Patients vs. Profits: Who Wins in the Traditional U.S. Dialysis System?

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June 2, 2021

The phrase “Medicare for all” has become a political rallying cry, but, for patients with end-stage renal disease (ESRD), Medicare for all has been a reality since the early 1970s.  

What sounded good in theory nearly 50 years ago, though, has led to a focus on profits at the expense of quality care.  

In a recent Freakonomics Radio podcast, “Is Dialysis a Test Case of Medicare for All?,” author and host Stephen Dubner dives into the history of the dialysis industry—arguably one of the most expensive, ineffective facets of U.S. healthcare.  

We listened to Dubner’s reporting and gathered five key takeaways:

  1. The U.S. population has gotten sicker.
    Approximately one-third of adults with diabetes have some form of kidney disease. And about 30% of people worldwide with ESRD have diabetes.  

Beyond transplant, dialysis is the only viable treatment option for ESRD. Yet one in five patients who start dialysis die within a year, with the average survival rate after initiation of dialysis being three years.  

  1. The cost of dialysis affects everyone.
    It’s no secret that dialysis is incredibly expensive. Each dialysis patient costs about $100,000 a year to treat, which means that Medicare spends over $30 billion a year treating ESRD patients.  

But have you ever really thought about what that means for individuals? The cost of dialysis is nearly 1% of the entire federal budget. Put into simpler terms, for every $100 Americans spend in taxes, approximately $1.00 goes toward paying for dialysis.

  1. Traditional dialysis organizations make most of their profits from a narrow population of commercially insured patients.
    In the 1970s, Medicare expanded and legislators ruled that people living with ESRD could get Medicare coverage at any age. The caveat: private insurance would cover the first 30 months if the patient is on private insurance when dialysis begins.

Traditional dialysis organizations receive much lower reimbursements from Medicare than from private insurance companies. While Medicare can set their preferred rate, dialysis organizations can negotiate high reimbursements from commercial health plans. These reimbursements typically end up being three to four times more than Medicare reimbursement rates.  

Experts estimate that about 12% of people on dialysis have commercial insurance, yet dialysis organizations receive about 40% of their revenue and all of their profits from these commercially insured patients.

  1. Poor health outcomes and high costs are a symptom of fee-for-service incentives.
    In a fee-for-service model, increasing the number of services you deliver increases profits. To realize higher profits, dialysis organizations have become larger dialysis chains, often through acquisitions.  

A 2019 review of these acquisitions showed behavioral changes post-acquisition that impacted cost, quality of care and outcomes. Researchers cited examples of dosage increases on highly reimbursable medications, reductions in skilled nurses in favor of technicians, lower rates of patients being added to the transplant list, higher rates of hospitalizations and increased mortality.  

Reimbursement—not clinical need or quality—is driving care delivery.

  1. New models offer incentive to improve care for kidney disease patients. There are enough people living with early stages of kidney disease that providers should be profitable even without a large population of patients with ESRD. Shifting from a fee-for-service model toward a value-based care model would incentivize providers and health care organizations to get and keep people healthy.  

The previous administration signed an executive order called Advancing American Kidney Health. The goals of the initiative were to:  

  • Reduce the number of Americans that develop ESRD  
  • Ensure 80% of patients receive dialysis at home or receive a transplant by 2025
  • Double the number of available kidneys for transplant by 2030  

The current administration is now evaluating what reforms to change and what to keep.  

At Strive Health we believe the future of healthcare is value-based reimbursement. In a recent episode of The Cost of Care podcast, Strive Chief Strategy Officer Will Stokes and Medical Director Natasha Dave discussed how kidney care disruptors are prioritizing patients and their overall health.

Chief Strategy Officer at Strive Health Will Stokes says, “As industry veterans, the Strive team has seen the unintended consequences of traditional fee-for-service payment that puts profits at odds with good patient care. We launched Strive to start over in kidney care. We provide kidney care services that re-center care around the patient and a business model that incentivized our patient’s health improving, not their kidneys failing.”

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