President Donald Trump's plans for the kidney care industry are not expected to result in any significant immediate rating actions for dialysis companies, but they will challenge the companies' business model, said S&P Global Ratings.
That takeaway is from a recent report in which S&P analysts examined potential effects of the administration's plans to transform kidney care in the U.S.
As part of these plans, CMS unveiled four optional Medicare payment models to improve kidney disease management and prevention efforts as well as a proposed rule for a mandatory "ESRD Treatment Choices" model, which aims to encourage home-based dialysis treatment.
S&P said most reimbursement and regulatory risks for dialysis companies, such as DaVita and Fresenius Medical Care, will come during the transition to these new models.
During the transition, "We believe companies will have to expand their home program to more clinics. This will likely lead to margin pressure initially. They may also build or acquire technologies and infrastructure to facilitate the transition to home. Depending on how quickly home dialysis gains momentum, companies may have to downsize their existing clinic footprint, which could result in additional margin pressure," the analysts wrote.
But S&P said it sees some mitigants to these risks. It said it expects a "very gradual" transition to home dialysis and believes dialysis providers should have enough flexibility to close clinics if they need to.
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