More Large Health Care Corporations Are Again Funding Politicians Who Threatened Representative Democratic Governance

Introduction: Health Care Corporations' Political Contributions: From Bipartisan to Trumpian

 At one time, leadership of large health corporations were circumspect in their financial support for US politicians and political causes. They provided some funds directly to politicians and political organizations, but often amounts given to different parties and organizations with different ideologies were balanced. Presumably, the goal was to promote access to whomever was in power at any given time. 

 

With the rise of Donald Trump, things changed. Many leaders apparently went all in for Trump and his Republican supporters.  In June, 2018  we discussed how CVS channeled money to a "dark money group," that promoted Trump administration policies, including repeal of the Affordable Care Act (ACA). In October, 2018, we discussed important but incomplete revelations about corporate contributions to such dark money groups that mainly favored again right-wing ideology, the Republican party, and Trump and associates. In November, 2018, we noted that health care corporations funneled funds through dark money organizations to specifically attack designated left-wing, Democratic politicians. In March, 2019, we discussed how in the 21st century, health care corporate CEOs' personal political contributions were increasingly partisan, that is individual CEOs gave predominantly or exclusively to one party, and for the vast majority, to the Republican party. 

Some corporations paused some of their political giving after a mob whipped up by Trump at a January 6, 2021, rally violently stormed the US Capitol to try to prevent the certification of the 2020 election. However, within two months they started giving again in support of Republicans in Congress who voted not to certify the election (see this April, 2021, post, and this July 7, 2021, post).

Now yet another report shows continuing support by large health care corporations for Republican legislators who supported the nullification of the election.

 Health Care Corporate Funding of Politicians Who Would Overturn an Election

On August 17, 2021, Popular Information published The January 6 Corporate Accountability Index.  It promised to be results of a comprehensive monitoring efforts of corporate pledges to make changes in their political giving to the "147 Republicans who voted to overturn the election, setting the stage for the riot." It included several categories of pledge violations.  Its results included some of the companies who went back on their pledges as described in our April and July posts.  It also included many more companies that did not make it to previous reports.  The relevant results by category were as follows

Corporations that pledged to suspend donations to the 147 Republican objectors but directly donated to those Republicans

Not included in previous reports: none

Included in previous reports: Cigna, Eli Lilly

Corporations that pledged to suspend donations to all 147 Republican objectors but violated the spirit of the pledge

Not included in previous reports: 

"After January 6, Genentech [part of the "Roche group'] said it would suspend contributions to Republican objectors. Genentech donated $15,000 to the NRCC and $15,000 to the NRSC on June 30."

"After January 6, Sanofi said it would suspend contributions to Republican objectors. Sanofi donated $15,000 to the NRSC on 3/17."

Corporations that pledged to suspend all PAC donations and then directly donates to the 147 Republican objectors

Not included in previous reports:

DaVita 

Included in previous reports: Abbott Laboratories, Gilead, Novo Nordisk

Corporations that pledged to suspend all PAC donations and then indirectly donated to the 147 Republican objectors

Not included in previous reports:

Baxter International

Included in previous reports: United Healthcare

Corporations that pledged to reevaluate their donation criteria after January 6 and directly donated to GOP objectors

Not included in previous reports:

Amgen, Laboratory Company of America

Corporations that pledged to reevaluate their donation criteria after January 6 and then indirectly donated to the 147 Republican objectors

Not included in previous reports: none

Included in previous reports: CVS

Discussion

As we said before, most health care corporations publish high-minded aspirational statements that promise pluralism, support of the community, and of our representative democratic society.  For example, Sanofi Pasteur claims:

Sanofi’s social impact strategy aims to build a healthier, more resilient world by ensuring access to healthcare for the world’s poorest people

However, the new data revealed above, and data discussed in our two previous posts showed that leaders of  more and more large health care corporations saw fit to direct contributions to politicians who promoted anti-democratic policies. Funding political leaders who would challenge election outcomes in the absence of very clear evidence of election irregularities seem s to violate high-minded corporate pledges of inclusiveness like those above.   

Is it that health care corporate leadership just are more interested in making money than in bettering society, despite their aspirational mission statements? As we previously discussed, that is a plausible formulation.  For example, per the Washington Post in January, 2021,

'Their attitude was: ‘Let’s take the big tax cuts and hold our noses for the obvious xenophobia and authoritarianism.’ It was a classic Faustian bargain,' said Rep. Brendan Boyle (D-Pa.), a member of the House Ways & Means Committee.

On the other hand, maybe it is not just about money.  Again, as we said before, by virtue of being top managers corporations, particular individuals can control political funds far beyond what they would  be able to control as private persons, and to do so quietly and sometimes anonymously.  Corporate leaders may thus be able to promote their own interests through their corporations' political giving.  Those interests may go beyond just personal enrichment.   Some may also be interested in personal political power, or have other ways they might benefit from anti-democratic, authoritarian, even openly fascist national political leadership.  Big industrialists have backed authoritarian and openly fascist regimes in other countries before, some to make more money, but in retrospect, some for darker reasons. (See, for example, this article on how German industrialists financially bailed out the Nazi party in 1932.)

