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Who won the San Diego dialysis war

Pumping ire

Dennis Fox and Larry Wolford still look shell-shocked. - Image by Craig Carlson
Dennis Fox and Larry Wolford still look shell-shocked.

This spring a trial unfolded in San Diego federal court that received almost no news coverage, perhaps because the case was so long and messy. On one side, it featured a group of influential local kidney doctors and a half-billion-dollar-a-year corporate medical giant. Against them, the case pitted two upstart entrepreneurs who decided to open their own hemodialysis business.

"Hospitals regard doctors as their customers, and not so much the patients."

Each side charged the other with unfair competition: Was it unfair for Larry Wolford and Dennis Fox to go into business against their former employer, the internationally dominant National Medical Care, Inc.? Was it unfair for National Medical Care to pay almost half a million dollars a year in kickbacks to the kidney doctors — who were in a position to influence hospital decisions about which hemodialysis service to use?

From La Jolla to the South Bay and east to the border of La Mesa, the federal government in December of 1982 counted 318 patients with “end-stage renal disease.’’

The trial provided some fascinating glimpses into the hidden workings of big medicine. And there was at least one surprise: the little guys won.

To call Larry Wolford a “little guy" is an act of poetic license. He’s actually a hefty man of forty-five who has an accounting degree from San Diego State University. Wolford didn’t go straight from college into the business of medicine; he instead managed a wholesale liquor firm.

Nephrologists Steinberg, Villalobos, Channick, Roland. “These doctors are extremely powerful because they have hundreds of patients."

But in 1976 he was hired to work as the controller for the San Diego offices of National Medical Care, which already had emerged as the undisputed national leader among for-profit hemodialysis companies.

Headquartered in Massachusetts, National Medical Care was one of the nation’s earliest private providers of that service in which kidney disease patients’ blood is artificially cleansed of harmful toxins by pumping it through special filtering machines.

People whose kidneys have failed to function must undergo dislysis several times a week or they will die.

People whose kidneys have failed to function must undergo this procedure several times a week or they will die. NMC also was one of the biggest of the lobbyists who worked back in the early Seventies to get the federal government to pay the majority of all dialysis costs for every patient with chronic kidney disease, regardless of the person’s income level.

Wolford and Dennis Fox implored Arnold Roland to upgrade the ancient equipment.

That legislation took effect in 1973, and hemodialysis became a giant industry overnight. (Approximately 100,000 Americans need dialysis to survive, and the average cost per patient per year is more than $20,000.) As the industry grew explosively, so did NMC, which today has two-thirds of the for-profit dialysis business in America.

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Wolford did well working for NMC, whose hemodialysis operations here and elsewhere throughout the nation go under the name Bio-medical Applications Management Co., Inc. After two years as controller in the San Diego office, he was promoted to administrator, and then he became NMC’s “regional administrator” in 1980. That job brought him into close contact with some nephrologists known as the Balboa Internal Medicine Medical Group Inc. Founded by Dr. Arnold Roland, one of the first kidney specialists in San Diego to use hemodialysis, the Balboa group by the early 1980s had grown to include three other prominent kidney doctors: Drs. J. Michael Channick, Steven M. Steinberg, and Richard Villalobos. Then, as now, their main offices were based on Walnut Street in Hillcrest. “They were the largest, most influential group of nephrologists in the county,” Wolford says today. “They were the chiefs of nephrology in the hospitals." The members of the Balboa group also served as “medical directors" for the various hemodialysis facilities operated by NMC. By 1982 those included eight so-called acute facilities based in hospitals (serving acutely ill patients) and three community-based “chronic” clinics where patients received routine, thrice-weekly treatments — Biomedical Community Dialysis of San Diego, Biomedical Community Dialysis of National City, and the Artificial Kidney Center in Kearny Mesa.

By the end of 1982, Wolford says his employer, NMC, enjoyed a commanding dominance over the San Diego dialysis business. He points to records, for example, that show that in the central area running from La Jolla to the South Bay and east to the border of La Mesa, the federal government in December of 1982 counted 318 patients with “end-stage renal disease,’’ and 215 of them — more than two-thirds — were dialyzed at NMC facilities. (The rest were receiving treatment at a handful of non-NMC clinics either based in or connected with hospitals.)

Given NMC’s status as a near monopoly, Wolford admits that even while he worked for NMC he gave some thought to leaving the big corporation and starting up his own competing dialysis service. Particularly tempting was the “acute" business — those facilities based in hospitals. Wolford says this business only constituted about ten percent of NMC’s revenues in San Diego, and “they had not spent a lot of attention on it. It was just a sideline.” For years Wolford and Dennis Fox (a former U.S. Navy medical corpsman who had gone to work for NMC in 1973 and rose to become the chief technologist) had implored Arnold Roland to upgrade the ancient equipment NMC had installed in San Diego hospitals, to no avail. “We had to fight for every nickel and dime we could get for salaries, equipment, and so forth. They were very tight in the way they operated,” according to Wolford. But he now says he wasn’t naive about the way this market functioned. He says he knew if he struck off on his own and simply offered better service at a much lower cost, that alone would not have insured his success in the hospital-based dialysis field. Wolford knew that another key element would be the attitude of the powerful nephrologists who practiced at the hospitals. And since the most powerful nephrologists in San Diego were firmly allied with NMC, Wolford says he gave no serious thought to challenging that relationship.

Other events were to rock the pact between the nephrologists and NMC. Wolford says those events were triggered by a casual conversation that he had in late summer of 1982 with Dr. J. Michael Channick. Wolford and Channick were discussing the financial arrangements between NMC and the Balboa doctors, when Wolford made a reference to the “profit share" paid by NMC to Arnold Roland (the group’s founder). “This was a substantial amount of money, some $30,000 to $40,000 per month, depending on the number of patients who were using the NMC facilities. Over the nine or so years of the Balboa group’s existence, it had amounted to more than $3.5 million — all of which had gone to Roland alone. Wolford says he had no idea the other three Balboa doctors were completely unaware of this kickback arrangement — but their ignorance was painfully obvious from the moment the subject came up in his conversation with Channick. “They [Channick, Steinberg, and Villalobos] were enraged," Wolford says simply. "They figured they were supplying seventy-five percent of the patients, while Arnold had only twenty-five percent, yet he was getting all the money.” Not long thereafter, a crossfire of lawsuits and countersuits exploded between Roland and the other three Balboa doctors. “They didn’t speak to each other,” says Wolford. “Staff meetings were tense.”

