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Fresenius Falls on Proposed Cut in Medicare Payments

Fresenius Medical Care AG fell the most in more than four years in Frankfurt after the U.S. government proposed cutting payments to kidney dialysis center operators by 9.4 percent next year.

The shares dropped as much as 10 percent, the biggest intraday decline since October 2008. The stock was down 9.7 percent at 49.18 euros as of 9:11 a.m.

Much of the $1 billion reduction in payments is the result of a federal budget-balancing agreement. That deal targeted overspending on anemia drugs such as Amgen Inc.’s Epogen and Aranesp for patients in Medicare, the U.S. health plan for the elderly and disabled.

The U.S. government will consider phasing in the reduction over more than one year, the Health and Human Services Department said yesterday in a regulatory filing, citing concerns it may “impact beneficiary access to care.” The proposal is subject to public comment and may change before taking effect.

“This is a very dramatic cut,” Robert Sepucha, Bad Homburg, Germany-based Fresenius’s senior vice president for government affairs in the U.S., said by telephone. “We’re concerned it would push dialysis clinics under the cost of care, which is not the right thing for Medicare to be doing.”

Medicare profit margins for dialysis payments are 3 percent to 4 percent this year, the Medicare Payment Advisory Commission estimated in March. Sepucha said that level is “very thin” and the proposed cuts would be too aggressive.

Fresenius, the world’s biggest provider of kidney dialysis, reported a profit margin of 9.6 percent before extraordinary items in 2012, according to data compiled by Bloomberg.

About 414,000 people in the U.S. in 2010 were on dialysis, a procedure in which waste is periodically removed from the blood in patients with malfunctioning kidneys. Diabetes and high blood pressure are the most common reasons for kidney failure.

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