On Oct. 22, 2014, the United States Department of Justice (DOJ) announced that it had finalized its settlement with DaVita HealthCare Partners, Inc.
(DaVita) resolving allegations against DaVita originally brought in a lawsuit filed under the qui tam or whistleblower provisions of the Federal False
Claims Act. The lawsuit (United States ex rel. David Barbetta v. DaVita, Inc. et al., No. 09-cv-02175-WJM-KMT (D. Colo.)) was filed by
whistleblower David Barbetta, a former DaVita senior financial analyst in its mergers and acquisitions department.
As part of the settlement, DaVita has agreed to pay $350 million to settle claims that it violated the Federal False Claims Act, and $39 million as a civil
forfeiture tied to two specific transactions. Additionally, DaVita has entered into a five-year
Corporate Integrity Agreement (CIA)
with the Office of the Inspector General to the Department of Health and Human Services (OIG) requiring DaVita to unwind a limited number of its joint
venture arrangements and restructure others, and includes the appointment of an independent monitor to prospectively review DaVita’s arrangements with
nephrologists and other healthcare providers for compliance with the Anti-Kickback Statute.
The settlement resolves allegations that between March 2005 and February 2014, DaVita identified nephrologists and physician group practices with large
patient populations suffering from chronic kidney disease and end stage renal disease, and offered them opportunities to become joint venture owners in
DaVita wholly owned dialysis centers at below fair market value pricing. According to the
DOJ’ press release, the DOJ alleged that DaVita
manipulated the valuation of equity in its wholly owned centers by making certain assumptions regarding future payments for dialysis treatments in order to
make the transactions financially attractive for physicians to purchase equity in its dialysis centers. The DOJ alleged that, as a result, physicians may
have paid below fair market value compensation for their joint ventures investment interests and benefitted from resulting high rates of return. As part of
the settlement, there has been no admission by DaVita of any wrongdoing.
The DOJ press release and the unsealed governmental complaint provide some guidance regarding activities and contractual joint venture arrangements that
the DOJ believed to be problematic during its investigation. According to the complaint, in order to ensure future patient referrals to the centers,
physician investors were required to sign noncompete agreements that prohibited them from inducing or advising a patient to seek treatment from a competing
center. Moreover, the noncompete agreements were structured so as to bind all physicians in a practice group, regardless of whether the physician was part
of the joint venture.
McGuireWoods is analyzing the complaint and the CIA for purposes of identifying dialysis joint venture practices, procedures and contractual provisions
that were found to be problematic by the DOJ during its investigation. We will be releasing alerts in the near future discussing further guidance provided
by the DOJ. Please contact one of the McGuireWoods attorneys listed if you have any questions regarding the settlement and its impact on your practice or
dialysis joint venture.