Another day, another DaVita settlement; $450M this time

Two weeks after it settled a breach of fiduciary duty claim by its shareholders based on paying more than $475 million in anti-kickback settlements, DaVita Healthcare Partners, Inc., agreed to pay $450 million to resolve claims that it violated the False Claims Act (FCA) (31 U.S.C. §3729, et seq.). DaVita is the largest provider of dialysis services in the United States; this newest settlement is for a whistleblower action alleging that DaVita knowingly created unnecessary waste in administering the drugs Zemplar® and Venofer® to dialysis patients, and then billed the federal government for the avoidable waste.

Whistleblowers’ allegations

Two whistleblowers, Dr. Alon Vanier and nurse Daniel Barbir, filed the qui tam suit against DaVita, captioned United States ex rel. Vainer v. DaVita, Inc., No. 1:07-cv-2509-CAP (N.D. Ga.). The suit alleged that DaVita devised and employed dosing grids and/or protocols specifically designed to create unnecessary waste of the drugs Venofer and Zemplar, which are packaged in single-use vials and intended for one-time use. When the amount of the drug in the vials does not match the dosage specified by the physician, it can result in the remainder of the drug in the vial being discarded.

At the time of the scheme, Medicare reimbursed dialysis providers for certain waste if the provider—acting in good faith—discarded the remainder of the drug contained in a single-use vial after administering the requisite dose and/or quantity of the drug to a Medicare patient. To create unnecessary Zemplar waste, the whistleblowers say that DaVita required its employees to provide Zemplar to dialysis patients pursuant to mandatory and wasteful “dosing grids,” and then allegedly billed the government not only for the amount of Zemplar administered to patients, but also for the amount “wasted.” With regard to Venofer, DaVita allegedly enacted protocols that required nurses to administer this drug in small amounts, and at frequent intervals, to maximize wastage.

End of scheme

In 2011, CMS changed the manner by which it reimbursed dialysis providers for such drugs, with wastage from single-use vials no longer being profitable. As a result, DaVita allegedly changed its practices and reduced its drug wastage dramatically.

“Through personal sacrifice and courage, two whistleblowers exposed knowingly wasteful dosing practices designed simply to increase profits and improperly drain the government’s resources,” said Acting U.S. Attorney John Horn of the Northern District of Georgia. “This settlement returns hundreds of millions of dollars to the treasury that had been improperly obtained by DaVita through these wasteful practices.”

Previous settlements

DaVita was previously sued under the FCA for fraudulent Medicare billing and for violating the federal Anti-kickback Statute (42 U.S.C. §1320a-7b) by soliciting and entering into joint venture agreements with physicians who had large renal patient bases. DaVita entered into an agreement with the Department of Justice to pay $350 million to settle the claims and agreed to a civil forfeiture of $39 million, totaling $389 million (see DaVita filters $350M to feds in dialysis scheme, Health Law Daily, October 23, 2014; DaVita to pay $389M in largest kickback-only case in healthcare history, Health Law Daily, October 27, 2014). DaVita also entered into an anti-kickback settlement agreement to repay $3 million in payments to Colorado’s Medicaid program (see Colorado recovers $3M in Medicaid payments from kickback scheme, Health Law Daily, January 6, 2015) A settlement of a different qui tam action further resulted in $86 million in expenses for DaVita.

Earlier this month, a district court ordered the final approval of the settlement agreement between DaVita’s shareholders and Board of Directors. While the settlement involved no monetary compensation, it required significant corporate governance reforms, including increased Medicare and joint ventures, which would help prevent the occurrence of misconduct (see DaVita directors settle with shareholders after $475M in anti-kickback payouts, Health Law Daily, June 11, 2015).