Dialysis Firm Under Investigation
Shares of DaVita Inc. fell 17% Monday after the No. 2 U.S. kidney dialysis company said federal prosecutors have asked for information on its billing practices and financial relationships with doctors.
Torrance-based DaVita, which until October was known as Total Renal Care Holdings Inc., said it was cooperating and hasn’t been accused of any wrongdoing or been subpoenaed. Its shares fell $3.25 to close at $15.50 on the New York Stock Exchange.
For the record:
12:00 a.m. Feb. 22, 2001 For the Record
Los Angeles Times Thursday February 22, 2001 Home Edition Business Part C Page 2 Financial Desk 2 inches; 64 words Type of Material: Correction
Fresenius Medical--A Bloomberg News article that appeared in The Times on Feb. 6 should have made clear that Fresenius Medical Care North America agreed to pay $486 million in civil payments and criminal fines last year to settle a case of Medicare fraud committed by three subsidiaries of National Medical Care. The subsidiaries pleaded guilty to criminal charges of wrongdoing that occurred before Fresenius’ purchase of National Medical Care in 1996.
The government is investigating whether DaVita offered financial incentives for doctors to refer patients, Chief Executive Kent Thiry said. Prosecutors also are looking into whether the company billed for treatments when all services hadn’t been provided, he said.
“This is a serious issue,” Thiry said. “It would be irresponsible to suggest otherwise.”
DaVita operates clinics at which patients suffering from chronic kidney failure undergo dialysis, a procedure that removes waste from the blood.
The company has been trying to fix billing problems since a new management team took over 18 months ago. Thiry said the new company has an “unambiguous track record of compliance,” and has more than tripled its auditing staff.
Under its previous management, the company “stumbled badly in a number of ways” Thiry said. The new management team hasn’t gone back and audited every claim, and if mistakes occurred, they’ll have to be corrected, he said.
DaVita gets half of its revenue from the Medicare health insurance program for the elderly, which halted payments to the company’s Florida labs in May 1998 and said last year the labs had overcharged the government going back to 1995. DaVita also paid $25 million last year to settle shareholder suits alleging that it had inflated earnings by booking payments before they were received.
“I don’t think this type of inquiry is totally unanticipated,” said William Bonello, an analyst with U.S. Bancorp Piper Jaffray. “The company has gone out of its way to articulate government inquiries and investigations as potential risk factors.”
Last year, industry leader Fresenius Medical paid $486 million to settle federal charges that it paid doctors kickbacks and overbilled Medicare.
The inquiry involving DaVita “is not a criminal investigation as . . . was the case in the instance of Fresenius,” Thiry said.
The company said it will turn over information to the civil division of the U.S. attorney’s office in Philadelphia. James Sheehan, an assistant U.S. attorney, said the government doesn’t confirm or deny the existence of investigations.
DaVita serves 41,000 chronic kidney disease patients at 486 outpatient facilities, including 48 clinics it manages. It also provides dialysis services for patients at 285 hospitals.
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Fragile Recovery
DaVita has worked to fix billing and other problems after restructuring more than a year ago. The stock price had quadrupled in the last 12 months but lost 17%on Monday.
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DVA, monthly closes and latest
Monday: $15.50, down $3.25
Source: Bloomberg News
