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DaVita Medical to pay $270 million in False Claims Act case

Medicare Advantage plans are owned and operated by private organizations called Medicare Advantage Organizations (MAOs). Medicare beneficiaries can enroll in and obtain healthcare through these plans. Unlike in traditional Medicare, MAOs are not paid based on services rendered but instead receive a fixed monthly amount for each beneficiary's care. Since some patients require more care than average, payments from Medicare to MAOs are "risk adjusted" to reflect the beneficiary's health status. In other words, MAOs receive higher payments for patients whose conditions require more care.

HealthCare Partners Holdings LLC, doing business as DaVita Medical Holdings LLC (DaVita), operated what is called a medical services organization (MSO) which contracted with MAOs to provide the healthcare for which the MAOs billed Medicare. This put it in the position not only of providing the healthcare services but also of providing the diagnosis codes that MAOs used to obtain risk-adjusted payments. In return, DaVita received a share of the Medicare payments received by the MAOs.

DaVita acquired HealthCare Partners Holdings in 2012. Afterwards, it made a voluntary disclosure to the government. Practices instituted at HealthCare Partners, it said, had caused certain MAOs to submit incorrect diagnosis codes which had resulted in inflated risk-adjusted payments. DaVita and HealthCare Partners had shared in these inflated payments.

Around the same time, a whistleblower told the government that HealthCare Partners had engaged in a fishy-sounding practice to obtain more favorable diagnosis codes. During so-called "one-way" chart reviews, HealthCare partners had scoured medical records for any diagnoses physicians had failed to record. These "missed" diagnoses were then forwarded to MAOs, which used them to obtain increased payments. However, the chart reviews did nothing to correct inaccurate diagnosis codes, which might have resulted in lower Medicare reimbursement rates and required the MAOs to repay the program.

Because DaVita made its disclosure voluntarily, the Justice Department agreed to resolve the issues more favorably than it might have done otherwise. The company has agreed to pay $270 million in reimbursement to the Centers for Medicare & Medicaid Services without admitting liability.

When whistleblowers bring successful lawsuits under the False Claims Act, they are entitled to a substantial share of any monetary recovery by the government. In this case, the whistleblower will receive $10,199,100 in regard to the "one-way" chart review allegations.

If you work in healthcare, defense contracting, or another area where government contracts are common, you may be in a position to blow the whistle on fraud, waste or abuse on those contracts. Before you take any steps, however, you should protect your rights by discussing your situation with an attorney familiar with False Claims Act and whistleblower law.

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