KHN: Dialysis Giant DaVita Defends Itself In Court And At The Polls

This company has numerous local outlets, and this story includes a comment from HBS prof.  

It’s been a year of playing defense for DaVita Inc., one of the country’s largest dialysis providers.

A federal jury in Colorado this summer awarded $383.5 million to the families of three of its dialysis patients in wrongful death lawsuits. Then this month, the Denver-based company announced it would pay $270 million  to settle a whistleblower’s allegation that one of its subsidiaries cheated the government on Medicare payments.

But its biggest financial threat is a ballot initiative in California that one Wall Street firm says could cost DaVita $450 million a year in business if the measure succeeds.

Company's Boston locations
Company’s Boston locations

Despite these recent hits, the company continues to rake in profits and receive favorable ratings from stock analysts. Its shares are trading at about $65 a share, only about 19 percent below a 52-week high set in January. That’s largely because DaVita controls about one-third of a growing market, health experts say.

“They don’t really have many rivals, and they perform a necessary, lifesaving service,” said Leemore Dafny, a professor of business administration at Harvard Business School. “If you’re producing something people want to buy and you’re the only one making it, people are going to buy it.”

Patients with chronic kidney failure often need dialysis to filter the impurities from their blood when their kidneys can no longer do that job.

And as Americans live longer and get heavier, more people become diagnosed with kidney disease and possibly need dialysis. In 2015, 124,114 new patients received dialysis, up from 94,702 in 2000, a 31 percent increase, according to the U.S. Renal Data System.

DaVita is one of the largest dialysis providers in the country, operating more than 2,500 clinics nationwide. In California, the company operates 292 clinics, half of all chronic dialysis clinics in the state.

Its parent company, DaVita Inc., reported $10.9 billion in revenue last year and $1.8 billion in profits, almost all of which came from its dialysis business.

This year, company officials project the dialysis group will bring in $1.5 billion to $1.6 billion in profits. It’s a big turnaround for a corporation that could barely make payroll in 1999, when it was under review by the Securities and Exchange Commission for questionable accounting practices. Its success has largely been credited to CEO Kent Thiry, a colorful personality who has dressed up as a Musketeer and ridden a horse into corporate meetings to rally workers.

Now those big profits — generated from treating sick patients — has put a target on the company’s back, as well as that of its biggest competitor, Fresenius Kidney Care.

The Service Employees International Union succeeded this year in placing Proposition 8 on California’s Nov. 6 ballot, which would limit dialysis center commercial revenues to 115 percent of patient care costs. The ballot fight pits a well-funded industry against labor and the California Democratic Party.

DaVita declined to make anyone available for this article, but in a statement said Proposition 8 “will limit patients’ access to life-saving dialysis treatments, jeopardizing their care.”

Last year, roughly two-thirds of DaVita’s dialysis revenue came from government-based programs, such as Medicare and Medicaid. But that isn’t enough to cover its costs, according to the company’s 2017 annual report, which states that DaVita loses money on each Medicare treatment it provides. (Medicare covers dialysis for people 65 and older, and for younger patients after private insurance has provided coverage for 30 months.)

Instead, DaVita generates profits from commercial health plans, which it acknowledges pay “significantly higher” rates than government programs. The ballot measure targets those higher rates, which Dafny describes as “their bread and butter.”

The prospect of the measure passing led DaVita to delay or cancel plans to open new clinics in California despite growing patient demand, Javier Rodriguez, chief executive officer of DaVita Kidney Care, told investors on a call in May, according to the online equity research website Seeking Alpha.

A few months later, Rodriguez declined to provide a dollar amount when asked how the initiative would impact the company. Rather, he warned investors that it would become “unsustainable” for the industry to treat the estimated 66,000 dialysis patients in California, should the measure succeed.

Wall Street analysts agree that Proposition 8 would wipe out DaVita’s earnings in California, according to recent reports issued by investment firms J.P. Morgan and Baird. Passing the initiative “would be so devastating,” to the tune of $450 million a year, that DaVita “would likely walk away from the state altogether,” according to a March Baird report.

