Fresenius Medical Care AG (FME) Earnings Call Transcript

Good afternoon, ladies and gentlemen. Thank you for standing by. I'm Franzi, your Chorus Call operator. Welcome, and thank you for joining the Fresenius Medical Care expert call on the accelerating growth in home dialysis. [Operator Instructions] It's my pleasure, and I would now like to turn the conference over to Dominik, Head of Investor Relations. Please go ahead, sir.

Thank you, Franzi. So we would like to welcome all of you to the Fresenius Medical Care Expert Call Series 2022 with accelerating growth in home dialysis. We appreciate you joining today. As always, I'm happy to start out the event by mentioning our cautionary language that is in our safe harbor statement on Slide 2 of the presentation. For further details concerning risks and uncertainties, please refer to this document as well as to our SEC filings. At Fresenius Medical Care and as a vertically integrated business, we are uniquely positioned to support and expand our patient population being treated at home. More than ever, accelerating our growth in home dialysis is a key strategic priority as the current labor environment further highlights the importance of expanding home treatments to help reduce in-center labor costs and staffing pressures. I'm delighted to have Dr. Frank Maddux, our Global Chief Medical Officer; and Joe Turk, our Global Head of Home here to present today. Please be aware that this call will not cover the financial background or any cost or revenue questions in this relation. I will now hand over to Frank to begin the presentation. The floor is yours.

