Settlement With DaVita Healthcare Partners Shows Fraud Trend in Dialysis Industry

Over the next two posts, we will explore an increasing fraud trend affecting the dialysis industry. As more and more Americans become dialysis-dependent, the opportunity to take advantage of government programs like Medicare and Medicaid grows – thereby creating an epidemic of niche fraud resulting in hundreds of millions of dollars in settlement money.

We begin today’s post by looking at a settlement involving dialysis heavyweight DaVita Healthcare Partners, who was found to be engaging in unlawful kickback schemes. In tomorrow’s article, we will review some other notable cases affecting the dialysis industry – all of which were brought about by courageous whistleblowers eager to bring fraud to justice.

As a bit of background, dialysis procedures are used to treat those with end-stage renal disease (“ESRD”). The process takes several hours and requires patients to attend centers 2-3 times per week to undergo a cleansing of the blood through a filtration machine. ESRD is a by-product of several other serious illnesses including diabetes and certain types of cancer.

DaVita Healthcare Partners Reaches $389 Million Settlement

As you know, the False Claims Act contains anti-kickback provisions disallowing doctors, pharmacies, pharmaceutical companies, or medical suppliers from engaging in lucrative deals with one another. The purpose of the prohibition is to ensure the doctor-patient relationship is not “tainted” with the effects of a background financial deal.

DaVita is a Denver-based company specializing in providing dialysis centers with the medical equipment necessary to support the daily influx of ESRD patients. According to allegations, DaVita was engaged in a complex profiteering scheme with several nephrologists across the United States. More specifically, DaVita had arranged joint ventures with at least 11 nephrology offices, thereby offering kidney doctors the opportunity to become part-owner in several dialysis clinics.

The pivotal question posed to the grand jury during the investigation was whether the offer of part-ownership was offered at fair market value, as is required by the statute, or whether it was offered at a cheaper price. If it was offered at a below-the-market rate, it could be construed as a  type of compensation (i.e., in return for patient referrals).

The group of doctors in question paid $1.89 million for part ownership in clinics averaging a yearly revenue of approximately $28 million. This exchange was considered suspicious when, just 17 months earlier, DaVita offered a 40 percent ownership for eight times the price. It maintained the fair market value had dropped significantly in the time period between the first and second offers. However, federal investigators believed DaVita was undoubtedly engaging in a less-than-market-value kickback scheme in violation of the FCA.

Case Settles

Without admitting liability in the matter, DaVita agreed to remit $389 million to settle these claims. The whistleblower in this case, who has not been identified, could receive up to 30 percent of this amount for his or her role in bringing the matter to justice. If you are aware of fraud in the dialysis industry, perhaps through your employer or as a patient yourself, contact a reputable attorney right away for assistance in filing your claim.

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