{"id":264730,"date":"2020-08-10T07:39:42","date_gmt":"2020-08-10T11:39:42","guid":{"rendered":"https:\/\/canadianinquirer.net\/v1\/?p=264730"},"modified":"2020-08-10T07:39:42","modified_gmt":"2020-08-10T11:39:42","slug":"business-is-booming-for-dialysis-giant-fresenius-it-took-a-137m-bailout-anyway","status":"publish","type":"post","link":"https:\/\/canadianinquirer.net\/v1\/2020\/08\/10\/business-is-booming-for-dialysis-giant-fresenius-it-took-a-137m-bailout-anyway\/","title":{"rendered":"Business Is Booming for Dialysis Giant Fresenius. It Took a $137M Bailout Anyway"},"content":{"rendered":"
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Yet when the Trump administration sent billions in federal relief funds to medical organizations, at least $259 million went to dialysis providers, a KHN analysis of federal records found. Of that, kidney care behemoth Fresenius Medical Care accepted more than half, at least $137 million, despite acknowledging it had ample financial resources, the analysis showed. (File Photo:<\/a> Dan\/Flickr<\/a>, CC BY 2.0<\/a>)<\/figcaption><\/figure>\n<\/div>\n

As the coronavirus pandemic paralyzed most nonemergency medical practices this spring, the dialysis business, vital to the survival of patients with kidney disease, rolled ahead and in some cases grew.<\/p>\n

Yet when the Trump administration sent billions in federal relief funds to medical organizations, at least $259 million went to dialysis providers, a KHN analysis of federal records found. Of that, kidney care behemoth Fresenius Medical Care accepted more than half, at least $137 million, despite acknowledging it had ample financial resources, the analysis showed.<\/p>\n

The full amount going to Fresenius and many other dialysis providers is far higher than what KHN could confirm. The analysis was limited to the portion of grants disclosed by the federal government. And the analysis counted only grants going to organizations whose primary purpose was providing dialysis. In a securities filing<\/a> last month, Fresenius disclosed it received a total of $277 million in relief funds under the Coronavirus Aid, Relief and Economic Security (CARES) Act.<\/p>\n

Funding to giant dialysis providers would have been greater if DaVita, the other multinational corporation that dominates dialysis care in the U.S., had not turned down $240 million in aid, saying other medical providers needed it more. Fresenius and DaVita each own more than 2,600 dialysis centers nationwide.<\/p>\n

Headquartered in Germany, Fresenius Medical Care is focused on patients with kidney failure who need blood-purifying dialysis treatment three times a week to stay alive, billing itself<\/a> as the world\u2019s largest provider of dialysis and related services, equipment and drugs. Fresenius treated about 350,000 people worldwide and earned last year about $1.4 billion<\/a>. The company announced second-quarter profits<\/a> exceeding $400 million, up more than a third over last year, due to a 14% operating margin.<\/p>\n

\u201cFrom what we know today, the net impact of COVID-19 on our earnings is not so significant,\u201d Helen Giza, Fresenius\u2019 chief financial officer, told analysts.<\/p>\n

With scores of COVID-19 patients developing major kidney damage, the pandemic caused unexpected demand for dialysis treatment. Chronic kidney disease and kidney failure were common among people hospitalized with COVID-19, accounting for 13% of all such patients<\/a> nationally from January to March, when the extent of the virus\u2019s spread in the U.S. was just coming to light, according to FAIR Health, a health data nonprofit that analyzes insurance bills.<\/p>\n

Little Drop-Off in Business<\/strong><\/p>\n

The bailouts to Fresenius and other dialysis operations provide one of the bluntest examples yet of how the Department of Health and Human Services failed to direct taxpayer-supported bailout funds only to providers in crisis. Massive assistance payments from the $175 billion Provider Relief Fund<\/a> allotted by Congress went to well-financed corporations and segments of the health care industry like dialysis that were financially stable, or to businesses with ample financial reserves.<\/p>\n

For instance, HCA Healthcare, the for-profit hospital chain, posted a $1.1 billion second-quarter profit<\/a> that included $590 million in government rescue funds. \u201cWe\u2019ve seen billions flow to wealthy hospital systems and health care corporations that may not need the money,\u201d said Kyle Herrig, president of Accountable.US, a government watchdog group and frequent critic of the Trump administration. \u201cWe should have designed a program that was most likely to help those that actually needed the help.\u201d<\/p>\n

Harder-hit segments of the health care industry reported the relief funds were insufficient to cover all COVID-related costs and losses. Some doctors\u2019 offices and dentists struggled to stay afloat after having to forgo visits and procedures that are the main part of their businesses. Unlike the services hospitals provide, noted Ge Bai, associate professor of accounting and health policy at Johns Hopkins University in Baltimore, dialysis is \u201cmuch more resistant to the pandemic in terms of revenue.\u201d<\/p>\n

