Trump Targets Dialysis, Kidney Transplants in Care Overhaul

(Bloomberg) -- President Donald Trump will announce an overhaul of the U.S. approach to care for people with kidney disease on Wednesday, an effort intended to move more patients out of costly dialysis centers and increase transplants.

Trump will direct Medicare to adjust payments for treatment of kidney disease to encourage patients to undergo dialysis at home, a person familiar with the plan said. Administration officials hope his proposal will also produce an additional 17,000 kidney transplants a year, the person said.

Trump on Wednesday will sign an executive order on “advancing kidney health,” the White House said Tuesday night.

Dialysis providers sank after reports on the plan. DaVita Inc. fell 5.3% Tuesday in New York, the most since May 29. American Renal Associates Holdings Inc., based in Beverly, Massachusetts, slid 9.6%.

German rival Fresenius Medical Care AG said in a statement that it has been working for years on initiatives to expand access to home dialysis, transplantation and new models of value-based care for chronic kidney disease, and looks forward to hearing the administration’s proposals. The shares were little changed in Frankfurt.

“Any drive to increase home dialysis rates should be a positive for Fresenius Medical Care,” Tom Jones, a Berenberg analyst, said in an email, pointing to , the company’s acquisition of NxStage Medical for $2 billion in February. Part of the rationale for the purchase was “anticipation of greater home dialysis use,” he said.

The administration’s plan will also encourage earlier diagnosis of kidney disease, prevention, and the development of artificial kidneys, the person said. Medicare, the program for the elderly and disabled, pays for most treatment of kidney failure, also known as end-stage renal disease. The program spent more than $62,000 per ESRD patient in 2013, according to a 2018 report by the Congressional Research Service.

“The prospect of losing patients who cover facility and staffing costs would crimp Ebitda near term, though an official proposal has yet to be made,” Bloomberg Intelligence analyst Jason McGorman wrote in a note earlier, addressing the potential impact on DaVita.

Sell-side analysts have warned investors that Trump’s speech may bring some volatility for dialysis providers. Raymond James analyst Chris Meekins predicts the president could announce a goal of having 80% of kidney patients either receive a kidney transplant or use home dialysis by 2025.

When asked about Trump’s upcoming announcement, the Department of Health and Human Services pointed to a speech Secretary Alex Azar gave in March that emphasized the need for earlier detection of kidney disease to allow for more in-home dialysis.

Azar said at the time that 12% of Americans with ESRD start treatment with at-home dialysis, compared to 80% in Hong Kong. He also focused on reorienting the payment system so dialysis companies would not be discouraged from helping patients get a transplant.

Barclays analyst Patrick Feeley said that the Trump administration is likely to echo these proposals. He doesn’t view them as a threat to the industry, and expects the established dialysis providers to benefit from any increase in home care.

Providers have been targeting growth in home dialysis. CVS Health Corp. also plans to enter the field. The company said it is working to start the final study of its home hemodialysis device soon.

Peter Grauer, the chairman of Bloomberg LP, is the lead independent director at DaVita.

--With assistance from Anna Edney and Tim Loh.

To contact the reporters on this story: Tatiana Darie in New York at tdarie1@bloomberg.net;Jennifer Jacobs in Washington at jjacobs68@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, John Lauerman, Eric Pfanner

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