Never a Dull Moment at DaVita

May 14 2013, 2:40 PM

When I wrote a profile of local CEO Kent Thiry last year, what I found was a breathtakingly intelligent and charismatic leader who presided over a multinational kidney dialysis titan—one that is brimming with contradictions.

There was no denying that Thiry, the self-anointed "mayor of DaVita Village," had captured the hearts and minds of his "teammates" with his dynamic personality and his establishment of a corporate culture that sows intense devotion among his followers.

But extensive reporting with sources outside the company showed there also was no denying that DaVita's patient care and business practices have been questionable, at best. It's easy to suspect that the sunny facade displayed by all DaVita's citizens has obscured something much darker.

This has become clearer than ever over the past few weeks. During its most recent quarterly earnings call, Thiry told listeners that the company has set aside $300 million to settle any potential civil or criminal complaints relating to its patient-referral practices with groups of nephrologists (kidney doctors) that have contracts with DaVita. Although federal law prohibits companies from paying doctors fees—better known as kickbacks—for patient referrals, DaVita and other dialysis companies have long lobbied, successfully, to remain exempt from such restrictions.

The federal government has been investigating and challenging these arrangements for about a year, and now it seems DaVita officials are poised to cede at least some of the battlefield. The settlement fund is no small announcement, as DaVita employs a notoriously efficient and aggressive legal team: To wit, within days after I appeared on Ryan Warner's Colorado Matters radio show last fall to discuss my story, the company's lawyers sent a stern letter to 5280 and Colorado Public Radio demanding, among other things, that we clarify remarks I made about how DaVita pays its contracted physicians.

Although we complied, I stood by the thrust of my remarks then, and still do. As a business-writer colleague of mine noted, "Companies don't set aside this kind of money unless they expect to spend it." With its earnings-call announcement, DaVita finally seems poised to give up at least this part of its longtime fight with the feds.

There will undoubtedly be more battles to come. DaVita still faces numerous investigations into and lawsuits over its patient care and financial practices. This is also true for at least a portion of the broader dialysis industry; another story emerged last week that Medicare spent more than a half-billion dollars than it should have in 2011 for the anti-anemia drugs these companies use. 

None of these brewing controversies has had much effect on DaVita's bottom line: Its stock, priced at around $100 per share last fall, now hovers near $130, and Warren Buffett's Berkshire Hathaway is so bullish on DaVita that the investment firm has said it might increase it share of stock from its current 14.2 percent to as much as 25 percent. Meanwhile, that $300 million represents a mere three percent of DaVita's $9.15 billion annual revenue.

All of which means that one of Colorado's 10 Fortune 500 companies won't be going away any time soon. But it's certainly worth keeping an eye on whether that mythical "village," with its glittering headquarters ushering pedestrians across the Milennium Bridge, is earning its riches rightly or merely filling its apparently bottomless coffers with fool's gold.

—Image couresy of DaVita.

Follow 5280 articles editor Luc Hatlestad on Twitter at @LucHatlestad.