By Peter Laird, MD
Davita and Fresenius make headline news every week on new dialysis unit acquisitions by these corporate dialysis giants. Many view the consolidation of the American dialysis industry as a danger to the long term quality of care with reduced patient choice. Several studies show that the for-profit dialysis industry has worse outcomes than those units owned by non-profit corporations.
Principle Findings. Of the five largest dialysis chains, the lowest mortality risk was observed among patients dialyzed at nonprofit (NP) Chain 5 facilities. Compared with Chain 5, hazard ratios were 19 percent higher (95 percent CI 1.06–1.34) and 24 percent higher (95 percent CI 1.10–1.40) for patients dialyzed at for-profit (FP) Chain 1 and Chain 2 facilities, respectively. In addition, patients at FP facilities had a 13 percent higher risk of mortality than those in NP facilities (95 percent CI 1.06–1.22).
Conclusions. Large chain affiliation is an independent risk factor for ESRD mortality in the United States. Given the movement toward further consolidation of large FP chains, reasons behind the increase in mortality require scrutiny.
Charges that these acquisitions are anti-competitive are essentially glossed over by the Federal trade commission such as the case with DSI recently sold to DaVita after compromises were reached in other markets:
Following a public comment period, the Federal Trade Commission has approved a final ordersettling charges that DaVita, Inc.’s acquisition of CDSI I Holding Company, also known as DSI, was anticompetitive and reduced competition in the U.S. market for outpatient dialysis clinics. The final order requires DaVita to sell 29 outpatient dialysis clinics in 22 markets throughout the country to resolve the alleged anticompetitive effects of the transaction.
Today, DaVita is listed as the second largest dialysis corporation in America with 1777 dialysis units nationwide serving over 130,000 patients. In 2008, DaVita ranked clearly behind Fresenius with only 1440 dialysis units. (here) Despite the order to sell 29 dialysis units as part of the deal to acquire DSI, DaVita has wasted no time over coming that mandatory loss of units by buying more dialysis units in other markets shortly thereafter. Fresenius Medical Care (FMC) stunned the dialysis world earlier this year with combined acquisition costing over 2 billion dollars.
The Germany-based company said it would buy privately held Liberty Dialysis Holdings for $1.7 billion including about $1 billion in assumed debt.
That would add about 19,000 U.S. patients to the 140,000 FMC already has, while its nearest rival, DaVita (DVA.N), has 128,000 patients.
The U.S. Medicare system, which provides insurance for about 80 percent of FMC's U.S. patients, no longer pays clinic operators for individual services and drugs but instead pays a so-called "bundled rate" per dialysis session.
The lump-sum reimbursement, which is only paid if patients are being kept in good health, has created fresh incentives for clinics to cut costs, use drugs sparingly and renegotiate procurement prices, which tends to be easier for bigger operators.
. . .FMC also agreed to buy American Access Care Holdings, which operates 28 vascular access centers for preparing patients for dialysis, for $385 million.
With the advent of the renal bundle starting in the last year and the newly released QIP results, a question not yet answered today is whether the bundle payment system and the QIP will fuel a new round of dialysis unit acquisitions by the LDO's further compromising the remaining market place competition. Thirty percent of the dialysis units in America will be penalized by failing to achieve the targeted QIP goals for 2011. (here) One of the more recent privately owned sales to DaVita in New Jersey achieved a poor performance on the QIP:
DaVita Inc., a Fortune 500 company with headquarters in Denver, operates or administers 1,777 dialysis centers nationwide, including 25 others in New Jersey. It recently bought the dialysis operations ofHackensack University Medical Center. . .
In a new report, the federal government noted that the in-patient unit at St. Joseph’s performed poorly in maintaining the hemoglobin level of dialysis patients. It scored 15 out of a possible 30 points on three performance measures, compared with the national average of 26. The satellite unit also fell short on the hemoglobin measure and earned a total score of 24 out of 30. A hospital spokeswoman, Elizabeth Asani, declined to comment on the performance issues.
The QIP is designed to promote improved quality of care for all dialysis patients in the U.S. However, it appears that many private operators are looking at the QIP as the straw that broke the camels back and giving in to the pressures to cash out of the market now instead of trying to compete against the giant dialysis corporations that are better able to prosper in the climate of reduced Medicare payments under the bundle and the impact of failing to meet the minimum QIP requirements. Another private company that also sold out to DaVita last year listed the falling Medicare reimbursements as a direct reason for the sale:
Meanwhile, in 2010, the U of C sold three clinics and its home dialysis program to DaVita for $27.8 million.
Medicare reimbursement rates were making it difficult for small dialysis programs to remain competitive, the U of C said in a news release about the deal issued last year.
Consolidation of the dialysis industry in America is gaining strength under the bundle and with the recent release of the QIP results where 30% of dialysis units will be further penalized by up to 2% of their Medicare reimbursement, I have to question what the biggest impact that the QIP and the bundle will eventually play as more and more dialysis centers gain the name of DaVita or FMC across this nation. DaVita appears to have their game plan well situated to deal with the QIP with their claim that they have the highest industry adherence to the goals of the QIP in 2011:
-- DaVita QIP Tops Dialysis Industry -- In late December, the Centers for Medicare & Medicaid Services (CMS) released its 2012 End-Stage Renal Disease Quality Improvement Program (QIP) Performance Measures results. The ratings are based on anemia management and dialysis adequacy, and the results showed that DaVita significantly outperformed the rest of the industry in QIP performance measures with 76 percent of the company's clinics ranking in the top clinical performance tier.
As the remaining private dialysis providers struggle under the new renal bundled payments and the QIP, it is likely that we will see further acquisitions in 2012 that will significantly increase the size of these megalithic corporations that already care for the majority of American dialysis patients. The jury is still out on how the QIP and the bundle will impact dialysis care in the United States, but these early indicators point to one of the largest periods of dialysis consolidation known to date. I do know that since 2008, DaVita has grown by nearly 20% (1440 to 1777 units). I have no accounting or business degrees or experience, but I find it hard to believe that this is simply due to DaVita business practices alone. The bundle and QIP may be very good for the business of DaVita and FMC. How good they will be for patients remains to be seen.