Leaders of large corporations now appear willing to wield large amounts of political power leveraged by the organizations they control.  Yet until recently they may have been able to do so without disclosure to society at large.  That society may be greatly affected by this power, but when it can be wielded quietly, have had little say in who has it and its uses.  

We as health care professionals, policy makers, patients and members of the public at large deserve to know how health care corporate leadership is directing money to political causes, and how they benefit from doing so. If they are not doing this in our interests, our we need to make sure things change.

DaVita Settles Another Lawsuit Amidst Accusations of "Managing Witnesses to Provide False Testimony," After Justice Department Lost Interest in Participating

The Latest Case

Less than a year since its last big settlement (look here), DaVita HealthCare Partners, the big for-profit dialysis provider, has to settle again.  The basics, according to the Denver Post, were:

DaVita HealthCare Partners said Monday it will pay up to $495 million to settle a whistle-blower lawsuit accusing the Denver company of defrauding the federal Medicare program of millions of dollars. 

The company, which said it does not admit any wrongdoing, has now settled its third whistle-blower lawsuit since 2012, with payouts totaling nearly $1 billion.

The civil suit, filed in Atlanta in 2011, revolves around a claim by Dr. Alon J. Vainer and nurse Daniel D. Barbir, who both worked for DaVita. They noticed that DaVita was throwing out good medicine that it then billed Medicare and Medicaid for, according to the lawsuit.

The details of the allegations about how the government was defrauded were:

The lawsuit cited DaVita's inefficient use and costly waste of the drugs Zemplar, or vitamin D, and Venofer, an iron supplement. If a patient, for example, needed 25 milligrams of Venofer, the physician would use that much and toss the rest of the 100 mg vial. Medicare would be billed for the 100 mg.

In other instances, if a patient needed 8 mg of Zemplar, DaVita doctors were instructed to a use a 10 mg vial, instead of four 2 mg vials.

According to the lawsuit, the National Centers for Disease Control and Prevention recommended against allowing multiple uses of the same vial in 2001, based on infection outbreaks caused by the re-entry of another drug, Epogen. But a year later, CDC changed its policy and allowed re-entry of single-use vials Epogen, Zemplar and Venofer if procedures were followed.

DaVita did not do this but 'should have,' according to the lawsuit, 'but they (DaVita) intentionally did not do so in order to purposefully create and maximize their waste and receive significantly higher reimbursements and revenue for Venofer and Zemplar usage.'

The US Department of Justice did not seem interested.

The case began as a sealed lawsuit filed with the federal government in 2007. But, after two years of investigating, the government decided not to join the lawsuit, according to The New York Times.

As is de rigeur in such cases, a company spokesperson proclaimed that the company only settled to avoid the expense and uncertainty of a trial,

'Although we believe strongly in the merits of our case, we decided it was in our stakeholders' best interests to resolve it,' DaVita's chief legal officer Kim Rivera said in a statement Monday. 'The potential mandatory penalties for being found in the wrong in even a small percentage of instances were simply too large.'

As best as I can tell, the penalties were only monetary, and accrued only to the company as a whole, not to any individuals who authorized, directed, or implemented the alleged misbehavior.

Meanwhile, as reported by Forbes this week,  DaVita CEO Kent Thiry's most recent yearly compensation was $17,099,257, and he continues to feel comfortable pontificating

'They don’t care how much you know,' he tells FORBES, 'until they know how much you care.'

The Forbes piece's timing may have not been coincidental, perhaps designed to put a smiling face on the company after yet more evidence of ethical problems.  If only Mr Thiry would show how much he cares about the ethics of his company's operations.

The company's integrity is particularly an issue since vulnerable patients entrust it with their care.  For example, the company's kidney care division claims it cares for 174,000 dialysis patients.  

However, there is still more to the story.


DaVita's Past Record 

We have often noted that big health care organizations get relatively lenient treatment from law enforcement compared to, say, small time Medicare and Medicaid fraudsters (e.g., look here.)  In this case, law enforcement was not just lenient.  The government law enforcers simply stepped away from the case, leaving it to proceed privately.  

What makes this particularly striking is DaVita's past record.  The Denver Post article included,

Since the case was filed, DaVita has settled on two other lawsuits brought on by whistle-blowers. In 2012, DaVita agreed to pay $55 million to the federal government and others over fraud claims that it medically overused and double-billed the government for Epogen, an anemia drug. The suit was filed by Ivey Woodard, a former employee of Epogen-maker Amgen, in 2002.

In October, the company paid $389 million to settle criminal and civil investigations into whether DaVita offered kickbacks to kidney doctors for patient referrals. David Barbetta, a DaVita senior financial analyst, filed the suit in 2009. The company in January paid an additional $22 million to settle related claims by five states, including Colorado. 

In fact, as we noted in a post last year, Gambro Inc, a company with which DaVita had a joint venture, and which was later acquired by DaVita, made multiple settlements, of alleged kickbacks and health care fraud, from 2000 - 2004.  And the proposed acquisition by DaVita of Gambro provoked charges by the Federal Trade Commission of anti-competitive practices.  

The federal authorities ought to have known about at least the 2000 - 2005 settlements and allegations, and the case filed in 2002 that was settled in 2012, at the time it decided not to pursue the current case.  So their conduct here seemed even more lenient than usual.

