(Reuters) - A medical care unit of DaVita Inc (DVA.N) has agreed to pay $270 million to resolve claims it provided inaccurate information about patients that caused Medicare Advantage plans operated by private insurers to obtain inflated payments from the government.
The civil settlement with HealthCare Partners Holdings, which Denver-based DaVita acquired in 2012 and is in the process of selling to UnitedHealth Group Inc (UNH.N), was announced on Monday by the U.S. Justice Department.
HealthCare Partners did not admit wrongdoing. DaVita in a statement said the $270 million will be paid for out of escrow funds that it required HealthCare Partners’ former owners to set aside when DaVita acquired it in 2012.
According to court papers, HealthCare Partners, a California-based independent physician association, contracted with insurers to provide medical services to Medicare Advantage patients.
More than one-third of Medicare recipients receive benefits through Medicare Advantage plans run by private insurers, who the government pays a predetermined monthly sum for each person they cover based on individual diagnostic traits.
Under this part of Medicare, the healthcare program for the elderly, the government makes so-called “risk adjustment” payments based on data it receives regarding the health status of a patient covered by a Medicare Advantage plan.
The case stemmed from a broader investigation into data that insurers who operate Medicare Advantage plans submit to receive “risk adjustment” payments. The probe has already led to the U.S. Justice Department suing UnitedHealth in a similar case.
The Justice Departments said HealthCare Partners instituted practices that led insurers operating Medicare Advantage plans to submit incorrect information about patients’ diagnoses and obtain inflated payments, which the company shared in.
HealthCare Partners also scoured patients’ records for diagnoses its medical providers failed to record which it then submitted to the insurers for use in obtaining increased Medicare payments, the Justice Department said.
Those allegations stemmed from a whistleblower lawsuit filed in 2009 against various insurers and, later, HealthCare Partners by James Swoben, a former employee of an insurer that did business with DaVita, the Justice Department said.
His lawsuit, pending in federal court in Los Angeles, was filed under the False Claims Act, which allows whistleblowers to sue companies on the government’s behalf to recover funds paid out based on fraudulent claims.
The government may intervene in such cases. For his role in bringing the case, Swoben will receive nearly $10.2 million, the Justice Department said.
The case is U.S. ex rel. Swoben v. Secure Horizons, et al, U.S. District Court, Central District of California, No. 09-5013.
Reporting by Nate Raymond in Boston; Editing by Rosalba O'Brien and Lisa Shumaker