Issue: November 2018
October 03, 2018
3 min read

DaVita’s medical group agrees to pay $270 million over inflated charges

Issue: November 2018
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DaVita Inc.’s medical group division, in the process of being sold to UnitedHealth Group for $4.9 billion, agreed to pay $270 million to settle claims that it provided inaccurate medical information on patients enrolled in Medicare Advantage plans, leading to overpayments by Medicare to DaVita.

“Federal health care programs rely on the accuracy of information submitted by health care providers to ensure that managed care plans receive the appropriate compensation,” said Assistant Attorney General Joseph H. Hunt of the Department of Justice’s Civil Division in a press release issued by the DOJ. “We will pursue those who undermine the integrity of the Medicare program and the data it relies upon.”

DaVita’s medical group division owns physician practices around the country that contract with Medicare Advantage plans to provide care. The plans are owned and operated by private Medicare Advantage organizations (MAOs). To accommodate costs that may be associated with patients who require more care than an average patient, Medicare payments to Medicare Advantage plans are “risk adjusted” to reflect, in significant part, the health status of the beneficiary. The result is that MAO plans receive higher payments for patients who are diagnosed with conditions that require greater care.

To provide the patient care, MAOs may contract directly with physicians and other health care providers or they may contract with medical services organizations (MSOs), which in turn either employ or contract with health care providers. These health care providers then render the patient care and provide the diagnoses that MAOs submit, in turn, to Medicare to obtain the risk-adjusted payments from CMS.

According to the DOJ, DaVita operated an MSO and contracted with MAOs in various states, including California, Nevada and Florida, to provide care to the MAOs’ enrolled Medicare beneficiaries. In connection with the medical services it provided to those beneficiaries, DaVita collected and submitted diagnoses to the MAOs. As payment for its services, DaVita received from the MAOs a share of the payments the MAOs received from CMS for the beneficiaries under DaVita’s care, the DOJ said.

The settlement also resolves allegations made by a whistleblower that HealthCare Partners engaged in “one-way” chart reviews in which it scoured its patients’ medical records for diagnoses its providers may have failed to record. It then submitted these “missed” diagnoses to MAOs to be used by them in obtaining increased Medicare payments. At the same time, it ignored inaccurate diagnosis codes that should have been deleted and that would have decreased Medicare reimbursement or required the MAOs to repay money to Medicare.


“This case involved illegal conduct in which patients’ medical conditions were improperly reported and were not corrected after further review – all for the purpose of boosting the bottom line,” said United States Attorney Nick Hanna in a prepared statement. “We will continue to pursue and hold accountable any entity that seeks to illegally increase revenue at the expense of the Medicare Advantage so that the program may continue to remain viable for all who need it.”

In a statement, DaVita said, “This settlement announced reflects close cooperation with the government to address practices largely originating with HealthCare Partners. The settlement will be paid with escrow funds that DaVita required be set aside by the former owners of HealthCare Partners in 2012 during its acquisition.

“This is the outcome of strong collaboration with the government,” the DaVita statement said. “We are proud of the comprehensive improvements to HealthCare Partners’ compliance program. We commend the clinical team’s achievement of excellent patient outcomes as we addressed these matters.”

The corporate affiliates related to Health Care Partners and which are part of the settlement are: DaVita Medical Group Nevada (Coats), Ltd.; DaVita Medical Group California P.C.; DaVita Medical Group Associates California Inc.; HealthCare Partners Affiliates Medical Group and its subsidiary medical groups; DaVita Medical Group ARTA Health Network California P.C.; and DaVita Medical Group ARTA Western California Inc.