Wolford says that’s the principal reason he decided to leave National Medical Care. “I just wanted to get out,” he says. By early 1983, he and Fox had also gotten interested in the idea of starting a computer-repair company. The two men each tapped about $5000 from their savings, and in the early summer of 1983 the new business, called American Computech, began operating with one employee, a friend of Wolford’s named Roy Rains. Wolford in the meantime made plans to join Rains, and on July 14, 1983, he left National Medical Care, while Fox continued to work there.

Wolford says he wasn’t completely startled when, a few days after his departure, he got a call from Channick. Wolford knew that Channick, Villalobos, and Steinberg were openly dissatisfied with NMC’s response to their squabble with Roland. Essentially, NMC had washed its corporate hands of the dispute, taking the stance that the four nephrologists would have to work things out themselves. But that didn’t satisfy the disgruntled Balboa trio, who “wanted to get NMC off the fence,” says Wolford. So when Channick met with Wolford, “He kind of informed me that acute dialysis would be a good business to go into, and I would not be suppressed by the (dissident) Balboa doctors.”

Wolford says to him this meant that if he formed a new dialysis company, the three kidney specialists would not automatically advise hospital administrators that they should continue to stick with NMC. “So I started looking into the acute business,” Wolford says. Toward the end of July 1983, he sent out letters to a number of local hospitals, asking if the hospitals would like to learn more about a new dialysis service.

When he got some positive response to the letters, Wolford followed up in August and September of 1983 with more specific proposals. His new dialysis business, to be called West Coast Medical Specialties, would charge the hospitals $325 per patient per treatment, a hundred dollars less than NMC was then charging. West Coast furthermore planned to employ the slickest, most modern dialysis machinery on the market. Fox today explains that National Medical Care had been supplying its San Diego hospitals with primitive machines that contained virtually no safety features. Even more of a nuisance was the fact that these machines (which Fox says were no longer manufactured but could be purchased for fifty dollars, used) had to be filled with hundreds of pounds of purified water. NMC’s hospital clients thus had to set up special dialysis areas (close to pure water supplies) to which their acutely ill patients had to be transported. But West Coast Medical Specialties in contrast was offering to use what Fox calls "the Mercedes of the dialysis business" — highly computerized units loaded with safety checks and containing their own built-in water purifiers. Hospitals thus would be able to dialyze patients right in the patients’ own rooms, connecting the fancy dialysis machines to ordinary tap water supplies (which were then purified by the machine itself).

The first hospital to commit to switching from NMC to the new company was Sharp Memorial, where Steinberg was the chief of nephrology. Wolford says it didn’t take long before he heard that Steinberg was taking not just a neutral position, but one actively supportive of the switch to West Coast Medical Specialties. “That really encouraged me,” Wolford says. “So I pushed even harder.” By December, he had won signed contracts from Sharp Memorial, Bay General (now Scripps Chula Vista), and Clairemont General hospitals, and Paradise Valley Hospital had also orally committed to Wolford’s new service.

Throughout that fall of 1983, something else occurred that promised to bring West Coast even more spectacular success — namely, Wolford began to work toward opening a new community-based center for chronic dialysis patients. Wolford explains that for a long time the chronic dialysis business had been extremely constricted by government regulations.

Before any new such center could open, the state of California had required an exhaustive review process in which the need for the new center had to be proved to the bureaucrats’ satisfaction. In practice, it had taken from eighteen months to two years to win such approval. But by the fall of 1983, the California nephrological community had become aware that the state was getting ready to drop the requirement for such certificates of need. Wolford says the three Balboa dissidents saw the potential in the coming change, and they called him in to discuss Wolford’s opening a chronic center for them. By December of 1983, Wolford and Fox (who left NMC at the beginning of December to work with Wolford on the dialysis business) began actively scouting for clinic locations. Since Wolford and Fox together had planned and done most of the work in starting some of NMC’s chronic dialysis clinics, the task was one they tackled with confidence.

By Christmas of 1983, life thus seemed full of promise for West Coast Medical Specialties. But that promise didn't go unnoticed by NMC. Wolford says, “When NMC finally realized that they were not only losing hospital contracts but that they also might lose three-quarters of their chronic patients, they realized that sitting on the fence in the Roland issue was not going to work for them." Fox chimes in, “They got off the fence in a hurry when they realized their potential loss.” Getting off the fence took the form of signing a contract with the Balboa group that awarded the lucrative “profit shares” to the group as a whole, rather than to Roland exclusively. (Shortly thereafter, Roland moved out of the Balboa offices.)

Wolford got wind of what had happened in January of 1984, when Channick called to inform him that the three Balboa doctors were about to sign a contract with NMC. Wolford says about a week later, Channick called again to tell Wolford that Wolford’s company wouldn’t be getting any more hospital contracts after February 1. Right around then, West Coast signed its contract with Paradise Valley Hospital, but Channick’s next call (which came about the first of February) touched upon that. Wolford says Channick informed him that he would have to “give back” the Paradise Valley contract; on a follow-up visit, Channick indicated that failure to do this would invite a lawsuit from NMC. But convinced that Channick was merely saber-rattling, Fox and Wolford flatly turned him down. Wolford, in fact, even went a step further and remarked that if NMC was upset about losing the Paradise Valley Hospital contract, then the corporate giant would really be upset about losing its contract with Sharp Cabrillo Hospital, which also had just made an oral commitment to switch to West Coast’s services.

Wolford later would regret blurting out this news to Channick, but he says he did it in a heated moment. “Also, I still felt that the doctors were not going to turn on us. They had already told us how good our service was, compared to what they had had." Within a week, however, Wolford and Fox learned that Steinberg had gone to Sharp Cabrillo with NMC’s new San Diego administrator (Wolford’s successor) and had dissuaded that hospital’s administrators from changing from NMC to West Coast.

"When the doctors are paid by NMC, we cannot compete with them," Wolford states unequivocally. "Hospitals regard doctors as their customers, and not so much the patients,” Fox contends. Adds Wolford, “These doctors are extremely powerful because they have hundreds of patients. And at any one time, five or six or seven percent of those patients are in the hospital." Patients with end-stage renal disease furthermore rate among the juiciest plums to fall into any hospital’s lap. All are registered with Medicare and have an assigned identification number. Says Fox, “So when one checks in, the hospital just types their number into a blank and they [the hospital billing department] send it out and they’re paid right away. So that’s instant revenue for the hospitals," which normally have a lot of trouble getting paid.