Great. Thank you, Dominik, and welcome, everybody, for joining this particular call. Today, we are really going to be talking about something that is vitally important to our expanding strategy and the opportunity to continue to grow the opportunities for patients to have greater power and choice in the care that they get. And I want to step back for just a moment for 50 years and recognize that next month, 50 years ago, the Social Security Act was -- Social Security Amendment of 1972 fundamentally changed access to kidney care and actually created this right for patients in the United States to survive and live with a very deadly condition. And over time, that growth of access to care has developed into this broad capability that wherever you live in many parts of the world, you can gain access to renal replacement therapy and kidney therapy. As this goal has evolved and matured, we've seen that the renal care continuum has become fundamentally more important in the evolving environment of people with kidney disease and living their lives with this difficult disease. Treating patients more holistically and through the different stages of kidney disease, has also included the expansion of the treatment modalities that are available that give them more power and more choice in what they're doing. And home treatments are a huge component of that, along with transplant CKD care, supporting acute care and the relevant areas for our call today being home. Home is a key driver for executing on our larger strategy and addresses some of the current challenges of the development of the field that promoted broad access to care, but is now looking for ways that improve patients symptom management, their quality of life and a more personalized care treatment. And it positions us as an opportunity for our future growth opportunities to extend beyond the traditional health care facility and providing that care. Empowering patients to live the life that they want and to select the treatment that's best for them at that stage of their life is a huge part of evolving the maturity of the field of kidney disease therapy and certainly kidney replacement therapy and developing patient choice in that and the power for patients and their doctors to choose what's best for them becomes very important. Improving outcomes and reducing costs are important. And whether it's the U.S. government, private insurer payers, other governments, the supportive home therapies and the underlying needs to get the advocacy for the appropriate home and transplant quality metrics and the appropriate value-based care arrangements is one of the opportunities to, again, mature the system that improves outcomes and reduces cost to the overall health care system of these important therapies. And finally, labor is one of the challenges today that has been a side effect and related to the pandemic. But as we address wage inflation and the fact that labor accounts for 40% of our in-center costs, we recognize that home and therapies in a non-health care facility like that become an important component. Our clinic network remains important to us because it is the opportunity for us to make sure that we adequately are supporting and developing the infrastructure that's needed for patients on home dialysis, whether that's a training environment, a respite care environment, an environment for somebody who transitioned to a sicker condition or, in fact, actually to recognize that there are other purposes that we can use for some of these facilities to support patients in their connected health environment. If we can move on to Slide 4, please. So we believe that Fresenius Medical Care is positioned uniquely to lead home growth. We have this full network of products, services and value-based care opportunities with our physician partners that leverages our vertically integrated business model to serve patients where they are and through this entire journey of life that they have with this difficult disease. It's critically important that patients and physicians are comfortable with their home treatments and that they have both access to the most current technology, but also that, that technology is reliable, straightforward and that we've embraced this connected health environment where whether you're operating in a facility and you have direct visualization of a patient or you're operating at home and the patient has connected health contact to their care team, all of those become critically important. This infrastructure is part of what is still in the process of being matured and developed and includes training support, 24/7 support every day of the week, so that there's access to a caregiver for a patient whether they're at home, whether they're in a community facility and to recognize that the distribution and logistics of the supplies and the treatments and the characteristics of care are something that's available to all of them. We, as a company, have made many of these investments and have tried to expand and recognize the importance of the proper infrastructure that aligns with the options for care and the choices that we want patients to have. Our experience in dealing with this complex patient population and the reach that we have globally really is unparalleled in this industry. And today, we have over 1,200 active home programs in the United States. We have experts that are both on the medical side, from the product development side, the engineering side, the science of the therapies and what it is that causes the therapies to work better or worse than an individual person. And finally, we have our FKC clinic footprint that helps create this seamless transition between modalities of care that need to occur when a patient is actually transitioning through the various stages of their life and the various stages of the modalities of care that they have. If we could move to Slide 5, please. So when we look at the results of this and we say, well, what happens when you increase the degree of power and choice that an individual patient has, what does that look like? Well, we know that one measure of that success is patient satisfaction. And what we found is when patients are highly engaged in their own care, they recognize the nuances of their own health and their own physiology we find that they are more satisfied with that care. They understand it better. They are living the life that they want, they have more choices with that. And so when we look at our home patients, we see Net Promoter Scores that are world-class. They are really -- they're above this 70% level of this Net Promoter Score identification of world-class and it recognizes that not only is the therapy part of that, but is this coordinated network that we provide that helps give them the confidence that they can be in charge. And part of this is critically important in their ability to manage the ebbs and flows of living a life with a severe disease such as this. If we could move on to Slide 6. I want to speak for just a minute before turning it over to Joe. Just a little bit about the fact that home dialysis offers a degree of flexibility in the timing of treatments, the number of treatments and the personalization of the care that a patient gets that is substantially different than the model where everybody dialyses in this consistent 3 treatment per week. Now although our systems and the recognition of our systems is the payment models pay us on this 3x per week basis. The realistic nature of taking care of patients recognizes that for some patients, that's more than adequate. For other patients, it's not inadequate and you need to tailor their care. And this opportunity to recognize the benefits of tailored care and where home dialysis offers a recognition of the potential for identifying an aligned number of treatments to what the patient needs is something that we think is actually a substantial advantage of this self-care environment that home dialysis brings today. For patients that recognize the number of treatments that they need based on what their oral intake is, their fluid intake, their nutritional needs, their blood pressure needs. We've seen that more frequent dialysis can be associated with better blood pressure, can be associated with lower mortality from the long interdialytic interval that can occur over the long weekend break in some patients. We know physiologically and anatomically, there's less cardiac remodeling that occurs. We've noticed that during a treatment, lower ultrafiltration rates can reduce the myocardial impact on a patient and we recognize that both health-related quality of life measures that patients report on themselves and better bone and mineral metabolism parameters are, in fact, improved when a tailored number of treatments is given to a patient. So given these favorable outcomes, we think that it's important to recognize that payers also understand that when you personalize the treatment and you have the greatest opportunity to do that in the environment of a -- home environment where the patient is participating actively in their care is one of those opportunities that we think is better for our business better for our health care system and results in better outcomes for patients. So with that, I'd like to turn it over to Joe Turk to discuss some of our aims and aspirations and starting on the next slide. Joe?

