LDO Consolidation Charging Ahead: Is the QIP the Straw that Broke the Camels Back?

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.

The Effect of Dialysis Chains on Mortality among Patients Receiving Hemodialysis

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:

FTC Approves Final Order Settling Charges that DaVita, Inc.'s Acquistion of DSI was Anitcompetitive in Market For Dialysis Clinics

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.

FMC to spend $2.1 billion on U.S. dialysis acquistions

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:

St. Josephs' sells controlling stake in 3 dialysis units

St. Joseph’s Healthcare System has sold the controlling interest in its three dialysis units in Wayne andPaterson to the nation’s largest for-profit kidney treatment company.

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:

Silver Cross to sell dialysis clinics for $30 million

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 Continues Clinical Outcomes Industry Leadership 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.

 

Comments

[Christopher Blagg]

Dear Peter
Thanks for your insightful comments about the U.S. dialysis scene.
If Dr. Scribner had been alive today he would have said "I told you so, back in the 1980s"
Chris

[roberta mikles]

For many of us advocates, non connected to the industry, the QIP has been a frustrating time, realizing that CMS, providers and congressional members, do not have patient safety and quality care as a priority. Unless there is an effective avenue to ensure that the daily care in facilities is safe, providing the best treatment which results in providing the patient with the optimum in quality of life, patients in many facilities will continue to experience poorer quality in their life, NEGATIVE consequences from preventable mistakes and retaliation from staff and/or physicians (for speaking up and other reasons, often not substantiated for involuntary discharges).. Quality care is based on more than that which the QIP measures demand. With infection data being reported, many of us can only wonder the validity of this data. When mistakes are made with no consequences for those making these mistakes and no effective oversight to ensure daily care is safe and supports improved care, then nothing will change. I have not seen any appreciable change in the type of deficiencies cited since the QIP. What does this say? Are providers only focused on those QIP measures and not focusedd on what is happening in the daily care of patients? When mistakes such as ranging from wrong BFR to wrong potassium bath -->ineffective infection control measures, wrong medications, lab draws at wrong times (e.g. midway through treatment for such as K+)wrong machine temperatures, reuse errors, etc etc) occur - ongoing in some units, what is one to think?
As I have stated, on behalf of our organization, the QIP does not address quality safe care, nor does it truly address improving care. It is only a small segment of the picture which has already been noted (on DFC site) for years.
opinions (above) of Roberta Mikles
Roberta Mikles BA RN
Dialysis Patient Safety Advocate
Director, Advocates4QualitySafePatientCare

[roberta mikles]

P.S.
If more had been focused on ineffective oversight of delivery of care in dialysis facilities this would not have happened.

If more had been focused on consequences for providers when preventable errors resulted in negative outcomes including death, this would not have happened (if such works with hospitals it should have worked with dialysis facilities - hospitals respect oversight more than dialysis providers when there are consequences -)

If more patient organizations were focused on improving daily care in dialysis units and ineffective oversight, perhaps this would not have happened.

If congressional members, and CMS,(as well as providers) took seriously the results of prior OIG reports, perhaps we would have seen improved care by now. Considering we have not seen any signficiant changes in the types of deficiencies cited over the last many years, esp in Calfiornia, we can say this, in itself, tells a story

If there were CMPs in place for negative outcomes resulting in harm,or a sliding grid as there is for nursing homes, these monies could have gone into a rehabilitation program for patients who wanted to return to work but were unable to do the work they did prior to dialysis, or these monies could have gone to patient-related educational programs..
opinions above of Roberta Mikles BA RN,
Director - Advocates4QualitySafePatientCare