Davita looks abroad for growth
DaVita’s appointment of market leaders in Europe and Asia is the first step of the dialysis provider’s long-term strategy to tap into underserved global markets.
Although the Denver-based company has 1,669 clinics in the U.S., its operations outside U.S. borders are limited to only four clinics, three of which are part of a joint venture with NephroLife that was formed this year in India.
“It became clear to us,” DaVita Chief Operating Officer Dennis Kogod said, “that there is a void today in terms of pure-play dialysis providers.”
The expansion is part of DaVita’s longterm strategy, in which the company seeks to establish clinics in what it considers the “right countries.” Kogod said that while the company plans to expand into Europe, it will not set up clinics in each country.
Last week, DaVita said it hired Bjorn Englund, 49, to lead the European market effort. Englund most recently worked for International Dialysis Centers, which was acquired by DaVita rival Fresenius Medical Care in January. Atul Mathur, 55, was named head of the company’s operations in Asia. Mathur will be based in Singapore, where DaVita established its first Asia-Pacific clinic this year.
DaVita’s view of its impact on the Asia market is markedly different than its strategy for Europe. Kogod said the company aims to work with governments and payers as dialysis becomes a covered disease state and they establish reimbursement policies.
Fresenius Medical Care and DaVita make up a combined 65% of the dialysis market in the U.S. Fresenius, which is based in Bad Homburg, Germany, has 2,700 kidney dialysis clinics worldwide, with 1,800 of the clinics in the U.S.
Moody’s Investors Service analyst Ron Neysmith said DaVita’s international expansion will not make a material contribution to the company in the near term. The global expansion “is so small that it wouldn’t offset anything at this stage,” he said.
In the U.S., modifications in the way Medicare pays for the treatment of end-stage renal disease are likely to negatively affect the company’s revenue. Earlier this year, the CMS shifted to a bundled payment system. Kogod said DaVita’s decision to pursue new opportunities abroad is not a response to declining prospects stateside.
Acquisitions are one way that DaVita expects to build its international operations, according to its annual filing. Meanwhile, the company still faces challenges growing its 30% market share in the U.S.
“Acquisitions, patient retention and medical director retention are an important part of our growth strategy,” the annual report said. “Because of the ease of entry into the dialysis business and the ability of physicians to be medical directors for their own centers, competition for growth in existing and expanding markets is not limited to large competitors with substantial financial resources.”