Thanks, Frank, and thanks, everybody, for joining this call. We like to talk about home, and we really do believe that home dialysis growth is set to accelerate in the years to come, and it's a key part of our strategy. So going back a couple of years at the time of the NxStage acquisition announcement, we set a target that we wanted to reach over 15% of home treatments in the U.S. by 2022. Now during that period, COVID-19 and the pandemic, certainly, impacted our business and brought on a number of challenges, most notably of this, whether it be from the hospital perspective or what was going on in the clinics, it reduced the training levels and the training capacity. We continue to grow home dialysis through this period and achieved the 15% plus target a year ago, early in 2021. And we do believe that our commitment allowed for growth that was in excess of the rest of the industry. The pandemic certainly presented some challenges, but it also highlighted the benefits of home treatments. And in February, we did announce a new aspiration target of 25% and there are number things that we need to do, that we need to continue to improve on to increase home access and the home penetration in order to approach the -- and reach the aspirational target. And the most important thing is increasing home access. And simply put, that's increasing the number of patients that start home dialysis get trained to go home on dialysis. And that is made up of a few key strategies, about 1/3 of the growth, 80% is increasing the training, as I mentioned, and about 1/3 of that is by improving -- increasing the number of patients that go home from in center. Dialysis is a continuum of care and patients will experience multiple modalities over the course of their treatment. And so it's important that patients that are in center given the opportunity to go home -- choose home. Also obviously, is increasing the number of the new patients that are starting dialysis that go directly to home. And that's about 1/3 of the opportunity. And then there are a number of patients that are on peritoneal dialysis as you all know. And at some point, peritoneal dialysis may not be the right therapy for them anymore and ensuring that those patients have the opportunity to stay at home with home hemodialysis is an important growth opportunity as well, and about 15% of the opportunity comes from that. The other 20% improves from increasing the number of patients that are able to stay at home and stay at home longer. This is just continuing to improve the quality of care, the quality of training, the quality of the ongoing support of patients that are home through technology and other means. And this contributes -- as the slide says, about 20% to the overall strategy to approaching the -- or to reaching the 25% target of home treatments. So next, let's go to Slide 8. So the growth will come from both peritoneal dialysis and home hemodialysis and we feel confident in both. The -- currently, about 2/3 of the patients at home are on peritoneal dialysis. And we believe that, that will continue to grow in the mid- to high single digit. Obviously, it's a more mature therapy, and there are more patients on home at on peritoneal dialysis right now. And the PD growth is really going to be driven by earlier detection and through CKD management and education. You've -- I'm sure you noted the 3-way InterWell Health merger that we've announced, and that really helps with management of our CKD population and helps to enable these home growths -- these home goals. And we really do believe that there's an opportunity to continue to grow peritoneal dialysis in the mid- to high single-digit range through the coming years. Now home hemodialysis is a smaller portion. It's about 1/3 of the U.S. home treatments right now. And we believe that there's much more growth opportunity in this about 20%. It's faster growing because the awareness is increasing more rapidly. But the key drivers here are really the -- we talked about the in-center to home transition. The reeducation of in-center patients is a big opportunity here. We also believe that not all patients are right for PD, whether it be clinically or from a lifestyle perspective. So we also believe that more new patients can choose home hemodialysis. And then clearly, once the PD therapy is not right for a patient being able to transition that patient to home hemodialysis is an opportunity. So opportunities in both therapies and together, they help reach the goals. So let's go to Slide 9. So one of the strategies that Fresenius Medical Care has been employing to increase and retain home patients has been the transitional care unit or the TCUs. We currently have about 100 TCUs in the U.S. nationally, and these serve a number of different -- a number of different functions. The TCUs help to educate patients on options. So this is not solely about home therapy, it's about helping the patients choose the right therapy for themselves based upon a better understanding of what they're looking for. It's really an opportunity for patients to try the different home therapies and advance, understanding what's involved with either peritoneal dialysis or home hemodialysis. And the TCUs, the 100 TCUs that we have each support roughly 4 programs -- 4 centers. that help them increase their home programs. So the TCUs operate in a regional hub type of network. So the results to date really demonstrate effectiveness. And this is even in some of the challenges staffing, those sorts of things during the COVID era that have impacted all of dialysis. But 1 out of 3 patients that are educated in the TCU end up choosing home, which -- versus just 5% or 1 out of 20 that don't participate in a TCU. And we're starting to see multiple other clinical advantages associated with patients that experience the TCU. We're seeing a trend towards improved survival and less likelihood of being hospitalized during the time after their TCU versus mass controls. We see more likely to be referred or wait listed for kidney transplant, and