Denver-based DaVita HealthCare Partners will pay $389 million to settle a criminal and civil anti-kickback investigation into transactions with doctors spanning nearly a decade, the U.S. Justice Department announced Wednesday.
The kidney dialysis company’s payment includes $350 million for the settlement and a civil forfeiture fine of $39 million for two joint ventures DaVita entered into with physicians in Denver.
“This case involved a sophisticated scheme to compensate doctors illegally for referring patients to DaVita’s dialysis centers,” U.S. Attorney for Colorado John Walsh said in the release.
“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,” he said.
The settlement resolves allegations regarding the company’s arrangements with physicians and physician groups from March 2005 to last February, the U.S. attorney’s office said.
DOCUMENT: Read the settlement in the DaVita case
As part of the settlement, DaVita agreed to have an independent monitor review its arrangements with physicians.
“We believe that this settlement is the right thing for our teammates, partners and shareholders,” DaVita said in a statement it released Wednesday. “It allows us to move forward with heightened clarity and transparency, both with regulators and our physician partners.”
The company said it planned to end joint ventures with kidney doctors involving 26 dialysis clinics. Those clinics were operated through 11 joint ventures DaVita had reached with kidney doctors.
The ventures had been the target of investigations by the U.S. attorney’s office, the civil division of the U.S. Department of Justice and the U.S. Department of Health and Human Services’ Office of Inspector General.
DaVita officials said the company operates about 2,100 dialysis clinics and has entered into about 300 ventures with doctors. DaVita treats about 170,000 patients in the United States at outpatient dialysis centers.
The allegations originally were brought in a whistle-blower lawsuit filed in 2009 under seal by David Barbetta, prosecutors said. Barbetta had been employed by DaVita as a senior financial analyst in its mergers and acquisitions department. His share of the recovery has not yet been determined.
The company previously had announced in an earnings call in February that it had “agreed to a framework” that included a payment to settle federal investigations into some of the company’s relationships with kidney doctors’ offices.
The company settled another whistle-blower lawsuit in 2012 and agreed to pay $55 million for other fraud claims. In that case, a former employee of Epogen-maker Amgen alleged the company overused the anemia drug.
The government alleged in its case that DaVita used a three-part joint-venture business model to attract patient referrals. First, the company identified physicians or physician groups with many dialysis patients. The company then allegedly gathered information about the physicians and physicians groups to determine whether they would be a “winning practice.”
DOCUMENT: Read the complaint in the DaVita case
In one transaction, DaVita labeled a physician’s group as a “wining practice” because the physicians were “young and in debt.”
DaVita then offered the physicians lucrative joint ventures and manipulated the financial models used to value the transactions to make them financially attractive to the physicians, according to prosecutors.
The company ensured future referrals with its physician partners by paying the physicians to work as medical directors of the joint ventures, and having the physicians enter into noncompete agreements. Even doctors not in the joint ventures who were part of a practice group would be bound by the noncompete agreements. The agreements included provisions that barred the physician partners from sending patients to a competing dialysis clinic.
One of the joint ventures the government identified as improper involved a physicians group in Central Florida. In that case, DaVita bought a majority position in the group’s new dialysis clinic and sold a minority position in three DaVita-owned clinics. The government asserted that the clinics were comparable in size and profits. But DaVita paid nearly $6 million to acquire a 60 percent interest in the group’s clinic, while selling a 40 percent interest in the other three clinics it owned for about $3 million.
The investigation also probed two joint-venture transactions entered into in Denver. In conjunction with the settlement, prosecutors closed their criminal investigation of those joint two joint ventures.
“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 Jonathan Olin, the deputy assistant attorney general for the Justice Department’s civil division, in a prepared statement. “The Justice Department is committed to protecting the integrity of our health care system and ensuring that financial arrangements in the health-care marketplace comply with the law.”
Christopher N. Osher: 303-954-1747, cosher@denverpost.com or twitter.com/chrisosher
