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The two dominant national dialysis companies are positioning themselves to profit from the growing market in Southern Arizona.

The prevalence of kidney disease, which can eventually lead to renal failure, is rising because of the large number of elderly people, Hispanics and American Indians here. Those populations are especially vulnerable to diabetes and high blood pressure, the main causes of kidney disease.

DaVita Inc. and Fresenius Medical Care are the leading for-profit providers of dialysis, the life-extending blood filtration treatment. Both arrived in Tucson in the last three years and have strategically chosen sites to reach the most patients. Both plan to add centers.

The growing competition is leading to a battle of services that can benefit consumers, said Kenneth Futch, DaVita's regional operations director.

To attract customers, dialysis centers are offering more comfortable chairs, along with Internet access and televisions with cable. And with additional centers, it's more likely that a patient will find one at a convenient location.

"Basically you have the same size pie, but you're cutting it into more pieces," Futch said.

Need, business growing

The companies treat hundreds of thousands of patients in the United States and generate billions of dollars in revenue.

As of June 30, Fresenius was treating 179,000 patients worldwide, nearly 124,000 of those in North America, says its second-quarter report for 2008. Its profit for the quarter was $211 million.

DaVita has more than 109,000 patients, its June 30th quarterly report says, and its Web site lists locations in 43 states. Profit for the latest quarter was more than $201 million.

There are 13 dialysis centers in Pima County, two in Cochise County and one in Santa Cruz County. The first two opened in Pima County in 1976, and it took nine years for the next one to open, says the Arizona Department of Health Services.

Now, the number of people with kidney disease is growing quickly, and the number of clinics is growing along with it. In the past two years, four dialysis centers opened in Pima County and one opened in Cochise County.

More clinics planned

Fresenius came to Tucson in November 2007 and has two dialysis clinics, one at 6261 N. La Cholla Blvd. and one at 100 W. Grant Road. It plans to open clinics at 1430 W. Valencia Road and 2802 S. Sixth Ave., once it has necessary approval, said Tammie Gideon, regional vice president for Tucson.

DaVita arrived in 2005 when it bought medical company Gambro and its Tucson dialysis centers. The company has six locations in Pima County and plans to open two more, Futch said.

Competition for patients is most intense on the West Side, Futch said, and centers there have room for more patients.

"My clinics are mostly full," Futch said. "But Fresenius is building brand new centers, and they're going to want to fill those."

There's a demand for additional centers on the East Side, so DaVita plans to open two in that part of town, he said.

Treatments are costly

Kidneys filter toxins from the bloodstream to create urine, help regulate blood pressure and play a vital role in red blood cells' ability to carry oxygen.

When kidneys fail, patients need dialysis or a kidney transplant to survive. Most patients receive dialysis in Medicare-certified health-care centers, though some do fluid exchanges at home to clean their blood.

Treatment is costly. Medicare spent $21 billion on end-stage renal disease in 2005, which was 6.4 percent of its $330 billion budget, says the U.S. Renal Data System's 2007 annual report. That same year, dialysis treatment costs averaged $65,405 per patient, the report says.

Dialysis patients often have other health complications that can push Medicare costs even higher, said Susan Price, CEO of the Arizona Kidney Disease & Hypertension Center, a network of kidney specialists.

Medicare, the federal health insurance plan for those 65 and over, pays for most dialysis treatments, even for those younger than 65. So companies that provide the care must work within the confines of a revenue stream dictated by Medicare reimbursement. Private insurance pays the bill until patients become eligible for Medicare, which can take up to 30 months.

Medicare reimbursement often doesn't cover the cost of treating patients, so providers depend on private insurance providers to make up the difference, said Futch, of DaVita.

"Our profit comes from the few commercial patients we have," he said.

In 2007, 6,747 Arizonans were on dialysis, a number that has climbed 38 percent since 2000, says the Intermountain End-Stage Renal Disease Network Inc., which collects data for Medicare.

Of those patients, 30.3 percent were Hispanic and 17.3 percent were American Indian, the network says. For most — about 54 percent — their primary diagnosis was diabetes.

Medicare payments key

While their profit comes from private insurance reimbursement, most of the money coming in hinges on Medicare.

The companies only get reimbursed for "allowable costs," said Kathleen Smith, Fresenius' vice president of government affairs. They also provide only one service, which makes them unique in the health-care business, Smith said.

Private insurance companies base their reimbursement on what Medicare pays, an amount that has gone down over the years, Price said. "So the government, what they've done is, they said, 'This is how much we can pay you, but this is all you're getting,' " she said.

That means dialysis companies constantly negotiate rates with insurance providers, and the concern is whether private payers will want a rate closer to Medicare's, Futch said.

There are new challenges, too.

The centers get reimbursed for some prescription drugs, one of which is Epogen, which many nephrologists call a "wonder drug." Kidneys play a vital role in red blood cells' ability to carry hemoglobin. Without hemoglobin, oxygen levels in the bloodstream fall and patients can get anemia. Epogen boosts oxygen in the bloodstream and keeps patients from needing blood transfusions.

But recently there's been concern that nephrologists, or kidney specialists, over-prescribe Epogen to increase Medicare reimbursements. Because of those concerns, Medicare won't pay for Epogen if hemoglobin levels are too high after a few months, Futch said.