Background
Most Dialysis Patients Receive Treatment in Clinics. Individuals with kidney failure may receive dialysis treatment at hospitals or in their own homes, but most receive treatment at chronic dialysis clinics (CDCs). As of May 2018, 588 licensed CDCs in California provided treatment to roughly 80,000 patients each month. Each CDC operates an average of 22 dialysis stations, with each station providing treatment to one patient at a time. The California Department of Public Health (DPH) is responsible for licensing and inspecting CDCs. Various entities own and operate CDCs. Two private for-profit entities (DaVita, Inc. and Fresenius Medical Care) operate and have at least partial ownership of the majority (72%) of CDCs in California.
CDCs have total estimated revenues of roughly $3 billion annually from their operations in California. These revenues consist of payments for dialysis treatment from a few main sources:
-
Medicare
-
Medi-Cal
-
Group and Individual Health Insurance
Group and individual health insurers typically pay higher rates—as much as multiple times more—for dialysis than government programs.
Proposition 8 Proposal
Requires Clinics to Pay Rebates When Total Revenues Exceed a Specified Cap. Beginning in 2019, the measure requires CDCs each year to calculate the amount by which their revenues exceed a specified cap. The measure then requires CDCs to pay rebates (that is, give money back) to payers, excluding Medicare and other government payers, in the amount that revenues exceed the cap. The more a payer paid for treatment, the larger the rebate the payer would receive.
The revenue cap established by the measure is equal to 115 percent of specified "direct patient care services costs" and "health care quality improvement costs. In addition to paying any rebates, CDCs would be required to pay interest on the rebate amounts, calculated from the date of payment for treatment.
Source: LAO Analysis of Proposition 8
