Why The DaVita Cases Matter To Your Business

Why The DaVita Cases Matter to Your Business

DaVita Cases Protest Dialysis Cost Containment

*This is the first in a series of posts on the DaVita and related dialysis sector litigation.*

DaVita, one of the two dominant dialysis providers, has filed numerous lawsuits against benefits plans for trying to limit the amount plans pay on dialysis claims. Why this matters to you: without dialysis cost containment, your clients’ health plans or your own company’s plan are forced to carry an unfairly high burden of dialysis charges, which go straight to the providers’ bottom line.

Two cases by the DaVita Star Dialysis unit underscore this desire to prevent plans from using dialysis cost containment strategies: Star Dialysis v. WinCo Foods (filed October 2018)(“WinCo”) and Star Dialysis v. Amy’s Kitchen (filed November 2018) (“Amy’s Kitchen”). These two cases seem to be part of a broader initiative to oppose dialysis cost containment, focusing on the Medicare Secondary Payor Act (“MSP”) and related discrimination allegations.

This kind of initiative is not new in the dialysis sector. Only a decade ago, the providers pursued a litigation strategy based on allegations that dialysis cost containment strategies were unfair trade practices. Some plans were in fact using questionable strategies, and those strategies were driven out of the market. Sound strategies were left intact, and in some cases, improved. Current legal battles suggest a very similar outcome on the MSP issue.  

Today’s dialysis cost containment legal battles have a clear focus: Does the MSP prohibit dialysis cost containment as a matter of discrimination against patients who need dialysis? Here’s what we know:

  • A 2016 complaint by “Dialysis Patient Citizens” to the Centers for Medicare and Medicaid Services (“CMS”), claiming payment of dialysis claims at multiples of Medicare rates (100% or 125% of Medicare rates) and plan payment of Medicare premiums violate the MSP. “Dialysis Patient Citizens” is principally funded by dialysis companies, and now seems like part of a public relations campaign to support the litigation to come.  
  • In WinCo, DaVita claims that the plan violated the MSP by taking dialysis providers out of network and paying dialysis claims at “Medicare-based rates.” The plan was allegedly advised by EthiCare.
  • In Amy’s Kitchen, DaVita essentially made the same MSP violation claims as noted in WinCo — in many instances, the complaints were echoed verbatim. It should be noted that the claims determinations in this case were not, in fact, based on Medicare rates per Renalogic’s advisement. Renalgoic does NOT use Medicare-based rates because of the MSP risks associated with them.   
  • In DaVita v. Marietta Memorial Hospital, filed in Ohio in December 2018, DaVita claims the plan violated the MSP by paying dialysis claims at 125% of Medicare. The plan was advised by MedBen, its TPA, which DaVita joined as a defendant.
  • In DaVita v. Smithfield Foods, filed in Virginia in December 2018, DaVita claims the plan violated the MSP by limiting dialysis benefits to nine months of treatment. This case is a bit of an outlier, but does fit the pattern of going after dialysis benefits limitations with MSP violation theories.

The bottom line is that this initiative is not targeting any particular vendor; instead, it is targeting the use of Medicare rates to determine dialysis claims.

I have been concerned about this issue for years because this kind of “Medicare-derivative” methodology simply looks as if it “takes Medicare into account” In violation of the MSP. The MSP rules are lengthy and confusing, and unless and until the courts give clear guidance the rules leave this line of attack open. Whatever the courts’ ultimate holdings on this particular issue, from the providers’ point of view, a plan’s vulnerability to legal attacks on dialysis claims determination may make it worth the cost of litigation, if only to discourage plans from trying to control dialysis costs. Plans should therefore look carefully at the strategies they use to make sure their dialysis claims determinations are as defensible as possible.

What’s next? These are fast-moving cases, and the plaintiffs have filed motions to dismiss in WinCo, Amy’s Kitchen, and Smithfield Foods. From what I know of the case, to hold in favor of DaVita, the court in Amy’s Kitchen at least would have to reject existing caselaw on the MSP and create a new interpretation of the law contrary to other courts’ holdings. My next post will dig into MSP legal theories in an effort to simplify what can be a complicated area of the law. I’ll also provide additional insight as these cases develop.

If you have questions about these cases or would like to know how Renalogic can help your employees or clients, please don’t hesitate to contact us. We look forward to hearing from you!  

Renalogic

Renalogic (formerly DCC, Inc.), headquartered in Phoenix, AZ, was founded in 2002 as a specialty dialysis cost-containment company to help clients understand the unique market dynamics in the dialysis provider community. The company has evolved to become a comprehensive provider of data-driven, end-to-end chronic kidney disease (CKD) care and cost management programs for the self-insured industry. Renalogic’s professional team includes leaders in healthcare administration, care management, legal specialists in ERISA and healthcare law, contract negotiation, payer/provider negotiation, and clinical experts.