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Better Know a Fraud: DaVita Healthcare Partners, Inc. Kickbacks

whitedialysis3.jpgDaVita Kidney Care is known for two things: first, for it’s “Core Values” which include aspirational terms such as “Service…Excellence…Integrity…[and] Accountability,” and second, for engaging in a sophisticated kickback scheme designed to pay doctors for patient referrals. As healthcare has become an increasingly lucrative market, certain types of patients and illnesses are more valuable than others because they allow providers to freely bill insurance companies and Medicare/Medicaid for treatment. It turns out that patients suffering from kidney disease or failure provide such an opportunity, because they require frequent rounds of kidney dialysis.

DaVita recognized this business opportunity, and for nearly 10 years paid doctors for referring patients to their dialysis clinics. First, DaVita would search out doctors or practices who treated large number of patients with renal disease, preferring health care providers who were young or in debt. Next, DaVita would make an impossibly good offer for the doctors to either buy a share of a DaVita dialysis clinic, or else DaVita would offer to buy a share of an existing clinic. Once a deal had been struck, DaVita would then sign non-compete agreements with the doctors, ensuring that all of their patients would be referred to their clinics. This guaranteed DaVita easy profits. Unfortunately, this kickback scheme was also highly illegal.

Fortunately, this fraud was finally exposed when David Barbetta, a former DaVita employee, blew the whistle and filed a False Claims Act lawsuit. Mr. Barbetta succeed in exposing this scheme, and in October 22, 2014 DaVita Healthcare Partners settled with the Department of Justice, agreeing to pay $350 million, as well as $39 million in civil forfeitures, and appointing an independent compliance monitor to ensure that no further violations will occur. Thanks to Mr. Barbetta’s efforts, California, Colorado, Florida, Kentucky, and Ohio will also split $22 million as part of the restitution.

While it is commendable that DaVita was finally brought to justice, healthcare fraud in the United States continues to grow every year. The sad fact is that Government healthcare programs such as Medicare and Medicaid have become magnets for unscrupulous doctors, petty criminals, and even organized crime. While insurance companies carefully scrutinize incoming bills before agreeing to pay them, Federal and State governments instead “pay and chase”–which means that they first pay incoming claims before determining whether or not they were fraudulent. Not only is this method inefficient, but there are so few government inspectors, regulators, and attorneys that fraudulent bills often pass through unnoticed.

Doctors, nurses, administrators, physician assistants, technicians, sales representatives, and even receptionists have all helped blow the whistle on various types of medical fraud over the years. Whistleblowers are often necessary to uncover the existence of fraud, given the many ways that health care providers can disguise their treatment plans and billing records.

Finally, it is important to note that healthcare fraud can be deadly. When healthcare funds are diverted by fraud, it means that a patient somewhere hasn’t received treatment, or that another patient has fewer resources for their actual medical condition. If healthcare costs continue to skyrocket due, in large part, to fraud and overtreatment, the whole system will eventually collapse.