Dialysis provider consolidation, growth, and controversy in 2015
Dialysis providers continued consolidating and investing in coordinated and managed care and looked toward the international market for growth opportunities.
The largest dialysis provider in the United States, Fresenius Medical Care, announced in October that it would acquire Nephromor Dialysis Units, which runs 21 dialysis centers in Israel. Nephromor is the largest dialysis provider in Israel within the private sector. Fresenius also established a research and design center in Shanghai, China.
In March, Fresenius announced an agreement with Heritage Development Organization, an affiliate of Heritage Provider Network, to develop physician networks and care coordination and population health management services in select markets throughout the country. Heritage Provider Network will acquire or build coordinated care networks in markets across the country that will partner with Fresenius.
In October, the United States District Court for the Northern District of Georgia ruled that Fresenius Medical Care did not violate the False Claims Act by billing Medicare for the overfill in medication vials. The court ruled that the relator had not proven that Fresenius acted deliberately.
DaVita Kidney Care, the second largest dialysis provider in the US, also faced allegations regarding overfill billing, and started the year off with a large settlement. In April, the company settled a legal battle with two former employees that began in 2007. DaVita said during its first quarter earnings report that it would pay up to $495 million to settle the whistleblower suit filed in Atlanta. As a result of the settlement, DaVita reported a loss of $111 million, or $.52 per share, for the first quarter of 2015. “I think our overwhelming feelings about this-forget the thoughts are just we’re very disappointed in ourselves and really humbled by the fact that we are having to write a check this big… this is not how we ever envisioned ourselves spending our time or your money. We did make some mistakes and we’re accountable for that;’ said CEO Kent Thiry.
But DaVita rebounded from the loss, and beat analyst expectations in the second quarter and income grew 17% in the third quarter. In September, the company announced that it would acquire the Everett Clinic, a Washington-based physician group that treats more than 315,000 patients at 20 facilities in Washington.
DaVita also expanded internationally this year, with announcements that it would establish operations in Brazil, and set up a joint venture kidney care specialty hospital chain in Shandong Province, China. And the company acquired Renal Ventures Limited LLC., the eighth largest dialysis provider in the U.S., for $415 million.
The consolidation trend continued with the third largest dialysis provider in the country, US Renal Care, announcing it would merge with DSI Renal, the sixth largest provider. Shortly before the merger, DSI had opened its 100th clinic. The fifth largest provider, American Renal Associates filed to go public in August. According to Renaissance Capital, ARA filed to raise up to $100 million in an initial public offering, but some estimate the deal size is a placeholder for an IPO that could raise $300 million
Technology and the future of kidney care
As dialysis providers continued to shuffle, device makers and manufacturers poised themselves for the future. NxStage Medical, which marked the 10-year anniversary of its System One home hemodialysis machine, unveiled details about its product pipeline during a second quarter earnings call. New products being developed included a home hemodialysis system, which they expect to release in the fourth quarter of 2016, that produces carbonate buffered dialysate on demand from tap water and can be used in-center at significantly higher flow rates. Burbank said they are also developing a peritoneal dialysis system that eliminates the need for bags of PD dialysate.
As PD becomes an increasingly popular modality choice, other companies are looking to advance their product portfolio. Fresenius and Swiss medical device developer Debiotech SA, have partnered to develop a portfolio of peritoneal dialysis technologies. Baxter International Inc’s automated peritoneal dialysis system got FDA approval in October. The new machine features a Sharesource web based remote connectivity platform. In August 2014, Baxter announced it had underestimated the growth among its customers in the number of new patients being placed on peritoneal dialysis and had a shortage of dialysate. The company continues to face criticism for the shortage.
Outset Medical debuted its new compact hemodialysis machine, the Tablo, at the American Society of Nephrology meeting in November. The company says it hopes to rekindle interest in establishing in-center, self-care stations among dialysis providers, where the simplicity of the Tablo would be useful.
As some companies are seeking to improve dialysis machines, others are looking to avoid them altogether. The Wearable Artificial Kidney passed the first FDA approved proof-of-concept trial, Victor Gura, MD, FASN and other researchers announced at the American Society of Nephrology’s Kidney Week 2015. Gura, from the David Geffen School of Medicine at UCLA, developed the device. “The results suggest that the WAK has the potential to reduce patient mortality and cut the exorbitant cost of treating kidney failure” Gura said. The present prototype of the WAK is a 10-pound device, powered by nine-volt batteries and worn around the waist.
Several studies presented at Kidney Week also showed progress has been made in developing an implantable artificial kidney, which is being designed to be connect ed internally to the patient’s blood supply and bladder and implanted near the patient’s own kidneys. Both the WAK and the implantable artificial kidney have been fast tracked by the FDA. “We aim to conduct clinical trials on an implantable, engineered organ in this decade, and we are coordinating our efforts with both the NIH and the U.S. Food and Drug Administration;’ said Shuvo Roy, PhD, a UCSF bioengineer who led the research on the implant able artificial kidney together with Vanderbilt University nephrologist William Fissell, MD. These new technologies have the potential to permanently alter an industry that has only seen slight incremental change in the last few decades.