Questions of Witness Manipulation

Despite the company's protestations that it settled as a matter of expediency, there is reason to think there might have been other motivation.  A blog post on Reuters by Alison Frankel stated

[Plaintiffs' attorneys] Wood, Wilbanks and their team persuaded the judge overseeing the case, U.S. District Judge Charles Pannell of Atlanta, that DaVita had orchestrated what Judge Pannell called 'a disturbing pattern of alterations in witness testimony.'

At the time the case settled, the judge was contemplating a motion by the whistleblowers to lift attorney-client privilege under the crime-fraud exception. Even DaVita, in a post-hearing brief filed on March 31, conceded that 'regrettable mistakes have been made in this case.'

Those mistakes began to emerge in November 2013, when Wood and the other whistleblower lawyers filed a motion for sanctions against DaVita. They claimed, among many other things, that the witness DaVita designated as its expert on a computerized dosage system gave false testimony at his deposition in October 2012 and only admitted his mistakes when plaintiffs’ lawyers confronted him with contradictions a year later. According to the sanctions motion, DaVita’s lawyers also improperly coached witnesses to change their deposition testimony about the dosage system. DaVita responded that its expert witness had corrected his testimony as soon as he realized his mistake, long before plaintiffs threatened sanctions. The company called the plaintiffs’ coaching and conspiracy theories 'facially incredible and a complete fiction.'

Nevertheless, after discovery that Judge Pannell called 'a series of protracted fights resulting in furious rounds of briefing, hearings, and accusations' and a three-day hearing before the judge in July 2014, Pannell concluded the evidence of forgetfulness and changed testimony from several witnesses was 'highly suspect.' At best, he said, DaVita tacitly led the whistleblower lawyers astray by letting erroneous testimony from its computer expert stand for a year.

At worst, Pannell wrote, 'the defendants purposely manipulated the evidence and witnesses to hide the truth from the (plaintiffs) and the court.' He ordered discovery to be reopened and instructed DaVita to pay plaintiffs’ lawyers their fees and costs for the sanctions litigation and the newly ordered discovery.

DaVita’s troubles still weren’t over, however. According to a November 2014 motion by the whistleblowers’ lawyers, a former DaVita clinical services specialist admitted in a post-sanctions deposition that she lied under oath at one of her previous depositions. She said she couldn’t say why without revealing privileged communications, which prompted plaintiffs’ lawyers to ask Judge Pannell to lift the privilege. 'DaVita’s scheme of managing witnesses to provide false testimony,' they wrote, 'will now collapse like a house of cards.'

The judge was sufficiently concerned to order an in camera review of communications between DaVita lawyers and three DaVita witnesses who changed their deposition testimony about the computer dosage system through errata filings or cited privilege in refusing to answer questions about it. He also held four days of hearings on the whistleblowers’ crime-fraud motion, including in camera testimony from those three witnesses and from two DaVita defense lawyers.

So the judge in this case thought there were serious suspicions that DaVita lawyers manipulated witnesses.  If true, this would be a whole other order of unethical behavior. Yet again this case was not considered big enough to become a "federal case."

Summary

So yet again we see a large health care company settling a lawsuit that alleged unethical acts, and in this case, generated further allegations of unethical acts during the litigation itself.  The settlement was for what seemed a lot of money, but actually little money compared to the corporation's revenues.  The settlement did not take into account previous legal and ethical allegations against the company.  The settlement did not involve any negative consequences for any individual who might have authorized, directed or implemented any of the apparent bad behavior.

We have seen such settlements again and again in the US health care sphere, and indeed in other spheres, such as finance.  They appear, as I have said before, to be part of a larger, mannered Kabuki play, in which rituals are performed to show some symbolic acceptance of ethics and morality, but without any true deterrent effect on bad behavior.

Perhaps the origin of the script was in some neoliberal fantasy that big corporations and their leaders ought to be exempt from even slightly harsh justice because of their economic importance, e.g., that they are Too Big to Jail.  A recent review of the book "Too Big to Jail" in the Washington Monthly noted that Mr Eric Holder, the current US Attorney General has urged leniency for big, and hence economically powerful corporations,

a memo written by Holder in 1999, during his stint as deputy U.S. attorney general. The document, 'Bringing Criminal Charges Against Corporations,' urged prosecutors to take into account 'collateral consequences' when pursuing cases against companies, lest they topple and take the economy down with them. Holder also raised the possibility of deferring prosecution against corporations in an effort to spur greater cooperation and reforms—a policy, unsurprisingly, later supported by the Bush administration.

The attorney general angered many last year when he reiterated those concerns at a congressional hearing, admitting 'that the size of some of these institutions becomes so large that it does become difficult for us to prosecute' because of the potential nasty economic effects of a major company failure.

Relieving large corporations and their leaders from the need to follow the law is a recipe for impunity, if not oligarch, and goes against the fundamental spirit of the US Constitution.  But, hey, who's counting?

