Prop. 8 foes top money raisers
Dialysis firms give most to fight limits on revenue
Opposition to Proposition 8, a California ballot measure that would cap revenue at the state’s dialysis clinics, has broken a record for the most money raised to support or oppose a single ballot measure in recent state history.
The opposition is being bankrolled by two of the nation’s largest dialysis companies, DaVita and Fresenius Medical Care, which have financed a vast majority of the record-high $111.4 million raised to defeat the initiative. DaVita contributed $66 million, roughly 60 percent of the total money raised, and Fresenius contributed $33 million, about 30 percent, according to campaign finance records.
By comparison, Lt. Gov. Gavin Newsom has raised about $36 million for his 2018 gubernatorial campaign
The last time a comparable amount of money was raised to oppose a California ballot initiative was in 2016, when drug companies raised $109 million to kill Proposition 61, which would have limited the amount the state pays for prescription drugs. The initiative was narrowly rejected by voters.
In 2006, Chevron and other oil and gas companies raised $94 million to defeat Proposition 87, which would have taxed oil production in California. And in 2008, Native American tribes raised $115 million to collectively back four separate but related measures — Propositions 94, 95, 96 and 97 — which allowed more slot machines in casinos operated by the tribes. The figures come from MapLight, a Berke-
ley nonpartisan organization that analyzes campaign finance data from the secretary of state dating to 2001, the first year data is available online.
The aggressive spending by dialysis providers shows just how concerned the companies are that the measure could hurt their customers and bottom line — and is a classic example of what happens when a deep-pocketed industry has the means to fight regulations that could slash their profitability.
“Once you get to this amount of money, it does seem like it’s hard to pass something if you have a $100 million campaign opposing it,” said MapLight spokesman Alec Saslow.
Prop. 8 would limit dialysis clinics’ revenue to 15 percent more than the cost of staff, medical supplies, facilities and information systems; the cost of paying managers and administrators is excluded from this calculation. Under Prop. 8, if dialysis clinics were to exceed the 15 percent limit, they would have to refund the money to health insurance companies that help pay for dialysis treatments. The initiative does not address how insurance companies, which could receive millions of dollars in refunds as a result, would have to spend the money. The changes would apply to all 588 dialysis centers in California, which treat about 80,000 patients each month.
The proposal was drafted by the health care union SEIU-United Healthcare Workers West, which has raised $20 million to secure its passage. The union tried unsuccessfully to pass legislation enacting similar revenue limits on dialysis centers, but the bill, SB1156, was vetoed by Gov. Jerry Brown in September. Critics of Prop. 8 say it is an attempt by the union, which has sought to unionize dialysis center workers, to punish the companies that resisted those efforts.
The No on Prop. 8 campaign says spending is so high because California “is a very big, very expensive state in which to campaign,” said Kathy Fairbanks, a spokeswoman for the coalition opposing the measure. “It just goes to show how disastrous Prop. 8 would be for patients and clinic viability in California . ... Dialysis providers have an obligation to their patients and their employees to defeat this terrible measure.”
But Sean Wherley, a spokesman for the union, said it is “an attempt by dialysis corporations to buy off voters and scare them, when what’s at stake here is profit.”
Even though DaVita and Fresenius have dialysis facilities all over the United States, California is a large market — representing roughly $3 billion in revenue a year, according to the Legislative Analyst’s Office. About 12 percent of DaVita’s 2,500 clinics are in California; 18 percent of DaVita patients live in the state, according to data compiled by the investment and research firm Morningstar.
Prop. 8 “is a pretty material measure for the dialysis industry in general and DaVita in particular,” said Jake Strole, a Morningstar analyst who covers DaVita, Fresenius and other companies in the health care sector.
That is in part because DaVita’s business is more reliant on providing dialysis services, whereas other dialysis companies like Fresenius have a larger international presence and maintain other lines of business such as selling dialysis products, Strole said.
DaVita reported $1.8 billion in profit in 2017, a roughly 17 percent operating profit margin. By comparison, the average operating profit margin of S&P 500 companies in 2017 was 15 percent.
Another reason behind the unprecedented No on 8 spending, some campaign finance experts say, is that the industry may want to send a message that a ballot measure arising from a labor dispute will not be successful.
“I think the industry views it as a bellwether,” said Jessica Levinson, a professor at Loyola Law School who specializes in campaign finance law. “I think there are other service sector industries that want to telegraph, clearly, this is not something that will be successful, that it will not work for workers to take their fight to the ballot . ... They don’t want this to become part of a trend.”
The most recent publicly available polling data, by SurveyUSA in October, showed that among 762 likely voters, 47 percent supported Prop. 8, 34 percent opposed it and 19 percent were undecided.