This year, California dialysis clinics — and their profits — are in a powerful union’s crosshairs.
On Nov. 6, the Service Employees International Union-United Healthcare Workers West union hopes to deliver a stinging blow with a ballot measure designed to limit clinic profits.
Proposition 8, or the “Fair Pricing for Dialysis Act,” would cap dialysis clinic profits at 115 percent of the costs of patient care, with revenue above that amount to be rebated primarily to insurers. Medicare and other government programs, which pay significantly lower prices for dialysis, would not receive rebates.
It’s been a costly campaign, suggesting high stakes for both sides. The union, which sponsored the initiative and represents over 150,000 nurses and other health care workers in California, so far has invested nearly $17 million in the effort.
Two leading national for-profit dialysis companies, DaVita and Fresenius Medical Care, dominate California’s market and are fighting back hard, contributing more than $40 million and $22 million respectively to defeat the measure. Overall, dialysis companies have raised more than $72 million to oppose the initiative.
In California, close to 70,000 patients need regular dialysis, which essentially performs the function of kidneys for patients whose own kidneys are failing. DaVita and Fresenius control 70 percent of the nation’s market. Between them, they reported more than $4 billion in operating profits last year.
Proponents say the initiative would spur clinics to reduce executive salaries, increase investment in patient care and lower the prices for patients with private insurance.
“It will allow these companies to make good profits, but not the obscene profits they make now,” said Steve Trossman, a spokesman for the union and the “Yes on 8” campaign.
Opponents argue the issue is too complicated to be decided at the polls and that it could reduce patients’ access to care, causing the vast majority of clinics to lose money and forcing many to shut down.
Fresenius and Davita referred questions on the initiative to the “No” campaign. But in an earnings call last month, DaVita CEO Kent Thiry said the passage of the initiative in California would have mostly “unsustainable” effects on dialysis centers.
A win for the union, known as SEIU-UHW, could encourage similar efforts elsewhere, said Laurel Lucia, director of the health care program at the Center for Labor Research and Education at the University of California-Berkeley.
“The initiative addresses a national problem,” she said. “If the policy is implemented successfully here, it wouldn’t be surprising if it spread to other states.”
Similar measures pushed by the union in Ohio and Arizona did not make the ballots for this November’s election.
The initiative is part of the union’s wide-ranging campaign to force changes in the dialysis industry. In August, California legislators approved a bill promoted by the union that would have effectively capped reimbursement rates for dialysis clinics. While that was perceived as a solid victory for SEIU-UHW, Democratic Gov. Jerry Brown vetoed the measure last month.
A few years ago, SEIU-UHW began organizing among dialysis clinic workers, raising concerns about poor sanitation, high infection rates, understaffing, exorbitant prices for those covered by private insurance and other problems. The union ramped up its efforts on the ballot measure after legislative attempts to address some of the issues stalled last year.
Since 2012, the union has spent tens of millions of dollars on multiple state and local ballot initiatives in California relating to a wide range of health care issues, including access to affordable insurance, hospital and clinic funding, and training for in-home supportive services.
In 2013, for instance, SEIU-UHW launched ballot measures in California targeting hospital pricing and executive pay, and opponents accused the union of abusing the ballot process to force compliance with its demands.
According to Thad Kousser, a professor at the University of California-San Diego and an expert in the legislative process, the strategy of using ballot measures for political leverage is standard practice and not unique to SEIU-UHW. Even if the dialysis initiative is defeated, Kousser said, the effort will likely provide the union with a bargaining edge in future negotiations.
“It strengthens the union’s hand for future bargaining, even if it doesn’t win now,” Kousser said.
The union says it uses ballot measures to improve health conditions for all state residents, not just its members. “We made a decision as a union a number of years ago that in order to be successful, we couldn’t just be worried about our own members and our own narrow interests and have blinders,” Trossman said.
Nonsense, say critics.
“The spin from the SEIU-UHW is that the union is crusading for a healthier California, not trying yet again to get leverage over health-care employers,” declared an editorial last year in the San Diego Union-Tribune. “Californians with failing kidneys have enough worries. They should not be political pawns.”
The “No on 8” campaign, citing findings from the Centers for Medicare & Medicaid Services, notes that California’s clinics rate higher than those in other states on quality-of-care measures, such as avoiding unnecessary transfusions, preventing infections and maintaining proper blood levels of calcium levels.
“The ‘Yes on 8’ people talk about a crisis in dialysis and that’s not even close to being the truth,” said Kathy Fairbanks, spokeswoman for the “No” campaign.
But other research, such as a 2014 study of Medicare beneficiaries nationwide, found that patients treated at for-profit clinics had higher hospitalization rates than those in not-for-profit centers.
In June, a Colorado jury found DaVita liable for the deaths of three patients who suffered cardiac arrests following dialysis treatment, ordering the company to pay almost $400 million in damages. Witnesses had accused DaVita of failing to provide sufficient warning to doctors about the possible risks of a medication commonly used during dialysis. The company said at the time it would appeal. In 2016, Fresenius agreed to pay $250 million to resolve thousands of lawsuits involving the same medication.
In the heated battle over next month’s ballot measure, both sides have lined up many dozens of endorsements from community and statewide organizations. Proponents have strong labor and Democratic Party support. The California Medical Association, and some other medical groups, along with many veterans’ and business organizations, back the “No” campaign, arguing that the change would put dialysis patients at risk.
The “No” campaign has spent millions on television and online ads as the election nears. The “Yes” campaign has also launched an aggressive ad campaign.
Not all dialysis patients support the bill. Dialysis patient DeWayne Cox, a 55-year-old independent filmmaker and Uber driver in Sherman Oaks, said his opposition goes against his natural inclination to support labor. But he fears the mandated changes would force clinics to close and make it harder for patients like him to get dialysis.
“The thing is, I come from a union family, I believe in unions, but in this case I question their [SEIU-UHW’s] motives,” Cox said.