The health care market was not so kind to the two largest dialysis providers in the U.S. at the start of the new year, with both companies reported declines in income in the first quarter and anticipated profit for the year.
Despite a rough first quarter, Fresenius Medical Care AG & Co. KGaA says it will maintain its financial outlook for 2014, and DaVita Healthcare Partners CEO Kent Thiry says his company’s dialysis division fared better than its integrated care business. Still, the Denver, Colo. based provider, which has invested heavily in international business deals with dialysis centers in Germany, Saudi Arabia, and other countries, says pressure from Medicare’s bundled payment system will force it to close possibly up to 20 clinics this year.
“…We still on average, lose money on our Medicare patients. (With the) absence of full market basket increases over the next few years, the Medicare reimbursement will be further below our cost of providing care,” said Lee Ann Zumwalt, DaVita’s Group VP of Purchasing and Government Affairs in an investor call May 1 about the company’s performance. “As a result, we will expand only in geographies where there is a healthy subsidy from the private sector. And geographies without the private support will remain flat, or be a contraction of service, as we will be forced to close some centers.”
Thiry said the poor performance for Healthcare Partners was “a miss, it was a big miss and it was another in a series of misses. This is embarrassing for us, and no doubt, worrisome for you.” The company's kidney care segment saw “strong financial performance,” he said.
Fresenius reported net income for the first quarter fell 9% to $205 million, compared to $225 million in the same quarter last year. The company said it still expects 2014 net profit to be between $1 billion and $1.05 billion, compared with $1.11 billion last year.
Net revenue for the first quarter increased 3% to $3,564 million compared to the first quarter of 2013. Dialysis services revenue grew 4% to $2,782 million and dialysis product revenue decreased 1% to $782 million compared to the first quarter of 2013.
North America revenue for the first quarter of 2014 increased 5% to $2,393 million. Dialysis services revenue in North America grew 5% to $2,201 million with a same store treatment growth of 3.3%. Dialysis product revenue increased 5% to $192 million.
Partners reported Healthcare Partners reported that first quarter income for 2014 fell 7% to $183.3 million, or $0.85 per share, compared to $196.9 million, or $0.92 per share, in the same quarter last year. The company also updated its consolidated operating income guidance for 2014 to now be in the range of $1.725 billion to $1.840 billion, compared to a guidance in the range of $1.725 billion to $1.860 billion.