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Analysis

California Gov. Newsom Signs Dialysis Regulations Into Law

By Jack O'Brien  
   October 14, 2019

The bill signing drew a pointed response from Fresenius Medical Care.

California Governor Gavin Newsom signed AB 290 into law Sunday, a piece of legislation that aims to restrict excessive profits for dialysis companies.

In his signing message, Newsom said that the bill removes financial incentives for dialysis providers to steer patients to certain providers for premium assistance. In addition to lowering the reimbursement rates to Medicare levels, the bill requires health plans to accept premium payments from charities on behalf of patients, who must be informed of their rights ahead of time.

In his letter, Newsom did acknowledge the pushback from the dialysis industry, but urged providers to put patients first.

"Charities that purport to impartially provide patient assistance, and the providers that substantially fund these charities, should act in good faith and continue providing assistance to patients," Newsom wrote. 

A May study from University of California, Los Angeles found that private health plans pay four times more than Medicare rates for dialysis treatments, dispensing an average of $1,041 per session. 

Related: Private Insurers Pay Dialysis Providers Four Times Above Medicare

Fresenius Medical Care NorthAmerica, a division of the German-based dialysis company, issued a response Monday morning calling AB 290 "flawed legislation" that will "drastically impact California's most vulnerable dialysis patients."

"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 wrote.

This is not the first time lawmakers in California have sought to put additional regulations on the dialysis industry. 

Last fall, DaVita Inc., a Denver-based dialysis company, fought against California Proposition 8, which would have limited dialysis clinic revenues and cost the company an estimated $450 million. Ultimately, the ballot initiative was defeated with nearly 60% of the vote.

DaVita Kidney Care, a subsidiary of the larger organization, stated it was "extremely disappointed" in AB 290 and predicted that thousands of dialysis patients would face financial harm, according to a statement sent to HealthLeaders Tuesday.

On Tuesday, Moody's Investors Service commented on the bill signing, stating that the law will be credit negative for DaVita due to a reduction in profits and the increased likelihood that the legislation would be mirrored by laws in other states.

Related: Trump Administration Launches Kidney Health Initiative

Scrutiny has mounted on both DaVita and Fresenius in recent years given the concentrated market power in the dialysis industry and accusations of questionable business practices.

In late July, Rep. Katie Porter, D-Calif., called on the Department of Health and Human Services' acting Inspector General to investigate the relationship between Fresenius, DaVita, and American Renal Associates to "implement practices that benefit their bottom line at the expense of patients with kidney disease."

Assemblymember Jim Wood, D-Santa Rosa, was the main sponsor of AB 290 and applauded Newsom in a statement Monday.

He wrote that the American Kidney Fund's revenue, which is generated primarily from DaVita and Fresenius donations, creates a conflict of interest that ultimately enriches the two companies without benefiting patients. 

"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 wrote. 

Editor's note: This story has been updated to include comments from Moody's Investors Service and DaVita Inc.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


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