Critics question Fletcher Allen’s spinoff of dialysis clinic to for-profit company

Fletcher Allen Health Care plans to sell five outpatient kidney dialysis clinics to a for-profit company for $26 million.

The state’s largest hospital is operating the clinics at a loss, and officials say the spin off to Fresenius Medical Care, the largest dialysis services provider in the United States, will enable the Burlington-based hospital to continue to offer a crucial service for patients.

Representatives of the Vermont Federation of Nurses and Health Professionals, however, say the sale could mean reduced quality of care for patients and decreased wages for hospital workers.

Fresenius is in the process of applying for approval from the state to purchase the clinics. The nurses’ union is concerned about public input in the state approval process. Act 48, passed in the last legislative session, eliminated the Public Oversight Commission. In the proceeding, commissioner Steve Kimbell opted not to pose questions to Fresenius offered by the union, according to BISHCA documents.

In 2010, Fletcher Allen publicly announced it would sell five clinics to Bio-Medical Applications of New Hampshire, Inc. — a subsidiary of Fresenius Medical Care North America. Fresenius has more than 2,700 kidney dialysis clinics on five continents, and 1,823 clinics in North America, according to the company’s website. In the United States alone, Fresenius has 45,000 employees. Its revenues exceeded $12 billion in 2010.

Fletcher Allen operates six dialysis facilities. It will sell all but the clinic located on the Medical Center Campus in Burlington.

Dialysis is a treatment for patients with kidney failure. A machine removes extra fluid and wastes from the body by constantly moving blood through a filter. The filter, known as a dialyzer or artificial kidney, is used with a dialysis machine. It removes blood from the patient’s body in small amounts, runs it through the filter, and then returns it. The process is time-consuming and not always pleasant. Patients generally receive the treatment several times a week.

One former dialysis patient, who asked not to be identified for this story, said “basically what happens is you sit there from one to four hours with two needles in and out of your arms.”

“It’s not a very dignified process at all,” he said.

Because of the uncomfortable, sometimes demeaning nature of dialysis, he said, the comfort and warmth that providers offer is important. Staff at a Fletcher Allen facility “were some of the most caring, hard-working, comfort-giving people that I’ve met.”

Why sell?
In June, Fresenius filed a 100-page application for a “Certificate of Need” through the Vermont Banking, Insurance, Securities and Health Care Administration to buy the five centers.

The documents highlight the anxiety of citizens’ groups and nurses; they also underscores Fletcher Allen’s resolve to move the project forward. A review of all documents and communication filed with the state about the project show how the deal will benefit Fletcher Allen and other hospitals. The correspondence also includes emails from citizen’s groups and the nurses’ union, both of which have serious doubts about the efficacy of the spinoff.

Fletcher Allen has been operating the units at a loss. In 2009, the clinics lost $2 million, according to the first press release announcing the proposed deal.

“We lose money each year on it,” said Mike Noble, a spokesman for Fletcher Allen.

Aerial view of the Fletcher Allen Health Care campus. Photo courtesy of FAHC.
Noble said Fresenius’ size and unique focus on dialysis will enable the clinics to make money. Noble said the units will keep as much existing staff as they can.

“The idea was to make the transition for the patients easy,” he said.

Fletcher Allen’s asset purchase agreement with Fresenius states that the company “shall offer to employ, starting on the closing date, the employees currently employed at the clinics who have direct patient care responsibilities” subject to “acceptance of new terms and conditions of employment, including new compensation and benefits and employment policies.” They also have to pass a drug test.

Under the agreement, Fresenius also agrees to offer “at least substantially” all of the same dialysis services currently offered at each clinic in its current location or within five miles for 10 years.

Jane Kramer, a spokeswoman for Fresenius, emphasized the company’s commitment to quality and said that the certificate of need proposal ensures that very little would change. The medical direction would remain the same, and the units would offer the same service and keep the same hours and clinical staffing.

