Consolidation in the Dialysis Industry, Patient Choice, and Local Market Competition

Abstract

The Medicare program insures >80% of patients with ESRD in the United States. An emphasis on reducing outpatient dialysis costs has motivated consolidation among dialysis providers, with two for-profit corporations now providing dialysis for >70% of patients. It is unknown whether industry consolidation has affected patients' ability to choose among competing dialysis providers. We identified patients receiving in-center hemodialysis at the start of 2001 and 2011 from the national ESRD registry and ascertained dialysis facility ownership. For each hospital service area, we determined the maximum distance within which 90% of patients traveled to receive dialysis in 2001. We compared the numbers of competing dialysis providers within that same distance between 2001 and 2011. Additionally, we examined the Herfindahl-Hirschman Index, a metric of market concentration ranging from near zero (perfect competition) to one (monopoly) for each hospital service area. Between 2001 and 2011, the number of different uniquely owned competing providers decreased 8%. However, increased facility entry into markets to meet rising demand for care offset the effect of provider consolidation on the number of choices available to patients. The number of dialysis facilities in the United States increased by 54%, and patients experienced an average 10% increase in the number of competing proximate facilities from which they could choose to receive dialysis (P<0.001). Local markets were highly concentrated in both 2001 and 2011 (mean Herfindahl-Hirschman Index =0.46; SD=0.2 for both years), but overall market concentration did not materially change. In summary, a decade of consolidation in the United States dialysis industry did not (on average) limit patient choice or result in more concentrated local markets. However, because dialysis markets remained highly concentrated, it will be important to understand whether market competition affects prices paid by private insurers, access to dialysis care, quality of care, and associated health outcomes.

Keywords: Choice Behavior; Chronic; Economic Analysis; Humans; Insurance; Insurance Carriers; Kidney Failure; Medicare; Outpatients; Ownership; Registries; Renal Insufficiency; United States; United States Renal Data System; dialysis; health policy; patient choice; peritoneal dialysis; renal dialysis.

Figure 1.

The number of dialysis facilities in the United States increased over time while the number of uniquely owned providers remained virtually unchanged. Data include number of providers caring for patients receiving in-center hemodialysis at the start of every year measured at 2-year intervals.

Figure 2.

Despite wide geographic variation at any point in time, an index of market concentration was unchanged over time, while the number of choices available to patients increased slightly. (A) Number of dialysis facility choices. (B) Market concentration index. Increases in the number of competing providers from which patients could choose occurred gradually, whereas the distribution of an index of market concentration remained stable over the decade. Note that vertical bars indicate 10th and 90th percentiles. Boxes represents 25th and 75th percentiles. Middle bars represent median Herfindahl–Hirschman Indices (HHIs) and number of choices. Illustrated distributions are weighted by the number of patients in each hospital service area.

Figure 3.

Number of competing dialysis facilities available for patients to choose from increased slightly between 2001 and 2011. The percentage of patients receiving hemodialysis with zero, one, or two choices among competing facilities decreased over the decade. *Instances where the proportions were significantly different between 2001 and 2011 at a P value of 0.05 using a test of equality of proportions. P values were as follows: P=0.03 for zero facilities, P=0.01 for five and 10 facilities, P=0.001 for 12 facilities, and P<0.001 for one, two, six, seven, and ≥15 facilities.

Figure 4.

Geographic variation in market concentration is present in the United States. (A) Market competition index in 2001. (B) Market competition index in 2011. Note that variation in Herfindahl–Hirschman Index (HHI) is illustrated after creating five categories of HHI in increments of 0.2 and plotting the category of HHI for each hospital service area. Map includes the HHI for each hospital service area. Areas in white are where there were no patients receiving hemodialysis. Markets were least concentrated in the North East Census Region, the southeastern portion of the South Census Region, parts of Texas, the East North Central Census Division (i.e., Great Lakes region), and the Pacific Census Division.