Posted: 07/04/2012 01:00:00 AM MDTBy Michael Booth and Christopher N. Osher
The Denver Postdenverpost.com
Read more: Denver-based DaVita settles case on overuse of kidney care drug - The Denver Post
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http://www.denverpost.com/termsofuse Kidney dialysis giant DaVita Inc. has settled a whistleblower lawsuit for the first time, agreeing to pay $55 million over allegations of drug overuse while denying any wrongdoing.
Denver-based DaVita settled fraud claims in a Texas lawsuit challenging the dialysis chain's past use of Epogen, an anemia drug whose high cost and dangers helped change how the government pays for kidney care.
DaVita said the $55 million settlement with Ivey Woodard, a former employee of Epogen-maker Amgen, would impact its second-quarter earnings. Attorneys fees will add to the total.
The federal government, which pays for most dialysis through Medicare, will get more than 70 percent of the settlement, the whistleblower's attorney said.
Wall Street shrugged off the news, with company stock rising nine cents Tuesday to $97.71, up more than $28 since the beginning of 2011. The company has predicted a rise in operating income up to $1.3 billion this year.
DaVita still faces ongoing legal action over its drug use in other states, as well as a federal grand jury investigation in Denver over its financial arrangements with kidney doctors.
DaVita said it was the first time it was settling a claim over federal anti-fraud laws, but noted the government had declined to join the whistleblower' s lawsuit.
"DaVita and its affiliated physicians did nothing wrong and stand by their anemia management practices, which were always consistent with their mission of providing the best possible care for each patient," a company statement said. The suit was first filed in 2002.
Most kidney dialysis patients are anemic. Epogen, made by Amgen, is commonly used in dialysis clinics to boost patients' red blood cell counts back to healthy levels. Medicare pays the bills of long-term dialysis patients.
The Texas whistleblower lawsuit accused DaVita of using more Epogen than was medically necessary, and for double-billing the government for Epogen left over in vials and reused. For the period covered by the lawsuit, the payment system rewarded dialysis companies by reimbursing for the amount of drugs used, critics have said.
Woodard and attorneys thought they could prove "DaVita was pushing the envelope and pushing the boundary of what would be good medical practice" by using more Epogen than patients needed in order to boost profits, Caddell said last year in commenting on the suit.
Whistleblowers can win percentages of judgments if courts agree health care companies defrauded the government. Government investigators can formally join the lawsuits to recover Medicare and Medicaid money, and judgments may reach into the hundreds of millions of dollars. In the Woodard case, the government had not joined the action.
In responding in the past to questions about lawsuits and other challenges, DaVita had said that physicians are the ones who make Epogen decisions and prescribe treatment. DaVita has also said in court responses that the government was aware of how dialysis companies used "overfill" in Epogen vials.
Since the years when doctors and other critics raised questions about overuse of Epogen, Medicare has reversed the way it pays dialysis companies. It now bundles dialysis-related services and drugs into one set payment, with targets for red blood cell counts and other measures. The incentive is now to use less of the drugs, analysts have said.
Patient advocates are still mistrustful of how the large dialysis chains make a profit.
"We should worry now about under use" of drugs "because the incentives have flipped 180 degrees," said Bill Peckham, a dialysis patient who runs an advocacy newsletter from Washington state.
In November, Kent Thiry, the chief executive of DaVita, said a federal grand jury in Denver was looking into partnerships between DaVita and a group of kidney doctors. At that time, he was responding to questions from stock analysts about an article in The Denver Post about the kidney dialysis firm's relationship with Denver Nephrology Inc.
Jeff Dorschner, a spokesman for the U.S. Attorney's Office in Colorado, declined comment Tuesday when asked about the status of that grand jury investigation. DaVita said it was ongoing.
In 2008, DaVita sold 49 percent ownership in seven dialysis clinics to Denver Nephrology for $1.89 million. Those clinics generated estimated annual revenues of more than $28 million.
That sale took place 17 months after DaVita offered the 40 percent ownership in the clinics to another group of Denver doctors for eight times the eventual purchase price. DaVita has said the value of the clinics plunged because a major dialysis competitor was coming to Denver.
Federal law says dialysis companies must sell part-ownership of clinics at market value.
Michael Booth: 303-954-1686 or mbooth@denverpost.com; Twitter: @MBoothdp
Copyright 2012 The Denver Post. All rights reserved.
Follow Christopher N. Osher on Twitter.
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