After losing the contract with Sharp Cabrillo, Wolford and Fox say they decided simply to lie low for a while. “We figured we could make a profit and stay in business.” By April of 1984, however, Wolford was ready to test the limits on his business imposed by NMC. He says he thus sent out some more letters, soliciting business from other hospitals in the county that were not being served by NMC. “I was just trying to see if I could do anything,” Wolford states. “Two weeks later, we were sued."

The legal attack came from NMC, which charged in state court that Wolford and Fox were guilty of fraud, stealing trade secrets, unfair competition, and breaking the covenant of “good faith and fair dealing.” Explains Wolford, "In essence what they were saying was that I knew the hospital administrators. I knew what their prices were. I knew their financial makeup and accounting procedures.... And yes, it helped me to know that.” But Wolford and Fox felt they had acted neither illegally nor unethically. Instead they saw NMC’s lawsuit as a barely concealed attempt to intimidate them into leaving the business.

At the urging of Roy Rains, the two flew up to Sacramento to talk to Roy’s brother, Omer L. Rains, a former state senator who had left politics and returned to his law practice. Rains felt Wolford and Fox had a good antitrust case against NMC, so he filed an answer and a cross-complaint in state court for alleged violations of the state antitrust act, as well as various actions for unfair competition and interference with contractual relations. He also filed an independent lawsuit against NMC in federal court for alleged violations of the federal Sherman Antitrust Act.

Rains says as soon as he filed the cross-complaint for Wolford and Fox, he got a call from an NMC attorney asking the San Diegans to dismiss their action. "I think they expected they could just scare Wolford and Fox off." Indeed, Wolford and Fox today look pained when they think back to their response to the lawsuits; knowing what they do now, it’s a little hard to remember just why they didn’t back down from the legal battle.

“It’s like starting out in a race that you thought was going to be a hundred yards long, and it turns out to be a marathon,” says Fox. “But we were angry at being double-crossed along the way. We thought we were right, and we thought we could stay with them.” He says Rains initially estimated it would cost around $5000 per month to fight the lawsuits and that the fight might last a year or two. "In fact, it cost us twice as much,” Fox says. Four years after NMC first filed suit, Fox and Wolford’s legal bill now stands around $700,000 (a substantial part of which they haven’t paid). Attorneys for both NMC and the nephrologistis declined to disclose their legal expenditures, but Rains and his clients believe NMC already has spent several million dollars fighting them. Rains says, “We have access to certain records evidencing that prior to the first of this year [and thus well before the trial began] they spent in excess of $1.8 million...

“They were doing everything they could to run up the costs and fees,” he contends. “I think that was the thrust of their lawsuit from Day One.” NMC’s chief attorneys (the firm of Weissburg and Aronson in Century City) ultimately filed more than thirty formal and informal motions, almost none of which were successful. “It was a plethora of motions,” says Rains. “Just constant. They brought motions for everything they could dream up — most, in my opinion, not brought in good faith. But we had to fight each and every one. They were clearly engaged in what we call a paper war.” J. Mark Waxman, NMC’s principal attorney, denies that and says, “Each side did the best they could handling the case.” He points out that West Coast’s attorneys at one point asked for the names of every patient NMC or the Balboa doctors had treated in San Diego over a period of several years. But Rains says his motivation differed from NMC’s. “They clearly were trying to exhaust the financial resources of American Computech. And they did. American Computech ended up in bankruptcy as a result of this lawsuit.”

Wolford and Fox say that happened in April of 1985, when their spiraling legal costs made them fall behind in their payments for leasing the fancy dialysis equipment. To forestall the lessors from marching into the hospitals and repossessing the equipment overnight, Wolford and Fox petitioned for Chapter 11 bankruptcy, a move they say allowed them to line up another supplier for good but less sophisticated and costly dialysis equipment (“the Chevy of the industry,” Fox characterizes it). Rains points out that NMC’s attorneys even took the unusual step of trying to turn the bankruptcy into a legal weapon. “They went into bankruptcy court and said, ‘These people are in bankruptcy. Therefore, they should not be allowed to pay their attorneys’ — knowing full well that if you don’t pay your attorneys, you go without representation. That, in America, is almost unbelievable!" Rains fulminates. “We give indigents the right to counsel." (The bankruptcy court continued to allow West Coast to pay its attorneys.)

While the legal fight thus boiled furiously, direct confrontations over dialysis contracts eased off a bit in the first year or two after the lawsuits were filed. But by 1986, Wolford and Fox began to detect rumblings of trouble — informal reports that their contract with Sharp Memorial Hospital, which made up half of West Coast’s dialysis business, was going to be given back to NMC. The rumbles became thunderous in February of 1987 when Sharp suddenly invited dialysis companies (NMC and West Coast) to bid on providing the service in the hospital. "Dr. Steinberg went in and began to strong-arm the hospital,” Rains says bluntly. “We know that. Quite frankly, he thought he could do it [get rid of West Coast] by snapping his fingers.” Rains responded, however, with some of his own heavy-handed tactics, threatening to sue Sharp Memorial for conspiring and colluding with the Balboa physicians. The hospital then backed off from the bid request for several months, meanwhile setting up an elaborate review board in an attempt to establish that no favoritism was being shown. By last November, the hospital finally asked once again for sealed bids.

Wolford says by that point he was convinced he was going to lose the contract, so he bid $260 per patient per treatment, an amount that was just barely above his own costs. West Coast nonetheless received notice that they had lost the contract, effective the day their trial started, this past February.

They say it was just luck that led them to some clearer insight into how NMC had beaten their bid. As part of the discovery process, they had learned that NMC also had bid $260 per patient. “And we thought, ‘Gee, that is so much lower than they have ever bid before,’ ” says Fox. As a result of subsequent correspondence, Sharp Memorial’s attorney offered to send Rains and his clients NMC’s bid. “In trying to show how open and above-board they are, he said, ‘Here, I’ll show you the papers,’ ” Fox says. Those documents, however, showed that NMC had bid $295 per patient per treatment. Subsequent testimony during the trial revealed that the hospital, after receiving the sealed bids, informed NMC that its bid was higher and allowed it to reduce its bid.

"Why have a sealed bid process if the other side gets to change its numbers?" Rains asks. Waxman, NMC’s attorney, points out that Sharp Memorial Hospital administrators testified that the difference between $260 (NMC’s revised bid) and $295 (NMC’s first bid) wasn’t that important to them but that they considered the overall qualifications of each bidder. “It was not purely a price competition," Waxman says. “They were concerned with the quality.”