this is a very, very important part of what Fresenius is looking to achieve the support of transplantation. And then we also see higher rates of our arteriovenous access either grafts or fistulas versus catheters after the TCU. And that's a really, really important part of improving the clinical outcomes and the experience of the patient. So we plan to further expand our training capabilities with more TCUs. We're looking to add 60-plus in the foreseeable future. Now that we understand some of these benefits, and we've worked out some of the operational processes, but an important part of success overall, but certainly success at home. So next, let's go to Slide 10. So one of the questions that I'm sure you're asking and we ask ourselves, do we really believe the opportunity to grow to 25% and beyond. And the -- when we take a look across our network within the United States, the home penetration in select markets really does support that growth opportunity. As we said last year, we passed 15% of treatments across the U.S. for home. But this varies dramatically by market. There are several markets that are well above 25% of home treatments and others that are well below 15%. And we're really optimistic about our opportunity to -- our ability to reach the 25% and beyond from leveraging some of the expertise and learnings from larger markets to really increase the penetration in home markets with lower penetration currently. And we've done work based upon the data that we have, and we understand that the differences are really more in practices and application of the different techniques to really support and excel in home versus any fundamental clinical differences between the patients or differences in the different markets. Clearly, there are some things that must be addressed with health equity and challenges that may be associated with that. But that's really an opportunity to do even more for patients. So this is just helping -- dealing the blocking and tackling and improving our practices across different regions, taking the experiences from others that are a little bit further ahead in the adoption is -- will be really supportive of growing home therapy. So next, Slide 11. So as a vertically integrated company, we have the opportunity clearly to work and optimize in the services side with things like the best practices and transitional care units. But with our product side, we have the opportunity to really innovate and bring to market those products that help patients, help nurses, help our customers grow therapy, grow home therapy. And we're committed to innovate across peritoneal dialysis connected health, home hemodialysis. One of the examples of our innovation is the VersiPD Cycler System, which is the smallest, the lightest, the quietest PD cycler available. We announced in April that we received FDA approval for this, and we continue to work on bringing this one to market. So -- but an example of a potential real breakthrough in terms of patient-focused and trainer focused innovations to help grow home dialysis. Next, let's go to Slide 12. One of the other innovations that we feel is incredibly important is the whole connected health platforms and with peritoneal dialysis the connected health platform we have is called Kinexus. And this is -- we've begun to roll connected Kinexus out and it's in a material number of our customers. And it is already improving outcomes. It increases time on PD by 3.5 months, and that's really driven by reducing the patient dropout by about 15%. And it also really allows for timely interventions, clinical interventions to ensure the dosing of the therapy is right, ensure that the fluid situation is, as Frank mentioned before, with respect to hemodialysis, but it's also an opportunity with peritoneal dialysis, make sure that, that's being addressed appropriately. So the therapy is really optimized for patients. It's reliable. It's easy to use. There are 15,000 patients connected. We passed 1 million treatments collected into the system on Kinexus and it uses a cellular connection so no Internet is required. So the vast majority of patients can adopt this and the clinics can start seeing the benefit both from an operational perspective and from a clinical perspective. So Kinexus helped big deal, we continue to invest in it and I think it will be a material advancement to the ability for home to grow in PD. So next, let's go to Slide 13. So with the NxStage acquisition back in 2019, we also have a very unique position in home hemodialysis, and we continue to innovate in that with the market-leading technology with the NxStage System One. The NxStage platform has been committed to innovation and from its introduction is that a steady pace of material innovations that have brought it to where it is today. And I summarize what some of the most important items on this is the devices and the system is very, very simple. It's a simple interface. It's not complicated. So it's easy to learn and use. The cartridge itself, the tubing set and the dialyzer that are used on a per treatment basis are designed to be super easy in order to use just by dropping it in and closing the door. And then the -- because of -- the system was really designed for use in a nonclinical environment. Any plumbing connections, if necessary, are very simple and don't require changes to the home and it uses a standard electrical plug. So no -- it does not require modifications to the electrical system. Its most unique advantage is that it is portable. 