Dialysis clinics said their drop-off in business was minimal.<\/p>\n

\u201cFor the most part, patients actually came,\u201d said Dr. Mihran Naljayan, medical director of Louisiana State University\u2019s peritoneal dialysis program in New Orleans, one of the country\u2019s earliest COVID-19 hot spots. \u201cWe didn\u2019t see a decrease in the number of visits.\u201d Instead, when the virus rapidly spread in the New Orleans metro area in late March, the number of inpatient dialysis treatments jumped 47% and continuous renal replacement therapy \u2014 dialysis for critically ill patients that is performed for a prolonged time \u2014 rose by 260%.<\/p>\n

HHS defended its approach for distributing funds, noting that other options would have taken much longer to implement. Congress also did not instruct the department to determine the financial strength of each provider when allocating the money.<\/p>\n

\u201cHHS is acutely aware of the financial hardship many facilities and providers are facing. That is why HHS has and will make targeted distributions to facilities and providers that have been disproportionately impacted by the coronavirus pandemic,\u201d the department said in a statement.<\/p>\n

Covering Unexpected Expenses<\/strong><\/p>\n

In explaining their need for federal money, dialysis clinics large and small said they faced unexpected costs to protect patients from COVID-19. They noted that defraying those costs was an explicit goal Congress set in creating the bailout fund and that their allotments did not cover those expenses.<\/p>\n

Brad Puffer, a spokesperson for Fresenius Medical Care North America, which recorded about $41 billion in sales last year, said the money helped dialysis centers equip workers with protective equipment such as gowns, segregate COVID-positive patients, give emergency pay and child care stipends for workers, cover the costs of COVID testing and enact a telehealth system to conduct virtual visits.<\/p>\n

\u201cWe believe our early and aggressive actions, and the vigilance with which our employees have implemented those actions, have successfully reduced the risks to our patients and employees,\u201d Puffer said in an email.<\/p>\n

Congress provided the money but largely left to federal health officials the specifics on how these grants, which don\u2019t have to be repaid, should be distributed. In its haste to prop up providers, and after lobbying by hospitals and other sectors to quickly get money out the door, HHS meted out the first $50 billion based on past Medicare payments and overall patient revenue. Subsequent funding was steered to COVID-19 hot spots, nursing homes, providers in rural areas and safety-net institutions that care for higher numbers of the uninsured and other vulnerable groups.<\/p>\n

The money is available to hospitals, physician practices, dialysis clinics and other medical entities regardless of financial strength; providers had only to agree<\/a> the money would be used either to replace income lost because of the pandemic or to cover COVID-related expenses that weren\u2019t reimbursed through other means.<\/p>\n

In April, DaVita, a Fortune 500 company based in Denver that saw $11 billion in revenue<\/a> and $1 billion in net income last year, indicated it would keep the $240 million the government sent. But a month later, CEO Javier Rodriguez told analysts<\/a> DaVita decided to return the payments even though the company had incurred extra costs because of the pandemic.<\/p>\n

\u201cFrom our perspective, they were a safety net,\u201d he said. \u201cAnd they were to be used for people that needed that money, because the economic damage was so severe, that they couldn\u2019t keep their doors open.\u201d<\/p>\n

In July, DaVita reported a 14% operating margin<\/a>, a key measure of its business, for the second quarter. That was down from 16% from the same time last year. The company\u2019s net profit was $202 million.<\/p>\n

Dan Mendelson, founder of the health consulting firm Avalere and a private equity investor, said the move by DaVita probably helps its image. \u201cThey are very attuned to how things look,\u201d Mendelson said. \u201cWhen I saw they were turning it down, I was not surprised.\u201d<\/p>\n

A Steady Demand<\/strong><\/p>\n

The dialysis industry adapted its care after the pandemic struck. That included segregating patients suspected of having or diagnosed with COVID-19 from uninfected people, limiting staff interaction with patients, hiring additional personnel and bulking up on protective equipment.<\/p>\n

But while the pandemic forced other types of providers to close temporarily or significantly limit procedures, there was little impact on dialysis services.<\/p>\n

LogistiCare Solutions, which has contracts with multiple state Medicaid programs to provide nonemergency medical transportation to enrollees, saw a steady demand from dialysis patients, while calls for other medical and social services waned because of COVID-induced shutdowns, senior adviser Albert Cortina said. Dialysis patients, who accounted for roughly a fifth of the company\u2019s volume before the pandemic, shot up to account for more than 40%.<\/p>\n

\u201cIt was considered a true essential service,\u201d Cortina said.<\/p>\n

Some independent dialysis centers said the HHS relief funds were crucial even though they maintained normal patient loads. Northwest Kidney Centers, a nonprofit that runs 19 dialysis centers primarily in Seattle, received $2.6 million. Dr. Suzanne Watnick, the chief medical officer, said that will not cover all of the substantial expenses the center incurred in increasing protection for patients and workers.<\/p>\n

\u201cIt\u2019s important to recognize that what we had to do and stand up was like being in a hospital,\u201d she said.<\/p>\n

Watnick did not begrudge the large dialysis corporations that accepted the bailout money. \u201cThey do have 100 times the number of patients; that seems a reasonable way to allocate,\u201d she said. \u201cWhat do you say? \u2018You have more of a profit margin, but you get less money\u2019?\u201d<\/p>\n

Subscribe<\/a> to KHN’s free Morning Briefing.<\/p>\n

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