The impunity of large corporations and their leaders has become so routine as not to even be news anymore.  I cannot find any coverage of the current DaVita settlement so far beyond a few regional news outlets, and one business wire service.  The national media and as been as blase as was the Justice Department.  A short version of the story, similar to that in the Denver Post, did appear in a nephrology news service, but I saw nothing in the national medical news media.  Legal settlements like this remain relatively anechoic. 

So yet another marcher in the parade of legal settlements could inspire boredom.  However, the cumulative procession of demonstrations that neither the US government, the news media, the medical and health care literature, nor any medical societies, patient advocacy groups, accrediting organizations, health care foundations and the like seem to care about continuing, repeated unethical behavior by large health care organizations should chill the hearts of patients and health care professionals.  If we do not stand up for ethical, honest health care, what kind of swamp will health care become?

As I have said again, again, again,...  Leadership that cares not for honesty, transparency, or accountability, and that puts short term revenue, and usually personal enrichment ahead of patients' and the public's health may be the single most important reason that US health care is so dysfunctional.  Yet hardly anyone even dares discuss the damning facts about health care leadership, much less propose solutions.  If we do not reform our health care leadership so that it is transparent, honest, accountable, unconflicted, and it puts patients' and the public's health over personal enrichment, our health care system will continue to founder.  

A "Bag of Money," but Executive Says Don't "Give Me Any of that Ethics Cr*p" - DaVita's Latest Settlement for $400 Million

A striking story of a large recent legal settlement, with reminders of previous related settlements, quietly slipped out in the midst of the ruckus about the Ebola virus.

A $400 Million Settlement

The basics were in a news release by the US Department of Justice.

DaVita Healthcare Partners, Inc., one of the leading providers of dialysis services in the United States, has agreed to pay $350 million to resolve claims that it violated the False Claims Act by paying kickbacks to induce the referral of patients to its dialysis clinics,...

This amount was augmented by 

a Civil Forfeiture in the amount of $39 million based upon conduct related to two specific joint venture transactions entered into in Denver, Colorado.

Also, according to Ed Silverman writing on PharmaLot, it was further augmented thus

DaVita, by the way, has agreed in principle to pay another $11 million to several states that filed false claims charges, according to a document that DaVita filed with the U.S. Securities and Exchange Commission. The DaVita spokesman says the deal involves five states.

So the total cost to the company seems to be about $400 million.   The settlement also  included a corporate integrity agreement,

  DaVita has entered into a Corporate Integrity Agreement with the Office of Counsel to the Inspector General of the Department of Health and Human Services which requires it to unwind some of its business arrangements and restructure others, and includes the appointment of an Independent Monitor to prospectively review DaVita’s arrangements with nephrologists and other health care providers for compliance with the Anti-Kickback Statute.

Kickbacks to Doctors who Refer Dialysis Patients


Here is how the kickbacks worked.

First, using information gathered from numerous sources, DaVita identified physicians or physician groups that had significant patient populations suffering renal disease within a specific geographic area. DaVita would then gather specific information about the physicians or physician group to determine if they would be a 'winning practice.' In one transaction, a physician’s group was considered a “winning practice” because the physicians were 'young and in debt.'  Based on this careful vetting process, DaVita knew and expected that many, if not most, of the physicians’ patients would be referred to the joint venture dialysis clinics.

Next, DaVita would offer the targeted physician or physician group a lucrative opportunity to enter into a joint venture involving DaVita’s acquisition of an interest in dialysis clinics owned by the physicians, and/or DaVita’s sale of an interest in its dialysis clinics to the physicians. To make the transaction financially attractive to potential physician partners, DaVita would manipulate the financial models used to value the transaction.

 So these alleged kickbacks were not envelopes full of unmarked bills, but sophisticated, complex transactions that would be hard for outsiders to understand.

To ensure that those bought stayed bought,

Last, DaVita ensured future patient referrals through a series of secondary agreements with their physician partners. These included paying the physicians to serve as medical directors of the joint venture clinics, and entering into agreements in which the physicians agreed not to compete with the clinic. The non-compete agreements were structured so that they bound all physicians in a practice group, even if some of the physicians were not part of the joint venture arrangements. These agreements also included provisions prohibiting the physician partners from inducing or advising a patient to seek treatment at a competing dialysis clinic. These agreements were of such importance to DaVita that it would not conclude a joint venture transaction without them.

Note that these alleged arrangements ensured the private gains of the physicians involved, and presumably by increasing referrals, ensured the private gains of DaVita, and likely specific managers whose remuneration depended on the fees produced by referrals.  However, the arrangements steered patients to dialysis services not based on what would be best for patients but what would be best for those involved in the arrangements.  Thus these arrangements appeared to fit the Transparency International definition of corruption: "abuse of entrusted power for private gain."  The physicians were entrusted to provide the best possible care of individual patients, yet they put their and the company (and likely the company's managers) financial gain ahead of the patients' care.

No One Admitted Anything or Suffered Any Negative Consequences



Although the company paid a fine and entered into the corporate integrity agreement, apparently no individuals, be they physicians or company managers, paid any sort of penalty.


Like many other settlements we discussed, the company paid out a lot of money but denied it did so because it did anything wrong. Ed Silverman wrote on the PharmaLot blog

In a statement, DaVita says it is 'pleased to announce a civil resolution' and that 'patient care was never an issue, nor were billing or payment practices… We are proud of our commitment to compliance over our 15-year history.'

