DaVita Activates Compliance after $400 Million Settlement

DaVita announced in May 2013 that it had set aside $300 million in case the company would be required to pay a federal fine, revealed CEO Kent Thiry, during what he termed a “sober” conference call to announce quarterly results. Eventually, the company had set aside a total of $414 million, so it would be prepared to pay for a potential violation of the False Claims Act when the time came.

The settlement money has finally come due, and amounted to $387 million plus interest accrued between February and October of this year.

In late October, the U.S. Department of Justice (DoJ) announced that DaVita had agreed to pay $350 million to resolve claims that the company had violated the False Claims Act. The claims included paying kickbacks to induce the referral of patients to DaVita dialysis clinics. Headquartered in Denver, DaVita has dialysis clinics in 46 states and the District of Columbia.

A fine of $39 million was also part of the settlement to the federal government, payment for two particular deals. In addition, another $11.5 million has to be paid to cover Medicaid (state) compensation. Interest charges on the settlement amount began in Feb. 2014 at the rate of 2.25 percent per year, the DoJ announced.

For its part, DaVita announced that the investigation, which covered a period from March 2005 to February 2014, was resolved with findings that “patient care was never at issue, nor were billing or payment practices.” The DaVita statement added: “We are proud of our commitment to compliance over our 15-year history. We have worked incredibly hard to get things right and it is our belief there was no intentional wrongdoing.”

The DoJ statement noted that DaVita had joint ventures with and eventually acquired Gambro in 2005. Gambro was accused of fraud, had to pay more than $300 million in a settlement, and had to unwind its own joint venture agreements as part of that settlement. DaVita had compliance agreements in place related to its Gambro relationship and eventual ownership.

In the current settlement, DaVita said it would “undo 11 joint venture transactions covering 26 of our 2,119 clinics.” According to the Denver Business Journal, the U.S. Attorney’s Office also announced that, “in conjunction with today’s announcement,” it was closing a criminal probe into two joint ventures involving DaVita and doctors. The $39 million civil forfeiture agreed to by DaVita was “based upon conduct related to two specific joint venture transactions entered into in Denver,” the office said, implying that ownership although crimes were not discovered in relation to the two joint ventures. (Forfeiture describes the process wherein a civil court, after all the interested parties have had a chance to make their case, orders a change in ownership of the property, without criminal charges.)

DaVita also will institute a strictly outlined compliance program through a Corporate Integrity Agreement that includes many required elements and potential fines if compliance requirements fail to be established, such as: “unwinding of the Subject Joint Venture Clinics, except to the extent covered by a Monitor’s certification.” The program calls for an independent monitor, a written code of conduct, detailed training of DaVita staff and others covered under the settlement, including board members; and hiring a chief compliance officer.

Now DaVita will have to start entering into transactions that uncouple 11 of the same clinics that it worked to partner with. The settlement noted that for 9 years, until February 2014, DaVita had identified physicians or physician groups with patient populations suffering from renal disease. DaVita, the claim said, “offered them (the physicians) lucrative opportunities to partner with DaVita by acquiring or selling an interest in the dialysis clinics to which their patients would be referred,” and the physicians also could not compete with the DaVita clinics nor refer patients to other dialysis providers.