DaVita is close to reaching a settlement with the Justice Department on the company's joint ventures with a Denver nephrology group
DaVita HealthCare Partners said Tuesday it will pay $389 million to settle criminal and civil anti-kickback investigations and plans to end joint ventures with kidney doctors involving 28 dialysis clinics.
Denver-based DaVita's CEO, Kent Thiry, announced in an earnings call with shareholders that the company has "agreed to a framework" for settling federal investigations into some of the company's relationships with kidney doctors' offices.
He said the exact settlement still is being finalized, but that both he and federal attorneys expect to hammer out the details in coming months.
In May 2008, DaVita sold 49 percent ownership of the same seven clinics to Denver Nephrology, the other large nephrology group in town. But the price paid by Denver Nephrology — $1.89 million — was only a fraction of what previously had been deemed fair-market value, according to the documents obtained by The Post.
What role did the Board play in ensuring legal due diligence was conducted and a fair sale price reached? The company filed the following with the SEC in February 2008:
Some of our medical directors also own equity interests in entities that operate our dialysis centers. The Stark II exception applicable to physician ownership interests in entities to which they make referrals does not encompass the kinds of ownership arrangements that referring physicians hold in several of our subsidiaries that operate dialysis centers. Accordingly, it is possible that CMS could require us to restructure some of these arrangements or could seek to impose substantial fines or additional penalties on us, prohibit us from accepting referrals from those physician owners and/or force us to return certain amounts paid by CMS and program beneficiaries.
Consequently, it is possible that CMS could determine that Stark II requires us to restructure existing compensation agreements with our medical directors and to repurchase or to request the sale of ownership interests in subsidiaries and partnerships held by referring physicians or, alternatively, to refuse to accept referrals for designated health services from these physicians.
This language occurred in every 10-K filing from 2005 to 2009, which included the last four years Nancy-Ann DeParle served on DaVita's board. Twice in 2005, March and October, the company received subpoenas regarding joint venture relationships with physicians.
Ex-CMS Chief William L. Roper chaired DaVita's Board Compliance Committee for this whole period. Did this committee exercise any oversight, receive any consultation, inquire with CMS or the other board representative that once headed CMS, Nancy-Ann DeParle? Surely Dr. Roper could've gotten an opinion as to the legality of DaVita's joint ventures and any recommendations for compliance. Surely Nancy-Ann DeParle heard enough at a whole board meeting to form an opinion in this regard.
DaVita's board deserves scrutiny in this investigation, especially the knowledge of Nancy-Ann DeParle and William L. Roper regarding any questionable activities. Instead, DaVita will pay a fine while perpetrators walk and enablers skate.
PPACA resets health care for similar behavior to occur. Nancy-Ann DeParle stands to profit handsomely from the landscape she created. After leaving the White House and an appropriate amount of time at a think tank (Brookings), DeParle co-founded Consonance Capital Partners, a private equity underwriter focused exclusively on investing in the U.S. healthcare industry.
She also landed two new board seats with CVS-Caremark and HCA. KKR's ownership of HCA added billions in costs to America's unaffordable health care system, much of which went into PEU pockets.
Health care reform is a private equity underwriter's dream. It should be as that's who created it. Look for many more DaVita's, widespread illegal corporate behavior, wiped away with a settlement. That's PPACA's future.
