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Jim Chanos says he is shorting kidney dialysis company DaVita

Key Points
  • "It's always interesting in my world when one of your biggest customers is suing you for fraud," Chanos says, referring to a lawsuit from health insurer Blue Cross of Florida.
  • DaVita shares fall to their session lows following Chanos' comments.
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Short-seller Chanos: DaVita's reimbursement model is at risk

NEW YORK — Jim Chanos, founder of Kynikos Associates, revealed Thursday a stock he has been shorting for years: kidney dialysis company DaVita.

"It's always interesting in my world when one of your biggest customers is suing you for fraud," Chanos said at the Delivering Alpha conference presented by CNBC and Institutional Investor, referring to a lawsuit from health insurer Blue Cross of Florida.

"Most dialysis patients are old and less affluent and qualify for Medicare and Medicaid in the vast majority of cases," Chanos said. "What DaVita is trying do is push those patients into, ironically, more expensive insurance contracts through the Obamacare exchanges."

"They then turn around and charge the commercial payer three to four times what they get from Medicare and Medicaid," Chanos said, referring to the lawsuit.

He added that while the American Kidney Foundation can agree to pay some of the higher commercial costs, DaVita is one of the two largest donors to the foundation. "So, they are donating to the charity; the charity is then paying the premium into the Obamacare exchange; then they're charging the insurers 3x-to-4x."

DaVita shares fell to their session lows following Chanos' comments, and were later down 3.2%. The stock had risen more than 17% this year but is down more than 13% over the past year.

Chanos, whose firm manages around $2 billion in assets, said in 2017 he was betting against dialysis companies. Thursday market the first time he revealed DaVita as one of his short positions.

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DaVita did not immediately respond to CNBC's request for comment.

Warren Buffett's Berkshire Hathaway is DaVita's largest shareholder. The conglomerate owns 24% of the company's shares outstanding. Ted Weschler, a portfolio manager at Berkshire, is responsible for the position.

Weschler told CNBC's Becky Quick in a 2014 interview that "You got an incredibly talented team running that company. I'm not sure what the stock will do over the next year or the next two years, but very comfortable at five years from now it'll be a more valuable franchise."

Chanos bashed Berkshire for its stake in DaVita. On Thursday, he noted DaVita's earnings per share have not grown over the past 10 years, adding this is "a very bad look for an insurance company like Berkshire Hathaway to be promoting a company that I think is running an insurance scam."

CNBC reached out to Berkshire for comment.

—CNBC's Alex Crippen contributed to this report.