Newsmakers Oct. 31-Nov. 13: Local clinics snared in DaVita settlement

DaVita Healthcare Partners Inc. said in October it agreed to undo a Colorado joint venture involved in an illegal kickback scheme that included clinics in Boulder and Longmont as part of a $389 million settlement with the Department of Justice stemming from a whistleblower lawsuit filed in Denver federal court.

Denver-based DaVita (NYSE: DVA), a Delaware corporation, agreed to the settlement to resolve claims that it violated the False Claims Act by paying illegal kickbacks to physicians who referred patients to dialysis centers in which the physicians had an ownership stake. DaVita has dialysis clinics in 46 states and Washington, D.C., and cares for nearly 170,000 kidney patients.

In announcing the settlement Oct. 22, DaVita said it did not knowingly engage in any wrongdoing.

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But the company said that it planned to undo 11 joint-venture transactions covering 26 of its 2,119 clinics. One of those joint ventures was Mountain West Dialysis Services LLC, including the Boulder Dialysis Center and the Longmont Dialysis Center, as well as other centers in Lakewood and Arvada.

Between March 1, 2005, and Feb. 1, 2014, DaVita identified physician groups that had patients with kidney disease and offered them lucrative opportunities to partner with DaVita by acquiring or selling an interest in dialysis clinics to which their patients would be referred for treatment.

DaVita further ensured referrals of patients to the clinics through a series of secondary agreements with the physicians, who agreed not to compete with DaVita, preventing the physicians from referring their patients to other dialysis providers.

Meanwhile, physicians received an upfront payment and continuous “extraordinarily high returns” of from 120 percent to 220 percent on their investments in the joint ventures, according to the Justice Department.

UPDATE

David Barbetta, of Virginia, will receive a $65 million share of the settlement as part of the lawsuit he filed against DaVita in U.S. District Court in 2009. Whistleblowers with knowledge of fraud against the U.S. can present those allegations to the government. If an investigation confirms those claims, the whistleblower shares in a settlement.

Barbetta’s attorney declined to comment.

The government reached an agreement on Barbetta’s share of the proceeds on Oct. 16, according to a court filing. DaVita paid the settlement to the government on Oct. 30.

U.S. District Judge William Martinez dismissed the lawsuit Nov. 3. The Justice Department, meanwhile, has indicated it will not investigate doctors involved in the scheme.