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Dialysis clinics reap big profits, W.Va. Health Care Authority finds

WASHINGTON – Profits in state kidney dialysis clinics have left those in other sectors of the health care industry in the dust, according to data from the West Virginia Health Care Authority’s most recent annual report.[cleeng_content id=”296867593″ description=”Read it now!” price=”0.49″ t=”article”]

Both nationally and in West Virginia, the kidney dialysis industry is dominated by two large corporations – Fresenius and DaVita – who together control about two-thirds of the national market, according to The Economist. Fresenius, a German company, is the largest operator of dialysis clinics, and the largest manufacturer of dialysis equipment in the world.

Fresenius operates 23 clinics in West Virginia. DaVita operates 10. Several of Fresenius’ clinics were formerly operated under the name of a subsidiary, Bio-Medical Applications. There were only seven other clinics in the state as of 2011.

Economists refer to such a situation, in which a small number of firms have near-total control of a market, as an ‘oligopoly.’ Both The Economist and a scholarly paper published in the Journal of the American Society of Nephrology have characterized the dialysis market using this term. Much as in the case of a monopoly, an oligopoly is able to set prices that are well above what a competitive market would normally bear because customers have few if any alternative options for care.

Between 2009 and 20011, the state’s hospitals had average before-tax profit margins of 2.5 percent, behavioral health clinics 4.5 percent, nursing homes and home health care services 6 percent, and hospices 7 percent, according to the HCA’s annual report. Profit margins at West Virginia hospitals, which are subject to rate setting, were less than half of the national average reported by the American Hospital Association.

Dialysis clinics in the state, on the other hand, had average annual profit margins of about 27 percent, meaning that more than a quarter of payments by patients, insurers and government programs that underwrite the procedure went to bolster corporate profit margins. Total profits in the state amounted to more than $26 million in 2011, the most recent year for which data is available.

Ambulatory surgery clinics, who exclusively provide outpatient surgeries, also had very high profit margins: an average of 16 percent.

 

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