DaVita Medical Pays $270 million to Settle False Claims Act Case
I have a tendency to sound like a “broken record” (an odd phrase in these days of digital music). The government’s most powerful enforcement tool continues to be – drumroll please, the False Claims Act. The government “always” (or in most cases) wins. Defendants are rarely willing to risk exclusion from valuable federal healthcare programs or defense contracts. When the government brings a case, the defendants usually seek a settlement.
The healthcare and defense companies should be getting the message on compliance. I emphasize ”should” – the number of Corporate Integrity Agreements imposed by Health and Human Services’ Inspector General continues to increase and companies are slowly gaining a proactive foothold on compliance.
When implementing a compliance program to avoid False Claims Act liability, the essential tool that has to be employed is a robust, proactive auditing and financial review program. No ifs, ands or buts – a creative and resource intensive approach is needed.
The latest reminder of the danger of the False Claims Act was DaVita Medical, the dialysis provider, which had to pay $270 million for receiving inflated Medicare payments. Interestingly, unlike most False Claims Act cases, DaVita voluntarily disclosed the problem to the government.
Under the Medicare Advantage program (or Medicare Part C), Medicare patients have the option of enrolling in Medicare Advantage Plans (MA Plans) owned and operated by private Medicare Advantage Organizations (MAOs). MA Plans are paid a fixed, monthly amount to provide healthcare to beneficiaries who enroll in their plans. Medicare payments to MA Plans are risk adjusted based on higher costs associated with patients that require more care than an average patient. MAOs receive higher payments for high-risk patients.
MAOs contract with physicians and other healthcare providers, or they may contract with Medical Service Organizations (MSOs), which in turn employ or contract with healthcare providers.
DaVita operated an MSO and contracted with MAOs in various states, including California, Nevada and Florida. DaVita collected and submitted diagnoses to the MAOs for purposes of claims submissions. DaVita, in turn received payments from the MAOs equal to the share of the patients under DaVita’s care.
DaVita voluntarily disclosed to the government a number of improper practices it discovered by HealthCare Partners, a large California physician association that DaVita acquired in 2012, which caused DaVita to submit incorrect diagnosis codes to Medicare and earn inflated payments. As an example, HealthCare Partners disseminated improper guidance for medical coding to its physicians that resulted in inflated reimbursement for a specific spinal condition.
DaVita also resolved allegations made by a whistleblower that HealthCare Partners engaged in “one-way” chart reviews in which it reviewed medical records seeking missed diagnoses to support higher claims. The reviews did not identify any improper diagnoses that would reduce the amount of any reimbursement claim. The whistleblower was awarded approximately $10 million for his claim.
Just an FYI, this disclosure and settlement had nothing to do with the dialysis piece of DaVita’s business. It was an issue that was inherited through the HealthCare Partners acquisition. DaVita Medical Group did not submit the claims that were part of this disclosure.