A June 2022 Supreme Court ruling illuminated the significant issues in the widely accepted dialysis care for-profit models. While legislation that would impose new coverage requirements does not appear to be included in the 2023 Omnibus Spending Package at this time, significant challenges for patients and insurers are still very much in play.
The cost of chronic conditions in the United States
According to the CDC, chronic conditions — like diabetes, heart disease, arthritis and kidney disease, or End-Stage Renal Disease (ESRD), to name a few — are some of the most common and costly health challenges in the United States. Startlingly, chronic conditions cause 7 out of 10 deaths each year and drive 75% of the country’s healthcare costs. The long-term nature of a chronic disease, related health complications and complex nature of care for individuals with more than one chronic condition continues to stress our country’s already-fractured healthcare system.
Varying insurance coverage limits and caps, private and federal reimbursement rates, expensive pharmaceutical research investments, and for-profit care models can leave even the most informed stakeholders left scratching their heads for an answer. And, when the entangled layers of healthcare and government systems intersect, a single line item or sentence in a complex piece of legislation — like an Omnibus Spending Package — can easily create space for a ripple to rise into a devastating wave.
Peeling back the layers of the care and cost for just one chronic condition — ESRD — tells quite a story
In the case of ESRD, kidney failure will progress quickly if untreated. Those with the condition will rely on dialysis care three times per week to sustain their lives — but the life-saving treatment of dialysis comes at a significant expense. While patients must dig deep to cover the cost of care, the rising — and potentially limitless — costs deeply affect society at large.
According to the Centers for Medicare & Medicaid Services (CMS), the cost of dialysis care for an individual on Medicare is an estimated $72,000 annually. While this is a significant expense for the federal CMS budget, a self-funded health plan can face upwards of $850,000 annually in dialysis costs. If high-quality dialysis care is delivered appropriately to each patient, regardless of an individual’s insurance, the extreme variance seems to hinge on whether the payor is a federal program or a commercial insurer. The extreme 1,200% markup imposed on commercial insurers seems almost abusive. Why would a company pay those exploitive rates? Looking deeper into the dialysis market and its core providers provides some insight.
Two major for-profit players dominate the dialysis care field
Individuals with ESRD are tethered to dialysis treatments for life (unless they are lucky enough to receive a kidney transplant), and the high costs of care delivery can be a lucrative business opportunity. At the core, it is simple economics. Individuals with ESRD will need dialysis care multiple times per week until they receive a kidney transplant or pass on. With more than 100,000 new ESRD diagnoses each year, the demand will always grow.
Pair this long-term need with a limited number of providers across the country and it’s the perfect recipe to turn life-saving healthcare into a high-dollar commodity. Entities such as DaVita and Fresenius Medical Care — the two largest dialysis businesses in the country — seem to have done just that. DaVita’s 2021 annual report suggested as much, stating “the payments we receive from commercial payors generate nearly all of our profits, and all of our non-hospital dialysis profits come from commercial payors.” Nor are Medicare payments a drop in the bucket, with an estimated $8.8 billion expected to be paid to approximately 7,700 ESRD facilities furnishing renal dialysis services in 20221.
The heartbeat of for-profit dialysis care: patients or profit?
According to their respective websites, DaVita maintains about 2,800 brick-and-mortar outpatient dialysis locations and Fresenius’ North America operates more than 2,600. Together, the two for-profits appear to serve 80% of the entire U.S. market. The two rarely cover the same geographic areas, generating a mutually beneficial dynamic of either DaVita or Fresenius emerging as the ‘go-to provider’ for dialysis care in a specific community.
Of course, lack of competition drives prices up and limits patient choice. As DaVita and Fresenius have a majority hold on the entire U.S. market, do patients have recourse for any sub-quality care or potentially predatory retention practices? The limited options for dialysis care is a serious concern for patients and commercial insurers aiming to negotiate fair and reasonable rates.
Like any other chronic condition, ESRD costs pose major financial hardships for many Americans. While DaVita and Fresenius have faced scrutiny surrounding rates, quality of care and unusual tactics to retain patients for the long-term, both also continue to turn juicy profits and thrive.
Can — and should — federal legislation contain ESRD costs?
In the early 60s, Congress established a handful of programs to fund research for dialysis, and in 1972, President Richard Nixon’s administration integrated comprehensive Medicare coverage for anyone diagnosed with kidney failure. This past summer, the Supreme Court issued its ruling on Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita Inc. In this lawsuit, the Supreme Court was tasked with deciding what type of dialysis-reimbursement plans are acceptable for group health plans, considering that ESRD patients are eligible for Medicare.
The crux of the ruling was that a plan cannot target — or carve out — a specific condition, but a plan may carve out a specific treatment so long as it does not discriminate against individuals eligible for Medicare and those who are not. In response to the ruling, Supreme Court Justice Elena Kagan expressed dissent, writing, "Now Congress will have to fix a statute this Court has broken."
Policymakers must stay informed and seek actionable, objective solutions
Considering the millions of dollars spent by DaVita and Fresenius in annual lobbying efforts (¹$8 million in 2022) and robust political campaign contributions, remaining objective and crafting future legislative action aiming at “fixing” said “broken” statute may pose a challenge for those at the helm.
Legislative decisions related to ESRD costs and care will affect far more than the vulnerable individuals dependent on dialysis to sustain their life. Impressively, just one sentence tucked into pages of complex legislation has the potential to undercut years of progress in developing cost-containment solutions in our country’s visibly stressed healthcare system.
Along with awareness, policymakers can strive for tangible solutions and support efforts geared toward reasonable pricing, cost-containment, transparency, patient choice and quality.
Dialysis Management Solutions (DMS) can help identify members at risk of kidney failure earlier in the process to deliver cost savings and protect plan assets through all stages of kidney disease — from prevention, through ESRD and outpatient dialysis treatments. The Amwins DMS solution was key for a large hospital system struggling with escalating dialysis claim costs. Although the client had nearly 10,000 employees, efforts to negotiate reasonable rates or discounts from the local dialysis providers was not successful.
Since implementing the DMS program, the average annual claims cost per patient has decreased from roughly $850,000 per patient, per year to about $133,000, a net cost savings of 84%. To date, the client has saved over $13 million off billed charges.
Cost-containment solutions like this are critical to individuals, employer-sponsored health plans, and to our country’s economy as a whole. Future legislation and spending packages may contain just one small line of text with the potential to align with patient-centered decisions or reset — and skyrocket — Medicare and commercial dialysis care rates with the stroke of a pen.
Lawmakers and constituents must stay informed and aware of the issues and decisions with the potential for widespread impact. When it comes to individuals suffering from ESRD and the commercial insurers aiming to provide reasonable, affordable employee health plans and care, abusive billing practices and exploitive costs should never be part of the equation.
