Dialysis companies to feel squeeze from Calif. reimbursement bill

California’s governor dealt a blow to dialysis companies over the weekend when he signed into law a bill that limits the reimbursement they receive for kidney disease patients who get insurance premium assistance from third-party organizations.

Gov. Gavin Newsom signed the bill, known as Assembly Bill 290, in the face of intense opposition from dialysis companies DaVita and Fresenius Medical Care, which together control most of California’s dialysis clinics. A similar measure was vetoed by then-Gov. Jerry Brown last year. The companies have argued the legislation would increase patients’ out-of-pocket medical costs and hinder their access to care.

“This bill will directly affect nearly 4,000 low-income, primarily minority, California dialysis patients who rely on charitable support to pay for their healthcare costs,” DaVita Kidney Care commented on Monday. “Based on statements made by the American Kidney Fund regarding their inability to continue operations in the state were AB 290 to become state law, we anticipate thousands of California dialysis patients face financial harm.”

Fresenius suggested the legislation would also increase hospital utilization.

“This charitable support helps ensure vulnerable patients don’t have to choose paying for their healthcare over housing and food. We are also concerned that this law will result in patients only being able to access their life-saving care at hospitals due to lack of insurance coverage, and we will support these patients’ transitions to whatever extent possible,” the company said in a statement on Monday.

While in their public statements the companies focused on how the new law would affect patients, the companies are also likely worried about their bottom lines. Early this year DaVita’s then-CEO, Kent Thiry, said that the law could reduce operating income by $24 million to $40 million. DaVita’s 2018 revenue totaled $11.4 billion, while its operating income was $1.5 billion.

Meanwhile, Fresenius Medical Care, whose parent company is based in Germany, reported 2018 revenue of 16.5 billion euros and operating income of 3 billion euros.

Rice Powell, CEO of Fresenius Medical Care, told Modern Healthcare in August that the company would “work our way through it” should the bill succeed. He argued it doesn’t make sense that the state should be able to determine how much the company makes.

“That doesn’t necessarily work with the way that capitalism in the United States works,” he said.

AB 290, which was introduced by Calif. Assemblyman Jim Wood, a Democrat, is meant to stop dialysis companies from collecting what Wood called excessive profits. It caps payments to dialysis companies at Medicare rates or a rate determined by a dispute resolution process when patients’ insurance premiums are paid by not-for-profit organizations, such as the American Kidney Fund. The American Kidney Fund, which receives most of its donations from DaVita and Fresenius, helps pay for health coverage for low-income dialysis patients.

Wood and other supporters of AB 290 have argued this system of premium assistance allows the dialysis companies to collect higher reimbursement by directing patients to private insurance, which pays more than Medicare or Medicaid.

“We can’t allow corporations to boost their profits at the expense of patients and increasing healthcare costs and I will continue to uncover these abusive practices in order to contain healthcare costs and bring healthcare to all Californians,” Wood said in a statement Sunday.

The American Kidney Fund on Sunday said it will be forced to stop providing financial assistance to about 3,700 low-income patients in California when the law goes into effect. Certain provisions of the law will take effect in 2020 while the reimbursement changes go into effect in 2022.