A lot of attention focused on the Sharp Memorial contract during the trial, but that issue was only one of numerous medical byways explored during the twelve-week proceeding. The six jurors (and several alternates) heard seemingly endless arguments about the pros and cons of reusing dialysis filters and other equipment; Wolford and Fox say this topic became relevant because Sharp’s request for bids surprisingly stated that the contractor should “provide dialysis reuse capacity."

(And Wolford and Fox had always adamantly opposed such reuse, in contrast with NMC, which has long contended that reuse is perfectly safe, as well as economical.)

A great deal of testimony also related to the ethics of the kickbacks paid by NMC to the kidney doctors. Ultimately, this question became a battle of the experts, states Dirk Metzger, the San Diego attorney who represented Drs. Channick, Steinberg, and Villalobos (added to the suit in early 1986). While Rains called one expert witness who denounced such kickbacks as being a violation of AMA canons and a perfidious conflict of interest, NMC’s legal team called two other prominent physicians who defended the practice. “The profit-sharing arrangement that NMC had with the Balboa doctors is consistent with National Medical Care’s nationwide policy," says Metzger, who only reluctantly agreed to be interviewed (and who explained that his physician clients would not be interviewed while certain aspects of the case were still pending). Metzger said his side’s expert testimony indicated that kickback arrangements, the so-called profit-sharing, are an accepted practice in “the current state of proprietary medicine.” The attorney adds that “there is always the possibility of abuse of any payment system" and ultimately any such system “depends on the physician’s ethical structure.”

In this particular case, the nephrologists argued that they wielded no special clout over hospital administrators. Metzger says, "It was the position of my clients that the hospital administrators made those choices [of which company to hire for dialysis service] based on what was best for the hospital, in terms of patient care.” The doctors even went to some lengths during the trial to downplay the amount of influence they wield over patients’ decisions over which hospital to enter. “Every physician who testified,” says Metzger, “says they told their patients this: ‘It appears that it is necessary to admit you to a hospital. These are the hospitals where I practice. These are also hospitals that have the facilities that you would need. You may choose from among the hospitals as to where you would like to be.’ That’s what the Balboa physicians said, and that’s what all the other doctors said.” (Rains argued that this is nonsense. “When you go to a hospital, it isn’t generally because you shop around. It’s because the doctor says to go there. The physicians automatically bring the patients.”)

Wolford and Fox, their opponents said, were making emotional appeals to try to win a big financial award In court, since they had failed to do so In the open marketplace.

Rains delivered his closing argument on April 25. Though it took nine hours, the core of his presentation was simple: NMC had used its powerful financial muscle to buy off the most influential kidney doctors in town, who then hustled to get business for NMC and to shut out any serious competition. The next day Waxman also spoke for several hours but hammered away at a few key planks: NMC and the doctors had fought hard but fairly, he argued, and had beaten out West Coast Medical because they represented a superior choice. Wolford and Fox, he said, were making emotional appeals to try to win a big financial reward in court,since they had failed to do so in the open marketplace.

The jury delivered its verdict on May 4. The panel actually proffered not simply one decision but the answers to some seventy-four separate questions raised by the case. Wolford and Fox certainly didn’t win them all. Rains had argued that NMC not only restricted West Coast’s acute dialysis operations but also effectively blocked the company from entering the chronic dialysis business, and as a result West Coast should be awarded several million dollars more for money it would have earned in that arena. The jury didn’t find this to be true, however, and furthermore agreed with NMC’s charge that Fox had acted in bad faith for remaining at NMC for six months after West Coast was founded. For this, the jury fined Fox $62,500.

On the other hand, the panel unanimously agreed that NMC and the Balboa doctors had illegally conspired to restrain trade, had conspired and attempted to monopolize the dialysis marketplace, and had engaged in other types of unfair business practices in the San Diego dialysis community. For this the jury awarded Wolford and Fox compensatory and punitive damages that total more than three million dollars.

Two other issues remain to be resolved and are scheduled to come before Senior U.S. District Judge Edward J. Schwartz on July 18. At that time Schwartz will decide how much, if any, of West Coast Medical’s $700,000 in attorney’s fees NMC and the Balboa doctors should pay. Rains says at that hearing he also will be requesting what is known as "injunctive relief.” That is, he’ll be asking the judge to make certain orders in an attempt "to insure an even playing field between American Computech and NMC.” Rains says he’ll probably seek to have the court force the doctors to disclose to local hospitals their clandestine financial arrangement with NMC and to force the nephrologists to disclose to other doctors who refer them patients "the conflict of interest they have because of their financial relationship with NMC." Rains says he’d also like to ask for some way to force the physicians to tell their patients that they receive a kickback from NMC whenever those patients get treated at NMC facilities. “What we want now is to assure [West Coast Medical Specialties) a fighting chance to survive in the marketplace against a company that has already been found to be a conspiratorial monopolist and one active in restraint of trade.”

Whatever the results of the July hearing, the legal battle between the two sides won’t end there. A trial to hear West Coast Medical Specialties’ assertion that NMC also broke state antitrust laws is scheduled to be heard in state court next January 27. Although Rains says he and his clients are ready to face another grueling trial experience, he hints that they might be willing to drop their state lawsuits if NMC were willing to forgo appealing the federal court decision.

Perhaps because so much remains to be resolved, Fox and Wolford don’t seem very jubilant these days. With the trial now two months behind them, they still look shell-shocked: just recounting their saga, a weary, slightly dazed expression settles on their faces. Fox says he’s still experiencing actual flashbacks; sometimes he’ll suddenly relive the experience of sitting next to Wolford in court for those three months. “And it’s like a bad movie!" He shakes his head and looks slightly awed by the intensity of the emotional drain. The men haven’t received any of the money awarded them and won’t until the question of an appeal is resolved. But both men say the money seems unreal anyway. After a while it was completely overshadowed by the principle they felt they were defending.

Rains, their attorney, is upbeat about the long-term ramifications of the case. “We’ve gotten calls from all over the country. I think it’s going to change the way dialysis is done," he exclaims. “This is going to shake NMC up. They are going to have to re-evaluate the way they do business." But Wolford and Fox sound less optimistic. They point out that at least as of today, the relationship between NMC and the local nephrologists is precisely what it was when all their troubles began four and a half years ago. For now they plan to stay in the business, but they say they may have to face some hard questions. Fox offers one: “Do we want to be in their face from now on?” Wolford states, “I don’t want to b6 a martyr for martyrdom’s sake.” But Fox adds, "I don’t want to be run out of this business. We fought real hard to stay in it.”