'We have worked incredibly hard to get things right and it is our belief there was no intentional wrongdoing. We believe this settlement is the right thing to do for our teammates, partners and shareholders. It allows us to move forward with heightened clarity and transparency, both with regulators and our physician partners.'

Why it was good for shareholders and "teammates and partners," presumably meaning employees to pay so much money in the absence of "intentional wrongdoing," when the money would likely come out of stock value and employees' salaries,  was not explained.  Why patient care was "not an issue" when the allegations were that patients were steered to dialysis providers because of financial inducements given to doctors, not due to any consideration of patients' needs and welfare also was not explained.

Furthermore, the whistleblower who triggered the lawsuit suggested there was wrongdoing.  Again, per Ed SIlverman on PharmaLot,

In a July 2009 e-mail cited in the whistleblower lawsuit, which was also filed in federal court in Colorado, one DaVita executive asks for suggestions on how to ensure the financial models used to value transactions pass internal standards. Another executive replies 'You mean gaming the model, right?' To which the first exec writes, 'I do.'

'I think there was a pretty wide understanding that what was going on was questionable at best,' David Barbetta, the former DaVita senior financial analyst, tells us. He says he worked at DaVita from March 2007 until August 2009, when he resigned after being disturbed by several joint venture transactions.

Barbetta, who is now an independent technology consultant, says he mentioned concerns to DaVita managers, but was ignored. 'I did raise this with someone who was a vice president, but he just said not give him any of that ethics nonsense,' he tells us. 'He was a vp and I was an analyst, so I pretty much looked at him and didn’t really push the issue any further.'

Another Denver Post article put it even more vividly,

 One vice president warned Barbetta not to 'give me any of that ethics crap,' court documents state.

And, in internal company e-mails Barbetta provided to the government, top DaVita officials boasted of 'gaming' valuation models. Barbetta also told prosecutors that another DaVita manager once explained to him the deals were used to funnel 'a bag of money' to physicians. Those doctors, in exchange, steered dialysis patients to DaVita.

Why there was no further investigation of these executives, and those to whom they reported, was also not explained.  

Just the Latest Settlement

The few media reports of this settlement suggested that this was not DaVita's first settlement.

The 2000 and 2004 Gambro Inc Settlements

The current DOJ release noted that DaVita

had previously been in a joint venture arrangement involving dialysis clinics with Gambro, Inc., a dialysis company acquired by DaVita in 2005. Prior to the acquisition, Gambro had entered into a settlement with the United States to resolve alleged kickback allegations that, among other things, required Gambro to unwind its joint venture agreements.

Actually, Gambro Inc, which became part of DaVita in 2005, had made two similar settlements.  According to a 2004 Department of Justice news release,

In 2000, Gambro Healthcare and its subsidiary, Gambro Healthcare Laboratory Services, agreed to pay $40 million to settle allegations of healthcare fraud. Gambro and another subsidiary, Dialysis Holdings Laboratory Services, Inc. (DHLSI), have agreed to pay more than $13.1 million to settle similar allegations. 

However, in 2004, a much bigger Gambro settlement was announced,

Gambro Healthcare will pay more than $350 million in criminal fines and civil penalties to settle allegations of healthcare fraud in the Medicare, Medicaid and TRICARE programs,...

Aspects of this settlement were eerily similar to those of the latest DaVita settlement,

As part of this comprehensive global resolution, Gambro Supply Corporation, a sham durable medical equipment company and a wholly owned subsidiary of Gambro Healthcare, admitted to the execution of a healthcare fraud scheme and agreed to plead guilty to criminal felony charges, pay a $25 million fine and be permanently excluded from the Medicare program.

Gambro Healthcare will also pay in excess of $310 million to resolve civil liabilities stemming from alleged kickbacks paid to physicians, false statements made to procure payment for unnecessary tests and services, and payments made to Gambro Supply. The settlement also requires Gambro to allocate an additional $15 million to resolve potential liability for the conduct resolved under the federal agreement pursuant to a preliminary understanding reached with representatives of various state Medicaid programs. Gambro Healthcare has also entered into a comprehensive Corporate Integrity Agreement.

Note that this older settlement actually involved admissions of wrongdoing, fraud, and a guilty plea by a subsidiary to federal felonies.  . 

The 2005 Settlement of Allegations of Illegal Anti Competitive Aspects of DaVita's Gambro Acquisition

DaVita's proposed acquisition of the criminal Gambro also provoked allegations by the US Federal Trade Commission of illegal anti competitive activities. In a 2005 FTC news release,

According to the Commission’s complaint, DaVita’s proposed acquisition of Gambro would be anticompetitive and in violation of Section 5 of the FTC Act and Section 7 of the Clayton Act, as amended. DaVita and Gambro account for a significant proportion of the dialysis clinics and treatment stations in many local areas in the United States, and the acquisition, if consummated, would lessen competition for outpatient dialysis services in 35 markets nationwide.

The 2012 DaVita Epogen Settlement

The 2014 Denver Post article included this offhand reference,

The company settled another whistle-blower lawsuit in 2012 and agreed to pay $55 million for other fraud claims. In that case, a former employee of Epogen-maker Amgen alleged the company overused the anemia drug.

