The relocation to Denver last year of kidney-dialysis titan DaVita was good news to a local economy battered by the recession.
But as the Fortune 500 company’s $101 million, 14-story corporate headquarters rises in Lower Downtown, it continues to battle questions about its business practices.
Chief among the accusations, raised in federal investigations and lawsuits, is that DaVita overused a lucrative anemia drug called Epogen in order to receive higher government reimbursements.
The Food and Drug Administration has warned since 2007 that the drug, routinely used to help anemic patients on dialysis, also can increase the risk of death when used at certain levels.
DaVita officials energetically defend their company and say they never put patients at risk.
They say that doctors ultimately decide how much Epogen to use and that the company’s protocols on the drug’s use are aimed solely at keeping patients healthy. They said a corporate recommendation in December to use less of the drug was tied to evolving science and not to a reduction in government reimbursements that took effect three weeks later.
“DaVita has done, in my view, a spectacular job of improving — in fact, year-after-year improvement in all the clinical outcomes that we monitor,” said Dr. Allen Nissenson, the company’s chief medical officer.
DaVita executives also point out that investigations are common in the health care industry and that the company has not been prosecuted or had to settle any federal claims. Meanwhile, some of DaVita’s competitors, including chief rival Fresenius Medical Care North America, have settled with federal prosecutors.
Still, the investigations into DaVita continue.
In Colorado, court documents show federal investigators subpoenaed records in December from a health care consulting company that works with DaVita. The investigation looks at whether DaVita submitted “false or otherwise improper claims” to Medicare and Medicaid.
According to DaVita, that subpoena is related to an investigation by the Dallas office of the Inspector General for the Department of Health and Human Services, which also is probing DaVita’s financial relationships with doctors who refer patients to DaVita clinics.
In addition, the U.S. attorney’s office in St. Louis is conducting a probe into Medicare reimbursements, including for the drug Epogen, that went to the company.
Kent Thiry, DaVita’s chief executive, said in a February 2010 earnings call with investment fund managers that getting investigated “comes with being a prominent health care service company in America.”
Thiry said that while DaVita strives to comply with all rules, “In some cases, playing it totally safe would be the same as unilaterally disarming and exiting the market. And so, this is not to say we predict we’re going to go the next 10 years without having to issue a check, that that wouldn’t be prudent rather than go through a couple-year battle.”
There also are two so-called whistle-blower lawsuits against DaVita — one from a director of a dialysis clinic and the other from an accounts manager for the manufacturer of Epogen — that allege DaVita overused the anemia drug to drive up revenues.
“We believe we can demonstrate DaVita was pushing the envelope and pushing the boundary of what would be good medical practice, and administering Epogen to people who didn’t really need it, . . . and they were primarily motivated by profit,” said Mike Caddell, a Texas lawyer representing one of the whistle-blowers.
DaVita officials declined to address specifics in the lawsuit but pointed out that whistle-blower lawyers stand to gain large percentages of any potential award.
Imitating a healthy hormone
Most dialysis patients are anemic. The synthetic Epogen corrects anemia by imitating a healthy kidney hormone that boosts red blood cells and, therefore, oxygen in the blood. When their red blood cell count is too low, patients feel wiped out — as someone from sea level would feel suddenly landing on a 14,000-foot peak.
But overcorrecting that by creating too many red cells in effect thickens the blood and can cause fatigue, stroke and heart problems.
Despite clinical trials and an FDA warning about using Epogen to raise the number of red blood cells too high, Medicare continued to financially reward dialysis companies for their Epogen use.
Since 2006, Medicare reimbursed dialysis companies 6 percent more than the companies paid the manufacturer for the drug. Money from the anemia-prevention medicine last year fueled 18 percent of DaVita’s revenue, according to its U.S. Securities and Exchange Commission filings.
But that payment system changed in January. Now companies receive a flat rate to care for a patient rather than bill for every treatment or dosage of drugs.
The new payment system severs the link between higher usage of Epogen and larger reimbursement checks from the federal government.
“The new bundling reimbursement policies shift the incentive away from using more drug and toward using less drug,” said Michael Yee, an analyst with RBC Capital Markets.
In December — about three weeks before the new Medicare rules took effect — DaVita instituted a new protocol recommending doctors withhold Epogen when the drug boosted patients’ blood above 12 grams of hemoglobin per deciliter rather than 14, as was formerly the case.
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