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Dennis Fox and Larry Wolford still look shell-shocked. - Image by Craig Carlson
Dennis Fox and Larry Wolford still look shell-shocked.

This spring a trial unfolded in San Diego federal court that received almost no news coverage, perhaps because the case was so long and messy. On one side, it featured a group of influential local kidney doctors and a half-billion-dollar-a-year corporate medical giant. Against them, the case pitted two upstart entrepreneurs who decided to open their own hemodialysis business.

"Hospitals regard doctors as their customers, and not so much the patients."

Each side charged the other with unfair competition: Was it unfair for Larry Wolford and Dennis Fox to go into business against their former employer, the internationally dominant National Medical Care, Inc.? Was it unfair for National Medical Care to pay almost half a million dollars a year in kickbacks to the kidney doctors — who were in a position to influence hospital decisions about which hemodialysis service to use?

From La Jolla to the South Bay and east to the border of La Mesa, the federal government in December of 1982 counted 318 patients with “end-stage renal disease.’’

The trial provided some fascinating glimpses into the hidden workings of big medicine. And there was at least one surprise: the little guys won.

To call Larry Wolford a “little guy" is an act of poetic license. He’s actually a hefty man of forty-five who has an accounting degree from San Diego State University. Wolford didn’t go straight from college into the business of medicine; he instead managed a wholesale liquor firm.

Nephrologists Steinberg, Villalobos, Channick, Roland. “These doctors are extremely powerful because they have hundreds of patients."

But in 1976 he was hired to work as the controller for the San Diego offices of National Medical Care, which already had emerged as the undisputed national leader among for-profit hemodialysis companies.

Headquartered in Massachusetts, National Medical Care was one of the nation’s earliest private providers of that service in which kidney disease patients’ blood is artificially cleansed of harmful toxins by pumping it through special filtering machines.

People whose kidneys have failed to function must undergo dislysis several times a week or they will die.

People whose kidneys have failed to function must undergo this procedure several times a week or they will die. NMC also was one of the biggest of the lobbyists who worked back in the early Seventies to get the federal government to pay the majority of all dialysis costs for every patient with chronic kidney disease, regardless of the person’s income level.

Wolford and Dennis Fox implored Arnold Roland to upgrade the ancient equipment.

That legislation took effect in 1973, and hemodialysis became a giant industry overnight. (Approximately 100,000 Americans need dialysis to survive, and the average cost per patient per year is more than $20,000.) As the industry grew explosively, so did NMC, which today has two-thirds of the for-profit dialysis business in America.

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Wolford did well working for NMC, whose hemodialysis operations here and elsewhere throughout the nation go under the name Bio-medical Applications Management Co., Inc. After two years as controller in the San Diego office, he was promoted to administrator, and then he became NMC’s “regional administrator” in 1980. That job brought him into close contact with some nephrologists known as the Balboa Internal Medicine Medical Group Inc. Founded by Dr. Arnold Roland, one of the first kidney specialists in San Diego to use hemodialysis, the Balboa group by the early 1980s had grown to include three other prominent kidney doctors: Drs. J. Michael Channick, Steven M. Steinberg, and Richard Villalobos. Then, as now, their main offices were based on Walnut Street in Hillcrest. “They were the largest, most influential group of nephrologists in the county,” Wolford says today. “They were the chiefs of nephrology in the hospitals." The members of the Balboa group also served as “medical directors" for the various hemodialysis facilities operated by NMC. By 1982 those included eight so-called acute facilities based in hospitals (serving acutely ill patients) and three community-based “chronic” clinics where patients received routine, thrice-weekly treatments — Biomedical Community Dialysis of San Diego, Biomedical Community Dialysis of National City, and the Artificial Kidney Center in Kearny Mesa.

By the end of 1982, Wolford says his employer, NMC, enjoyed a commanding dominance over the San Diego dialysis business. He points to records, for example, that show that in the central area running from La Jolla to the South Bay and east to the border of La Mesa, the federal government in December of 1982 counted 318 patients with “end-stage renal disease,’’ and 215 of them — more than two-thirds — were dialyzed at NMC facilities. (The rest were receiving treatment at a handful of non-NMC clinics either based in or connected with hospitals.)

Given NMC’s status as a near monopoly, Wolford admits that even while he worked for NMC he gave some thought to leaving the big corporation and starting up his own competing dialysis service. Particularly tempting was the “acute" business — those facilities based in hospitals. Wolford says this business only constituted about ten percent of NMC’s revenues in San Diego, and “they had not spent a lot of attention on it. It was just a sideline.” For years Wolford and Dennis Fox (a former U.S. Navy medical corpsman who had gone to work for NMC in 1973 and rose to become the chief technologist) had implored Arnold Roland to upgrade the ancient equipment NMC had installed in San Diego hospitals, to no avail. “We had to fight for every nickel and dime we could get for salaries, equipment, and so forth. They were very tight in the way they operated,” according to Wolford. But he now says he wasn’t naive about the way this market functioned. He says he knew if he struck off on his own and simply offered better service at a much lower cost, that alone would not have insured his success in the hospital-based dialysis field. Wolford knew that another key element would be the attitude of the powerful nephrologists who practiced at the hospitals. And since the most powerful nephrologists in San Diego were firmly allied with NMC, Wolford says he gave no serious thought to challenging that relationship.

Other events were to rock the pact between the nephrologists and NMC. Wolford says those events were triggered by a casual conversation that he had in late summer of 1982 with Dr. J. Michael Channick. Wolford and Channick were discussing the financial arrangements between NMC and the Balboa doctors, when Wolford made a reference to the “profit share" paid by NMC to Arnold Roland (the group’s founder). “This was a substantial amount of money, some $30,000 to $40,000 per month, depending on the number of patients who were using the NMC facilities. Over the nine or so years of the Balboa group’s existence, it had amounted to more than $3.5 million — all of which had gone to Roland alone. Wolford says he had no idea the other three Balboa doctors were completely unaware of this kickback arrangement — but their ignorance was painfully obvious from the moment the subject came up in his conversation with Channick. “They [Channick, Steinberg, and Villalobos] were enraged," Wolford says simply. "They figured they were supplying seventy-five percent of the patients, while Arnold had only twenty-five percent, yet he was getting all the money.” Not long thereafter, a crossfire of lawsuits and countersuits exploded between Roland and the other three Balboa doctors. “They didn’t speak to each other,” says Wolford. “Staff meetings were tense.”

