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Dialysis companies spend millions to defeat Prop 8, which seeks to limit dialysis center profits

on October 17, 2018

Billion-dollar dialysis companies and a labor union are spending tens of millions of dollars to sway Proposition 8 votes their way on Election Day. Health experts say the proposition, which seeks to limit dialysis center profits, is unlikely to improve care for dialysis patients and may put care out of reach for patients in low-income areas, including parts of Oakland and Richmond.

But they also say risky practices in the industry put patients’ lives at risk.

“They are willing to do harm to patients in exchange for increasing their profits,” said David Himmelstein, a health policy professor at the City University of New York School of Public Health.

Introduced by the Service Employees International Union-United Healthcare Workers West, which has been attempting to unionize dialysis clinic workers, Proposition 8 would limit the clinics’ profits to 15 percent more than the cost of direct patient care, with exceeding amounts leading to penalties. Proposition 8 proponents said they hope to improve dialysis patient care by requiring clinics to choose between investing in direct patient care or paying penalties for overcharging.

Some health experts say that the proposition is unlikely to succeed at that—but that the rise of for-profit dialysis clinics has led to poor quality of treatment.

“These clinics want to maximize profit and minimize expenses,” said Henry Abrons, a retired associate professor of medicine at West Virginia University in Morgantown, West Virginia. “Just like McDonald’s or Starbucks would.”

Dialysis, which mimics kidney function by mechanically removing blood from a patient’s body to clean it, has been provided mostly by for-profit corporations since the 1970s, when then-President Richard Nixon expanded Medicare to cover the treatment. In the years that followed, dialysis patients started overcrowding hospitals and private companies saw a business opportunity.

Today, two dialysis providers, Denver-based DaVita Medical Group and German company Fresenius Medical Care, own almost 70 percent of dialysis clinics in California, where 66,000 patients suffering from end-stage renal disease depend on the treatment to live.

Last year, the two companies made a combined profit of $4 billion.

Dialysis clinics charge private health insurers much higher rates than they do the government through Medi-Cal and Medicare, said Abrons. “There’s an unspoken agreement between private insurers and dialysis providers not to try to bring the prices down,” said Abrons. “They’re milking the system.” 

Himmelstein said that dialysis clinics sometimes use dubious practices to increase profits, too, such as overusing drugs covered by Medicare and shortening treatment sessions. “For-profit dialysis facilities have higher death rates than non-profits. That’s not a coincidence,” Himmelstein said.

A 2000 study published in Inquiry: The Journal of Health Care Organization, Provision and Financing found that for-profit facilities delivered lower quality care than non-profit facilities. A 2010 study published in Health Services Research found that patients treated at for-profit dialysis centers had a 13 percent higher risk of mortality than those treated in non-profit centers.

“Clinics are understaffed and the equipment, overused,” said Sean Wherley, spokesperson for SEIU-UHW West, which represents more than 95,000 hospital workers in California. “Patients report mice, cockroaches and other insects.”

Between 2015 and 2017, the California Department of Public Health documented 1,254 health and sanitary violations at dialysis centers across the state, finding at least one violation in 339 of 380 surveyed clinics.

“After a treatment, I saw a large blood stain on the floor,” said Banbury Holmes, an Oakland resident and dialysis patient who now self-treats at home. “It was almost black. When blood gets old, it gets black.”

Holmes said he began doing dialysis at home after a medical error that caused him to faint during treatment. “Technicians at the clinic would miss the mark and the needle would go through my muscle,” he said. “This never happened to me at home … not once in seven years.”

Home dialysis is not an option for everyone. The dialysis clinics require patients who want to self-treat to take a training program of up to five weeks. The cost is billed to insurers.

But health economists do not agree that Proposition 8 would improve patient care or limit profit-seeking practices.

“The risk with managing profits of private companies through something as clumsy as percentage of costs is that accountants are very skilled at manipulating these variables,” said Anthony LoSasso, professor of health policy and administration at the University of Illinois at Chicago’s School of Public Health.

LoSasso said that if Proposition 8 passes, companies could try to get their direct patient care costs as high as possible by artificially inflating them so that their capped revenue is raised. “In general, these types of efforts are really just clumsy, bad policy,” he said.

Himmelstein agreed. “I just do not see how this proposition could improve quality of care,” he said.

More than 120 groups oppose Prop 8, including the California Medical Association, which represents 43,000 physicians across the state. Opponents said the proposition was introduced as a “threat” to force dialysis companies to allow workers to unionize, and that if passed, it would force clinics to close.

“SEIU are using patients as political pawn,” said Kathy Fairbanks, spokesperson for the official “NoProp8” campaign.

“There is a strong will to unionize,” SEIU-UHW West spokesperson Wherley said. But, he added, “there is nothing to gain for us. The purpose of the initiative is to improve patient care.”

A study conducted by independent consulting firm Berkeley Research Group and paid for by dialysis companies found that if Proposition 8 passes, 83 percent of dialysis clinics would operate at a loss, forcing many clinics to close. The study found that it would lead to the “withdrawal of dialysis services from hundreds or thousands of patients.”

Health experts are skeptical of the claim, but agree that clinic closures would mostly affect those in greatest need.

“I think it is possible that a few clinics could close,” said LoSasso, “but they’d invariably tend to be in places that are lower-income neighborhoods.”

Bryan Wong, director of Oakland-based, Fresenius-owned East Bay Medical Care dialysis center, said Proposition 8 would harm his “racially diverse and economically disadvantaged” patients.

Since residents in lower-income neighborhoods usually have no choice but to rely on federal programs, dialysis clinics in these areas generate less profit through reimbursement from insurers. “None of my patients have private insurance,” he said.

Himmelstein offered a different take.

“If all the proposition would do is limit their profit on direct care, it should still allow them to make very large profits,” he said. “Closing the clinics sounds like a threat to affect the elections.”

To date, dialysis clinics have invested $70 million in defeating Proposition 8 and the SEIU has spent $20 million in the YesOn8 campaign, making it the most expensive of the 11 November ballot measures.

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