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State Regulator Denies Sale of Fletcher Allen Dialysis Clinics

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State regulators Thursday preliminarily denied the sale of five outpatient dialysis clinics owned by Fletcher Allen Health Care to one of the nation's largest, for-profit dialysis providers. They claimed the sale could drastically increase rates.

The decision is not final.

FAHC and Fresenius will be able to contest the proposed decision issued by Steve Kimbell, commissioner of the Department of Banking, Insurance, Securities and Health Care Administration, at a January 18 hearing.

In his decision, Kimbell said BISHCA's analysis of the proposal found that dialysis rates would have to be increased fourfold by Fresenius in order to make the clinics profitable.

FAHC announced last year it wanted to sell off the clinics because they were losing about $1.8 million annually. Fresenius proposed to buy the clinics and run them through its subsidiary, Bio-Medical Care Holdings, based in New Hampshire.

Fletcher Allen operates five outpatient dialysis clinics, in South Burlington, St. Albans, Berlin, Rutland and Newport. They collectively serve about 241 people, with another 26 people receiving services in their homes. Had it taken place, the total sale was valued at more than $28 million.

In its application, Fresenius claimed it would need to increase its charges to commercial insurance companies by nearly $6 million over the current charges. "This is not containing increases in costs," wrote Kimbell. "It would be less costly for Fletcher Allen, which claims to be losing money on its dialysis operations, to raise its charges to commercial payors by $1.8 million, which would both cover its losses and provide a surplus."

Kimbell also claimed that Fresenius' proposal would not improve the care provided by the clinics. In several measures, Fletcher Allen clinics scored better than Fresenius in some inspection areas.

"To sell facilities to a buyer who — by the seller's own data — scores lower on key quality measures is not an improvement, nor does it give reason to believe that the current quality standards will even be maintained," wrote Kimbell. He also noted that Fresenius' own financial tables showed a roughly 20 percent decrease in the number of full-time equivalent nurses to be on staff at the clinics.

This raised "questions as to whether the patients — whose numbers are expected to increase — will receive the same attention they have with Fletcher Allen," wrote Kimbell.

Opponents of the sale cheered Kimbell's preliminary decision.

“We, including our hardworking dialysis nurses and techs, have stated publicly from the beginning our concerns that a huge, for-profit, multinational corporation like Fresenius would not be able to provide our dialysis patients with the high quality of care that Vermonters receive now, and that making profit from the medical needs of human beings violates the spirit and principles of the Vermont Health Care Reform law, Act 48,” stated Mari Cordes, president of Vermont Federation of Nurses and Health Professionals.

Another group — the Vermont Workers' Center — also weighed in publicly against the sale.

“This is a huge victory for Vermonters,” said Peg Franzen, president of the Vermont Workers’ Center which coordinates the Healthcare Is a Human Right campaign. “Fresenius, as a for-profit, multinational corporation, is accountable to its shareholders, not to the patients or communities of Vermont. Last year Fresenius made $950 million in profits. That money was taken out of the health care system and put into the pockets of investors. Vermont’s new universal health care law, Act 48, is based on human rights principles, and this sale would have undermined that law, especially the principles of full accountability and transparency.”

It's unclear what Fresenius will do next.

"We're evaluating our options," said Jane Kramer, a spokeswoman for the company. "We're disappointed in the ruling and we did do the certificate of need process in good faith with all earnestness."

Read the full proposed decision by BISHCA:  Download Proposed decision 12-1-2011

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