DaVita, Fresenius Broke Kickback Rules, Whistleblower Says

(Bloomberg) -- A newly unsealed whistleblower lawsuit by a former employee of a kidney-care charity accuses the charity and the two largest dialysis companies of violating anti-kickback rules.

The lawsuit brought under the False Claims Act alleges that donations DaVita Inc. and Fresenius SE made to the American Kidney Fund to help patients pay for insurance premiums constituted illegal kickbacks.

The suit, filed in 2016 in U.S. District Court in Massachusetts, was unsealed Thursday. The Justice Department, which can litigate whistleblower lawsuits, declined to intervene in the case. DaVita had previously disclosed a subpoena in the investigation by the Massachusetts U.S. Attorney and revealed the lawsuit in its quarterly filing Friday.

DaVita and Fresenius together control more than 70% of the U.S. market for kidney dialysis, a life-sustaining treatment to filter toxins from patients' blood, according to Bloomberg Intelligence.

“The Department of Justice has looked at this matter and decided not to pursue any action against DaVita,” company spokeswoman Courtney Culpepper said in an email. “Unfortunately, some health insurers seeking to avoid high-cost patients may continue to try to challenge charitable premium assistance. We, in turn, will continue to defend our patients' right to access such assistance.”

Fresenius didn't respond to requests for comment.

The American Kidney Fund said it cooperated fully with the investigation and was pleased that the Justice Department declined to intervene.

“We now know that this suit was brought by a former employee who, prior to making this complaint, was terminated for cause,” LaVarne Burton, president and chief executive officer of the American Kidney Fund, said in a statement. “AKF strictly adheres to the federal advisory opinion that governs our charitable premium assistance program, and we have in place strict safeguards and conflict of interest policies to ensure that.”

The complaint alleges that the companies and the charity broke a long-standing agreement with federal health-care authorities intended to prevent donations from becoming illegal kickbacks.

The relationship between the two largest dialysis providers and the American Kidney Fund has been under scrutiny. In July, U.S. Representative Katie Porter, a California Democrat, asked federal authorities to investigate, Bloomberg News reported.

Read more: Rep. Porter requests probe into dialysis providers' charity ties

The American Kidney Fund assists patients in paying premiums for Medicare and private insurance. That helps people with end-stage renal disease pay for dialysis and other needed medical care. Legal opinions by the Health and Human Services Office of Inspector General set out rules to prevent donors from influencing patients' care.

The lawsuit alleges that DaVita and Fresenius profited by steering money to the charity “so that the patient can obtain government funding for dialysis treatment to be spent on the providers.”

The arrangement between the charity and the two dialysis companies “provided illegal remuneration to patients” and encouraged them to get care from the companies funding their premiums, according to the lawsuit by David Gonzalez, a longtime employee of the American Kidney Fund who worked in its division that provides insurance assistance to patients.

“The coverage did not follow the patient, but was subject to the provider's donations,” the complaint said.

Gonzalez alleged that the charity, strapped for funding, restricted its grants to patients whose dialysis providers made donations. It kept a list of dialysis providers that didn't make donations, according to the lawsuit, and would steer patients away from them in favor of companies that gave the group money.

An attorney for Gonzalez didn't immediately respond to a request for comment.

Peter Grauer, the chairman of Bloomberg LP, the parent company of Bloomberg News, is the lead independent director at DaVita.

To contact the reporter on this story: John Tozzi in New York at jtozzi2@bloomberg.net

To contact the editors responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net, Mark Schoifet, Timothy Annett

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