreed to pay $350 million to resolve claims that it violated the False Claims Act by paying kickbacks to receive referrals of patients to its dialysis clinics, the Justice Department announced Oct. 22. The dialysis provider has also agreed to a civil forfeiture of $39 million based upon conduct related to two specific joint venture transactions agreed upon in Denver.

As part of the settlement, DaVita said it will undo 11 joint venture transactions covering 26 of its 2,119 clinics. The company will also be subject to a corporate integrity agreement and an independent monitor to oversee certain future joint ventures.

"We have worked incredibly hard to get things right and it is our belief there was no intentional wrongdoing," DaVita said in a statement. "We believe this settlement is the right thing for our teammates, partners and shareholders."

The settlement resolves allegations that for nearly a decade DaVita identified physicians or physician groups that treated a large number of patients with renal disease and offered them lucrative opportunities to partner with DaVita by acquiring and/or selling an interest in dialysis clinics to which their patients would be referred for dialysis treatment, according to the Justice Department.

According to claims made by the Justice Department, the dialysis provider had a vetting process that included gathering specific information about physicians or physician groups to determine if they would be a "winning practice."

"In one transaction, a physician’s group was considered a 'winning practice' because the physicians were 'young and in debt.' Based on this careful vetting process, DaVita knew and expected that many, if not most, of the physicians' patients would be referred to the joint venture dialysis clinics," the Justice Department said in a news release.

The allegations were originally brought in a whistleblower lawsuit filed in 2009 by David Barbetta, a former DaVita employee. The lawsuit had been under seal until Oct. 22. DaVita previously announced in a February 2014 earnings call that it had reached a framework for a settlement with federal investigators.

“Health care providers should generate business by offering their patients superior quality services or more convenient options, not by entering into contractual agreements designed to induce physicians to provide referrals,” said Deputy Assistant Attorney General for the Justice Department’s Civil Division Jonathan F. Olin.

According to the law firm representing the whistleblower in the original suit, Phillips & Cohen LLP, the complaint says that DaVita rewarded doctors who referred patients to its dialysis centers by:

Selling them shares in existing DaVita dialysis centers for less than fair-market value.
Buying shares in dialysis centers owned by physicians for more than fair-market value.
Giving physicians kickbacks masked as profits from joint ventures.
Paying them to refrain from building competing dialysis centers.

“This case involved a sophisticated scheme to compensate doctors illegally for referring patients to DaVita’s dialysis centers," said U.S. Attorney John Walsh. "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 “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.” -by Rebecca Zumoff