Stakeholder Theory and For-Profit Dialysis: A Call for Greater Accountability

Most patients with kidney failure in the United States are dependent on large for-profit corporations for dialysis treatments. For most patients, this care is paid for by the Centers for Medicare & Medicaid Services (CMS) through the End-Stage Renal Disease (ESRD) program, creating in essence a huge flow of US taxpayer dollars to these two corporations and their stockholders (both are traded on the New York Stock Exchange). With such a large amount of these companies' revenue derived from US taxpayers, we believe that these corporations have an obligation to the public to ensure that corporate behaviors and use of these revenues are aligned with improving health outcomes and the lives of patients.

While outcomes for patients with kidney failure have improved over the past decade, there is still room for improvement. Recent data show that there was a >25-year projected lifespan difference between men receiving dialysis compared with men in the general population and a >30-year lifespan difference among women.¹ Patients on dialysis experience high symptom burdens that negatively affect quality of life.² Access to therapies that have benefits, such as transplantation and home dialysis, varies widely, with important geographic, racial, economic, and other disparities.³ Efforts to improve outcomes have led to modest success. Models have been designed to provide financial incentives for dialysis facilities and nephrologists to improve outcomes for patients (and financial penalties for failure to do so).⁴ As of yet, these efforts have not dramatically improved the health of patients with kidney failure.

The cost of dialysis in the United States is staggering. In 2022, the Medicare program alone (i.e., excluding payments by commercial insurers) was expected to pay an estimated $8.8 billion to the owners of approximately 7700 dialysis facilities in the United States for dialysis services. With DaVita and Fresenius having a combined market share of approximately 70%–75% of all US dialysis treatments, most of these dollars go to these two for-profit corporations. For 2021, approximately 90% of all dialysis patients treated at DaVita facilities were covered under some form of government-based program, with approximately 75% covered under Medicare and Medicare Advantage Programs.⁵ US dialysis revenues represent 91% of consolidated revenues for DaVita, 68% of which is derived from US taxpayer government-based programs.⁵ Fresenius generates approximately 68% of its revenue from the United States, with the majority accounted for by CMS payments.⁶

In health care settings, corporate behaviors can conflict with the best interests of patients; we believe that a high standard for corporate behavior and investment in patient care should be placed on all such companies, and even more so upon those so largely supported by taxpayer dollars. One might ask whether these and other dialysis corporations have committed sufficient resources to improve outcomes and eliminate disparities among the patients they treat and whether they have adequately invested in dialysis innovation and research to ensure that patients receive the best care possible.

Freeman detailed the stakeholder theory of organizational management and business ethics that addresses morals and values in managing an organization and stresses the “interconnected relationships between a business and its customers, suppliers, employees, investors, communities and others who have a stake in the organization.”⁷ The theory argues that a firm should create value for all stakeholders, not just shareholders. In this case, the expectation of patients as central stakeholders should be on corporate behaviors and investments that significantly improve their quality of life and health outcomes, foster innovation, and promote home dialysis and transplantation. Clinicians, as stakeholders, should also expect investment in tools and staffing (quantity and quality) that maximize outcomes. Staff, as stakeholders, should expect fair wages, reasonable working hours, safe working conditions, and input into their work environment.

However, much of the emphasis of modern corporations is focused on increasing shareholder value through efforts to hold down labor and other costs, becoming more vertically integrated to capture as much dialysis-related revenue as possible, ensuring maximum dialysis facility utilization, closure of insufficiently profitable facilities, and through financial maneuvers such as acquisitions and stock buybacks. In recent years, there has also been migration upstream to engage patients with CKD who are not on dialysis. In 2021, DaVita had an operating income of $1797 billion, of which $407 million was invested in acquisitions and development and $1.546 billion was spent on repurchases of nearly 14 million shares of their common stock, which reduced the outstanding share amounts by 11%.⁵ Critiques of stock buybacks have included (1) that they artificially increase the earning per share and short-term stock valuations and can thus mask financial problems, and (2) companies can use buybacks as a way to allow executives to take advantage of stock option programs. Some economists argue that using excess cash to buy up stocks in the open market is the opposite of what companies should be doing, which is reinvesting to facilitate growth (as well as job creation and training) or, in the case of health care, investing to support research and programs that aim to better support patients. Consider that the current National Institutes of Health funding for kidney disease research is approximately $660 million, less than half of what DaVita spent on stock buybacks in 2021.⁸ If, for example, only 20% of dialysis corporation profits had instead been reinvested to support kidney research, it is likely that significant advances in the treatment of kidney failure could have been achieved.

