When Jeffrey Berns first began practice as a nephrologist in the late 1980s, kidney disease in the U.S. was in the early stages of a stratospheric rise. In 1972, Congress had passed legislation that made anyone with end-stage renal disease, or ESRD — the current formal medical diagnosis for kidney failure — eligible for Medicare. Unlike private insurance, which rarely covered dialysis at the time, Medicare did, and the nation was at the dawn of a dialysis demand boom. The only question for the marketplace was: Who was going to step in to meet that demand.
The answer wasn’t immediately obvious. People with ESRD present some of the most complex cases in all of medicine, says Berns. They often have a variety of co-occurring conditions, from anemia to diabetes to heart failure, and this makes managing their care time-consuming — something that many doctors say isn’t adequately reimbursed in the Medicare fee for a basic appointment
Independent and hospital-based dialysis clinics began popping up in the 1960s and 70s, but thanks to an aging population and rising rates of diabetes and high blood pressure, the ESRD population grew so quickly that the dialysis industry couldn’t keep up. Although the dialysis industry was incredibly lucrative, startup costs were, and still are, steep, according to Deepak Jasuja, a nephrologist with Columbus Regional Health outside Indianapolis.
What emerged was the joint venture, an entrepreneurial arrangement that lets two or more individuals share in the risks and benefits of a business. In the case of kidney disease treatment, two key services were in play: the diagnosis and management of care for the patient, including prescribing dialysis, by a nephrologist and the delivery of mechanical dialysis itself, where the filtering that would normally be done by the kidney is done by machine.
It proved a winning solution, and in the decades since Berns entered the field, the number of dialysis clinics has exploded. By 2008, the average zip code in the U.S. had 1.2 dialysis clinics, with some having as many as seven. The problem, says Berns, is that no one outside the two big chains that own most dialysis clinics has any idea of how many are operated as joint ventures, and how that arrangement can influence medical decision making
Berns, who was briefly a partner in a dialysis joint venture in Virginia before decamping to the University of Pennsylvania and a career in academic medicine in 1999, says that patients often don’t know that their doctors might have a financial stake in the dialysis clinics to which they are referred. Among other important issues, Berns suggests, the arrangement leaves many nephrologists with a financial incentive to steer patients to their co-owned clinics for dialysis, even when other, perhaps even better or more appropriate interventions like medication and lifestyle changes are available. And worst of all, Berns argues, most of his colleagues in the wider medical…