Today, I’m going to Talk Dialysis to You. Up until now, I’ve covered durable mostly on the discharge side - wheelchairs, pressure mattresses, patient lifts. But DME covers a broad spectrum, and a conversation I had at HLTH sparked my decision to do a piece on dialysis, and what value based care means in this context. Don’t worry, just like many other US healthcare sectors, there are a few large dialysis oligopolists who would prefer things to stay as they are. But at least their attempts to do that are….villainously creative?
Quick note: Dr. Bricker of A-Z Healthcare is the man, and has some great content on this subject - you should follow him on LinkedIn for all things healthcare finance.
What is a kidney? What is kidney disease? What is dialysis?
This was a recap I needed, so apologies if this next paragraph is stuff you already know. Your kidneys, of which you have two, filter unwanted fluid and waste from your blood stream and direct this excess out of your body as urine. If your kidneys fail (which clinically means losing 85-90% of their function), then your kidneys no longer provide this filtration, theses fluid/waste no longer leaves your blood stream, and you become progressively sicker and eventually die.
Kidney failure is also known as end stage, or stage 5, renal disease. Chronic renal/kidney disease is onset by a variety of factors, with diabetes and high blood pressure being the two most common causes. Unfortunately, there is no cure for kidney disease - at best, you can maintain your current level of kidney function with appropriate care. Further, kidney disease symptoms are not immediately noticeable, especially early on, and many patients don’t find out that they have the disease until it has progressed substantially.
Kidney failure is not a death sentence, thanks to modern medicine. The best patient option is receiving kidney transplant from an organ donor. The problem is that the demand-supply of kidney transplants is heavily skewed towards demand, and so most people with kidney failure must use dialysis treatment either as a stop-gap until they are next in queue to receive a kidney transplant from a donor, or permanently.
Dialysis
Dialysis was invented in 1943 by Dr. Wilhelm Koloff - since then, millions of people have had their life spans increased significantly thanks to his work. Hemodialysis -the most common treatment form - is performed by connecting an artificial kidney machine, called a dialyzer, to your blood stream via tubing. Your blood is then pumped into said dialyzer, where it interfaces with the acid solution dialysate. This dialysate "purifies” the blood, which is then pumped back into your blood stream. Meanwhile, the waste and fluid now separate from your stream are left behind for eventual discard.
For patients who need or want at-home treatment, there is also the option of peritoneal dialysis. Peritoneal dialysis requires the patient to run the dialysis process through a surgically placed catheter 3-5 times a day for a 30-40 minute session each. Research has shown that this method is as effective as hemodialysis and often a better option for those in rural areas where driving to the nearest dialysis clinic may not be feasible. Peritoneal dialysis is not always possible for patients physically, especially those who are morbidly obese, or who have had various surgical operations in their stomach areas.
Dialysis is an amazing invention - but definitely not convenient for recipients. A standard hemodialysis regiment requires a patient to go to a dialysis clinic 3 times a week, for infusions of 4 hours at a time. Small price to pay for saving your life, but not anyone’s preferred way of living. Peritoneal dialysis is not a walk in the park either - while there’s no travel requirement, imagine having to charge your phone 4 times a day for 40 minutes - and that’s annoying even without any real effort on your part.
The Economics of and Players in Dialysis - You can’t make this stuff up.
Today, there are two main players in US dialysis - DaVita Medical and Fresenius, each with about 1/3 of the entire market and $10B in annual revenue, as well as a combined ownership of 5,000 out of 7,500 centers in the country. To give you a sense of how dominant we are talking, the next biggest players has a market share of ~3%.
Like AdaptHealth, Apria, and Lincare, DaVita and Fresenius got this big through the acquire, acquire, acquire strategy that healthcare regulation engenders. And once acquired, these formerly independent clinics started operating a bit differently. For instance, as Dr. Bricker and the Freakonomics podcast note, the amount of EPO given to each patient (a drug used to prevent anemia by stimulating red blood cell production) increased 200% per dialysis session. No change in condition, no medical differences of opinion in dialysis science. So why the increase?
