ANTI-KICKBACK STATUTE WHISTLEBLOWER BLOG: DaVita To Pay $350 Million to Resolve Whistleblower Lawsuit Alleging Illegal Kickback Arrangements With Referring Physicians

DaVita Healthcare Partners, Inc., recently agree to pay $350 million to the federal government to settle a whistleblower lawsuit alleging that it violated the civil False Claims Act.

The settlement resolves allegations originally brought in a whistleblower lawsuit filed under the qui tam or whistleblower provisions of the civil False Claims Act, which allow private parties to bring suit on behalf of the government and to share in any recovery.  The suit was filed by a Senior Financial Analyst in DaVita’s Mergers and Acquisitions Department. The whistleblower’s reward share of the recovery has yet to be determined.

DaVita is one of the leading providers of dialysis services in the United States. The whistleblower lawsuit alleges that DaVita violated the civil False Claims Act and the federal Anti-Kickback Statute by paying kickbacks to physicians to induce patient referrals to its dialysis clinics.

Specifically, the whistleblower lawsuit alleged that the company engaged in a three part scheme to defraud government health care programs.

First, it was alleged that DaVita gathered information to identify physicians and physician practice groups in targeted areas with a substantial patient population suffering from renal disease. The company would then determine which of these practices were worth targeting. Once the target list was established, DaVita would offer the physician or physician group the opportunity to enter a joint venture where the company would either buy an interest in the dialysis clinics owned by the physicians and/or sell the physicians an interest in its dialysis clinics. The government also alleged that DaVita would manipulate financial models to make these investments appear more profitable to referring physicians.

Lastly, to ensure future patient referrals, the company entered a series of secondary agreements with their physician partners. These agreements included compensating physicians for serving as medical directors of the jointly-owned dialysis clinics. In addition, DaVita also entered into non-compete agreements with some physicians, preventing both the physician and the physician’s entire practice (even if the physician were not part of the joint venture) from competing against DaVita. These agreements also included provisions prohibiting the physician partners from inducing or advising a patient to seek treatment at a competing dialysis clinic. And DaVita required these non-compete agreements be signed before closing a deal with a physician or physician practice.

DaVita’s illegal kickback arrangement was very complicated. The Department of Justice, in a press release, described one example of an alleged Anti-Kickback Violation by the company:

“The Government’s complaint identifies a joint venture with a physicians’ group in central Florida as one of several examples illustrating DaVita’s scheme to improperly induce patient referrals. The group had previously been in a joint venture arrangement involving dialysis clinics with Gambro, Inc., a dialysis company acquired by DaVita in 2005. Prior to the acquisition, Gambro had entered into a settlement with the United States to resolve alleged kickback allegations that, among other things, required Gambro to unwind its joint venture agreements. As a consequence, Gambro purchased the group’s interest in the joint venture clinics and agreed to a “carve-out” of the associated non-competition agreement which allowed the group to open its own dialysis clinic nearby, which it did. After acquiring Gambro, DaVita bought a majority position in the group’s newly established dialysis clinic, and sold a minority position in three DaVita-owned clinics. Despite the fact that each of the clinics involved were roughly comparable in terms of size and profits, DaVita agreed to pay $5,975,000 to acquire a 60 percent interest in the group’s clinic, while selling a 40 percent interest in the three clinics it owned for a total of $3,075,000. As part of this joint venture, the group agreed to enter into new non-compete agreements.”

As part of the settlement, DaVita has also agreed to a Civil Forfeiture in the amount of $39 million based upon conduct related to two specific joint venture transactions entered into in Denver, Colorado.   Additionally, DaVita has entered into a Corporate Integrity Agreement with the Office of Counsel to the Inspector General of the Department of Health and Human Services which requires it to unwind some of its business arrangements and restructure others, and includes the appointment of an Independent Monitor to prospectively review DaVita’s arrangements with nephrologists and other health care providers for compliance with the Anti-Kickback Statute.

The case was handled by the United States Attorney’s Office for the District of Colorado, the Civil Division of the United States Department of Justice, and the U.S. Department of Health and Human Services, Office of Inspector General.

The lawsuit is captioned United States ex rel. David Barbetta v. DaVita, Inc. et al., No. 09-cv-02175-WJM-KMT (D. Colo.).  The claims settled by this agreement are allegations only; there has been no determination of liability.

No Fees Without Recovery

Ross M. Wolfe and the Weiser Law Firm litigate whistleblower lawsuits on a contingent fee basis, so whistleblowers do not pay attorneys’ fees or court costs unless there is a recovery.

Please contact Ross M. Wolfe if you would like to speak with a whistleblower attorney for more information about the whistleblower process, illegal kickbacks or to schedule a free consultation to confidentially discuss your potential case.