Kristoffer Tripplaar/Sipa USA via AP Images
The headquarters of DaVita, Inc., in Denver, Colorado
The Revolving Door Project, a Prospect partner, scrutinizes the executive branch and presidential power. Follow them at therevolvingdoorproject.org.
The federal contracting system has long been riddled with monopolists, union-busters, and rampant profiteers. From the Pentagon to the Department of Agriculture, bad behavior from private companies is routinely and paradoxically rewarded with public funds, and little oversight from the government institutions. Sometimes, these corrupt dynamics literally cost lives.
The Department of Veterans Affairs (VA) has long been assailed for the costly and ineffective contracting network it has built to (often, grossly inadequately) service veterans’ health care needs. This dysfunction has been both caused and worsened by privatization schemes that transfer untold billions to private corporations, at the cost of basic access to care for veterans.
These ineffectual privatization schemes extend to everything from the VA’s IT network to its provision of mental health treatment. Each additional iteration of privatization undermines veterans’ basic access to quality care, allows the obscene profiteering of taxpayer money by private companies, fosters the formation of abusive monopolies, and endangers workers and patients alike.
Perhaps nowhere is this dynamic more viciously on display than in the VA’s relationship with its dialysis contractors.
“Pointless Death and Moral Injury”
There are over 40,000 veterans enrolled in the Veterans Health Administration (VHA) who are suffering with kidney failure, as per the National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK). Kidney failure is largely treated by dialysis, and approximately 81 percent of veterans who received dialysis treatment through the VHA do so through so-called “community providers,” which is now largely accomplished via two distinct programs; the Nationwide Dialysis Services Contract (NDSC) program and the Community Care Network (CCN).
NDSC is significantly more expensive for dialysis services, in part because its fees are not capped by Medicare rates, as CCN is. This is on its face obscene, given that providers have been found to charge NDSC patients significantly increased rates compared to Medicare patients, while providing no rationale for such a significant price differentiation.
Of course, while (appropriately) attempting to remediate pricing discrepancies between government programs, CCN has itself proven to be a wildly inadequate system, reliant on private care providers that routinely underdeliver in their care commitments. Even so, it is the preferable (and significantly less expensive) system for dialysis care within the VHA and, except for limited circumstances, veterans are supposed to be referred to providers secured under the CCN umbrella first.
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But a 2023 VA Inspector General report found that, from October 2020 to September 2022, nearly 95 percent of veterans being treated were receiving dialysis services from NDSCs and not CCNs. That translates to 20,800 people who were referred to NDSC services, and a paltry 1,200 referred to CCNs.
Of that 20,800, the vast majority of patients ultimately received treatment from just two providers. The two, referred to in the report as Contractors B and E, treated 42 and 45 percent of patients respectively, meaning that just two NDSC contractors treated a whopping 87 percent of NDSC patients and 82 percent of the VHA’s dialysis patients overall. While the specific names of these contractors aren’t disclosed in the report itself, the identities are fairly obvious: The two largest VHA contract recipients for dialysis are Fresenius and DaVita, which have so far received a total of $1 billion and $559 million, respectively, through the NDSC since 2019.
That functional duopoly (which exists inside and outside of the VHA) has created a reality in which “dialysis has turned from a miraculous life-saving medical innovation of the 1960s into a legal morass full of pointless death and moral injury.” That includes clinics over-administering dialysis to deadly effect, providing disproportionately poor health outcomes for ethnic and racial minorities, retaliating against patients who raise too many concerns, and more.
This system has left contracted firms almost entirely unaccountable to the harms undergone by patients in their facilities. From a lack of appropriate oversight for dialysis referrals specifically, to the VA’s lack of oversight for its contractors more generally, these basic administrative failures cost vets their health—and even their lives—every single day.
Union Busting and Labor Abuse Galore
The lack of a basic standard of care, or of federal oversight adequate enough to enforce one, has also been worsened by these duopolists’ abuse of their employees, which further undermines the quality of patient care while also doing egregious harm to caregivers.
Fresenius and DaVita have for years elected to put their profits over patients and staff by failing to properly staff their facilities. Staffing shortages, as acknowledged by these corporations themselves, can lead to unexpected clinic closures, can harm long-term patient outcomes, and can contribute to an absolutely brutal work environment for staff members.
Dialysis, which involves a machine purifying blood and performing the functions of the kidneys, is a delicate and complicated medical process, requiring specific and attentive care in order to get medications used in the process correctly apportioned, properly maintain machines, and ensure that patients are receiving appropriately timed visits. Changes to those details, or a simple failure to maintain them, can be—and routinely is—devastating for patients’ health.
Even so, dialysis caregivers at Fresenius and DaVita are being asked to serve the needs of up to ten patients at once due to severe understaffing. They often work multiple 12-hour shifts per week, receive poor compensation, and are threatened and bullied by their bosses when they attempt to advocate for themselves or their patients. Not to mention, Fresenius and DaVita have long attempted to prevent caregiving staff from improving clinic conditions for themselves and their patients through intensely repressive union-busting activities. This has included the use of “union avoidance consultants, often holding captive audience meetings and distributing anti-union flyers,” and aggressive managerial harassment and intimidation of pro-union advocates in the workplace. It has also included allegations that Fresenius is engaging in “retaliatory firings, retaliatory discipline, threats aimed at suppressing legally protected activities, and bargaining in bad faith,” which are very serious (and illegal) acts that are currently being investigated by the National Labor Relations Board (NLRB).
All the while, instead of addressing these crises, Fresenius and DaVita have spent years engaging in sweeping stock buybacks and lavish executive payouts. From 2018 to 2022, DaVita spent over $7 billion on stock buybacks, and Fresenius spent $1 billion in buybacks from 2017 to 2020. That financial windfall for executives has been augmented by hugely generous bailout funds that Fresenius accepted in 2020 (to be fair, DaVita turned the money down), years of obscene profits, and billions in federal contract funding. It makes these companies’ utter lack of regard for their staff or patients all the more unforgivable, and makes the federal government’s delinquency in holding them accountable all the more egregious, too.
Oversight Is Easy, and Necessary
As we have said again and again, the federal government does not have to and in fact should not prop up abusive companies via its contracting system. Public dollars should fuel the public good, not arbitrarily pad the pockets of companies and their executives breaking state and federal laws to hurt their patients and their staff.
What is perhaps most disappointing about this structuring is that the VA’s own systems are already supposed to be structured around diverting funds from these duopolies in the first place. Yet there exists an utter lack of desire or will to comply with those basic standards. At minimum, the VA—as with all government offices—can and should fight to ensure compliance with its contracting policies, especially those that fundamentally exist to defend its patients and its staff from abusive profiteers and monopolists.
If nothing else, the government should ensure that public monies are well spent, and that the public is protected against abusive contractors, by “closing the revolving door between contractors and government agencies, preventing government awards from being used for stock buybacks and union busting, and enforcing strict standards of corporate eligibility for participation in contracting bids when other parts of the government sue for violations of federal law.”
As the VA’s contracts with NDSC servicers come to a formal end this September, the department has yet another opportunity to finally address this part of its broken contracting infrastructure. However, the department has made few concrete plans regarding how to move forward and away from it. They must, for the sake of veterans, caregivers, and taxpayers alike.
