A global dialysis service corporation withdrew its bid to purchase outpatient clinics owned by the state’s largest hospital on Monday. Fresenius, the parent company of Bio-Medical Applications, withdrew its application in a letter to the state on Monday.
The decision was issued on the same day that Fletcher Allen Medical Care officials told the state they would not object to a proposed decision by Steve Kimbell, the commissioner of the Department of Banking, Insurance, Securities and Health Care Administration, to block the sale of outpatient dialysis clinics to the for-profit company.
On Dec. 1, Kimbell issued a proposed decision denying a certificate of need for a for-profit company, Bio-Medical Applications of New Hampshire, to buy five outpatient renal dialysis clinics from Fletcher Allen Health Care.
John Brumsted, interim president and CEO of Fletcher Allen Health Care, said “We’re suggesting a face-to-face meeting to see if we can just explore innovative solutions to see if we can make this sustainable for the long term for all Vermonters.”
The hospital has said it is losing money on the service. Fletcher Allen’s letter states that it will apply promptly to adjust its budget (which BISHCA approved) and increase its charges.
More than one year after Fletcher Allen announced its decision to sell off its dialysis units, the legal process for determining whether the spin-off could go forward is over.
“Bio-Medical’s decision to withdraw closes the docket in this matter,” Clifford Peterson, BISHCA’s General Counsel said in a written statement. “The Department will work with Fletcher Allen to assure continued delivery of high quality outpatient dialysis treatment to Vermonters.”
In sum, Commissioner Steve Kimbell’s proposed decision denied the application by the for-profit company on the grounds that the sale would result in lower quality services at higher cost without any improvement in access to care.
Kimbell’s decision cites an increase of $6 million over current charges to commercial payers in the first year of operation if the sale were to go through. The entire transaction would have totalled more than $28 million with $26 million going to Fletcher Allen. Kimbell proposed, instead, that the hospital raise its charges by $1.8 million, which would cover losses and provide a surplus. Fletcher Allen stated in a press release in 2010 that it had lost $2 million on the five units in the year leading up to the sale.
Brumsted said 90 percent of payment for dialysis services comes from the feds through Medicare. That leaves 10 percent paid by commercial payers. He said shifting that share of the costs for dialysis to private payers is not feasible.
“It would be very difficult as a provider of all health care services for us to just segregate out that piece of the reimbursement puzzle and raise the rates so we would get enough revenue out of that to make up for the shortfall,” he said.
Kimbell’s proposed decision also criticized Fletcher Allen for only agreeing to maintain the current level of care at the clinics, rather than improving it as the statute requires. It highlighted sworn testimony submitted by Fletcher Allen as to the quality of Fresenius’ services that showed Fletcher Allen scored higher on each key quality measure.
“To sell facilities to a buyer who — by the seller’s own data — scores lower on key quality measures is not an improvement, nor does it give reason to believe key quality measures will even be maintained,” the proposed decision reads.
Brumsted’s letter points out that other quality measures not mentioned in his original statement show Fresenius scored higher than Fletcher Allen.
Despite the hospital’s frustrations, Brumsted said, “First and foremost, what we want is what everybody wants and what’s most important, and that’s that Vermonters have access to high quality dialysis services going forward.”
He said in the near term, the hospital would continue to provide dialysis services. For the long term, Brumsted said, he could make no guarantees since the hospital needs to make the service financially sustainable.
Other regional hospitals offered both statements and live testimony supporting Fresenius’ certificate of need application.
The law firm representing Fresenius in the proceeding, Primer, Piper, Eggleston and Cramer, took the opportunity in its letter withdrawing the certificate of need application to address what Fresenius saw as an unprecedented standard.
Anne Cramer, an attorney with the firm, said there are not a lot of acquisition certificates of need in Vermont, but in the past, they have dealt with the need for the service as opposed to the need for the sale, as Kimbell’s decision does.
The letter says Kimbell’s interpretation of “need” is “completely without precedent and apparently sets a new standard for obtaining a favorable decision.”
BISHCA’s general counsel sent a letter acknowledging the withdrawal. The letter states that to the extent the letter goes beyond withdrawal, it is not part of the record.
When Fresenius begrudgingly withdrew its application, the local nurses’ union cheered the end of the proceeding.
“We’re relieved we can now turn our energy and resources back to providing high-quality patient care,” said Mari Cordes, president of the Vermont Federation of Nurses and Health Professionals.
BISHCA had granted the union interested party status in the proceeding. In its application for that status the union expressed serious concerns about the way Fresenius and other for-profit providers operated dialysis clinics.
Numerous studies and news reports have highlighted trends in increased mortality rates in for-profit dialysis centers. Representatives for for-profit dialysis companies have called at least one study into question.