“We hold ourselves to a very high standard, and we are regulated by various agencies,” Kramer said.

Kramer said the company is cognizant of local concerns that a large company is going to provide a service that was previously offered by a nonprofit health care organization. Fresenius is a subsidiary of Fresenius Medical Care AG & Co. KGaA, a German partnership. The company’s web site boasts a list of achievements in quality of care and patient safety. The company started in New England under the name National Medical Care before it merged with Fresenius in 1996.

Fresenius currently operates outpatient dialysis clinics in St. Johnsbury and in Lebanon and Lancaster, N.H., in collaboration with Dartmouth Hitchcock Medical Center. It also provides services within the Veterans’ Administration Hospital in White River Junction, and the company owns and operates clinics in Concord, Londonderry, Rochester, Keene and Exeter, N.H.

Fresenius’ track record led Fletcher Allen to pick the company out of four dialysis providers that submitted proposals, according to a statement submitted to BISHCA by Interim President and CEO of Fletcher Allen Health Care John Brumsted.

“The clinical outcomes of the Fresenius programs, in my opinion, are at least comparable to Fletcher Allen’s clinical outcomes,” Brumsted wrote.

According to its statement to BISHCA, Fletcher Allen based its decision in part on statistics from the Centers for Medicare and Medicaid Services (CMS) 2010 Dialysis Facility Reports compared with a sample of 12 Fresenius dialysis sites in locations with similar population profiles and conditions.

According to CMS data for 2006 to 2009, the “all patient” death rate for Fletcher Allen Dialysis Clinics was 22.2 deaths per 100 patient years compared with 22.3 deaths per 100 patient years for the surveyed Fresenius clinics. The national average was 20.3. Other indicators of long-term survival rates for dialysis patients, like measuring Hemoglobin (the proteins that carry oxygen from lungs to the rest of the body), showed Fresenius was above the national average. According to CMS statistics, 91 percent of Fletcher Allen patients and 83 percent of Fresenius patients were within the desired range. The national average is 80.9 percent.

It’s not unusual for an academic medical center to sell its dialysis services to a private corporation, according to documents from Fletcher Allen. Data gathered by a consultant for Fletcher Allen showed academic medical centers currently comprise only 1 percent of the dialysis market share in the United States. Hospitals comprise only 5.2 percent of the market according to the same study.

Dartmouth-Hitchcock entered into a similar agreement in 2005 and offered its support in a letter to BISHCA this summer. The letter, signed by Dartmouth-Hitchcock Health President Thomas Colacchio calls Fresenius an “excellent partner.” The letter says annual patient satisfaction surveys show concerns and complaints were met, and hospital staff was satisfied with the transition.

Vermont hospitals have expressed support also. Claudio Fort, President and CEO of North Country Hospital in Newport, said the transaction would be a good thing for patients in the Northeast Kingdom. There was no local dialysis for people in Newport until 2006. People drove several hours a day, three days a week, to get the service at Fletcher Allen or Dartmouth-Hitchcock.

“Their whole life revolved around going to dialysis,” Fort said.

For patients who had to travel three days a week, 52 weeks a year, a local dialysis clinic was a “godsend,” Fort said. If it comes down to having a for-profit offer the service and not having the service at all, Fort said he prefers the for-profit. He said his executive team has worked with Fresenius, who currently has a clinic in St. Johnsbury, and found they offered high quality service.

“Quality health care is quality health care,” Fort said, whether it is offered by a nonprofit hospital or a for-profit company.

Critics of the For-Profit Model
Not everyone has been so thrilled with the prospect of Fresenius taking over the five outpatient clinics.

On July 12, the Vermont Federation of Nurses and Health Professionals filed a request for interested party status in the certificate of need process. The organization represents the 60 nurses and technicians who provide direct patient care in the clinics Fresenius plans to purchase.

“We have serious concerns with the way Fresenius operates dialysis clinics and are worried how this may adversely affect our jobs and the patients we serve,” the letter states.

