DaVita group to pay $270M to settle Medicare Advantage false claims probe with DOJ

HealthCare Partners Holdings—which DaVita acquired in 2012 and is selling to United Healthcare Group—agreed to the civil settlement without admitting wrongdoing, the Justice Department said in a statement. (Getty/Jupiterimages)

A medical care group that is part of dialysis giant DaVita Inc. will pay $270 million to resolve claims it provided inaccurate information that caused Medicare Advantage plans to receive inflated Medicare payments.

HealthCare Partners Holdings—which DaVita acquired in 2012 and is selling to United Healthcare Group—agreed to the civil settlement without admitting wrongdoing, the Justice Department said in a statement. DaVita said the $270 million will be paid out of escrow funds it required HealthCare Partners' former owners to set aside when it acquired the group.

According to the DOJ, DaVita voluntarily disclosed problematic practices of HealthCare Partners after it discovered those practices caused its Medicare Advantage Organizations (MAOs) to submit incorrect diagnostic codes to the Centers for Medicare & Medicaid Services and obtain inflated payments.

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For example, HealthCare Partners disseminated improper medical coding for a particular spinal condition that yielded higher reimbursement from CMS.

RELATED: Federal court nixes CMS overpayment rule, handing a big win to Medicare Advantage insurers

The settlement also resolves allegations made by a whistleblower that HealthCare Partners engaged in “one-way” chart reviews. In that scenario, the DOJ said, it scoured patients’ medical records for diagnoses its providers may have failed to record and submitted the “missed” diagnoses to obtain increased Medicare payments—but it ignored inaccurate diagnosis codes that should have been deleted.

The allegations of one-way chart reviews were brought in a lawsuit under whistleblower provisions of the federal False Claims Act. Whistleblower James Swoben, a former employee of Senior Care Action Network Health Plan that did business with DaVita, will receive $10.2 million for the settlement.

Because of DaVita's self disclosures and cooperation, the DOJ said it agreed to a favorable resolution.

RELATED: Federal court nixes CMS overpayment rule, handing a big win to Medicare Advantage insurers

The case was the result of a wider look into Medicare Advantage insurers, including an ongoing fraud case against UnitedHealth in which the government alleges the insurer knowingly submitted inaccurate diagnosis codes. The DOJ has also pushed for a court to force Anthem to turn over information related to an ongoing fraud investigation involving the insurer's MA plans that brought in nearly $215 million using retrospective chart reviews over a two-year period. 

However, last month MA insurers scored a significant legal victory when a federal court struck down a 2014 rule requiring payers to report and return overpayments—a judgment that could have significant implications for fraud cases involving MA diagnosis codes. In her ruling (PDF), U.S. District Judge Rosemary Collyer in D.C. sided with UnitedHealth, which argued the rule that requires MA plans to return overpayments based on an analysis of its members’ health status was “wholly inconsistent” with Medicare fee-for-service requirements.

Meanwhile, DaVita is still working to close the deal on the sale of its medical group to UnitedHealth Group subsidiary OptumHealth for $4.9 billion. The deal has been on hold again because of questions from the Federal Trade Commission, but officials have said they expect it close by the end of the year. 

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