Another area of concern is the large compensation packages of senior executives at these dialysis corporations. DaVita reported that their chief executive officer (CEO) received a compensation of $73.4 million as of June 2021, which includes a 5-year equity grant.⁵ The equity grant is not guaranteed, but is based on meeting specific benchmarks over time. However, other reports list his compensation at $3.29 million, which goes to the difficulty in ascertaining executive compensation that may include stock options or other incentives. The CEO of Fresenius Medical Care AG has been reported to have made €3.93 million in 2020.⁶ In both cases, it is not clear whether, or how, compensation is tied to outcomes or metrics that are important to patients, dialysis facility staff, and clinicians. Stakeholder theory would argue that CEO compensation should not be completely tied to profits and stock prices but also to outcomes of interest for all stakeholders, patients most importantly. This may be the case to some degree currently, but the metrics to which these CEOs are held accountable by their Boards of Directors are not publicly available. Just as nephrologist compensation is moving toward a larger at-risk component dependent on outcomes and improved value through processes that are highly transparent, we believe that the same approach is warranted for executives of these dialysis companies given their dependence on public payer sources.

Currently, many parts of the country are suffering from a shortage of skillful dialysis nurses and patient care technicians because of chronically low pay and difficult working conditions.^9,10 While many hospitals have grappled with similar issues, they have been much faster to increase wages and take other steps to ensure minimal disruption of patient care. By contrast, certain regions of the country have been forced to deal with abrupt closure of dialysis facilities, displacing staff and patients and disrupting continuity of care. An investment into developing a strong, sustainable, well-trained workforce by dialysis corporations is essential.

Just as hospitals and health care systems are increasingly expected or required to provide essential services and care to patients after a hospital discharge and to identify and address social determinates of health and health disparities in the patients they serve, dialysis facility owners should be expected to do the same. This might take the form of providing nutritional support, assisting with internet access, offering more home-based and telehealth services, and/or providing programs to help patients remain employed or gain new employment (and bring greater flexibility into dialysis scheduling to make it easier for patients to be employed). Of course, these programs would require careful legal and regulatory review to ensure compliance with applicable laws, but there is no doubt that much more can be done to support and improve the lives of this vulnerable patient population. Dialysis corporations are in a unique position to do so, and we believe they have a moral obligation to do so.

Thus, we advocate for a holistic look at large dialysis organizations with the lens of stakeholder theory and greater responsibility to tax payers and the patients who rely on their services to sustain life. We believe that DaVita and Fresenius must rebalance how they prioritize their stakeholders versus their shareholders, with (1) greater investment in meaningful research, education, technological advancements, and patient support; (2) more focus on developing and sustaining a highly skilled and dependable workforce across the full spectrum—patient-care technicians, nurses, social workers, dieticians, water-treatment specialists, etc.—and on creating a better environment for these individuals to perform their important work; (3) commitment of significant resources to increasing access to kidney transplantation and use of home dialysis and to addressing the social determinants of health of the patients they serve; and (4) greater transparency around compensation for CEOs and other senior executives, with compensation tied to important patient outcomes. Even a modest movement of money away from executive compensation, shareholder profits, and practices, such as stock buybacks, would markedly improve the lives of patients treated with dialysis.

No doubt some (many) in the dialysis industry will object to our comments, perhaps citing such things as fiduciary responsibilities to shareholders, declining patient volumes, rising labor costs and staffing shortages, inadequate reimbursements, anti-kickback, and other legal constraints. We sincerely acknowledge and deeply respect the hard work and outstanding care that is provided by staff in dialysis facilities all across the country every day. However, at the end of the day, DaVita and Fresenius derive most of their revenue from US taxpayers, hence owe it to those taxpayers to address the issues and societal obligations discussed.

Disclosures

J.S. Berns reports consultancy for Rubicon, Inc.; honoraria from ABIM, National Kidney Foundation, and UpToDate; and an advisory or leadership role for the American Society of Nephrology Council. E.V. Hickey reports advisory or leadership roles as President, Chair, Veterans Health Initiative of American Association of Kidney Patients (AAKP); Patient Advisory Board, Intensity of Statin Therapy in Veterans with CKD Study, Veterans Administration Pittsburgh Healthcare System; Reviewer, US Department of Defense Congressionally Medical Research Program; and Member, Project Advisory Board, The Kidney Project; and Kidney stakeholder, US Food and Drug Administration Medical Device User Fee Amendment V Reauthorization Planning Team. M.H. Rosner reports honoraria from American Society of Nephrology; serving as an Editor-at-Large for CJASN; and advisory or leadership roles for American Society of Nephrology and Data safety monitoring boards for Reata and Retrophin. The remaining author has nothing to disclose.

Funding

None.

Author Contributions

Conceptualization: Jeffrey S. Berns, Charles R. Manley, Mitchell H. Rosner.

Data curation: Charles R. Manley.

Formal analysis: Jeffrey S. Berns, Charles R. Manley.

Investigation: Jeffrey S. Berns.

Methodology: Charles R. Manley.

Project administration: Mitchell H. Rosner.

Supervision: Mitchell H. Rosner.

Writing – original draft: Jeffrey S. Berns, Edward V. Hickey, Charles R. Manley, Mitchell H. Rosner.

Writing – review & editing: Jeffrey S. Berns, Edward V. Hickey, Charles R. Manley, Mitchell H. Rosner.