DaVita has poured $66.6 million into the opposition campaign as of Oct. 25, and rival Fresenius has contributed $33.6 million. That dwarfs $17.3 million in union contributions in support of the measure, according to campaign records filed with California’s secretary of state office.

Both Wall Street firms conclude that Proposition 8 is likely to fail, citing the industry’s massive spending and the union’s record of failure at the polls on other issues.

The company’s legal troubles don’t worry stock analysts, either; Baird’s October report on DaVita’s financial performance dedicates just two sentences to them. It notes that DaVita “is subject to numerous ongoing government investigations and inquiries, similar to most large-scale, high-profile Medicare providers.”

There are no specific references to the Colorado jury award this summer, which the company is appealing, over the death of three patients who died of cardiac arrest after treatment at DaVita clinics. Nor was there concern about this month’s $270 million settlement over Medicare billing.

That’s because those incidents are seen by investors as the cost of doing business — one-time hits that don’t affect a company’s earnings power in the future, said Matthew Gillmor, a senior research analyst at Baird.

“Almost all companies I follow, at some point, have had to pay a fine to the government,” Gillmor said.

Thiry, DaVita’s CEO, acknowledged that settlements, which aren’t good public relations, are a reality for large corporations, when The Denver Post asked him last year about the company’s previous legal battles.

“If, in a trial, you are found to be wrong on even a small part of the case, it could mean that you are excluded from Medicare, which typically would mean bankruptcy for your company,” Thiry said. “So, you are essentially forced to settle.”

Harriet Rowan of California Healthline contributed to this report.

This story was produced by Kaiser Health News, which publishes California Healthline, a service of the California Health Care Foundation.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation which is not affiliated with Kaiser Permanente.

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Gluten, hoarding and reading: Boston health and medicine events for week of 3/9

Selections from the Boston Science and Engineering calendar Please double check times.

Monday

Noon.  “Demystifying Drug Development.”   Jonathan Hurov.   BWH:  Carrie Hall Conference Room.  Details, Registration.

Noon.  “Reading and the Brain: A Workshop.”   Joanna Christodoulou.   Harvard School of Education:  Longfellow Hall 320, 13 Appian Way.   Details, RSVP.

Tuesday

6p.  “High-Tech Med: The newest wave of medical innovation.”   A panel discussion.   Follow events live on #HMSminimed.   HMS:  Joseph B. Martin Conference Center, 77 Avenue Louis Pasteur.  Details, Registration.

6 – 8p.  “Is There Still Room for Gluten?  Separating Science from Supposition.”   Alessio Fasano.   Russell Museum of Medical History, 2 North Grove Street.   Details.

SOLD OUT 6p.  “Decade of Discovery.”   Celebrating 10 years of groundbreaking science on stage.   Central Square Theater, 450 Massachusetts Ave.   Details, Tickets.

Wednesday 

6p.  “High-Tech Med: The newest wave of medical innovation.”   A panel discussion.   Follow events live on #HMSminimed.   HMS:  Joseph B. Martin Conference Center, 77 Avenue Louis Pasteur.  Details, Registration.

6 – 8p.  “Is There Still Room for Gluten?  Separating Science from Supposition.”   Alessio Fasano.   Russell Museum of Medical History, 2 North Grove Street.   Details.

7 – 9p.  “The Air We Breathe: An assessment of urban air pollution“.   Jordan Wilkerson.   Harvard:  Pfizer Hall, 12 Oxford St.   Details.

Thursday 

Noon.  “Overflowing and Overwhelming: Treating Hoarding Disorder.”   Gail Stekette.   McLean Hospital:    Details.

Saturday

10:30a.  “Spring into Health.”   Rhoda Kubrick, Arboretum Docent.   Arnold Arboretum, Hunnewell Bldg.   Details, Abstract, Registration.