The letter cites concerns over staffing levels, anemia control measures, mortality rates and changes in standards on how “clean” blood gets in the filtration process. The letter cites a 2002 study that compares mortality rates between private for-profit hemodialysis centers and not-for-profit centers. The study, which was published in the Journal of the American Medical Association, examined more than 500,000 patient years worth of data (patient years means all the years patients participate in a study) and found that hemodialysis care in private not-for-profit centers is associated with a lower risk of mortality compared with care in private for-profit centers.

A later study in the journal Health Sciences Research found patients treated at dialysis clinics run by the largest U.S. for-profit chains have a higher risk of death than patients treated by the biggest nonprofit chain. Patients at the largest for-profit chain were found to have a 19 percent higher risk of death than patients receiving care at the nonprofit; at the second-largest chain, the risk was 24 percent higher.

We’re saying: how do you get a for-profit business that is answerable only to its shareholders, not the public, to be accountable to the community?”
- Peg Franzen
According to an article by the news Web site ProPublica, Fresenius and another company, DaVita, Inc. controlled two-thirds of the national market in 2010. An official for DaVita pointed out in the article that the unflattering 2010 study “examines seven-year-old data, and significant changes in the way dialysis care is delivered have been made in the more than half a decade since, with continued overall improvement in patient outcomes.”

In Vermont, the Fresenius facility in St. Johnsbury ranks better than the Fletcher Allen clinics in mortality rates per 100 patient years, according to statistics from the Centers for Medicare and Medicaid Services numbers compiled by ProPublica. The St. Johnsbury facility ranks lower for Hemoglobin levels than the five Fletcher Allen facilities that will be purchased.

Fletcher Allen’s facility at its Medical Center Hospital of Vermont Campus, which will not be sold, showed surprisingly high rates of mortality, according to these same statistics — which were highlighted in a story by Shay Totten in the weekly publication Seven Days earlier this year. These numbers, Fletcher Allen representatives say, could be skewed because many dialysis patients suffer from other conditions of which kidney failure is a secondary symptom.

Mari Cordes, president of the Vermont Federation of Nurses and Health Professionals, said the sell off to Fresenius could pose problems for workers and patients alike.

“In general, we are very concerned about two primary things: quality of care for patients and patient safety,” Cordes said.

She said part of the quality of care patients receive depends on nurses and technicians having what they need to do their jobs, which translates to fair wages and working conditions.

Another worry Cordes said, is company protocols that could affect patient care.

“The Fresenius model is quite inflexible to the needs of patients,” she said.

One specific concern, Cordes said, is the specific “run times” or length of treatments that patients will receive. During treatment, patients are connected to a dialyzer, which actually filters the patient’s blood. Some patients can tolerate three hours, others longer. Some are better with two sessions a week rather than three. Cordes said treatment flexibility and adequate staffing levels are crucial to quality patient care.

Staffing levels prior to news of the takeover were one nurse and three technicians to nine patients. This ratio changed after news of the pending sale to one nurse and two technicians per eight or nine patients — a ratio the union considers unsafe.

Request for party status fails
While the nurses’ union received interested party status in the proceeding, another group, the Vermont Workers’ Center did not. The center requested status based on its representation of thousands of working Vermonters.

A week later, the Burlington law firm Primmer, Piper, Eggleston and Cramer (representing Fresenius), filed a memorandum in opposition to Workers’ Center request.

A day after the memo was filed, BISHCA denied Vermont Workers’ Center status because it had not identified the requisite financial or business interests that rise to the “substantial interest” required for interested party status under its regulations.

Peg Franzen, with the Vermont Workers’ Center, said she was concerned about the fact that a for-profit corporation will be operating the service.

“We’re saying: how do you get a for-profit business that is answerable only to its shareholders, not the public, to be accountable to the community,” Franzen said.

Patient receiving dialysis. Photo by Queco Jones.
She said the sale “flies in the face of the principles of Act 48 of transparency and participation,” Vermont’s new law which sets the state on a path toward universal health care.

