I believe the datasource is never getting updated (you defined "Hydro" with exploded set to true). However, if you set the datasource as seen in this jsfiddle, then the explosion happens. I believe you may need to manually update the dataItem in the data source in the series click event if you choose to use your original pattern of defining the dataContext variable outside of the scope of the function.
function createChart() {
$("#piechart").kendoChart({
title: {
position: "bottom",
text: "Patient Encounter Totals by Encounter Type - Pie"
},
legend: {
position: "bottom",
padding: {right: 20, left: 20},
border: { width: 1}
},
dataSource: { data: data },
...
}