California legislature advances bill that caps dialysis profits

Gavin Newsom
California Gov. Gavin Newsom must now decide whether to sign into law a bill that aims to curb dialysis provider profits. (Stephen Lam/Getty Images)

California’s state legislature advanced a bill that targets dialysis providers who steer patients toward charities that subsidize their premiums in order to increase their profits. 

The bill passed 47 to 32 in the California State Assembly Tuesday after passing 21 to 19 out of the state Senate Monday. The legislation now heads to California Gov. Gavin Newsom to decide what to do.

Newsom’s predecessor Gov. Jerry Brown vetoed similar legislation back in 2018.

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Starting in 2022, the legislation would cap payments to dialysis providers with connections to charities that subsidize patient premiums. Lawmakers specifically called out an arrangement between major dialysis providers DaVita and Fresenius and the charity nonprofit American Kidney Fund (AKF).

If the bill becomes law, dialysis providers would only be reimbursed at the Medicare level or a rate for patients that have arrangements with a third party such as AKF.  Providers would also have to disclose to insurers which patients get premium assistance from the AKF or other such charities.

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State lawmakers behind the legislation charge that it targets a years-old scheme that pads providers’ profits.

In 2016, Fresenius and DaVita donated $265 million to AKF. The nonprofit is accused of steering kidney dialysis patients into private insurance by paying for their monthly premiums instead of state programs such as Medi-Cal, according to a January release from Assembly Member Jim Wood, who sponsored the assembly version of the legislation.

The goal of patient steering is to secure a higher reimbursement rate for the dialysis service provider on the Affordable Care Act’s insurance exchanges.

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“For every $1 these dialysis businesses donate to AKF, which in turn pays for a patient’s health care premium, the dialysis companies reap a 350% return through increased reimbursement rates,” the release said. “This practice has been a key factor in the $4 billion profits these dialysis companies experienced in 2017.”

However, the Centers for Medicare & Medicaid Services has warned that such schemes could result in patients facing higher out-of-pocket costs.

The AKF said in a statement Wednesday that the legislation will be “harmful to California’s low-income, mostly minority dialysis and transplant patients who depend on charitable premium assistance.” The charity said it provides premium assistance to 3,700 Californians.

If the legislation becomes law, AKF will have to get an updated advisory opinion from the Department of Health and Human Services on whether it can divulge the patients who get assistance.

“The (Office of the Inspector General) has repeatedly affirmed strong requirements for privacy on programs of this type,” the group said.

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Fresenius and DaVita declined to comment, instead referring to an industry-backed group called Dialysis is Life Support that charges the bill is an effort of the insurance industry to “boost profits.”

Newsom's office did not immediately return a request for comment as of press time. 

This legislation is the latest issue surrounding such arrangements.

A 2016 whistleblower lawsuit that was unsealed last month charged AKF with patient steering, but the Department of Justice declined to pursue the whistleblower's claims, according to a report in Bloomberg

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