The 2012 Denver Post article to which it referred stated,

Kidney dialysis giant DaVita Inc. has settled a whistleblower lawsuit for the first time, agreeing to pay $55 million over allegations of drug overuse while denying any wrongdoing.

Denver-based DaVita settled fraud claims in a Texas lawsuit challenging the dialysis chain's past use of Epogen, an anemia drug whose high cost and dangers helped change how the government pays for kidney care.

Note that this case suggested actions that could have hurt patients,

 The Texas whistleblower lawsuit accused DaVita of using more Epogen than was medically necessary,...

Epogen is not without serious adverse effects, as noted above, and overdosing multiple patients with it made it likely that some were harmed.

Further, while

DaVita said it was the first time it was settling a claim over federal anti-fraud laws, but noted the government had declined to join the whistleblower' s lawsuit.

Only two years later DaVita had to settle more federal claims, this time due to a suit that the federal government had certainly joined.  And as noted above, a company which DaVita was about to acquire as a subsidiary had admitted to fraud and pleaded guilty to federal charges apparently involving fraud just before the acquisition. 

Finally, just as in 2014, in 2012 DaVita denied responsibility,

'DaVita and its affiliated physicians did nothing wrong and stand by their anemia management practices, which were always consistent with their mission of providing the best possible care for each patient,' a company statement said.

Summary

The latest settlement by DaVita was of allegations that the company gave kickbacks to physicians to get them to refer patients to DaVita facilities, regardless of the patients' best interests.  The company paid about $400 million and signed a corporate integrity agreement, but no individual who authorized, directed, or implemented the provision of kickbacks was identified, or paid any penalties.  This settlement turns out to have been only the latest settlement by DaVita or companies it acquired.  Previous settlements involved penalties of $53 million, $350 million, and $55 million (totaling more than three-quarters of a billion dollars from 2004 to 2014.  Previous settlements were for kickbacks and fraud.  One included a guilty plea to a felony.  Previous settlements involved alleged and sometimes admitted behavior that likely put patients at risk.   One earlier settlement also included a corporate integrity agreement.  However, no settlement imposed any negative consequences on any individual who authorized, directed, or implemented the bad, and sometimes criminal behavior.

The DaVita Statement of Mission and Core Values includes

Integrity
We say what we believe, and we do what we say. We are trusted because we are trustworthy. In our personal, team, and organizational values, we strive for alignment in what we say and do.

and

Accountability
We don’t say, 'It’s not my fault,' or 'It’s not my job.' We take responsibility for meeting our commitments — our personal ones as well as those of the entire organization. We take ownership of the results.

Despite the fact that the above settlements made a mockery of these lofty values, the company managers who presided over the behavior that lead to them prospered mightily during this time period.  The company' 2014 proxy statement showed the current CEO and board chairman Kent J Thiry received $17,099,257 in total compensation in 2013.  The five next best paid executives received collectively about $22 million.  Note that Mr Thiry as been CEO since 1999, and thus all the above settlements and most of the behavior that led to them occurred on his watch.

So the march of legal settlements continues in step with the same old song.  Big health care organizations preach their lofty missions and values, pay their top managers millions, and in some cases turn them into billionaires, while the organizations are accruing amazing records of bad and sometimes criminal corporate behavior.  The legal settlements only provide hints as to this behavior, but nearly every time, the management need not admit nor deny wrongdoing while merrily going on to collect their next huge paycheck which was justified by the corporate financial performance in part generated by the bad behavior.

Leadership that cares not for honesty, transparency, or accountability, and that puts short term revenue, and usually personal enrichment ahead of patients' and the public's health may be the single most important reason that US health care is so dysfunctional.  Yet hardly anyone even dares discuss the damning facts about health care leadership, much less propose solutions.  If we do not reform our health care leadership so that it is transparent, honest, accountable, unconflicted, and it puts patients' and the public's health over personal enrichment, our health care system will continue to founder.  

On Automobile, and Health Care Companies Run by Finance People

The New Republic published "Upper Mismanagement" about what happens when businesses are run by people who do not understand their companies' businesses.  Although the article was focused on the decline of manufacturing in the US, its applicability to health care is obvious:

Harvard business professor Rakesh Khurana, with whom I discussed these questions at length, observes that most of GM’s top executives in recent decades hailed from a finance rather than an operations background. (Outgoing GM CEO Fritz Henderson and his failed predecessor, Rick Wagoner, both worked their way up from the company’s vaunted Treasurer’s office.) But these executives were frequently numb to the sorts of innovations that enable high-quality production at low cost. As Khurana quips, “That’s how you end up with GM rather than Toyota.”

How did we get to this point? In some sense, it’s the result of broad historical and economic forces. Up until World War I, the archetypal manufacturing CEO was production oriented—usually an engineer or inventor of some kind. Even as late as the 1930s, business school curriculums focused mostly on production. Khurana notes that many schools during this era had mini-factories on campus to train future managers.

