Is the kidney care industry finally entering a new era? New industry insights and a spotlight on one startup’s journey suggest a shakeup is coming. We are finally seeing new approaches and resources coming to the aid of physicians who’ve been fighting a Sisyphean battle long plagued by discouraging outcomes, high-cost care inefficiencies, and misaligned incentives.
When Medicare made the unprecedented decision in 1972 to extend coverage to anyone requiring dialysis to stay alive, it created an opportunity for special interests to vie for the dollars attached to policy change. And it put a monetary incentive behind treating only the sickest people. Decades later, the result was a highly consolidated industry of dialysis providers that exert an enormous degree of market power to negotiate inflated reimbursement. These large dialysis providers have little need to compete on quality or prevent early-stage kidney disease from progressing, which would keep patients out of their centers, despite the substantial burden the thrice-weekly four-hour sessions place on the patients and their caregivers.
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Anna Kamen and Dan Gebremedhim Anna Kamen is a dual degree MPA MBA candidate at Harvard Kennedy School and MIT Sloan School of Management, and a member of the 2021 Flare Capital Scholars Class. She previously worked as a health policy analyst at Acumen, LLC and advised the implementation of Medicare’s dialysis payment system. Dan […]
Despite the frustrations of primary care providers and nephrologists who have been calling for help in preventing kidney disease from progressing so far in the first place, the current standard of care incentivizes treating patients who already have kidney failure (end-stage kidney disease, or ESKD) in profit-producing dialysis centers. This paradigm neglects the significantly larger population of chronic kidney disease (CKD) patients, who, without appropriate intervention, have a high likelihood of progressing to ESKD.
The negative impact of this warped system is apparent in poor patient outcomes. Many patients are not referred to a nephrologist until Stage 4, just before kidney failure requires dialysis. Roughly 1 in 5 patients with ESKD do not survive the year, and 50% die within five years of onset. According to the United States Renal Data System, the US kidney transplant rate has actually decreased by 25% in the last 20 years. Further, the US ranks 10th among peer countries in peritoneal dialysis (PD), a more convenient and cost-effective modality that can be performed at home.
To combat challenges facing the industry, both policymakers and entrepreneurs have been working on complementary strategies to help primary care physicians, nephrologists and other care team members disrupt the status quo. On the policy side, two major policy updates are paving the way for change.
First, Medicare’s Innovation Center has developed an array of novel payment models for nephrology groups and their startup partners. These models create strong financial incentives to manage care for beneficiaries with CKD to delay the onset of ESKD, encourage more cost-effective and safer treatment modalities like PD, and incentivize kidney transplantation.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Second, the rollout of the 21st Century Cures Act in 2021 enables ESKD patients to actively enroll in any private Medicare Advantage (MA) plan for the first time. This change allows patients the flexibility to choose a plan that best suits their needs and incentivizes MA plans to develop innovative strategies to better manage kidney care patients and keep them healthier. This change also incentivizes MA plans to develop or in-source robust care management programs to manage this complex population as these plans will have financial liability for thousands of ESKD patients for the first time ever.
One start-up that is seeing early traction in bringing innovative population health strategies for kidney care patients amidst this changing regulatory landscape is Somatus (a Flare Capital portfolio company). Founded in 2016, Somatus works with health plans, provider practices, and regulators to develop novel care models and manages the care of over 120,000 patients in more than 30 states.
The company leverages advanced predictive analytics and risk stratification technology to identify patients who are at highest risk for CKD progression. Somatus’ systems trigger alerts to field-based care teams, enabling them to custom target interventions to patients in the community. Interventions are designed to proactively slow down the progression of kidney disease. This is done by investing in preventive care over costly late-stage kidney failure crisis management. For patients whose kidneys have already failed, this suite of interventions may also include education on cheaper home dialysis modalities and transplant referrals in addition to evidence-based chronic disease management.
Through tracking industry standard quality and outcomes metrics, including HEDIS and STARS scores, Somatus has found major improvements on both cost and quality outcomes for its patients. The company has seen an 18% reduction in Medical Cost, 34% reduction in inpatient utilization, and 12% improvement to Medical Loss Ratio, for certain cohorts of members.
Of course, Somatus is not the only company hoping to disrupt the kidney care industry. Other companies such as Cricket Health are also gaining ground. Cigna Ventures and Blue Shield of California both invested in Cricket Health’s $83.5 million funding round last year. In fact, the two payers cited improved outcomes as a reason for their investment. Cricket Health’s kidney care program uses digital care solutions, education, and virtual and telephonic care team support to help kidney disease patients across the country manage their disease.
However, these young companies will all face similar challenges. They have to navigate a fragmented care delivery system where patients’ primary care physician, nephrologist, other specialists, and dialysis center have not been empowered to efficiently talk to one another (an ongoing challenge yet other federal shifts, such as the implementation of the Trusted Exchange Framework and Common Agreement in 2022, are working to address). They will contend with a regulatory environment that can be slow to respond to change. And finally, they will have to compete with large dialysis organizations who are resistant to change, have powerful lobbies, and own a significant share of the nation’s nephrology groups.
Yet we can be hopeful that, with players like Somatus and other young kidney care start-ups, bolstered by significant regulatory tailwinds, the industry is moving in the right direction.
Photo: peterschreiber.media, Getty Image
Anna Kamen is a dual degree MPA MBA candidate at Harvard Kennedy School and MIT Sloan School of Management, and a member of the 2021 Flare Capital Scholars Class. She previously worked as a health policy analyst at Acumen, LLC and advised the implementation of Medicare’s dialysis payment system.
Dan Gebremedhin, MD, MBA is a Partner at Flare Capital Partners, where he sits on the Board of Somatus, a Flare Capital portfolio company. Dan has also served on Massachusetts Governor Charlie Baker’s Board of Nursing Home Administrators. Dan was a practicing Internal Medicine Physician at the Massachusetts General Hospital and had a Faculty appointment as Instructor in Medicine at Harvard Medical School from 2010 until 2019. Prior to joining Flare Capital, Dan served as a Medical Director at the Harvard Pilgrim Health Plan, leading Population Health Analytics, Value-Based Purchasing, and General Strategy. Dan also spent time as an entrepreneur and operator in the Health IT Industry, cofounding and managing two separate businesses in the Electronic Health Records and Online Medical Education industries.
