U.S. seeks to cut dialysis costs with more home care versus clinics

(Reuters) – The Trump administration is working on a new payment approach for treating kidney disease that favors lower cost care at home and transplants, a change that would upend a dialysis industry that provides care in thousands of clinics nationwide.

The goal is to reduce the $114 billion paid by the U.S. government each year to treat chronic kidney disease and end-stage renal disease, a top area of spending.

The U.S. Centers for Medicare and Medicaid Services (CMS), which provides Medicare health benefits to more than 55 million Americans, is looking at a trial payment design that would improve care in the early stages of kidney disease, increase access to kidney transplants and favor home dialysis over clinic-based treatment, CMS head Seema Verma told Reuters in an interview.

“A lot of the way the program has been set up, it creates a lot of perverse incentives to actually keep people in an institutional setting,” said Verma, who first signaled in a speech this year that CMS wanted to curb costs and improve quality of life for kidney disease patients through a new payment structure.

Indeed, consultants say home dialysis has been slow to take off because doctors prefer to send patients to clinics.

The changes pose a particular risk to DaVita Inc and Fresenius Medical Care AG, which operate more than 5,000 U.S. dialysis clinics and control around 70 percent of the market.

Shares of DaVita and Fresenius Medical Care both fell, with DaVita off 3 percent at $55.36. Fresenius Medical Care closed down 2.2 percent in Frankfurt.

They could also provide an opening for new rivals, including CVS Health Corp, which seeks to offer lower-cost home dialysis, and startups Cricket Health and Somatus, which focus on early intervention to slow progression to kidney failure.

“We have to be open to what I’m hearing coming out of (CMS), that they want to look at different ways for us being paid and how can we really try to create more opportunities for these patients to be better served,” Fresenius Medical Care Chief Executive Rice Powell told analysts.

The company is expanding in home dialysis with its $2 billion purchase of NxStage, a U.S. maker of home-use dialysis machines. Fresenius Medical Care said it plans to convert some dialysis clinics into “transitional care units” to train people for care at home. It aims to boost the percentage of its U.S. customers using home dialysis to more than 15 percent by 2022 from around 12 percent currently.

DaVita recently launched new technology, including remote monitoring and telehealth, to improve the patient experience at home and “champions” home dialysis, a company spokeswoman said.

KIDNEY DISEASE ON THE RISE

Nearly 15 percent of the U.S. adult population was suffering from chronic kidney disease in 2018, fueled by growing rates of diabetes and hypertension, according to the government’s U.S. Renal Data System.

In 2016, more than 720,000 people were estimated to have progressed to kidney failure. That is forecast to climb as high as 1.26 million people by 2030.

Without a transplant, patients with end-stage kidney disease require dialysis to clear their blood of waste and excess fluid, which involves spending three-to-five hours hooked up to a machine three times a week. Home dialysis would not only be cheaper, since it would not require nursing assistance once a patient is properly trained, but could be done at night, freeing people for a regular work schedule.

DaVita and Fresenius Medical Care offer two forms of home dialysis: hemodialysis, which requires a machine and special filter much like in clinics, and peritoneal dialysis, which utilizes the lining of the abdomen to filter waste from the blood.

CMS is considering the benefits of peritoneal dialysis, which is used more widely outside the United States. Peritoneal dialysis machines are around the size of a desktop printer, smaller than home hemodialysis machines.

DaVita believes home dialysis could eventually account for up to 25 percent of treatments if physicians are educated on its merits, and it plans to build fewer new clinics.

Meanwhile, U.S. pharmacy chain CVS is preparing to enter the dialysis business and has more retail outlets than Fresenius Medical Care and DaVita clinics combined, as well as deep enough pockets to drive disruption. CVS said last April its kidney care plans involve a program to identify the disease early and delay the need for dialysis. It will also seek regulatory approval for its own home dialysis device. CVS Chief Executive Larry Merlo, in an interview, said it wants a home care solution “which is going to be more patient friendly and we believe lower cost than the therapies that exist today.”

Medicare pays for home dialysis, but adoption has been slow. Only around 8 percent of end-stage renal disease patients were on home dialysis in 2016. The U.S. Department of Health and Human Services (HHS), which oversees CMS, is also seeking to increase the number of kidney transplants through proposals it hopes will expedite access to organs. More than 20,000 people received kidney transplants in the United States in 2018, a fraction of the more than 100,000 people on the waiting list.

HHS Secretary Alex Azar plans to speak to kidney patients on Monday afternoon in Washington D.C.

CMS has also finalized new rules that beginning next year will offer financial incentives for new drugs to treat kidney failure.

‘KILLER GAP’

Proponents of home care say more frequent dialysis can improve patient outcomes by avoiding the so-called “killer gap” – a two-day wait between clinic sessions associated with increased hospitalization and death. Hospitalization accounts for about 40 percent of Medicare spending on dialysis patients.

“Imagine if we could keep patients out of the hospital by dealing with this killer gap … giving them the tools to treat themselves,” said John Milad, CEO of Britain-based Quanta Dialysis Technologies, which is working on a simpler dialysis machine for home use. “The savings that are available there are as big as everything that is being spent on dialysis.”

CVS is working on its home hemodialysis device with DEKA Research & Development Corp, a New Hampshire-based company owned by Segway scooter inventor Dean Kamen, according to sources familiar with the arrangement.

Startups including Quanta, France’s Physidia and California-based Outset Medical, are working on user-friendly dialysis machines for home use.

U.S.-based Cricket Health and Somatus use data analysis to detect high-risk chronic kidney disease patients earlier, educate them on treatment options and provide home dialysis services. Cricket CEO Arvind Rajan said the government could save money via a flat fee to manage patients earlier in the disease and reward providers who keep costs down. “The most profitable thing you can do is keep a patient from kidney failure and the least profitable thing you can do is have the patient on in-center dialysis,” he said.