After World War II, large corporations went on acquisition binges and turned themselves into massive conglomerates. In their landmark Harvard Business Review article from 1980, 'Managing Our Way to Economic Decline,' Robert Hayes and William Abernathy pointed out that the conglomerate structure forced managers to think of their firms as a collection of financial assets, where the goal was to allocate capital efficiently, rather than as makers of specific products, where the goal was to maximize quality and long-term* market share.

By the 1980s, the conglomerate boom was reversing itself. Investors began seizing control of overgrown public companies and breaking them up. But this task was, if anything, even more dependent on fluency in financial abstractions. The leveraged-buyout boom produced a whole generation of finance tycoons—the Michael Milkens of the world—whose ability to value corporate assets was far more important than their ability to run them.

The new managerial class tended to neglect process innovation because it was hard to justify in a quarterly earnings report, where metrics like “return on investment” reigned supreme. 'In an era of management by the numbers, many American managers … are reluctant to invest heavily in the development of new manufacturing processes,' Hayes and Abernathy wrote. 'Many of them have effectively forsworn long-term technological superiority as a competitive weapon.' By contrast, European and Japanese manufacturers, who lived and died on the strength of their exports, innovated relentlessly

Furthermore,

The business schools had their own incentives to channel students into high-paying fields like finance, thanks to the rising importance of school rankings, which heavily weighted starting salaries. The career offices at places like Harvard, Stanford, and Chicago institutionalized the process—for example, by making it easier for Wall Street outfits and consulting firms to recruit on campus. A recent Harvard Business School case study about General Electric shows that the company had so much trouble competing for MBAs that it decided to woo top graduates from non-elite schools rather than settle for elite-school graduates in the bottom half or bottom quarter of their classes.

No surprise then that, over time, the faculty and curriculum at the Harvards and Stanfords of the world began to evolve. 'If you look at the distribution of faculty at leading business schools,' says Khurana, '“they’re mostly in finance. … Business schools are responsive to changes in the external environment.' Which meant that, even if a student aspired to become a top operations man (or woman) at a big industrial company, the infrastructure to teach him didn’t really exist.

If business schools did little to teach about manufacturing, they did almost nothing to teach about health care. But at the same time the finance people were taking over manufacturing, health care organizations were pushed to turn over their leadership to business people to improve efficiency and break the physician's "guild." Would there be any reason to expect that a finance background would be better preparation to run a health care corporation than to run an automobile company?

For the latest thought- and wince-provoking example of how leaders of health care corporations seem to know almost nothing about the actual health care their companies provide, see a DailyFinance interview with Mr Kent Thiry, CEO of DaVita, a for-profit corporate provider of dialysis services. According to the company web-site, "prior to working for Vivra, Mr. Thiry was a partner at Bain & Company, an International management consulting company. He earned his BA degree, with distinction and Phi Beta Kappa, in Political Science from Stanford University in 1978, and his MBA, with honors from Harvard Business School in 1983"  So he got his MBA from an elite US business school at the time in which finance was becoming dominant as described above. 

Asked to explain his business model, Mr Thiry responded:

Most of us have a couple of kidneys. These kidneys are amazing organs -- some of the most complex, sophisticated organs in the human body, which is why they've been so difficult to replicate compared to other organs like the heart and lung and others. And when the kidney fails, you need to go on dialysis, unless you're one of the fortunate few to get a transplant. And we operate the centers that people come to if their kidney fails and they can't get a transplant.

And what we do in our centers is take care of these people typically three times a week -- four hours each time -- where we take their blood out of their body, clean out all the toxins that they would normally clean out themselves through the act of urinating. But you don't do that anymore once you've lost your kidney function. And we take that part out, take the toxins out and then put the blood back in with some other nutrients.

To be charitable, I do not think that would merit a "C" on a high school biology test. [Medical science cannot "replicate" hearts or lungs. Kidney function is not the same thing as "urinating." The functions of the kidney are far more complex than "cleaning out toxins."]

Does it make any sense to put someone who obviously understands so little about kidneys in charge of a kidney dialysis company?  (On the other hand, see this post on accusations that DaVita's ruthless business practices treat patients like "dialysis dollars.")

So, if putting finance people in charge of automobile companies turned out to be a recipe for bankruptcy, why should we expect from putting finance people in charge of dialysis companies, or hospitals, or drug, biotechnology or medical device companies, or health care insurance companies, or health care information technology companies?

The CEOs of big health care organizations, most of whom have business, not health care backgrounds, have mainly been good at paying themselves and their cronies well. (For example, according to the 2009 DaVita proxy statement, in 2008, Mr Thiry owned over 2 million shares of stock, 1.9% of all shares outstanding, and received more than $11 million in total compensation.  Clearly, he was not paid according to his knowledge of kidney biology.)  Meanwhile, health care costs rise, access falls, and quality degrades.

If we really want to reform health care, maybe we should take a lesson from Toyota. Put the car guys and gals in charge of car companies. And put the health care guys and gals in charge of health care.

