The US company DaVita has seen its stock price soar in recent years, but this success comes at a cost – the health of American kidneys. The Medicare system covers the cost of kidney dialysis treatment regardless of age, leading to this treatment accounting for around 1% of the total US federal budget.

Patients in need of dialysis services must go to a clinic, and in the US, the market is dominated by a duopoly controlled by DaVita and Fresenius. This lack of competition, combined with taxpayer subsidies, has allowed these companies to generate significant cash flow. Warren Buffett’s Berkshire Hathaway owns a large stake in DaVita, with investment manager Ted Weschler praising the company’s stability and recession-resistant business model.

The number of Americans receiving in-clinic dialysis treatment has been on the rise, with DaVita treating a quarter of a million patients and generating $390 per treatment. The high cost of dialysis, which can exceed $60,000 annually, highlights the financial burden on the healthcare system.

While kidney transplants offer the best chance of survival for patients with kidney failure, many end up on dialysis due to failed transplants. Efforts to prevent kidney failure, such as through healthier lifestyles and medications like Ozempic, could impact DaVita’s business in the future. However, with an aging population and rising healthcare costs, the demand for dialysis is expected to remain high.

Despite the US spending a significant portion of its GDP on healthcare, its average life expectancy lags behind other developed countries. DaVita’s market cap has nearly doubled in the past two years, reflecting the company’s success in treating patients but also highlighting the challenges of an aging and unhealthy population.

As the healthcare landscape continues to evolve, companies like DaVita will play a crucial role in providing essential services to those in need. However, addressing the root causes of kidney failure and promoting healthier lifestyles will be key to reducing the burden on both patients and the healthcare system.