Fresenius Making inroads with ACOs

Dialysis provider Fresenius Medical Care has announced its second accountable care organization (ACO) arrangement. The latest deal is with ApolloMed ACO of Glendale, CA, announced in May. Fresenius will provide integrated health care management for its patients with ESRD.

As part of the agreement, ApolloMed ACO and Fresenius Medical Care will share in the operations and financial cost savings gained from the partnership. The agreement is built on the 5-year demonstration project that Fresenius Health Partners, a subsidiary of Fresenius Medical Care, conducted with Medicare beneficiaries receiving dialysis.

In April, Fresenius similarly teamed up with Heritage California ACO (HCACO) and its ESRD patients. The agreement lets Fresenius Medical Care work with HCACO to manage the overall health and coordination of care of these HCACO beneficiaries, with the goal of improving their health outcomes and reducing their total cost of care, according to Fresenius Medical Care, the world’s largest provider of dialysis services.

DaVita has been more cautious in its approach to ACO partnerships. DaVita executives said during an investor conference call in February that it wouldn’t participate in the Centers for Medicare & Medicaid Services’ new renal ACO demonstration unless the agency changed some of its rules. What were the issues? Several things: the ACO method penalizes dialysis providers who have had better outcomes in the past; there isn’t time to make an investment and see return before the ESRD bundle rebasing begins; and there are some economic penalties for larger dialysis organizations, noted DaVita, the second largest dialysis provider in the United States.

But by May 22, DaVita had announced a shift, by buying a pioneering ACO, HealthCare Partners of Torrance, CA, for $4.42 billion. The Los Angeles Times reported that HealthCare Partners, with more than 50 medical offices and 550,000 patients across southern California, has been a national leader in coordinating patient care.

“Medicare is searching desperately for ways to make the delivery system more cost effective, and groups like HealthCare Partners have been doing just that for 20-plus years, so they have particular value going forward,” said Glenn Melnick, a health economist for Rand Corporation. “But I must say DaVita comes out of left field.” The latter comment refers to the fact that most of the big buyers of ACOs have been insurers.

HealthCare Partners notes that it had $2.4 billion in revenue last year, and its operating income was $488 million, according to company documents.

July 2013 (Vol. 5, Number 7)