I've been coming to Renalweb for several years, and have learned a great deal from this forum. With many of the "Home Page" articles, I often see editor's notes referencing the "junk bond" dialysis funding system, the outdated clinical indicators as well as other points that seem to strike a nerve.
Now maybe this is the wrong forum, but for a technical guy, I'm still fascinated with the business side of dialysis. For better understanding, what exactly are you referring to with the "junk bond" funding, and how do you suggest we fix it? Same with the outdated clinical indicators. Do you suggest that we tie reimbursement to things like employment rates among patients?
In my semi-eduated opinion, I feel that we all can benefit from a better understanding of the current dialysis model. I happen to work for the large non-profit you mention, and while I take great pride in our level of care, I wonder how we can continually make improvements with reimbursement that decreases and expenses that increase almost annually. Looking forward to the replies, and hopefully getting a little smarter.
S&P has Fresenius as BBB-.
Moody's has Davita as Ba1.
I don't think either rating is considered a "junk-bond" grade.
DISCLAIMER : My opinions and views are mine and may not be the same as my employer.
"Junk Bonds" are high risk bonds in the financial world. They offer higher than normal dividends than good quality bonds because they are very risky businesses. Maybe they have negative earnings and are burning through their cash; maybe they had a bad experience with their business (Chipolte)and the business has been downgraded; or other leery business models that cause investors to stay clear. So in order to draw in money, they offer bonds with high rates of return. You invest in the company, you may not get all your money back if something goes wrong. But if the company stays afloat, you will get a good return on your money. Risk versus reward.
I see the term "junk bond dialysis" being applied to companies that don't really care about their rate of return ( improving the well-being of their customers (patients). Instead of doing whatever is necessary to grow (improve their quality of life) they are just trying to stay afloat (keep the patient alive to return and get another treatment).
The dialysis model outside the US is quite different.
This is my opinion and mine alone.
Having watched these companies for some time, I can say that DaVita has always been seen as having a "junk" rating, while Fresenius Medical Care has fluctuated on the edge between junk and investment grades.
They are both seen as having a significant risk of default, but the nature of their business (life sustaining treatments largely paid for by the government) essentially guarantees that they are "too big to fail."
I'll put together an opinion piece on this soon.
I appreciate your willingnesss to give some more detail on this. Please don't take this as an attack on your stance, as it is really just me trying to get a little more educated. It seems like some (or maybe me alone) may be miscategorizing your "junk bond" reference to mean you're tying that phrase directlty to their current credit rating. When I read your notes it seems to me that you may be referencing more of mindset, as opposed to, an actual credit rating but I could be totally wrong on that. Either way I look forward to your insight.
The junk credit rating definitely does create a business mindset.
Here's a 2015 article about the credit rating of Fresenius SE, the parent company of Fresenius Medical Care:
Still waiting on the piece you are going to put together on this subject or is the link to an old article it?
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