DaVita to purchase Medical Center dialysis centers

April 21, 2010

DaVita, Inc., one of the largest companies in the United States providing dialysis services for patients with chronic kidney disease, will assume ownership, including administrative and financial management, of the University of Chicago Medical Center's three off-site dialysis centers and its home dialysis program on August 1, 2010.

University of Chicago faculty physicians will remain as medical directors of each center. Most, if not all, of the current staff, including nurses and dialysis technicians, will also remain, so patient care will not be affected. The inpatient-dialysis program, for hospitalized patients with serious kidney disease, will not be involved.

"For patients, the transition should be seamless," said Kenneth J. Sharigian, interim president of the University of Chicago Medical Center. "Over the long run, it will lead to more efficient management of dialysis services, better facilities, and the opportunity to expand the program."

The combination of University of Chicago faculty physicians and staff with DaVita's management expertise, full-time focus on dialysis, and economies of scale "should enhance care that is already well above the industry standard," said F. Gary Toback, MD, PhD, professor of medicine and section chief of nephrology at the University of Chicago. "The sale will bring new resources to the caregivers and enable the medical directors to focus on clinical and academic rather than administrative concerns."

"As a state-of-the-art dialysis enterprise, DaVita will bring our patients -- and these are still our patients -- the most technically-advanced dialysis and computing equipment to optimize their dialysis care," he added. "But they will do that under the watchful eye of the same physicians who have been taking excellent care of these patients for many years."

Outpatient dialysis is the core business for Denver-based DaVita. That means they are able to apply their extensive experience to running an efficient, high-quality operation, allowing them to invest greater resources in the physical facilities of each dialysis center.

The Medical Center has declined previous offers to purchase the centers, choosing instead to wait for the right time and the optimal partner. This year, however, "that time has arrived," said Toback. "All of the factors are aligned."

One of the Medical Center's three sites, located at 8725 South Stony Island, required significant renovations, now underway, and the patients have temporarily shifted to two nearby dialysis centers. Leases for the Medical Center's two other off-site facilities -- 1146 East 55th Street and 1531 E. Hyde Park -- will expire within one to two years with no option to renew. The home dialysis program, now located in cramped quarters in the basement of the old Chicago Lying-in Hospital, also needs expanded and modernized space. It will share space in a new location with the current 55th-Street facility, which will move in 2011.

At the same time, Medicare, the federal health insurance program for the elderly and disabled, which covers 80 percent of patients receiving chronic dialysis, is preparing to restrict reimbursement for dialysis, making it difficult for smaller programs such as the Medical Center's to remain competitive.

This has accelerated the trend away from small, hospital-affiliated centers toward large, specialty corporations such as DaVita, one of two companies that now dominate the U.S. dialysis market. In the last five years, the majority of free-standing dialysis centers have been established by corporations, not by hospitals. The number of such centers increased from 3,394 in 1998, to 4,957 in 2008.

DaVita works with many academic medical centers, including Johns Hopkins University, the University of Pennsylvania and UCLA. It brings system-wide management tools, enormous purchasing power and vast experience. The Medical Center manages about 450 dialysis patients; DaVita manages nearly 120,000, about one-third of all dialysis patients in the United States. It has 15 freestanding dialysis centers in the Chicago area and relationships with more than 35 local hospitals.

For dialysis patients, both the University of Chicago and DaVita offer superior programs, with annual mortality rates that are significantly better than the U.S. average of 20 percent. For the University of Chicago's four units, average annual mortality is between 14 and 15 percent.

The need for dialysis services on the South Side of Chicago "can only increase," said Toback. The trend toward sedentary lifestyles combined with high rates of hypertension and diabetes means "we can expect a tidal wave of end-stage renal disease" in the near future, he said. "The combination of DaVita's management expertise and resources with our physicians' clinical skills will help us prepare for that future."

The Medical Center and DaVita have arranged for UCMC's outpatient and home dialysis staff, administrators, dialysis technicians and nurses, about 90 people, to be able to apply for corresponding jobs at DaVita, with the expectation that most, if not all, of them will be rehired. The Medical Center also will subsidize their salaries for the first year, if necessary, to equal their salaries at the time of the sale.

DaVita has an excellent record as a place to work. Modern Healthcare selected it as one of the 100 Best Places to Work in Healthcare. It has been one of Fortune's World's Most Admired Companies for the past five years (2006-2010). Newsweek magazine listed DaVita as one of the greenest companies in America for 2009.