By Barbara Feder Ostrov, CALMATTERS
July 19 2021
Federal conspiracy charges against dialysis giant DaVita and its former CEO have cast one of Sacramento’s biggest political spenders in an unflattering light.
The Denver-based company spent $68 million last year to defeat a union-backed California ballot measure to more strictly regulate dialysis centers — and $67 million more to defeat a similar measure in 2018.
“I wouldn’t be surprised to see some politicians give DaVita money back,” California political consultant Steve Maviglio, a leading Democratic strategist, told CalMatters. “Taking contributions from an indicted CEO is the perfect script for an attack ad. Any donation would be considered radioactive.”
The two-count federal indictment announced Thursday is unrelated to treatment of DaVita’s more than 200,000 patients at its 2,800 dialysis centers, including 320 centers in California. The U.S. Justice Department alleges that DaVita and its previous CEO, Kent Thiry, colluded with another healthcare company by agreeing not to poach the others’ employees.
If convicted of the antitrust allegations, DaVita could face up to a $100 million fine per count, and Thiry would face 10 years in prison and a $1 million fine per count. Thiry did not respond to CalMatters’ request for comment on Friday.
DaVita called the charges “unjust and unwarranted” in an emailed statement. “The government’s case relies on an unprecedented and untested application of the antitrust laws to alleged discussions involving former executives that occurred many years ago.”
With 2020 revenues of more than $11.5 billion, DaVita has long spent big money to influence California politics.
In addition to spending roughly $135 million to fight the two ballot measures, since 2011 the company has contributed about $1.3 million to the campaign coffers of more than 180 California politicians and more than $2 million to various political committees, according to data from the Secretary of State.
The $138.3 million is more than double what DaVita’s dialysis competitor Fresenius Medical Care spent, and more than the combined political contributions of heavyweights Chevron, Uber and Facebook in California over the past decade.
Thiry, who stepped down as CEO in 2019 but remained on the company’s board until spring of 2020, personally has donated more than $154,000 to political candidates and ballot measures since 2000, according to California Secretary of State records. His LinkedIn profile now lists him as an advisor to private equity giant Kohlberg Kravis Roberts. He did not respond to a request for comment Friday.
As DaVita’s legal woes play out, will lawmakers, industry groups and lobbyists be less willing to accept the company’s money?
It’s possible, said Carmen Balber, executive director of the Consumer Watchdog advocacy group, which itself has spent about $3.5 million to influence California policy in the past decade. But she remains skeptical.
“When a company is accused of abusing both employees and labor laws to increase its profitability, and has been accused of excess profits, then every lawmaker should think twice about taking that money,” Balber said.
DaVita gave Senate Health Committee Chair Dr. Richard Pan, a Sacramento Democrat, $11,100 between 2011 and 2019, according to California Secretary of State data. He did not respond to a request for comment Friday.
Spending by DaVita and other industry players to defeat 2020’s Proposition 23 had “the force of a tsunami,” Balber said. Both the 2018 and 2020 initiatives, which would have increased regulation of dialysis centers if approved by voters, were backed by Service Employees International Union-United Healthcare Workers West (SEIU-UHW).
“It’s not impossible to win a ballot initiative fight when you’re an underdog, but the overwhelming saturation of the airwaves make it very difficult,” Balber said.
The dialysis industry characterized the ballot measures as a power play by the union to gain more bargaining power at the for-profit dialysis centers where it wants to unionize workers.
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“It’s not impossible to win a ballot initiative fight when you’re an underdog, but the overwhelming saturation of the airwaves make it very difficult”.
CARMEN BALBER, EXECUTIVE DIRECTOR OF THE CONSUMER WATCHDOG ADVOCACY GROUP
DaVita, along with other dialysis companies, is in a legal battle with California tooverturn a 2019 law sponsored by Assemblymember Jim Wood, a Democrat from Santa Rosa.
“As someone who has spent some time investigating the market behavior and practices of large for-profit dialysis companies, this does not surprise me,” Wood said in a statement. “Although my investigations have been related to how they use charitable organizations to increase profits, the theme of increasing profits at others’ expense appears to be a consistent one.”
The law, which a judge barred from going into effect, aims to end a complicated arrangement in which DaVita and its competitors increased their profits by helping pay for dialysis patients’ private insurance costs through an intermediary of patient advocacy groups. This practice was profitable for the companies because they were paid more for dialysis by private insurers than by the government’s Medicare or Medi-Cal. The case is on hold because of the pandemic.
Wood received $10,300 from DaVita between 2016 and 2018 before he introduced his bill. He declined to comment about the company’s donations to his campaign.
DaVita also donated $300,000 and $315,000, respectively, to the state Democratic and Republican parties between 2017 and 2020.
In late June, Senate President Pro Tempore Toni Atkins, a San Diego Democrat, received $30,500 from DaVita between 2003 and this year, including $8,100 donated late last month. Atkins declined to comment.
“DaVita has functionally unlimited resources,” said SEIU-UHW President Dave Regan. “I’d like to believe elected officials take a different view (after the indictment) that … we shouldn’t take DaVita’s money… But I’m sure they’ll find folks to represent them in the Capitol.”
A federal grand jury in Denver indicted the company for two violations of the Sherman Act, the nation’s antitrust law. DaVita’s alleged co-conspirator, Surgical Care Affiliates LLC and its related entity, were charged in January.
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Barbara Feder Ostrov, Contributing Writer for CalMatters, has reported on medicine and health policy for more than 15 years. She most recently covered California and national health issues for Kaiser Health News.