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Lewis County lawmakers, hospital unfazed by dialysis provider’s legal troubles

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LOWVILLE — Despite two major lawsuits — one potentially the largest Medicare fraud suit in U.S. history — and a doctor kickback scandal, Denver-based dialysis giant DaVita Inc. was approved in September 2011 to open a dialysis center at Lewis County General Hospital.

The decision to partner with DaVita was made without input from county legislators, a majority of whom did not know about the lawsuits until asked for comment.

“I was surprised. I didn’t know about it, but I’m still supportive of the hospital,” said Legislator Paul M. Stanford, D-Watson. “I don’t want to downplay it, but you do hear about cases like this in the medical industry.”

County Attorney Richard J. Graham also was unaware of the lawsuits, but said such cases could pose a problem for companies to operate in the state. If found guilty, DaVita could be excluded from running the facility.

Financial or ethical fallout from the lawsuits was not a concern for Eric R. Burch, the county-owned hospital’s CEO, when a 10-year lease agreement was struck between the two parties, he said recently.

“The alleged lawsuits did not deter us from pursuing a relationship with DaVita to provide dialysis services, given the fact that there is a huge need in the community,” Mr. Burch said. “The hospital was aware of the alleged pending lawsuits with DaVita and discussed them in great detail early on with the company.”

The lawsuits are not alleged.

The first of two fraud suits was filed in 2002 and was settled out of court in July 2012 for $55 million. In that case, a whistleblower in Texas brought forth claims that DaVita overused Epogen, an anemia drug, over a 10-year period.

In 2007, a similar lawsuit was filed by a doctor and nurse in Atlanta, also with claims that DaVita policies overcharged for a drug, this time for Venofer, an iron drug used frequently for dialysis patients.

The two, Dr. Alon Vainer and Daniel Barbir, accuse DaVita of prescribing the drug from larger vials than necessary and then throwing away the extra, instead of using smaller vials.

The intentional waste, they say, padded Medicare bills at DaVita’s more than 1,800 dialysis facilities, according to the lawsuit, in amounts that add up to hundreds of millions of dollars.

Neither Dr. Vainer nor Mr. Barbir returned calls for comment about the still-pending suit.

Vince Hancock, DaVita Communications, said results from any investigations or lawsuits would not affect the company’s agreement with Lewis County General Hospital.

In regard to the doctor kickback investigation and lawsuit, Mr. Hancock said, “The investigation is solely about physician relationships and does not concern patient care.”

Accusations of a doctor-kickback scam in 2010 have resulted in a criminal investigation by the Office of the Inspector General in Dallas, Texas. The OIG has requested documents relating to the financial relationships with physicians and joint ventures, and whether those relationships and joint ventures comply with the federal anti-kickback statute and the False Claims Act.

A civil lawsuit also has been filed.

As of Nov. 6, DaVita had set aside $397 million, according to the Securities and Exchange Commission, in the event of an out-of-court settlement.

In New York, the state Office of Medicaid Inspector General oversees the list of prohibited providers. DaVita is not prohibited, though it is included in an audit conducted by the office for payments received from January 2007 through December 2010 for use of the drug Epogen.

Findings of the audit, issued in June 2013, say DaVita received an overpayment during that period and requests repayment of $3,290,143.81.

OMIG Director of Public Information Wanda A. Fischer said DaVita “has requested a hearing on this situation,” and could make no further comment.

Ms. Fischer did, however, say the alleged overcharge for Epogen in Texas has no connection with OMIG’s decision for the audit.

After learning about the OMIG audit, Mr. Hancock said, “This particular issue here is in the state of New York OMIG doing a routine audit to make sure that Medicaid is paying us appropriately. These are not uncommon in any way, shape or form, and they are actually quite common with larger dialysis providers like DaVita. They are just auditing providers how much they are paying providers for” Epogen.

DaVita is appealing the audit, he said, “because the state department of Medicaid dictates the info that we put on a claim form for medication services and we think that is inconsistent with federal law.”

It is unclear whether the state Department of Health was aware of the lawsuits when a certificate of need was issued for Lewis County General Hospital in September 2011.

Jeffrey Hammond, Health Department spokesman, said the state does consider “the character and competence” of a company before issuing such a certificate.

Asked whether the pending lawsuits were considered at the time DaVita’s certificate was issued to operate at Lewis County General Hospital, Mr. Hammond said he did not have an immediate answer.

He did not return numerous requests for that information.

Mr. Burch said he did not believe the lawsuits, whether settled out of court or resulting in a judgment against DaVita, would affect Lewis County General Hospital.

“The hospital and the county will not be involved with the billing, staffing or services provided by DaVita,” he said.

The agreement with DaVita has the hospital cooperating only in a landlord and tenant capacity, he said.

In addition, he said, “The hospital will benefit from ancillary services, like lab tests.”

Hopeful for a March opening, DaVita took over interior construction of the recently completed wing exterior.

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