If you’re a cynic (and like being right), you can probably guess why before reading the next sentence. Medicare and commercial plans reimbursed the clinics on a per dosage basis. Imagine knowing this as a patient - that clinics were putting substances in your body at levels not because you NEEDED it, but because they would get paid more. Let that sink in. OK, maybe you’re thinking this was just the SOP dosage for DaVita/Fresenius, and that increasing the formerly independent clinic’s dosage was just standardization across facilities. Well, funny enough, as soon Medicare changed their reimbursement policy away from a per dosage basis, EPO dosages per DaVita patient WENT DOWN 50%. No change in patients, no clinical necessity discovered, just $$$ incentives at work.
Freakonomics also noted a Duke study that discovered a 10% decrease in patients on the waiting list for or in receipt of kidney transplants at the acquired clinics. When you think about it, this makes sense fiscally. DaVita/Fresenius doesn’t make money off of “cured” patients, they make money off of treatment. More patients in treatment = more patients paying = more $$$. More patients cured = less patients to treat = less $$$. Now, there’s no way to prove that this is necessarily causal to acquisition, but it’s hard to imagine such a difference is purely coincidence.
Last scheme to cover: the American Kidney Fund - a charity fund that exists pay the insurance premiums for families with members on dialysis. Nothing wrong with that, right? Except that DaVita and Fresenius collectively pay for 80% of the American Kidney Fund’s annual budget. Turns out commercial insurance on average pays more than 10x what Medicare does for dialysis. Further, patients younger than 65 are allowed to switch over entirely to Medicare after 34 months of dialysis treatment - which means that DaVita/Fresenius have major reasons to prevent that from happening. When put in that light, setting up a “charitable” fund to pay patient’s premiums seems more like an upfront investment with a respectable long-term ROI than a mission-oriented initiative.
Dialysis Dips its Toe in the Value Based Pool
Clearly DaVita and Fresenius like the status quo here, especially on employers’ dimes, but how do other entities feel about dialysis treatment? Well - they’d prefer to spend less on it. In recent years, CMS has tried to rein in dialysis spend through value based care pilots starting with the Comprehensive End-Stage Renal Disease Care (CEC) Model launched in 2015. The program’s goal was to create kidney care “ACOs,” referred to as End Stage Renal Diseases (ESRD) Seamless Care Organizations (ESCOs), to better coordinate ESRD care and spending. Unfortunately, the program ended up as a net loss to Medicare once shared savings payments were taken in account. CMS blamed the failure on their focus on dialysis centers instead of nephrologists, as well as the
CMS is now trying again with a new voluntary model called Chronic Kidney Care Contracting (CKCC). The idea is to bring nephrologists into quarterback care to guide patients BEFORE kidney failure occurs. By catching CKD before kidney failure, CMS believes that nephrologists can better manage overall costs, and potentially avoid the need for dialysis altogether. With FFS incentives, this prospective approach wasn’t something traditionally feasible, so CMS’s hope is that an ACO model can produce meaningful savings.
This is easier said than done though. While nephrologists can intervene immediately on patients with diagnosed CKD, many people simply do not know they have CKD until it’s too late - in early stages patients can be asymptomatic and even in later stages it’s hard for primary care doctors to determine that symptoms are a result of CKD. Having recently talked a VBC expert in kidney care, a way to solve this conundrum is by targeting members with existing conditions that can lead to CKD - think pre-diabetes, diabetes, and high blood pressure. Targeted members would then get referred to a nephrologist to check for CKD before the condition can becomes severe. Then, the nephrologist can build a plan of care that helps the CKD-identified members maintain their current level of kidney function to avoid dialysis altogether.
This seems like a value-based approach as above could work for Medicare and Medicare Advantage plans, but I see this as an incredibly tough sell to commercial payors. For one, specialist visits are significantly more expensive than primary care appointments, so there’s the immediate cost pain. Now, you could argue that the savings from reducing patients on dialysis would make the initial cost totally worth the long-term benefits. BUT that’s assuming that the member today is a member in five years. We live in a time where employees move from job to job (and thus plan to plan) more rapidly than ever. Why would a commercial payor fund the front-end cost to incur savings for a different commercial payor down the line? Yeah, they probably wouldn't.
Conclusion
That’s a very brief look into American dialysis, and the potential for value based care here. I hope you weren’t TOO surprised by that this sector is run by a few large players and that financial incentives don’t neatly align with optimal patient care. Hope you enjoyed the piece, next time I’ll probably cover a different, specific area of DME!
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