John D. Sullivan
Boston University, USA
Title: The State of kidney failure in the United States in 2018
Biography:
Dr. Sullivan is an expert in health care policy, finance, and asset valuation. Prior to joining Boston University, he worked for Fresenius Medical Care, completing the acquisitions of over one hundred health care companies with an estimated value of over $5 billion. In 2008, Sullivan co-founded Reliant Renal Care with private equity funding. He has provided strategic guidance for many of the largest health care organizations in the United States. Sullivan presently teaches mergers and acquisitions, corporate finance, investments, and financial markets and institutions.
Abstract:
End Stage Renal Disease (ESRD) impacts the lives of over 700,000 American patients (including transplant recipients) and their families and costs United States taxpayers approximately $32.8 billion in annual Medicare expenditures. Spending continues to rise each year, likely due to an increase in various comorbid conditions which contribute to ESRD, including diabetes and hypertension in the context of an aging population. In 1972, President Nixon created an ESRD program in response to ‘God panels’ that were tasked with determining a patient’s eligibility for hemodialysis based on their social worth, since dialysis was seen as too costly to perform universally for all patients with ESRD. Unfortunately, the government grossly underestimated the future cost of this program, since it assumed that most patients who are medically suitable for dialysis are under age 54 with few if any comorbidities and that only one in five ESRD patients are eligible for dialysis. In hindsight, it was an altruistic but economically infeasible plan. In addition, while this program provides funding to the Center for Medicare Services (CMS) to treat patients under 65 with ESRD, it doesn’t help defray the cost of disease prevention. Medicare spends $32.9 billion per year on the treatment of ESRD but only $564 million annually on research geared towards the prevention and treatment of kidney disease. In contrast, in 2015 the NIH had a $3 billion research budget for the study of HIV/AIDS. As a result, there hasn’t been a significant improvement in dialysis delivery systems over the past four decades.
The payment structure for dialysis therapies remains complex, with Medicare bearing the brunt of the responsibility. Upon initiation of dialysis, if a patient is already a Medicare recipient, Medicare becomes the primary payer for dialysis service and covers approximately 80% of the cost, leaving supplemental insurance to cover the balance. For those who only have private employer-based insurance, their insurance is the primary payer for the first 33 months of care (a.k.a. the ‘waiting period’), after which time they are eligible for Medicare. Private insurance companies typically reimburse dialysis organizations at a significantly higher rate than Medicare or Medicaid. Therefore, it is during the waiting period that the dialysis organizations accrue the most financial benefit. Without employer insurance, a gap in payment would exist until the patient moved over to Medicare insurance after the standard waiting period.