Some nephrologists, doctors who study kidney functions and disease, are skeptical of the for-profit model as well.

Dr. John Sadler, CEO of the Independent Dialysis Foundation and retired Head of the Nephrology Division at the University of Maryland School of Medicine, has been studying kidney disease for more than 40 years. He said Fresenius tries to provide good care, and often times they do. However, the for-profit model concerns him.

In nonprofit clinics, health care providers have a duty to put their patients first. With for-profit centers, corporations have a duty to create profits for their shareholders which sometimes means patients come second, and “I don’t think that’s a good thing,” Sadler said.

He said the large market share held by the two largest dialysis companies is “a little frightening to me.”

Sadler said it is difficult to track statistics to determine if a company as a whole is providing the best care because its clinics are not uniform throughout the country.

He said of Fresenius, “as a business, they’ve done well. As a medical entity, I’m not so sure.”

According to a 2010 quarterly report by Berenberg Bank offered in the certificate of need application, Fresenius sustained its reputation as a consistent deliverer of earnings growth, reporting strong results. Revenues worldwide were more than $12 billion that year.

An uncertain public hearing process
The Fresenius certificate of need application, the state approval process, sheds light on confusion about a new public input process.

In the past the Public Oversight Commission reviewed certificate of need applications and made recommendations to the commissioner of BISHCA. Act 48, however, eliminated the Public Oversight Commission. Now the commissioner holds public hearings at his discretion and makes the ultimate decision. He can also expedite reviews of uncontested applications.

Cliff Peterson, general counsel for BISHCA, said the change is minor since the commission did not have any decision-making authority anyway, and there will still be public hearings on major certificate of need applications.

The elimination of the Public Oversight Commission was an attempt to simplify procedures, Peterson said, and it will not substantively change public involvement in the certificate of need process. He said if there are interested parties in an application, the department will most likely hold a public hearing.

Parties in the Fresenius proceeding are concerned that the Public Oversight Commission procedures won’t apply.

Lawyers for the firm representing Fresenius sent a letter to BISHCA asking to “confirm that the format of the hearing will mirror” that of the Public Oversight Commission.

Peterson responded via letter: “There is nothing to confirm; the Public Oversight Commission no longer exists and its procedures no longer pertain.” The letter states BISHCA would send a protocol to the hearing to the interested parties.

Vermont Health Care Ombudsman Trinka Kerr appeared to be confused by the new process. In an email Kerr wrote, “My recollection is that the public oversight commission was abolished this past legislative session. However, I don’t see any changes to the statute [o]r the rules online so what is the process now? Will there still be public hearings? It’s important that this process be fair and public as contemplated by statute. I think the current state of affairs is pretty confusing to applicants, parties and the public.”

Peterson replied via email: “The Rule does not require a public hearing. In this instance the Commissioner has exercised his discretion to hold one.”

The Vermont Federation of Nurses and Health Professionals asked similar questions about the Public Oversight Commission.

The union was also shocked when it received a letter from BISHCA stating that the commissioner decided not to ask questions of Fresenius that it posed as an interested party. Under the rules, interested parties can submit proposed questions for the applicant, and the commissioner can decide whether to ask them.

Cordes, a member of the nurses’ union, is disturbed by the uncertain public participation process. She is also worried about the amount of input the public will have in the hospital budget review process as well.

At the Nov. 14 public hearing, Fresenius will try to demonstrate to BISHCA that it will contain or reduce the increases in the cost of treatment delivery, while at the same time maintaining and promoting quality care services.

The Fresenius deal is not a sure thing yet, and Peterson said he could not speculate when the department will make a decision whether to approve it. The company filed its certificate of need application with the state on June 22, 2011. BISHCA closed the application period on Oct. 7. BISHCA is currently in the process of determining whether to approve the application.

The public hearing will be held in the BISHCA third floor conference room at 89 Main St., Montpelier.