Turning Patients into "Dialysis Dollars"

As we have discussed in previous posts (here and here), prior to a US Supreme Court decision in 1975, physicians (and other professionals) were left free to set up and enforce their own codes of ethics. Until about 1980, the US American Medical Association (AMA) stated,

• "in the practice of medicine a physician should limit the source of his professional income to medical services actually rendered by him, or under his supervision, to his patients"
• "the practice of medicine should not be commercialized, nor treated as a commodity in trade"

The Supreme Court decision was widely construed as meaning that any promulgation by US professional organizations of ethical regulations that constrained any economic practices of their members was a violation of anti-trust laws. Thus, in 1980, the AMA dropped their prohibitions against the commercialization of medicine, and nobody, it appeared, tried to change the anti-trust law whose provisions the court interpreted.

A vivid example of how physicians and patients may be caught in the cross-fires among health care corporations in this brave new era of commercialized health care was provided by a recent report in the Denver Post:

News that Fortune 500 company DaVita Dialysis is moving its headquarters to Denver socked its competitors like a punch in the gut.

To its rivals, the kidney-care giant is a bully armed with high-powered attorneys who use lawsuits as tools to intimidate.

DaVita executives counter that they are simply strong competitors — they act as aggressors only when doctors or nurses or other dialysis companies break promises and double-cross them.

Either way, a string of DaVita-filed lawsuits around the country — with two major battles boiling in Denver and Colorado Springs — shed light on the ruthless competition over dialysis patients in an industry that costs Medicare alone more than $8 billion per year.

For years, DaVita's competition in Colorado's two largest cities was almost nonexistent.

The mud began to fly last year when the second-largest group of Denver kidney doctors, called nephrologists, ended their exclusive affiliation with DaVita and partnered with a Massachusetts dialysis company entering the Denver market. Near the same time, the largest nephrology group in Colorado Springs dumped DaVita in favor of Liberty Dialysis, which recently opened two dialysis centers in the city.

DaVita quickly sued doctors in both cities, plus a nurse battling breast cancer who quit her job at a DaVita dialysis center and took one with Liberty.

The hostility between the companies is so intense, it's seeping down to the patients.
'With everything that is going on, you feel like you are becoming sort of a dialysis dollar,' said Julie Estes, a 53-year- old Colorado Springs woman who spends three days a week, four hours at a time, hooked to a dialysis machine in order to stay alive.

DaVita says it 'paid millions' in 1998 to the doctors of Western Nephrology in Denver to retain them as medical directors of six dialysis centers in the metro area for 10 years. The doctors signed non-compete agreements, promising not to join forces with DaVita rivals or steal any of the California-based company's nurses.

Patients are free by law to choose any dialysis center they want. But dialysis companies bank on the fact that snagging the most popular kidney doctors in town to serve as medical directors of their centers will bring in the most patients — and the most dollars.

Every dialysis center is required by federal law to have a medical director to oversee the care of patients and the water purification system used to flush toxins from the blood of people with failing kidneys.

It's a side job, separate from a nephrologist's practice, that some estimate takes only a couple of hours each week. Companies and doctors declined to say what salary comes with the job, but estimates range from $20,000 to $200,000 per year depending on the competitiveness of the market.

After 10 years with DaVita, when they believed the non-compete agreement was about to expire, Western Nephrology doctors began making plans to become medical directors of shiny-new American Renal Associates dialysis centers opening in Denver with a flat-panel TV and heated, massage chair at every dialysis station.

Four of the new centers are within 3 1/2 miles of existing Da Vita centers. The non-compete agreement that Western Nephrology doctors had signed for DaVita prohibited them from having relationships with competitors within a 35-mile radius.

DaVita contends in its lawsuit that it found out about Western Nephrology's 'secret campaign' because the dialysis company they were working with applied for Medicare billing numbers for five new centers in the Denver area.

In its counterclaim, American Renal Associates accused DaVita of violating federal antitrust law — the company had controlled at least 80 percent of the Denver market. DaVita lagged in updating its dialysis centers until competition was imminent, according to court records. And the claim accused DaVita of 'filing legal actions that are objectively baseless' merely as an 'anticompetitive weapon.'

"Ruthless competition," "lawsuits as a tool to intimidate," "double crosses," flying mud, patients who feel like "dialyis dollars," non-compete agreements, medical directors paid according to "the competitiveness of the market," "secret campaigns?" - is this any way to run a health care system?

As Dr Arnold Relman pointed out (see our previous posts linked above), through the 1960s there was some consensus that health care does not function like a pure market, partially because patients cannot function like steely-eyed consumers. They do not have enough information about the benefits, harms and costs of their possible choices. They have trouble understanding the ambiguity and uncertainty of the medical context. And most important, they may not be capable of the cold cognition the free market model requires, since they may be dealing with choices whose potential outcomes prompt extreme emotions, and in many cases, they may be too frightened, sick, or cognitively impaired to make fully rational choices. In particular, patients with end-stage kidney disease, requiring dialysis to maintain life, seem very different from some ideal, coldly cognitive consumers. So what in the world are they doing caught up in these sorts of disputes?

I submit that real health care reform ought to help physicians and other health care professionals renew their professionalism, and put the provision of health care (and health education and clinical research) back in the hands of people who view these activities as callings, not purely as ways to get rich. Meanwhile, when you are a patient, be prepared to be treated merely like a source of revenue.

PS - Please note that, as we have posted before, the new US "czar" for health care reform is a former member of the board of directors of DaVita.