Medicare cuts hit dialysis provider

(TS) (TS)

(Bloomberg) – Cuts in U.S. government health spending are hurting profits at Fresenius Medical Care A.G., the world’s biggest dialysis provider.

Rice Powell, the chief executive officer, said he is setting a net income target of just $1 billion to $1.05 billion for 2014.

The new target compares with a securities analyst consensus estimate of about $1.2 billion.

“Every day last year I felt like my back was up against the wall because we had guidance that was very difficult,” Powell said in a phone interview. “This year we tried to create what I would call adequate guidance.”

Because U.S. residents with end-stage renal disease qualify for Medicare, Medicare pays for a majority of U.S. dialysis services. The program now spends about $10 billion a year on dialysis and is trying to cut that amount by 10 percent.

Powell said Fresenius probably will close some lower-performing U.S. dialysis centers.

--Editors: Thomas Mulier, Robert Valpuesta

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