Wolford says that’s the principal reason he decided to leave National Medical Care. “I just wanted to get out,” he says. By early 1983, he and Fox had also gotten interested in the idea of starting a computer-repair company. The two men each tapped about $5000 from their savings, and in the early summer of 1983 the new business, called American Computech, began operating with one employee, a friend of Wolford’s named Roy Rains. Wolford in the meantime made plans to join Rains, and on July 14, 1983, he left National Medical Care, while Fox continued to work there.

Wolford says he wasn’t completely startled when, a few days after his departure, he got a call from Channick. Wolford knew that Channick, Villalobos, and Steinberg were openly dissatisfied with NMC’s response to their squabble with Roland. Essentially, NMC had washed its corporate hands of the dispute, taking the stance that the four nephrologists would have to work things out themselves. But that didn’t satisfy the disgruntled Balboa trio, who “wanted to get NMC off the fence,” says Wolford. So when Channick met with Wolford, “He kind of informed me that acute dialysis would be a good business to go into, and I would not be suppressed by the (dissident) Balboa doctors.”

Wolford says to him this meant that if he formed a new dialysis company, the three kidney specialists would not automatically advise hospital administrators that they should continue to stick with NMC. “So I started looking into the acute business,” Wolford says. Toward the end of July 1983, he sent out letters to a number of local hospitals, asking if the hospitals would like to learn more about a new dialysis service.

When he got some positive response to the letters, Wolford followed up in August and September of 1983 with more specific proposals. His new dialysis business, to be called West Coast Medical Specialties, would charge the hospitals $325 per patient per treatment, a hundred dollars less than NMC was then charging. West Coast furthermore planned to employ the slickest, most modern dialysis machinery on the market. Fox today explains that National Medical Care had been supplying its San Diego hospitals with primitive machines that contained virtually no safety features. Even more of a nuisance was the fact that these machines (which Fox says were no longer manufactured but could be purchased for fifty dollars, used) had to be filled with hundreds of pounds of purified water. NMC’s hospital clients thus had to set up special dialysis areas (close to pure water supplies) to which their acutely ill patients had to be transported. But West Coast Medical Specialties in contrast was offering to use what Fox calls "the Mercedes of the dialysis business" — highly computerized units loaded with safety checks and containing their own built-in water purifiers. Hospitals thus would be able to dialyze patients right in the patients’ own rooms, connecting the fancy dialysis machines to ordinary tap water supplies (which were then purified by the machine itself).

The first hospital to commit to switching from NMC to the new company was Sharp Memorial, where Steinberg was the chief of nephrology. Wolford says it didn’t take long before he heard that Steinberg was taking not just a neutral position, but one actively supportive of the switch to West Coast Medical Specialties. “That really encouraged me,” Wolford says. “So I pushed even harder.” By December, he had won signed contracts from Sharp Memorial, Bay General (now Scripps Chula Vista), and Clairemont General hospitals, and Paradise Valley Hospital had also orally committed to Wolford’s new service.

Throughout that fall of 1983, something else occurred that promised to bring West Coast even more spectacular success — namely, Wolford began to work toward opening a new community-based center for chronic dialysis patients. Wolford explains that for a long time the chronic dialysis business had been extremely constricted by government regulations.

Before any new such center could open, the state of California had required an exhaustive review process in which the need for the new center had to be proved to the bureaucrats’ satisfaction. In practice, it had taken from eighteen months to two years to win such approval. But by the fall of 1983, the California nephrological community had become aware that the state was getting ready to drop the requirement for such certificates of need. Wolford says the three Balboa dissidents saw the potential in the coming change, and they called him in to discuss Wolford’s opening a chronic center for them. By December of 1983, Wolford and Fox (who left NMC at the beginning of December to work with Wolford on the dialysis business) began actively scouting for clinic locations. Since Wolford and Fox together had planned and done most of the work in starting some of NMC’s chronic dialysis clinics, the task was one they tackled with confidence.

By Christmas of 1983, life thus seemed full of promise for West Coast Medical Specialties. But that promise didn't go unnoticed by NMC. Wolford says, “When NMC finally realized that they were not only losing hospital contracts but that they also might lose three-quarters of their chronic patients, they realized that sitting on the fence in the Roland issue was not going to work for them." Fox chimes in, “They got off the fence in a hurry when they realized their potential loss.” Getting off the fence took the form of signing a contract with the Balboa group that awarded the lucrative “profit shares” to the group as a whole, rather than to Roland exclusively. (Shortly thereafter, Roland moved out of the Balboa offices.)

Wolford got wind of what had happened in January of 1984, when Channick called to inform him that the three Balboa doctors were about to sign a contract with NMC. Wolford says about a week later, Channick called again to tell Wolford that Wolford’s company wouldn’t be getting any more hospital contracts after February 1. Right around then, West Coast signed its contract with Paradise Valley Hospital, but Channick’s next call (which came about the first of February) touched upon that. Wolford says Channick informed him that he would have to “give back” the Paradise Valley contract; on a follow-up visit, Channick indicated that failure to do this would invite a lawsuit from NMC. But convinced that Channick was merely saber-rattling, Fox and Wolford flatly turned him down. Wolford, in fact, even went a step further and remarked that if NMC was upset about losing the Paradise Valley Hospital contract, then the corporate giant would really be upset about losing its contract with Sharp Cabrillo Hospital, which also had just made an oral commitment to switch to West Coast’s services.

Wolford later would regret blurting out this news to Channick, but he says he did it in a heated moment. “Also, I still felt that the doctors were not going to turn on us. They had already told us how good our service was, compared to what they had had." Within a week, however, Wolford and Fox learned that Steinberg had gone to Sharp Cabrillo with NMC’s new San Diego administrator (Wolford’s successor) and had dissuaded that hospital’s administrators from changing from NMC to West Coast.

"When the doctors are paid by NMC, we cannot compete with them," Wolford states unequivocally. "Hospitals regard doctors as their customers, and not so much the patients,” Fox contends. Adds Wolford, “These doctors are extremely powerful because they have hundreds of patients. And at any one time, five or six or seven percent of those patients are in the hospital." Patients with end-stage renal disease furthermore rate among the juiciest plums to fall into any hospital’s lap. All are registered with Medicare and have an assigned identification number. Says Fox, “So when one checks in, the hospital just types their number into a blank and they [the hospital billing department] send it out and they’re paid right away. So that’s instant revenue for the hospitals," which normally have a lot of trouble getting paid.

