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DaVita Dialysis Healthcare Fraud Accusation, Explained: Is There a Scandal?

Nov. 29, 2012
DaVita Dialysis Health Care Fraud Accusation
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by Susan Lyon

DaVita, or more formally known as DaVita HealthCare Partners Inc (DVA), operates kidney dialysis service centers around the country.

CNN’s Situation Room with Wolf Blitzer called into question last night the validity of DaVita’s medical model, raising to light a potential defrauding of the federal government’s Medicare system.  Two new whistleblowers are trying to sue DaVita over what they believe to be fraud of up to $800 million dollars – but this isn’t the first time the company has faced such whistleblower initiated lawsuits.

What Is DaVita and What is the Controversy?

While most of their revenue does come from Medicare and Medicaid, this in itself is not the issue at hand; rather, the claim by whistleblowers that the company has been throwing away perfectly good medicine in order to qualify for even more government funding: to a tune of $800 million.  The court system has investigated DaVita before, but it has not yet engaged this time around.

Founded in 1999 and headquartered in Denver, DaVita is currently run by CEO Kent Thiry, famous for his company culture of integrity and ethics.  The company was ranked #2 on CNN Money’s list of World’s Most Admired Companies in healthcare.  DaVita is Italian for “giving life.”

DaVita Dialysis By the Numbers

DaVita has been doing extremely well in recent years.  As of September 2012, DaVita owned and operated 1.912 outpatient dialysis centers nationwide, serving 150,000 patients.  It has over 41,000 employees.

A major healthcare stock, DaVita (DVA) has been strong in recent quarters, boasting increased income and revenue in Q3 2012.  The company saw the following positive performance numbers:

  • In the first 3 quarters of 2012, DaVita’s net income went up 15.2% to $380.2 million.
  • DaVita’s total net operating revenue rose 12 percent to $1.96 billion.

Who Owns DaVita:

  • DaVita’s largest shareholder is Warren Buffett’s Berkshire Hathaway, holding 10.8% of the company as of the most recent filing.  Berkshire has also been increasing its position over the past few months.
  • Three major hedge funds also hold ownership stakes in DaVita: Lone Pine Capital; Viking Global Investors, and Pennant Capital.

Investor beware: despite recent success and growth, if these whistleblowers gain traction with the media, government, and public much like the investigation last time around – as they are currently seeking to do on CNN – DaVita’s stock could tumble quickly.

Why So Quiet?

As of Thursday morning, the only mainstream news media hits about DaVita are short summaries of the show’s report.  So far, CNN aside, the media is giving this the silent treatment – it remains whether to be seen whether the government will pursue these charges.