70% of the patients actually travel in some way, shape or form, whether it's a weekend trip to go visit family in the back of the car or putting the system on a plane to go on a vacation elsewhere, and it's really the only system that allows this type of portability in travel. It's -- through all the years of experience, it's extraordinarily reliable. And it is the only model with FDA approval for additional indications other than just home, assisted home. It's approved for solo -- cleared for solo use without a partner and for nocturnal hemodialysis. And the reliability is high, but it's also supported by a service swap model. So if the device happens to need some repairs, the patient doesn't miss treatments because another system is sent and put in its place within 24 hours, which is really important for keeping patients at home. The -- it is the only system out there that allows the patient to used dialysate fluid that's prepared at home or the use of premixed dialysate bags. And that's important for a number of different reasons. One is that there's no travel with the system without premixed dialysate bag. So part of it is associated with portability. But not all homes are -- have the quality of water or the quantity of water to allow dialysis -- traditional dialysis treatments or using online fluids. And so having that option is important for home adoption. And then the other thing is that, like it or not, we have issues with water supply discontinuity, whether it be in quality or volume and not missing treatments because there's always the option to use premixed dialysate bags is really important. And then just like in peritoneal dialysis, connected health is essential for home hemodialysis as well. And the platform that with home hemodialysis is called Nx2me. Now over time, we're going to harmonize these products that connect Nx2me. But Nx2me has also been shown to improve patient retention, essentially 29% lower therapy discontinuation rate and reduce training time to actually -- for patients that use Nx2me when they start therapy. So connected health is a big deal for hemodialysis as well. Now let's -- next, let's go to Slide 14. So there are a number of innovations in the HHD pipeline as well. We've learned a lot about this market, brought forth by NxStage is time in it, but also with the close integration between Fresenius Kidney Care services and the product side. And one of the first innovations that is intended to come to market targeted for mid-2023 is the GuideMe interface. I had mentioned before that the home hemodialysis platform has involved a series of innovations over the years and building upon each other and the GuideMe interface is intended to be the state of the art in terms of ease of use with a touchscreen interface and it builds upon uses the touch screen that exists in today's NxStage System. And it really -- it will drive a new level of usability within the platform. It really helps patients understand what's going on with the treatment, context-sensitive help use just really helping improve that connectivity between the patient and the therapy. It will allow enhanced troubleshooting. The good news is that patients don't have that many issues with the system, but when you do, it's with -- for whatever reason, whether there's kind of a vaster access challenge or something else going on. It's nice to have some trouble shooting help there because you might not have had a troubleshoot for a while. And as I mentioned before, this is a software improvement that can be applied to machines in the field with the touchscreen interface. So this is really something that a large number of patients in clinics will be able to experience the benefit relatively quickly. And we're targeting this mid-2023. So one example, we've got other things that are in the pipeline. I'm not going to talk about those right now, but continued development and innovation is really important. And one of the things that will allow home to continue to grow to 25% and beyond. Next, let's go to Slide 15. So we also believe that there is home growth potential outside the U.S. in the mid- to long term. We spent most of the time today talking about how home could develop in the U.S. And that's because U.S. with the current status of the presence of Fresenius Kidney Care -- our presence in the services market with Fresenius Kidney Care with what's been going on with some of the governmental support of home dialysis and the evolution of value-based care in the U.S. The U.S. is really advanced with respect to its commitment to home growth. There -- however, several of the reasons that make home attractive in the U.S. really do apply to other regions of the world. So the technology advances and the increased connectivity really do make home treatments a possibility and more effective in more locations. But looking out in the mid- to long term, we also see some growth potential based upon some of the macro trends. There's no doubt that COVID-19 has raised awareness and highlighted some of the benefits of home therapies in an uncertain environment. There have been headwinds for sure. But the notion that home therapy is a really, really valuable therapy in the face of uncertain types of events is really recognized across geographies. Second is that the U.S. is not the only market in the world facing a nursing shortage. This is relevant in emerging markets for sure, where the dialysis population is growing quickly. But there's also issues in more of the developed markets, Eastern and Southern Europe and in some of Southeast Asia. The health care systems in general across the world are beginning to introduce is a general trend that they're beginning to introduce targets or for home dialysis or preference for home dialysis versus in-center dialysis, and this exists in Asia, also in Europe, particularly in France and the U.K. and Italy. And then lastly, in emerging markets in countries with limited clinic infrastructure today, home therapies can really increase access to dialysis care. It may not be exactly how home dialysis is implemented in more of the developed markets or how -- exactly how it's happening in the U.S. right now, but it really can help to increase access to dialysis care in some of these markets and change the way that these markets evolve. So again, thanks for the opportunity, and that's -- we really are excited about where home dialysis can go both from a patient access perspective and from a technology perspective. And so with that, Dominik, why don't I hand it back over to you for Q&A.

