Kidney care provider Davita (DVA) is trading lower following a report that the company attempted to push low-income Medicaid patients into private insurance to collect richer payouts.

Emails show insurance steering

The St. Louis Post-Dispatch reported Sunday that company emails from DaVita appear to show that it "targeted some patients in a campaign to get them to buy insurance they didn't necessarily need." The publication explained that DaVita had a financial incentive to transition Medicaid patients to private insurance, which pays significantly more for kidney treatment.

The internal communications obtained by the St. Louis Post-Dispatch demonstrate a "systematic approach" to guide thousands of patients away from government plans with claims that private coverage would improve their care. Appearing to corroborate the news, health insurance broker Emily Bremer confirmed to the publication that some of her clients were encouraged to enroll in a private plan, which was described to them as the "best" option despite lacking many features.

Government crackdown

The issue of "steering" patients toward private insurance has been an ongoing area of focus for the Centers for Medicare & Medicaid Services. In late August, the agency issued a request for public comment on concerns that some providers may be steering Medicare/Medicaid eligible patients "for the purpose of obtaining higher reimbursement rates."

CMS said at the time it is also considering "potential regulatory and operational options to prohibit or limit premium payments and routine waiver of cost-sharing for qualified health plans by health care providers, revisions to Medicare and Medicaid provider enrollment rules, the imposition of civil monetary penalties for individuals that fail to provide correct information about consumers enrolling in a plan, and potential changes that would allow issuers to limit their payment to health care providers to Medicare-based amounts for particular services and items of care."

Price action 

Shares of DaVita are down 4.3% to $58.33 in afternoon trading. American Renal Associates (ARA), which had dipped alongside DaVita after the CMS steering announcement in August, is up 1.5% to $18.40.