After losing the contract with Sharp Cabrillo, Wolford and Fox say they decided simply to lie low for a while. “We figured we could make a profit and stay in business.” By April of 1984, however, Wolford was ready to test the limits on his business imposed by NMC. He says he thus sent out some more letters, soliciting business from other hospitals in the county that were not being served by NMC. “I was just trying to see if I could do anything,” Wolford states. “Two weeks later, we were sued."

The legal attack came from NMC, which charged in state court that Wolford and Fox were guilty of fraud, stealing trade secrets, unfair competition, and breaking the covenant of “good faith and fair dealing.” Explains Wolford, "In essence what they were saying was that I knew the hospital administrators. I knew what their prices were. I knew their financial makeup and accounting procedures.... And yes, it helped me to know that.” But Wolford and Fox felt they had acted neither illegally nor unethically. Instead they saw NMC’s lawsuit as a barely concealed attempt to intimidate them into leaving the business.

At the urging of Roy Rains, the two flew up to Sacramento to talk to Roy’s brother, Omer L. Rains, a former state senator who had left politics and returned to his law practice. Rains felt Wolford and Fox had a good antitrust case against NMC, so he filed an answer and a cross-complaint in state court for alleged violations of the state antitrust act, as well as various actions for unfair competition and interference with contractual relations. He also filed an independent lawsuit against NMC in federal court for alleged violations of the federal Sherman Antitrust Act.

Rains says as soon as he filed the cross-complaint for Wolford and Fox, he got a call from an NMC attorney asking the San Diegans to dismiss their action. "I think they expected they could just scare Wolford and Fox off." Indeed, Wolford and Fox today look pained when they think back to their response to the lawsuits; knowing what they do now, it’s a little hard to remember just why they didn’t back down from the legal battle.

“It’s like starting out in a race that you thought was going to be a hundred yards long, and it turns out to be a marathon,” says Fox. “But we were angry at being double-crossed along the way. We thought we were right, and we thought we could stay with them.” He says Rains initially estimated it would cost around $5000 per month to fight the lawsuits and that the fight might last a year or two. "In fact, it cost us twice as much,” Fox says. Four years after NMC first filed suit, Fox and Wolford’s legal bill now stands around $700,000 (a substantial part of which they haven’t paid). Attorneys for both NMC and the nephrologistis declined to disclose their legal expenditures, but Rains and his clients believe NMC already has spent several million dollars fighting them. Rains says, “We have access to certain records evidencing that prior to the first of this year [and thus well before the trial began] they spent in excess of $1.8 million...

“They were doing everything they could to run up the costs and fees,” he contends. “I think that was the thrust of their lawsuit from Day One.” NMC’s chief attorneys (the firm of Weissburg and Aronson in Century City) ultimately filed more than thirty formal and informal motions, almost none of which were successful. “It was a plethora of motions,” says Rains. “Just constant. They brought motions for everything they could dream up — most, in my opinion, not brought in good faith. But we had to fight each and every one. They were clearly engaged in what we call a paper war.” J. Mark Waxman, NMC’s principal attorney, denies that and says, “Each side did the best they could handling the case.” He points out that West Coast’s attorneys at one point asked for the names of every patient NMC or the Balboa doctors had treated in San Diego over a period of several years. But Rains says his motivation differed from NMC’s. “They clearly were trying to exhaust the financial resources of American Computech. And they did. American Computech ended up in bankruptcy as a result of this lawsuit.”

Wolford and Fox say that happened in April of 1985, when their spiraling legal costs made them fall behind in their payments for leasing the fancy dialysis equipment. To forestall the lessors from marching into the hospitals and repossessing the equipment overnight, Wolford and Fox petitioned for Chapter 11 bankruptcy, a move they say allowed them to line up another supplier for good but less sophisticated and costly dialysis equipment (“the Chevy of the industry,” Fox characterizes it). Rains points out that NMC’s attorneys even took the unusual step of trying to turn the bankruptcy into a legal weapon. “They went into bankruptcy court and said, ‘These people are in bankruptcy. Therefore, they should not be allowed to pay their attorneys’ — knowing full well that if you don’t pay your attorneys, you go without representation. That, in America, is almost unbelievable!" Rains fulminates. “We give indigents the right to counsel." (The bankruptcy court continued to allow West Coast to pay its attorneys.)

While the legal fight thus boiled furiously, direct confrontations over dialysis contracts eased off a bit in the first year or two after the lawsuits were filed. But by 1986, Wolford and Fox began to detect rumblings of trouble — informal reports that their contract with Sharp Memorial Hospital, which made up half of West Coast’s dialysis business, was going to be given back to NMC. The rumbles became thunderous in February of 1987 when Sharp suddenly invited dialysis companies (NMC and West Coast) to bid on providing the service in the hospital. "Dr. Steinberg went in and began to strong-arm the hospital,” Rains says bluntly. “We know that. Quite frankly, he thought he could do it [get rid of West Coast] by snapping his fingers.” Rains responded, however, with some of his own heavy-handed tactics, threatening to sue Sharp Memorial for conspiring and colluding with the Balboa physicians. The hospital then backed off from the bid request for several months, meanwhile setting up an elaborate review board in an attempt to establish that no favoritism was being shown. By last November, the hospital finally asked once again for sealed bids.

Wolford says by that point he was convinced he was going to lose the contract, so he bid $260 per patient per treatment, an amount that was just barely above his own costs. West Coast nonetheless received notice that they had lost the contract, effective the day their trial started, this past February.

They say it was just luck that led them to some clearer insight into how NMC had beaten their bid. As part of the discovery process, they had learned that NMC also had bid $260 per patient. “And we thought, ‘Gee, that is so much lower than they have ever bid before,’ ” says Fox. As a result of subsequent correspondence, Sharp Memorial’s attorney offered to send Rains and his clients NMC’s bid. “In trying to show how open and above-board they are, he said, ‘Here, I’ll show you the papers,’ ” Fox says. Those documents, however, showed that NMC had bid $295 per patient per treatment. Subsequent testimony during the trial revealed that the hospital, after receiving the sealed bids, informed NMC that its bid was higher and allowed it to reduce its bid.

"Why have a sealed bid process if the other side gets to change its numbers?" Rains asks. Waxman, NMC’s attorney, points out that Sharp Memorial Hospital administrators testified that the difference between $260 (NMC’s revised bid) and $295 (NMC’s first bid) wasn’t that important to them but that they considered the overall qualifications of each bidder. “It was not purely a price competition," Waxman says. “They were concerned with the quality.”

