DAVITA CEO RESPONDS More than one deal between DaVita, doctors under investigati

[okarol]

DAVITA CEO RESPONDS
More than one deal between DaVita, doctors under investigation
By Jennifer Brown
The Denver Post
POSTED: 11/04/2011 01:00:00 AM MDT
UPDATED: 11/04/2011 08:25:17 AM MDT

A federal grand jury in Denver is looking into more than one partnership between DaVita Inc. and a group of kidney doctors, chief executive Kent Thiry said Thursday during an earnings call.

Thiry was responding to questions from stock analysts about a Denver Post story Wednesday that described the kidney dialysis giant's relationship with Denver Nephrology.

"We know that they are not limiting their inquiry into that one transaction," he said. "All we know is that they are looking at a small number, but it is not just one."

In 2008, DaVita sold 49 percent ownership in seven dialysis clinics to Denver Nephrology for $1.89 million. Those clinics generated estimated annual revenues of more than $28 million.

DaVita had offered 40 percent ownership to another group of Denver doctors for eight times the price 17 months earlier. DaVita says the value of the clinics dropped substantially by the time of the sale because a major dialysis competitor was coming to Denver.

Thiry said he could not comment in detail about the grand jury inquiry but said it is "common sense that the value of a business can change dramatically if the market and/or competitive conditions change."

Thiry and other executives said they looked forward to defending the company "vigorously" but that government investigations take several months.

"It's no fun waiting, but there is nothing we can do about it," Thiry said.

Federal law regarding relationships between doctors and dialysis clinics says dialysis companies must sell part-ownership of clinics at fair-market value. The point is to make sure a dialysis company is not buying off doctors in order to get patients.

DaVita, a Fortune 500 company, posted third-quarter income from continuing operations of $164.5 million, or $1.48 a share, compared with $143 million, or $1.16 a share, the same period a year earlier. Net profits rose 13 percent to $135.4 million, the company said.

DaVita shares closed at $73.52, up $3.38.

Jennifer Brown: 303-954-1593 or jenbrown@denverpost.com



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[plugger]

Golly, I wonder where doctors will send their patients: to the dialysis clinic they have a 49% stake in, or the clinic across the street that just might me so much better?  Gosh, I might have to think about that one!

[Joe]

And nothing like getting that stake in the clinic at fire sale prices...even with another company coming to town I doubt the value of the clinic went from 15 million to 1.8 million. Especially in a city the size of Denver. And as a business person, I'd love to buy into a business that had a 15x ROI  in the first year!

[thegrammalady]

that article doesn't tell half of it. denver nephrology is the group that runs my clinic although not every patient at the clinic sees a doctor from denver nephrology. in 2008 there were 2 dialysis in the denver metro area, there are now 3 and a 4th in castle rock which is not considered part of the metro area. davita is full of it as usual. i hope they investigate hard and sets davita on their corporate asses.

by the way, Davita is building a 12 story office building in downtown denver and moving their corporate offices from i believe california.

afterthought......................after i posted this i thought it was importand to mention the i do not go to a davita clinic and that my doctor is not part of denver nephrology.

[plugger]

This looks like a clear violation of the Stark Law and Physician self-referral: "Physician self-referral is the practice of a physician referring a patient to a medical facility in which he/she has a financial interest, be it ownership, investment, or a structured compensation arrangement."

Unfortunately, I seem to recall nephs got an exemption to that very fine law.  Wish somebody could explain the logic behind that!

[Whamo]

DaVita seems to rub people the wrong way.  I'm glad I don't go there.  I like the Nephro team at Loma Linda. 

[Joe]

My Neph does have an interest in the dialysis center I use. And they were up front with that when we started doing the initial work after my PD placement. The Neph group and the dialysis center share the building, so it's very convenient to use Liberty, at least for me. I could have chosen DaVita as they are just across the parking lot and my Neph is on staff there too. But I do feel I'm getting the best care possible and, thanks to the discussions here on IHD, I'm likely a well or better informed than a lot of patients.

[plugger]

I suppose in some instances having the neph have an interest in the clinic might work out, but with the vast majority of clinics being owned by the likes of DaVita and Fresenius I would worry.

[thegrammalady]

it is apparently perfectly legal for davita to sell part interest in a center but it must be at fair market value. it's simply ludicrous for davita to say that the value of the centers dropped 20 million just because a new company was moving into the area.

[plugger]

This development scares the beejeebees out of me.  Years ago I seem to recall some of the nephs made a bundle selling their clinics to the for-profits (I've heard stories about care going downhill), then I heard the nephs were making money off epo - that has been rightfully taken away with bundling, now my neph-wanna-be-son is telling me med students aren't going into nephrology because the pay stinks.

So we might be looking at a shortage of nephs and those that are left could be taking deals like davita is offering - this is looking very bad for competition among clinics to me.