Davita Medical Holdings, based in El Segundo, has agreed to pay a $270 million settlement to resolve federal allegations of Medicare billing fraud, the U.S. Attorney’s Office announced Oct. 1.

The settlement follows allegedly inaccurate coding practices by Healthcare Partners Holdings, a physician’s network acquired by Davita in 2012.

The Department of Justice alleges that HealthCare Partners instructed its doctors to submit incorrect medical diagnosis codes for patients in order to obtain inflated payments shared by Davita and HealthCare Partners.

In one example, according to the DOJ, the physicians allegedly included an improper diagnosis code for a spinal condition that boosted Medicare reimbursement.

The settlement also resolves allegations by a whistleblower that HealthCare Partners engaged in “one-way” chart reviews in which it scoured patients’ medical records for “missed” diagnoses in order to get more Medicare payments, according to the U.S. Attorney. At the same time, it ignored inaccurate diagnosis codes that could have caused HealthCare Partners to lose money.

“This settlement demonstrates our tireless commitment to rooting out fraud that drains too many taxpayer dollars from public health programs like Medicare,” said U.S. Attorney Nick Hanna, in a statement. “This case involved illegal conduct in which patients’ medical conditions were improperly reported and were not corrected after further review – all for the purpose of boosting the bottom line.”

HealthCare Partners, a division of DaVita Medical Group under Denver-based parent DaVita Inc., on Aug. 21 opened a 60,000-square-foot urgent care clinic in the Pico-Union district west of downtown. It replaces Partners’ 40-year-old founding clinic on Olympic Boulevard.

Davita Inc. is now in the process of selling its DaVita primary care divisions to

the Optum health services arm of Minnetonka, Minn.-based UnitedHealth Group Inc. for $4.9 billion.

Federal prosecutors said that DaVita cooperation and its self-disclosures about its fraudulent billing led to a more favorable resolution of potential claims arising from its conduct.

Parent company DaVita Inc. said it will pay the DOJ settlement out of an escrow fund the company required the former owner of HealthCare Partners to set aside during its sale six years ago.

“This is the outcome of strong collaboration with the government,” DaVita, a company known for its dialysis services, said in a statement. “We are proud of the comprehensive improvements to HealthCare Partners’ compliance program. We commend the clinical team’s achievement of excellent patient outcomes as we addressed these matters.”

Health business reporter Dana Bartholomew can be reached at dbartholomew@labusinessjournal.com. Follow him on Twitter @_DanaBart.