Whistleblower behind DaVita's record $400 million settlement of charges alleging kickbacks to doctors

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Oct 22, 2014, 10:06 ET

DENVER, Oct. 22, 2014 /PRNewswire-USNewswire/ -- A whistleblower lawsuit brought by Phillips & Cohen LLP prompted a federal investigation into the business practices of DaVita Healthcare Partners and has resulted in DaVita paying $400 million to settle civil charges involving kickbacks to doctors.

DaVita's settlement, announced by the US Department of Justice tonight, is apparently the largest one ever that covers solely allegations of kickbacks in the healthcare industry. DaVita will pay $350 million to the federal government to settle the whistleblower lawsuit and other government civil charges and an additional $39 million as a civil forfeiture. DaVita also will pay $11.5 million to settle related state false claims act charges.

The "qui tam" (whistleblower) lawsuit, which DOJ joined, alleged that DaVita --one of the nation's biggest providers of dialysis services -- 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.

The complaint says that DaVita rewarded doctors who referred patients to its dialysis centers by:

Selling them shares in existing DaVita dialysis centers for less than fair-market value.
Buying shares in dialysis centers owned by physicians for more than fair-market value.
Giving physicians kickbacks masked as profits from joint ventures.
Paying them to refrain from building competing dialysis centers.

"Our lawsuit alleges that to disguise payments to doctors, DaVita followed the unusual business strategy to 'buy high and sell low,'" said Eric R. Havian, a whistleblower attorney with Phillips & Cohen. "Buying high and selling low – although seemingly illogical -- makes perfect financial sense if a company wants to pay doctors extra money to influence their decisions and doesn't want those payments to be detected."

Phillips & Cohen filed the whistleblower lawsuit on behalf of David Barbetta, a former DaVita employee, in federal district court in Denver in 2009. The lawsuit alleged violations of the False Claims Act, state false claims laws and the federal Anti-Kickback Statute. The lawsuit had been "under seal," meaning it wasn't publicly known, until the court unsealed it late Wednesday afternoon.

Barbetta, a resident of Virginia, worked in DaVita's mergers and acquisitions department. He left the company after growing increasingly concerned about DaVita's financial transactions involving its joint ventures. He then spent nearly 5,000 hours over the next several years poring over detailed financial documents and working with his attorneys and the government to strengthen the case against DaVita.

"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 Barbetta. "DaVita should exercise its power in ways that improve patient care, not in ways that lock up patient referrals for financial reasons."

Doctors who referred patients to centers they co-owned with DaVita sometimes received returns ranging from 120 percent to 220 percent or more within two years of their initial investment, according to the complaint.

"The law prohibits kickbacks in healthcare so that financial motivations won't influence decisions about patients' treatment," said Jessica T. Moore, a whistleblower attorney with Phillips & Cohen who also worked on the case. "In the dialysis industry, the patients of just a few doctors often account for a significant portion of a center's business, making doctors' referrals extremely valuable. It's important that money doesn't violate the integrity of medical decisions and patient choices."

Total Renal Care, a wholly owned subsidiary of DaVita, also was named as a defendant.

Barbetta and his attorneys thanked the government attorneys and investigators who worked diligently on the case for several years. In particular, they commended Assistant US Attorneys Edwin Winstead, J. Chris Larson and Jaime Pena of the US Attorney's Office in Colorado and DOJ Trial Attorney John Henebery in Washington D.C.

"The success in this case was due to a very effective working relationship between the whistleblower's and the government's teams," said attorney Havian.

The False Claims Act fosters a private-public partnership to fight fraud against the government. The law encourages whistleblowers to file civil lawsuits against companies that are defrauding the government by offering job protections and a reward of 15 percent to 25 percent of the government's civil recovery if the government joins, or intervenes in, the case.

About Phillips & Cohen LLP
Phillips & Cohen is the nation's most successful law firm representing whistleblowers, with recoveries for governments totaling $11 billion in civil settlements and criminal fines. It represents whistleblowers in cases under the False Claims Act and claims under the Securities Exchange Commission, Commodity Futures Trading Commission and IRS whistleblower reward programs. For more information, see www.phillipsandcohen.com.

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SOURCE Phillips & Cohen LLP