The Intricacies of the Healthcare Industry: Mergers, Dialysis Centers, and Financial Incentives

Ben H.

Hatched by Ben H.

Aug 27, 2023

3 min read

0

The Intricacies of the Healthcare Industry: Mergers, Dialysis Centers, and Financial Incentives

Introduction:

In the ever-evolving landscape of the healthcare industry, mergers and acquisitions have become commonplace. UnitedHealth Group's Optum Care Solutions recently made headlines with an unsolicited all-cash bid for Amedisys, a move that could potentially disrupt the existing agreement with Option Care Health. Meanwhile, the dialysis industry in America is dominated by just two companies, DaVita Kidney Care and Fresenius Medical Care, who have grown their market share through acquisitions. These developments raise questions about the impact on patient care, treatment options, and the influence of financial incentives in the healthcare system.

Mergers and Acquisitions in the Healthcare Industry:

The bid made by Optum Care Solutions for Amedisys highlights the competitive nature of the healthcare industry. With a substantial all-cash offer of $3.3 billion, Optum aims to outshine Option Care Health's all-stock deal. This move not only reflects the desire for market dominance but also emphasizes the value of consolidation and expansion within the industry. Mergers and acquisitions allow companies to strengthen their position, streamline operations, and potentially improve patient care through increased resources and expertise.

The Dominance of DaVita Kidney Care and Fresenius Medical Care:

According to a Freakonomics Podcast, the dialysis industry in America is largely controlled by just two companies, DaVita Kidney Care and Fresenius Medical Care. Out of a total of 7,500 dialysis centers, these two companies operate a staggering 5,000 centers. Their growth has been fueled by acquiring small, independent dialysis centers, consolidating the market and expanding their reach. However, economists from Duke University have discovered concerning consequences resulting from these acquisitions.

The Impact on Patient Care and Treatment Options:

The Duke University study found a significant increase in the use of an anemia shot called EPO following the acquisition of independent clinics by DaVita or Fresenius. This 200% surge in EPO usage occurred without any change in the patients' clinical condition, indicating that the change in ownership of the dialysis center played a role. Additionally, the study revealed a 9.5% decrease in patients receiving kidney transplants or being listed for transplants after the acquisitions. This decrease can be attributed to the fact that if a patient receives a kidney transplant, they no longer require dialysis, resulting in a loss of customers for DaVita and Fresenius.

Financial Incentives and the American Kidney Fund:

The Freakonomics Podcast delves into the intricate financial arrangements within the dialysis industry. It reveals that commercial health insurance pays DaVita and Fresenius four times more than what Medicare pays for the first 30 months a patient is on dialysis. This stark difference in reimbursement rates creates a financial incentive for clinics to prioritize patients with commercial insurance over those with Medicare. Additionally, the American Kidney Fund, an organization that supports dialysis patients, receives 80% of its budget from DaVita and Fresenius. The podcast describes a scheme where the American Kidney Fund pays insurance premiums for patients, allowing them to stay on commercial insurance for the maximum amount of time, ultimately benefiting the dialysis companies financially.

Actionable Advice:

  • 1. Advocate for increased transparency in healthcare mergers and acquisitions to ensure that patient care remains a top priority and that potential negative consequences are thoroughly assessed.
  • 2. Encourage research and studies to investigate the impact of financial incentives on treatment options, with a particular focus on dialysis and other specialized areas of healthcare.
  • 3. Support policies and initiatives that promote competition and prevent monopolistic practices in the healthcare industry, safeguarding patient access to a diverse range of treatment options.

Conclusion:

The healthcare industry is a complex ecosystem where mergers, acquisitions, and financial incentives play a significant role. The bid by Optum Care Solutions for Amedisys exemplifies the competitive nature of the industry, while the dominance of DaVita Kidney Care and Fresenius Medical Care in the dialysis sector raises concerns about patient care and treatment options. Understanding the intricacies of these developments allows us to advocate for greater transparency, research, and policies that prioritize patient well-being in this ever-evolving landscape.

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