Video: How to use national database to evaluate your doctor’s Medicare billing, treament patterns #hcr #doctors #costs

More from ProPublica:

Medicare recently released, for the first time, details on 2012 payments to individual doctors and other health professionals serving the 46 million seniors and disabled in its Part B program. Part B covers services as varied as office visits, ambulance mileage, lab tests, and the doctor’s fee for open-heart surgery. Use this tool to find and compare providers. | Related story »

Get fit, save the earth and cut down on the *#$!&#!$ Cambridge traffic

In Cambridge and across the nation, Friday is monthly Walk/Ride Day. Cambridge and Somerville are both part of a larger effort to encourage people to leave their cars at home in favor of bikes, buses, subways and feet.  

The benefits of this effort are obvious – more exercise, less pollution.

And —  if you’ve ever sat in rush hour traffic on Third Street, Alewife Brook Parkway, Mass Ave, Harvard Street  or in Union Square– fewer headaches. It can take forever to get from one end of Cambridge to another.  

For more info, check out the Green Streets Initiative website.

New Commonhealth and Ozzy’s genes

Not in the same story

Check out the new and improved Commonhealth on WBUR.org While you’re there, check out Radio Boston’s conversation with new BC/BS CEO Andrew Dreyfus, in particular the discussion of global payments.

From Commonhealth: Massachusetts is the leading laboratory for health care reform in the nation. It is also the hub of medical innovation. But as the nation looks on, what is the reality on the ground here? We’d like CommonHealth to be your go-to source for news, conversation and analysis about these historic efforts as they unfold. Your hosts are Carey Goldberg, former Boston bureau chief of The New York Times, and Rachel Zimmerman, former health and medicine reporter for The Wall Street Journal.

With BHN and White Coat Notes at the Globe, Boston is now a three health-news-blogs town. (Not to mention a lot of niche blogs like The Health Blawg The Health Business blog and Nature Network Boston.)  In blogging, as in  journalism, competition is good. We can see who poaches someone else’s story first.

With that in mind, they did beat me on the link to Julie Rover’s NPR piece on primary care, which features a doc from Maine. But do note that none of the other blogs have this important story:

The Weekly World News — a supermarket tabloid now run as a supplement to the Sun— makes reference to Knome, the Cambridge genome sequencing company. As reported elsewhere, the company is sequencing Ozzy Osbourne’s genome.

Ozzy is interested in finding out why he has survived but the study may well produce an incidental benefit to medical science in general. For instance, it may be that some variant in his genes make this liver better than most at breaking down toxic substances. It that’s true, gene therapies based on Ozzy’s cells could provide powerful weapons in the fight against disease.

Here @ NNB, we scan the all the best medical reporting for links to local scientists.

Health of Boston report, 2009

greetings-from-boston

 

The city of Boston just released its 2009 “Health Report.” Lots of interesting factoids, such as:  

 

Boston’s Black and Latino residents experience higher levels of chronic disease, mortality, and poorer health outcomes than White residents…The city has become more racially and ethnically diverse over the past several decades. In 2007, approximately 28% of Boston residents were foreign born, originating from a wide array of countries such as Haiti, China and Colombia. This diverse population brings with it fluency in a variety of languages including Spanish, French, Chinese, and Vietnamese. The percentage of Latino residents in Boston has continued to increase from 1980 (6.4%) to 2007 (16.9%). Understanding the diversity within our city is essential to combating racial/ethnic disparities that persist in medical care for a number of health conditions and services.

The commissioners themselves blog on it at WBUR’s Commonhealth site. Click here for the full report, or below for individuals chapters.  

Also see my blog entry on the topic of health disparities.

From the Health of Boston 2009

Neighborhoods

Demographics

Socioeconomic Status

Community Assets

Access to Health Care

Environmental Health

Health Behaviors

Natality and Infant Mortality

Sexual Health

Infectious Diseases

Injury

Mental Health

Substance Abuse

Violence

Chronic Diseases

Cancer

Mortality