DaVita whistleblower David Barbetta alleged in a qui tam case that DaVita paid doctors hidden kickbacks as a way to get patient referrals for its dialysis clinics and to reduce or eliminate competition from other dialysis centers.
DaVita paid a total of $400 million to the federal government and various states in 2014 to settle the whistleblower case, which was brought on Mr. Barbetta’s behalf by Phillips & Cohen LLP. DaVita’s settlement was apparently the largest one at the time that covered solely allegations of kickbacks in the healthcare industry.
[See excerpts below from Denver Post story, “Former Davita Insider Helped Build Case That Led To $389m Settlement.”]
Mr. Barbetta worked in DaVita’s mergers and acquisitions department when he became concerned about the company’s financial transactions involving joint ventures. He left the company because of those concerns.
Phillips & Cohen filed Mr. Barbetta’s qui tam whistleblower lawsuit against DaVita in federal district court in Denver in 2009. He devoted nearly 5,000 hours over the next several years analyzing financial documents to support the government’s investigation into DaVita’s conduct.
In his qui tam lawsuit, Mr. Barbetta alleged that DaVita illegally paid kickbacks to doctors and rewarded doctors who referred patients to DaVita dialysis centers with prohibited perks, including:
- Selling doctors shares in existing DaVita dialysis centers for less than their market value.
- Buying shares in dialysis centers owned by physicians at inflated rates.
- Paying doctors kickbacks disguised as profits from joint ventures.
- Paying physicians to dissuade them from establishing competing dialysis centers.
The Davita whistleblower lawsuit said these practices yielded massive returns for doctors cooperating in DaVita’s alleged kickback scheme. Physicians who referred patients to centers they co-owned with DaVita sometimes received returns ranging from 120% to 220% within two years of their initial investment, according to the qui tam complaint.
The Davita lawsuit brought by Mr. Barbetta stated, “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.”
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DaVita’s annual revenues from providing dialysis treatment for patients with chronic kidney failure grew from $5.9 billion in 2009 to $11.7 billion in 2013, a year before Mr. Barbetta’s case was unsealed.
At the time the Davita whistleblower lawsuit was settled, treatment costs for approximately 90% of DaVita’s patients were paid for by Medicare, Medicaid and other government healthcare plans.
“I am happy DaVita agreed to end a number of its joint ventures with kidney doctors and agreed not to enter into those types of financial relationships in the future,” said Mr. Barbetta after his qui tam case settled. “DaVita should exercise its power in ways that improve patient care, not in ways that lock up patient referrals for financial reasons.”
Whistleblowers who bring successful qui tam cases under the False Claims Act receive rewards of 15% to 30% of the government’s recovery in the case and are offered protection from employment retaliation.
A Denver Post story chronicled Mr. Barbetta’s efforts. Here are excerpts from the whistleblower story.
FORMER DAVITA INSIDER HELPED BUILD CASE THAT LED TO $389M SETTLEMENT
A key witness in an anti-kickback investigation that ended with DaVita HealthCare Partners paying $389 million gave federal prosecutors sales spreadsheets, e-mails and insight into Colorado’s third largest private company.
David Barbetta said he pushed against DaVita’s practice of rewarding doctors with lucrative joint ventures in exchange for patient referrals. He worked as a senior financial analyst in the company’s mergers and acquisitions division from 2007 to 2009.
But his complaints and warnings earned him scorn at the highest levels of the company, he said.
One vice president warned Barbetta not to “give me any of that ethics crap,” court documents state.
Barbetta said that after he left the company, he considered filing a complaint anonymously but feared it would be ignored. After researching his options, he decided to go to lawyers to file his false claims whistleblower lawsuit.
“No one else was standing up and saying this wasn’t right and it should stop,” Barbetta said. “Everyone seemed to know about it, and no one seemed to be doing willing to do anything about it.”
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