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Dialysis: America’s Next Big Market Opportunity?

| Monday March 11th, 2013 | 4 Comments
The 3rd DaVita clinic to open within a mile of my Oakland, CA home.

The third DaVita clinic to open within a mile of my Oakland, CA home.

In my neighborhood in Oakland, CA, three DaVita Dialysis centers have popped up in the last year, in whatever empty real estate is available (including the former video rental store pictured at right). According to the National Kidney Foundation, 26 million people, nearly 1 in 10 Americans, suffer from Chronic Kidney Disease (CKD), a gradual loss of kidney function.

Diabetes and high blood pressure are responsible for up to two thirds of cases of CKD. While death rates from communicable diseases are down, deaths attributed to CKD increased 82 percent between 1999 and 2010, according to a recent study.

Poverty, diet, and healthcare

CKD remains a condition which adversely impacts the poor and people of color, due to its high correlation with diabetes and hypertension, both of which have genetic indicators. African Americans make up 13 percent of the U.S. population yet constitute 33 percent of patients treated for kidney failure. Hispanics are twice as likely as white Americans to have Type 2 diabetes.

The connection between poor food choices and poverty is also well-documented. “The unfortunate globalization of the fast food market combined with unhealthy eating and obesity play a major role in the rise of chronic kidney disease,” says Dr. Beth Piraino, President of the National Kidney Foundation.

It’s no surprise to TriplePundit readers that eating junk foods can cause obesity, diabetes and hypertension and that these things could lead to kidney failure. These problems should be addressed at the source, but they aren’t, at least quickly enough to help the 10 percent of Americans with CKD. In the meantime, rapidly rising rates of kidney failure actually represent an enormous market opportunity for dialysis providers. One company is capitalizing on it. What’s interesting is how they manage to treat patients with dignity and kindness and give them very high quality care, all while making a tidy profit.

In the later stages of CKD, the only treatment options available are dialysis or kidney transplant. That means dialysis is literally a life-saving treatment for CKD sufferers, but it’s difficult and sometimes painful. Dialysis machines basically clean a patient’s blood while he awaits a kidney transplant, and the most common treatment, hemodialysis, must be conducted regularly, 3-4 times a week for 3-4 hours each session.

The big business of healthcare

DaVita is the dialysis division of DaVita HealthCare Partners Inc., a Fortune 500 company that provides a variety of health care services to patient populations throughout the United States and abroad. As of last September, DaVita operated 1,912 outpatient dialysis centers in the United States serving approximately 150,000 patients. That’s a lot of medical care provided, with huge profit margins.

Warren Buffett’s Berkshire Hathaway has been buying up stock in DaVita left and right, and, at the time of this posting, had stocks totaling over $37 million. Why? DaVita is growing rapidly, with stock prices up 35 percent over the past year.

But DaVita is not just in it for the money.

While the company’s shareholders have been earning money hand over fist, DaVita’s clinical outcomes have continuously improved for a decade, and that’s what keeps the DaVita team members excited to come to work. Said Bill Myers, VP of Corporate Communications,

Our CEO Kent Thiry leads every earnings call with our clinical outcomes. A lot of those analysts and shareholders that are calling in care about clinical outcomes, but they care maybe a little bit more about some of the business metrics that we report out each quarter. We lead with the clinical outcomes because that is the most important thing that we do from a business standpoint.

High quality treatment

The numbers back up DaVita’s focus on patient outcomes. According to DaVita’s internal data, in 2011, their gross mortality rate fell to the lowest level ever, a 15 percent decrease in mortality rates since 2005. To put those numbers in perspective, this decrease represents thousands of lives saved over a period of years.

DaVita focuses on prevention to provide high-quality care while keeping costs low. The company uses those 12 hours a week when patients are in the clinic to build rapport and educate patients on health and nutrition, resulting in an impressive 91 percent vaccination rate among patients for pnumonia and influenza. The company’s pharmacies, DaVita Rx, allow patients to avoid adding more time to an onerous medical routine. Dedicated pharmacies also mean pharmacists who specialize in kidney care can pick up on dangerous drug interactions for this very sick population with multiple co-morbidities and an average of 8-9 separate prescriptions.

“Dialysis is difficult, it’s physically taxing for the patients,” Myers says. “To create an environment where people are laughing and celebrating each other’s successes – it really is remarkable and it has a real beneficial effect in terms of patient outcomes.”

Another impressive initiative is their Cathaway program which focuses on shifting patients off catheters that draw blood directly from the heart, a major risk of infection, onto safer fistulas.

