Share prices of dialysis companies rose sharply on Monday after California Gov. Jerry Brown’s veto late Sunday of a bill that would have had a major impact on their bottom line.
Under the bill, dialysis providers would have been restricted on the American Kidney Fund (AKF) financial assistance they could provide to patients. The bill’s legislative sponsors argue that this assistance allows dialysis companies to inflate reimbursement, causing premiums to go up.
In a memo (PDF) to state legislators, Brown said that bill goes too far in trying to address a noble goal, as “it would permit health plans and insurers to refuse premium assistance payments and to choose which payments they will cover.”
He encouraged legislators to find a more “narrowly-tailored solution” to address the problem.
Shares for two of the major national dialysis providers went up in trade following the veto. Shares of DaVita Kidney Care were up 3.5% on Monday morning and Fresenius Medical Care AG shares were up by 2.7%, according to MarketWatch.
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In a statement, DaVita CEO Javier Rodriguez said the company was “deeply relieved” by the veto.
“The bill was sponsored and pushed by the SEIU and Blue Shield of California and would have harmed thousands of dialysis patients in California by allowing health plans to discriminate against low-income dialysis patients who rely on charitable assistance to pay their insurance premiums,” Rodriguez said.
LaVarne A. Burton, CEO of AKF, echoed Rodriguez, saying that the bill was pushed through at the behest of payers of the union. The effect on low-income dialysis patients would have been disastrous, Burton said.
“For 21 years, low-income California kidney patients have turned to AKF and our federally approved Health Insurance Premium Program for help with the devastating financial impacts that accompany this disease,” he said. “This year alone, we have helped close to 4,000 people statewide. We are grateful that Governor Brown recognized the importance of AKF’s program to the people of California.”
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Leerink Partners LLC, a healthcare investment group, also projects (PDF) that the veto will have a positive impact on shares of American Renal Associates, though ARA operates only five locations in California. Leerink also does not believe that California’s legislative efforts in this area provide a look at other states.
ARA’s association with AKF has come under fire. UnitedHealthcare sued ARA twice for overpayments, and in July it paid $32 million to settle the fraud allegations.
Even with the veto, dialysis companies will be keeping a close eye on California. Voters will decide next month on a ballot initiative known as Proposal 8, which would cap the revenue dialysis providers can make off commercially insured patients.