DaVita HealthCare Partners said Monday it will pay up to $495 million to settle a whistle-blower lawsuit accusing the Denver company of defrauding the federal Medicare program of millions of dollars.
The company, which said it does not admit any wrongdoing, has now settled its third whistle-blower lawsuit since 2012, with payouts totaling nearly $1 billion.
The civil suit, filed in Atlanta in 2011, revolves around a claim by Dr. Alon J. Vainer and nurse Daniel D. Barbir, who both worked for DaVita. They noticed that DaVita was throwing out good medicine that it then billed Medicare and Medicaid for, according to the lawsuit.
Vainer and Barbir, who could be paid up to $135 million as part of the settlement, said in court filings that they questioned DaVita about the waste and claimed the company submitted fraudulent claims for reimbursement between 2003 and 2010.
Lin Wood, the Atlanta-based attorney for the plaintiffs, and co-counsel Marlan B. Wilbanks did not return requests for comment on Monday.
DaVita Kidney Care CEO Javier Rodriguez said in a statement: “Our 67,000 teammates across 11 countries look forward to putting this behind us. We can now renew our focus on collaborating with regulators to avoid situations like this going forward.”
The case began as a sealed lawsuit filed with the federal government in 2007. But, after two years of investigating, the government decided not to join the lawsuit,
according to The New York Times.
Vainer and Barbir filed the case again under the False Claims Act in civil court in 2011.
The lawsuit cited DaVita’s inefficient use and costly waste of the drugs Zemplar, or vitamin D, and Venofer, an iron supplement. If a patient, for example, needed 25 milligrams of Venofer, the physician would use that much and toss the rest of the 100 mg vial. Medicare would be billed for the 100 mg.
In other instances, if a patient needed 8 mg of Zemplar, DaVita doctors were instructed to a use a 10 mg vial, instead of four 2 mg vials.
According to the lawsuit, the National Centers for Disease Control and Prevention recommended against allowing multiple uses of the same vial in 2001, based on infection outbreaks caused by the re-entry of another drug, Epogen. But a year later, CDC changed its policy and allowed re-entry of single-use vials Epogen, Zemplar and Venofer if procedures were followed.
DaVita did not do this but “should have,” according to the lawsuit, “but they (DaVita) intentionally did not do so in order to purposefully create and maximize their waste and receive significantly higher reimbursements and revenue for Venofer and Zemplar usage.”
False Claims Act cases have the strongest whistle-blower protection in the U.S., according to the National Whistleblowers Center. Violators face huge penalties of $5,000 to $10,000 for each false claim. The whistle-blower could get between 15 to 30 percent of the settlement funds.
Because of its False Claims status, a DaVita loss during a jury trial could mean it must pay thousands of dollars per claim, which could be millions because it would count every instance a patient was given a dose of the drugs. DaVita announced the settlement in an April 15 Securities and Exchange Commission filing.
As part of the settlement, DaVita will pay the government $450 million, plus reserve an additional $45 million to cover fees. The government would then work with Vainer’s and Barbir’s lawyers to compensate the former DaVita employees.
“Although we believe strongly in the merits of our case, we decided it was in our stakeholders’ best interests to resolve it,” DaVita’s chief legal officer Kim Rivera said in a statement Monday. “The potential mandatory penalties for being found in the wrong in even a small percentage of instances were simply too large.”
Since the case was filed, DaVita has settled on two other lawsuits brought on by whistle-blowers. In 2012, DaVita agreed to pay $55 million to the federal government and others over fraud claims that it medically overused and double-billed the government for Epogen, an anemia drug. The suit was filed by Ivey Woodard, a former employee of Epogen-maker Amgen, in 2002.
In October, the company paid $389 million to settle criminal and civil investigations into whether DaVita offered kickbacks to kidney doctors for patient referrals. David Barbetta, a DaVita senior financial analyst, filed the suit in 2009. The company in January paid an additional $22 million to settle related claims by five states, including Colorado.
The latest settlement is pretty much resolved, according to DaVita. A motion for U.S. District Senior Judge Charles Pannell Jr. in Atlanta to dismiss the case with prejudice is next.
DaVita also reported its first-quarter earnings on Monday. For the quarter, ended March 31, it reported a net loss of $76.1 million, compared with year-ago net income of $211.7 million. Total net revenues improved 8 percent from a year earlier to $3.3 billion.
Tamara Chuang: 303-954-1209, tchuang@denverpost.com or twitter.com/Gadgetress