Balancing patient welfare with the bottom line

The long and the short of it is that quality care does not need to be expensive. In fact, with a focus on bedside manner, preventative care, and accountability, quality care can actually be a lot cheaper than a trip to the emergency room. DaVita claims Medicare as its biggest customer: 89 percent percent of DaVita’s patients are on Medicare or another government aid program. That means DaVita has a huge incentive to keep costs manageable – shareholders and customers both demand efficiently-run facilities and transparent books.

DaVita uses an “accountable care” model to manage costs and outcomes at the same time. Accountable care means tying expenses to quality metrics and patient outcomes.

Whole health programs like Cathaway and prevention programs are adding up to real results for patients. In 2011, DaVita patients had 31 percent fewer hospital readmissions than Medicare’s benchmark. Fewer hospitalizations also keep costs down.

Patient satisfaction

Just because people are well taken care of does not mean they feel cared about. DaVita manages to do both. Ninety-three percent of patients are satisfied with the care they receive at DaVita clinics. Ninety-two percent of DaVita patients feel that their dialysis center’s caregivers make them comfortable during their visits. Try comparing those numbers to what you’d find polling your local ER.

Patients speak very highly of DaVita’s care and bedside manner as well. Bryan Laychak’s son Noah contracted e-coli in the summer of 2009 at the age of two, and after a week at Long Beach Memorial hospital, his condition rapidly declined and he developed renal failure. Luckily for Noah and his family, after 2 weeks of dialysis treatment provided by DaVita in the PICU, Noah’s kidneys recovered function. Laychak attributes much of Noah’s recovery to the quality of care provided by the DaVita nurse. “The nurse was really informative, well-trained and had a great ability to explain the treatment to us. He had a calmness about him that was really effective and had a great impact on our son.” The nurse’s coat and equipment were all branded with the DaVita logo, which is why Laychak remembers the treatment and the nurse so clearly. “When we saw him coming, we were just really relieved.” Noah has recovered completely and only requires annual check-ups to make sure that his kidneys are in good working order.

Joyce Zborower, a 70-year old author from Tempe, AZ, suffers from kidney failure. She’s been on peritoneal dialysis since 2008 to manage her illness, which stems from medication complications. Peritoneal dialysis takes place at home while you are sleeping – Zborower spends about 10 hours each night receiving her treatments. Says Joyce, “They gave me a choice if I wanted to do hemo[dialysis] or if I wanted to do peritoneal. Peritoneal lets you be freer. You don’t have to go into the clinic for 3-4 hours 3-4 times a week. You just hook up every night and then you have your days free.” Her treatment is managed by the DaVita clinic in Tempe, AZ, where she goes about once a month. “The staff are very conscientious, friendly and nice. They’re very professional.”

We live in a time with skyrocketing healthcare costs and rapidly shrinking doctor availability. DaVita shows that a public company focused on accountable care can provide high quality care to even the sickest patients at a rate Medicare will cover. This is a company worth watching.


▼▼▼      4 Comments     ▼▼▼

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  • NDXUFan

    I had to laugh when I read this article. Yes, Davita is making tons of money by treating patients like dirt and discharging them for no reason.

    • Leon O

      Making big profit off sick people is disgusting

  • kkt

    Davita is an outright criminal organization. Kent Thirty is a monster. A man whose cult of personality is rivaled by the likes of Joseph Stalin. Do the math on KT’s salary and he makes 36,000 a day!!!! They are constantly in court settling fraud cases by paying of the feds with hundreds of millions they stole from tax payers. If you want to see look at the venofer case. They pay their techs poverty wages to do a job which has more responsibility than the nurses or nephrologists they work under. It is lunacy. But the board of directors are laughing all the way to the bank on the backs of these poor souls. I worked there and it is a horror house. Seeing people suffer, and often die on treatment is traumatic. The patients are then expired in Davita terms. A word used to refer to a useless product. Ultimately for profit healthcare is fundamentally evil and the upper echelons of Davita should be locked away for life.

  • M

    I currently work as a Tech at DaVita, and have been employed there fore 12 months. Although we get bottom dollar wages, we are saving lives and we do not treat our patients like “dirt.” My clinic is like a family, and our patients love us. We make friends with them, and when one passes, it hits hard for all of us. If you have people constantly dying during treatment, there is something wrong with you or your clinic, but that is not the case with every clinic. Yes, the higher ups make a lot of money, but it is like that with any medical company. DaVita is a not a bad company, and one bad experience does not set the tone for the whole company.