Davita looks abroad for growth

Modern Healthcare - - The Week In Health­care - Jaimy Lee

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.”

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