Davita: is the vial half empty or half full

Early Tuesday, I caught half a headline about drugs being wasted at the expense of Medicare and to the benefit of some dialysis company. A few hours later I saw the first caustic tweets:

Just some of the angry tweets

Then I started getting direct messages asking for my thoughts. Recently, Davita has been getting more than its share of bad press recently and this seemed like more of the same. The facts of the news story, as far as I can tell, are as follows

• A former medical director and nurse brought a whistle blower suit against Davita
• They accuse Davita of using large vials to administer IV drugs during dialysis. The large vials resulted in excess medication being wasted
• Medicare pays for the entire vial regardless of how much is wasted
• The Justice department investigated this claim for more than two years and decided not to join the lawsuit

My first reaction was Davita had done a bad, bad deed here but the more I thought about it, the more that seemed to be a rush to judgment. The fact that the Justice Department, after investigating  for two years, did not join the lawsuit became the itch I could not ignore. My interpretation, is that the Feds looked into how Davita was handling the drugs and they did not find any unlawful activity.

So I was satisfied with the assumption that the way Davita was handling the drugs was legal. However, even when things are within the letter of the law we want our medical institutions to use resources efficiently. Clearly, intensionally pouring drugs down the biohazard drain, as the whistle blowers contend, is not the most efficient use of medical resources. The problem was the Medicare reimbursement system. For years, Medicare underpaid for the dialysis procedure so that dialysis providers had to turn themselves into high-end retail pharmacies that peddled Epo, and Zemplar in order to keep the lights on. With this type of system the providers were incentivized to use as much drug as possible. This perversion of fee-for-service has been at the root of almost all of the recent scandals in dialysis units. The recent anemia controversies were driven to the forefront largely because dialysis companies were payed for giving drugs not for patient oriented outcomes.

Its clear to me that retail pharmacy system was not the system we wanted. The laws need to change and you know what? This system is no longer the law. Bundling began earlier this year and removes these perverted incentives in order to better align provider and patient goals. In response to the new incentives you know what happened? The vials became right sized and Epo use plummeted. It's too early to see how bundling effects patient outcomes but Davita and the other Large Dialysis Organizations are responding to the new incentives.

The lesson here is that incentives drive medical decision making. Incentives need to be implemented thoughtfully because small, seemingly minor holes can be blown wide open and introduce major distortions in the delivery of care. In terms of this whistle blower case, I think we shouldn't dwell on the cows leaving the old barn that has been replaced by one with automatic and secure doors. The old reimbursement system was broken and has been fixed (or at least changed) and I don't think there is much to be gained by dwelling on the previous system's inefficiencies and errors.

So as I see it:

• Davita administered and wasted dialysis drugs in a way that is uncomfortable, and inefficient but legal.
• The Government realized the incentives were not aligned with better outcomes and changed the incentives
• Davita and the other large dialysis organizations have changed their purchasing and administration procedures in response to the new incentives
• A couple of former employees want to sue Davita for its legal, but opportunistic, drug handling behavior under the old incentives

Transparency: I am a part owner of a dialysis joint venture with Davita and one of my partners, Robert Provenzano, is Davita's VP of Medical Affairs.