By George Stahl and Joseph Walker
Kidney dialysis centers owned by DaVita Healthcare Partners Inc.
(DVA) and Fresenius Medical Care AG (FMS, FME.XE) could receive
9.4% less in Medicare payments, starting in 2014, based on new
rates proposed by the federal government.
News of the possible rate cuts, which came late Monday, sent
shares of DaVita falling 8.4% to $111 in after-hours trading and
shares of Fresenius down 3 cents to $35.47. While lower rates were
expected from the Centers for Medicare and Medicaid Services, the
proposed reductions were higher than some expected.
The proposed rates are open to public comment until Aug. 30,
with a final ruling expected later this year.
Based on government reports, Medicare for years has overpaid for
the anti-anemia drugs used in the treatment of kidney dialysis
patients. One recent estimate said Medicare paid $529 million more
than it should have in 2011 for the drugs made by Amgen Inc. (AMGN)
and others.
As a result, lawmakers have tried to rein in the costs of those
drugs. In 2011, the drugs were included in the "bundle" payment
given to dialysis centers, a lump sum that includes the costs for
all dialysis services.
In addition, CMS was expected to propose a new payment rate by
this summer that will go into effect next year. The reductions are
projected to save Medicare $4.9 billion over 10 years, according to
the Congressional Budget Office.
Dialysis providers such as DaVita and Fresenius, however, have
argued costs for the drugs and other services have increased
dramatically in recent years, and the new payment rate should
reflect those changes. Otherwise, they say, the cuts could result
in diminished services for dialysis patients.
Anemia drugs, primarily Amgen's Epogen, accounted for 73%--about
$2.2 billion--of the dialysis program's drug costs in 2010,
according to a government report.
Write to Joseph Walker at joseph.walker@wsj.com and George Stahl
at george.stahl@wsj.com
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