DaVita Unit to Pay $270 Million to End US Probe of Medicare Payments

October 1, 2018 Updated: October 2, 2018

A medical-care unit of DaVita Inc. has agreed to pay $270 million to resolve claims that it provided inaccurate information about patients that caused Medicare Advantage plans operated by private insurers to obtain inflated payments from the government.

The civil settlement with HealthCare Partners Holdings, which Denver-based DaVita acquired in 2012 and is in the process of selling to UnitedHealth Group Inc., was announced Oct. 1 by the Justice Department (DOJ).

HealthCare Partners didn’t admit wrongdoing. The $270 million will be paid for out of escrow funds that HealthCare Partners’ former owners were required to set aside when DaVita acquired the business in 2012, DaVita said in a statement.

HealthCare Partners instituted practices that led insurers operating Medicare Advantage plans to submit incorrect information about patients’ diagnoses and obtain inflated payments, which the company shared in, DOJ said.

HealthCare Partners also scoured patients’ records for diagnoses its medical providers failed to record which it then submitted to the insurers for use in obtaining increased Medicare payments, the DOJ said.

The case stemmed from a broader investigation into data that insurers who operate Medicare Advantage plans submit to receive “risk adjustment” payments. The probe has already led to the DOJ suing UnitedHealth in a similar case.

“DaVita’s alleged conduct was irresponsible and compromised the integrity of the Medicare program,” Special Agent in Charge Scott Lampert of the Department of Health and Human Services, Office of Inspector General’s New York Region, said in a statement.

According to court papers, HealthCare Partners, a California-based independent physician association, contracted with insurers to provide medical services to Medicare Advantage patients. More than one-third of Medicare recipients receive benefits through Medicare Advantage plans run by private insurers, who the government pays a predetermined monthly sum for each person they cover based on individual diagnostic traits.

Under this part of Medicare, the healthcare program for the elderly, the government makes so-called “risk adjustment” payments based on data it receives regarding the health status of a patient covered by a Medicare Advantage plan.

The allegations stemmed from a whistleblower lawsuit filed in 2009 against various insurers and, later, HealthCare Partners by James Swoben, a former employee of an insurer that did business with DaVita, the DOJ said.

His lawsuit, pending in federal court in Los Angeles, was filed under the False Claims Act, which allows whistleblowers to sue companies on the government’s behalf to recover funds paid out based on fraudulent claims.

The government may intervene in such cases. For his role in bringing the case, Swoben will receive almost $10.2 million, the DOJ said.

“This settlement demonstrates our tireless commitment to rooting out fraud that drains too many taxpayer dollars from public health programs like Medicare,” U.S. Attorney Nick Hanna said in a statement. “This case involved illegal conduct in which patients’ medical conditions were improperly reported and were not corrected after further review—all for the purpose of boosting the bottom line.

By Nate Raymond