DaVita Holdings Medicare Advantage pays $270 million to settle fraud charges whistleblower rewarded $10.1 million

HealthCare Partners Holdings LLC, d/b/a DaVita Medical Holdings LLC (DaVita), will pay $270 million to settle its False Claims Act liability for providing inaccurate information causing Medicare Advantage Plans to receive increased Medicare payments. DaVita voluntarily disclosed that caused MAOs to submit incorrect diagnosis codes to CMS and obtain inflated payments in which DaVita and HealthCare Partners shared.  For example, HealthCare Partners disseminated improper medical coding guidance instructing its physicians to use an improper diagnosis code for a particular spinal condition that yielded increased reimbursement from CMS.  Based on these self-disclosures, and DaVita’s cooperation with the government’s subsequent investigation, the United States agreed to a favorable resolution of potential claims arising from the conduct.

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.

The allegations of “one-way” chart reviews were brought in a lawsuit under the qui tam, or whistleblower, provisions of the Federal False Claims Act. This statute permits private parties to sue on behalf of the government for false claims and to receive a share of any recovery. The whistleblower in this action is James Swoben, who was a former employee of an MAO that did business with DaVita. Mr. Swoben will receive $10,199,100 for the settlement of the “one-way” allegations.

Under Medicare Advantage, also known as the Medicare Part C program, Medicare beneficiaries have the option of enrolling in and obtaining health care from Medicare Advantage Plans (MA Plans) that are owned and operated by private Medicare Advantage Organizations (MAOs).  Unlike traditional Medicare, where payments to health providers are based on the services they render to the patient, MA Plans are paid a fixed, monthly amount to provide health care to beneficiaries who enroll in their plans. To accommodate costs that may be associated with patients that require more care than an average patient, Medicare payments to MA 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 healthcare providers, or they may contract with Medical Services Organizations (MSOs), which in turn either employ or contract with healthcare providers. These healthcare 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.

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 that the MAOs received from CMS for the beneficiaries under DaVita’s care.