A lot of attention focused on the Sharp Memorial contract during the trial, but that issue was only one of numerous medical byways explored during the twelve-week proceeding. The six jurors (and several alternates) heard seemingly endless arguments about the pros and cons of reusing dialysis filters and other equipment; Wolford and Fox say this topic became relevant because Sharp’s request for bids surprisingly stated that the contractor should “provide dialysis reuse capacity."

(And Wolford and Fox had always adamantly opposed such reuse, in contrast with NMC, which has long contended that reuse is perfectly safe, as well as economical.)

A great deal of testimony also related to the ethics of the kickbacks paid by NMC to the kidney doctors. Ultimately, this question became a battle of the experts, states Dirk Metzger, the San Diego attorney who represented Drs. Channick, Steinberg, and Villalobos (added to the suit in early 1986). While Rains called one expert witness who denounced such kickbacks as being a violation of AMA canons and a perfidious conflict of interest, NMC’s legal team called two other prominent physicians who defended the practice. “The profit-sharing arrangement that NMC had with the Balboa doctors is consistent with National Medical Care’s nationwide policy," says Metzger, who only reluctantly agreed to be interviewed (and who explained that his physician clients would not be interviewed while certain aspects of the case were still pending). Metzger said his side’s expert testimony indicated that kickback arrangements, the so-called profit-sharing, are an accepted practice in “the current state of proprietary medicine.” The attorney adds that “there is always the possibility of abuse of any payment system" and ultimately any such system “depends on the physician’s ethical structure.”

In this particular case, the nephrologists argued that they wielded no special clout over hospital administrators. Metzger says, "It was the position of my clients that the hospital administrators made those choices [of which company to hire for dialysis service] based on what was best for the hospital, in terms of patient care.” The doctors even went to some lengths during the trial to downplay the amount of influence they wield over patients’ decisions over which hospital to enter. “Every physician who testified,” says Metzger, “says they told their patients this: ‘It appears that it is necessary to admit you to a hospital. These are the hospitals where I practice. These are also hospitals that have the facilities that you would need. You may choose from among the hospitals as to where you would like to be.’ That’s what the Balboa physicians said, and that’s what all the other doctors said.” (Rains argued that this is nonsense. “When you go to a hospital, it isn’t generally because you shop around. It’s because the doctor says to go there. The physicians automatically bring the patients.”)

Wolford and Fox, their opponents said, were making emotional appeals to try to win a big financial award In court, since they had failed to do so In the open marketplace.

Rains delivered his closing argument on April 25. Though it took nine hours, the core of his presentation was simple: NMC had used its powerful financial muscle to buy off the most influential kidney doctors in town, who then hustled to get business for NMC and to shut out any serious competition. The next day Waxman also spoke for several hours but hammered away at a few key planks: NMC and the doctors had fought hard but fairly, he argued, and had beaten out West Coast Medical because they represented a superior choice. Wolford and Fox, he said, were making emotional appeals to try to win a big financial reward in court,since they had failed to do so in the open marketplace.

The jury delivered its verdict on May 4. The panel actually proffered not simply one decision but the answers to some seventy-four separate questions raised by the case. Wolford and Fox certainly didn’t win them all. Rains had argued that NMC not only restricted West Coast’s acute dialysis operations but also effectively blocked the company from entering the chronic dialysis business, and as a result West Coast should be awarded several million dollars more for money it would have earned in that arena. The jury didn’t find this to be true, however, and furthermore agreed with NMC’s charge that Fox had acted in bad faith for remaining at NMC for six months after West Coast was founded. For this, the jury fined Fox $62,500.

On the other hand, the panel unanimously agreed that NMC and the Balboa doctors had illegally conspired to restrain trade, had conspired and attempted to monopolize the dialysis marketplace, and had engaged in other types of unfair business practices in the San Diego dialysis community. For this the jury awarded Wolford and Fox compensatory and punitive damages that total more than three million dollars.

Two other issues remain to be resolved and are scheduled to come before Senior U.S. District Judge Edward J. Schwartz on July 18. At that time Schwartz will decide how much, if any, of West Coast Medical’s $700,000 in attorney’s fees NMC and the Balboa doctors should pay. Rains says at that hearing he also will be requesting what is known as "injunctive relief.” That is, he’ll be asking the judge to make certain orders in an attempt "to insure an even playing field between American Computech and NMC.” Rains says he’ll probably seek to have the court force the doctors to disclose to local hospitals their clandestine financial arrangement with NMC and to force the nephrologists to disclose to other doctors who refer them patients "the conflict of interest they have because of their financial relationship with NMC." Rains says he’d also like to ask for some way to force the physicians to tell their patients that they receive a kickback from NMC whenever those patients get treated at NMC facilities. “What we want now is to assure [West Coast Medical Specialties) a fighting chance to survive in the marketplace against a company that has already been found to be a conspiratorial monopolist and one active in restraint of trade.”

Whatever the results of the July hearing, the legal battle between the two sides won’t end there. A trial to hear West Coast Medical Specialties’ assertion that NMC also broke state antitrust laws is scheduled to be heard in state court next January 27. Although Rains says he and his clients are ready to face another grueling trial experience, he hints that they might be willing to drop their state lawsuits if NMC were willing to forgo appealing the federal court decision.

Perhaps because so much remains to be resolved, Fox and Wolford don’t seem very jubilant these days. With the trial now two months behind them, they still look shell-shocked: just recounting their saga, a weary, slightly dazed expression settles on their faces. Fox says he’s still experiencing actual flashbacks; sometimes he’ll suddenly relive the experience of sitting next to Wolford in court for those three months. “And it’s like a bad movie!" He shakes his head and looks slightly awed by the intensity of the emotional drain. The men haven’t received any of the money awarded them and won’t until the question of an appeal is resolved. But both men say the money seems unreal anyway. After a while it was completely overshadowed by the principle they felt they were defending.

Rains, their attorney, is upbeat about the long-term ramifications of the case. “We’ve gotten calls from all over the country. I think it’s going to change the way dialysis is done," he exclaims. “This is going to shake NMC up. They are going to have to re-evaluate the way they do business." But Wolford and Fox sound less optimistic. They point out that at least as of today, the relationship between NMC and the local nephrologists is precisely what it was when all their troubles began four and a half years ago. For now they plan to stay in the business, but they say they may have to face some hard questions. Fox offers one: “Do we want to be in their face from now on?” Wolford states, “I don’t want to b6 a martyr for martyrdom’s sake.” But Fox adds, "I don’t want to be run out of this business. We fought real hard to stay in it.”

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