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Dialysis-Facility Joint-Venture Ownership — Hidden Conflicts of Interest

Article · November 12, 2018

Since 1972, when the U.S. government began covering the costs of dialysis for nearly all Americans with end-stage renal disease (ESRD), dialysis has become big business. In 2015, the Centers for Medicare and Medicaid Services (CMS) spent roughly $34 billion on its beneficiaries with ESRD. In recent years, the two largest U.S. dialysis companies, DaVita and Fresenius Medical Care (FMC), which between them control roughly 70% of the U.S. dialysis market, have each reported an annual net income in the range of $1 billion.

One of the most notable but perhaps least discussed and least understood features of the U.S. dialysis landscape is the prominence of joint ventures between nephrologists and dialysis companies. Joint ventures allow the participating partners to share in the management, profits, and losses of an outpatient maintenance dialysis facility. In such arrangements, the dialysis company typically owns a majority share and nephrologists who see patients at the facility or serve as its medical directors obtain minority shares by investing in the facility’s development. Such ventures have been promoted as a way of aligning the interests of nephrologists with those of dialysis providers in order to improve clinical outcomes and patient satisfaction.

Despite potential benefits, joint ventures raise legal and ethical concerns because of participants’ conflicts of interest.1,2 Dialysis-facility joint-venture arrangements are, within limits, exempt from prohibitions against physician self-referrals. However, they have led to multimillion-dollar settlements with the Department of Justice over allegations of illegal payments — including offering physicians below-market ownership shares in new dialysis clinics and paying above-market price for shares in physician-owned clinics — as kickbacks to joint-venture partners. Even legally compliant joint ventures create financial incentives for participating nephrologists that may inappropriately influence decisions about patient care. That physician ownership of specialized medical facilities has the potential to negatively influence health care utilization and costs, as well as equity of care, has been well documented in a variety of disciplines and settings.3 Might a nephrologist with a financial stake in a dialysis facility be more likely than one who has no such stake to recommend that a patient start dialysis? Could there be pressure to refer a patient to a facility in which the nephrologist is a partner, even though other facilities might be closer to the patient’s home, have more convenient dialysis shifts, offer better services or treatment modes, or provide higher-quality care? Since a facility’s poor performance in the ESRD Quality Incentive Program can lead to reductions in its Medicare payments, there is a risk that nephrologists might “cherry pick” healthier patients for their own facility and steer sicker patients away.4

It is certainly possible that these concerns are not borne out in practice and that joint ventures actually improve outcomes and patient satisfaction. The only way to find out is with independent, empirical research comparing the outcomes and costs of care among patients receiving treatment at joint-venture facilities with those at other facilities. Unfortunately, such research is not only nonexistent, it is currently impossible to conduct.

There is a striking lack of transparency regarding joint-venture arrangements. Virtually no information about these partnerships, including which facilities have joint ownership, who the partners are, how the partnerships are structured, or even the total number of joint ventures that exist, is collected or made publicly available by dialysis companies or regulatory agencies.

Seeking more information, we made numerous informal queries, including queries to medical directors of DaVita and FMC and to the ESRD Network for Pennsylvania, and formal state and federal requests, including requests under the Pennsylvania Department of Health Right to Know Law and the CMS Freedom of Information Act (FOIA), all initially to no avail. A response arrived from CMS 7 months after the FOIA request: the agency provided a file with a list of dialysis-facility owners, percentage ownership, and ownership type (individual or organization) but did not provide information on the number of dialysis facilities with joint-venture ownership, which facilities had joint-venture owners or partners, which owners were practicing in which facility, any quality metrics, or facility or owner addresses. The response also acknowledged discrepancies in data on actual percent ownership from the Medicare Provider Enrollment, Chain, and Ownership System (PECOS), which indicated ownership stakes totaling more than 100% for most listed facilities.

This lack of transparency not only poses a major barrier for evidence-based health care policy but also deprives patients of critical information: they cannot find out whether the nephrologist referring them to a particular dialysis facility has a financial incentive to do so. Recent position papers from the Renal Physicians Association, the Forum of ESRD Networks, and the International Society of Nephrology Ethical Dialysis Task Force have emphasized the need for routine public disclosure of nephrologists’ competing financial interests.1,2 We believe that such disclosure should include readily accessible information about joint-venture partnerships.

Joint-venture partnerships are not the only financial arrangements that raise serious concerns about conflicts of interest in the dialysis industry. End-stage renal disease seamless care organizations (ESCOs) are legal partnerships created through the CMS Comprehensive ESRD Care Model program that aim to align the financial incentives of dialysis-facility owners and participating nephrologists to enhance patient services and reduce hospitalizations and overall costs of care while maintaining performance on quality metrics. Which physicians or group practices are financial partners in any of the 37 operating ESCOs is not publicly available information. The CMS website for the ESCO program identifies the dialysis-provider company but not the nephrologists or nephrology practices with financial interests tied to ESCO performance. Thus, as with joint ventures, patients are unknowingly exposed to the risk that their care might be influenced by their physician’s financial conflicts due to ESCO participation.5

We make no allegations regarding quality of care or illegal or unethical practices by nephrologists or dialysis companies as a result of joint-venture partnerships. Rather, we are advocating for far greater transparency and public availability of information about nephrologist participation in these business arrangements. If CMS, state health departments, ESRD networks, and others involved in the regulation and oversight of dialysis facilities systematically collected such information and made it readily available, it could then be used to study the effects of these arrangements on outcomes, disparities in care delivery, access to home dialysis options, kidney transplantation, and other important aspects of care, as well as to guide CMS policy. Nephrology specialty societies can follow the lead of the American Medical Association and other professional organizations by developing guidelines mandating appropriate disclosure of joint-venture arrangements, as well as ESCO participation, to patients and their families before initiation of dialysis at a particular facility. Only with such transparency can patients and their families make fully informed choices about their options.


SOURCE INFORMATION

From the Perelman School of Medicine at the University of Pennsylvania (J.S.B., A.G., M.S.M.), and the Hospital of the University of Pennsylvania (J.S.B.) — both in Philadelphia.

1. Ozar DT, Kristensen C, Fadem SZ, Blaser R, Singer D, Moss AH. Nephrologists’ professional ethics in dialysis practices. Clin J Am Soc Nephrol 2013;8:840-844. CrossRef | Medline | Google Scholar
2. Jha V, Martin DE, Bargman JM, et al. Ethical issues in dialysis therapy. Lancet 2017;389:1851-1856. CrossRef | Medline | Google Scholar
3. Trybou J, De Regge M, Gemmel P, Duyck P, Annemans L. Effects of physician-owned specialized facilities in health care: a systematic review. Health Policy 2014;118:316-340. CrossRef | Medline | Google Scholar
4. Parker JC. Cherry picking in ESRD: an ethical challenge in the era of pay for performance. Semin Dial 2011;24:5-8. CrossRef | Medline | Google Scholar
5. Berns JS, Glickman JD, Reese PP. Dialysis payment model reform: managing conflicts between profits and patient goals of care decision making. Am J Kidney Dis 2018;71:133-136. CrossRef | Medline | Google Scholar

This Perspective article originally appeared in The New England Journal of Medicine.

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