DaVita has agreed to pay the government more than $400 million to settle civil charges alleging DaVita paid doctors kickbacks so that they would refer patients to DaVita's dialysis centers. The total settlement includes $350 million to settle a "qui tam" (whistleblower) case brought by a former employee who is represented by Phillips & Cohen LLP and $11.5 million to settle state Medicaid claims.
Documents in the case:
- The qui tam (whistleblower) complaint and exhibits: US ex rel. David Barbetta vs. DaVita, Inc. and Total Renal Care, Inc., Case No. 1:09-cv-02175-WJM-KMT (D. Colo.)
- The government complaint in intervention.
- The settlement agreement.
- Phillips & Cohen's press release.
- The Justice Department press release.
Excerpts from the qui tam complaint:
- "One DaVita manager explained to Relator [Barbetta] that Deal Depot [DaVita's mergers and acquisitions department] used these deals to funnel a 'bag of money' to the physicians." (Paragraph 56.)
- "DaVita deliberately pays more than fair market value for dialysis centers and joint-venture shares it buys from physicians in a position to refer business to the centers, and regularly charges cut-rate, below-market prices when it sells shares of dialysis centers to physicians. This 'Buy High/Sell Low' strategy is the cover DaVita uses to mask the illegal kickbacks it gives these physicians to secure a steady flow of referrals from them." (Paragraphs 57-60.)
- "The primary mechanism DaVita uses to depress the value of centers DaVita sells is the application of a financial algorithm known as HIPPER compression." (Paragraph 62) "In DaVita's parlance, a HIPPER is a 'High Paying Patient' (i.e., a patient with an insurance plan that reimburses at a high rate.)" (Paragraph 69)
- "For some transactions, DaVita increased the expected revenue by inflating the projected number of high paying (HIPPER) patients the center was expected to treat. This method, which effectively turns the usual HIPPER assumption on its head, is known colloquially within DaVita as using the 'HIPPER bus' - i.e., assuming a mythic bus full of HIPPERS will routinely drop patients off at the center." (Paragraph 82.)
- "While Relator [Barbetta] was preparing the financial projects that DaVita planned to give its third-party valuation firm, [a division vice president] told Relator that he had artificially inflated the operating cost projections for the centers because he wanted to 'crush the projections to keep the valuation low.' When Relator indicated discomfort with that brazen admission, [the division vice president] warned him not to 'give me any of that ethics nonsense.'" (Paragraph 88.)