Thank you, Joe. Thank you, Frank, for the presentation. Before we open the lines for questions, please be reminded we focus on home dialysis and not business development right now. Please use the opportunity to ask questions on home-related topics while you have these experts here. I know this is a rare opportunity, and we gave a lot of detail, which might make it difficult to ask questions, but use the opportunity. And with that, I'll hand back to Franzi to open the line, please.

[Operator Instructions] We got the first question from Oliver Metzger from ODDO BHF.

The first one is on the labor savings. So can you give us just a rough indication, so an HHD patients still needs some nursing time. You have other training, you have potentially even some temporary treatments in dialysis centers. And if you index the normal HHD patients at 100, do you think it is fair to assume a level of 20 for HHD patients with regards to labor intensity compared to the average hemodialysis patients? That's number one. Number 2 is a question on the regulatory framework. So you flagged also in the presentation that basically HHD treatments are more frequently -- you mentioned even the 4 treatments per week compared to the 3 treatments per week for in-center dialysis. So First, it converts into more revenues for patients, which is good. So you flagged also the medical benefits. So could you share with us your experience in conversations with the health care payers, how happy they are the current reimbursement set up. And even if your aspirational target of 25% fulfills, the HHD number will be much bigger. So do you think that the payment per treatment for home hemodialysis patients will continue?

Joe, why don't you take the first one on labor savings. And let me comment at least first on the second question that Oliver had.

Okay. So good question on the labor savings. We're not going to answer that specifically -- with specific number, your 100 versus 20. But let me give you a little bit how we are thinking about it. The labor is clearly a challenge today. It's also historically, a very significant component of in-center dialysis treatment. It's about 40% of in-center costs. Home is actually a little bit more labor-intensive upfront when you're training the patient. But then it's much, much less labor intensive on an ongoing basis when the patient is at home and you're doing case management, you're not doing the direct treatments. So there's definitely an opportunity to become more efficient with labor leverage over time with home therapies. And we're continuing to make investments and things that will help to improve that, helping the investments in technology that we're making to help keep patients home, are helped to extend that period and, therefore, help with our efficiency in terms of being able -- and effectiveness of being able to manage that. And then other investments that we make and how we organize and telehealth help to improve that as well. So we're not going to give specific numbers on that. But suffice it to say that as we continue to grow, and as we continue to make the improvements that we plan to make, the labor efficiency, dealing with the challenges that we have right now is an important part of the strategy.

May I ask one quick follow-up on your answer, please. So if you look for the labor intensity during the training, is it comparable to the labor intensity in of a normal HHD patient or is it just more labor intense during this first, let's say, weeks or months and then you just get the benefit?

It's a little bit more intense for the -- during the weeks that are required for training depending upon which modality is and depending on the patient. And it's a little bit more intense just because there's actual small group communication either one-on-one or a very small group in terms of things that are required to manage from the patient to do well on the therapy at home, which is more than just the machine. And it's -- and there's more interaction during the training period than there is during administering a treatment in the clinic.

Oliver, this is Frank. I'll take your second question and be fairly quick about it. I think payers recognize that when patients do better. They're in the hospital less and their overall costs are substantially reduced. And we have great data to show that patients that are highly engaged in their own care that also affects how much support they need and reduces that some also reduces their intensity of care that they're required as an inpatient and hospitals in their overall cost of care. And so for us, we think that tailoring the number of treatments is accepted by the payers because the overall cost of health care is controlled better that way.

The next question is from James Vane-Tempest from Jefferies.

Two please, if I can. Just curious on the NxStage One. How is this differentiated to sort of outlet medical offering and what comes kind of offering as well in terms of the differentiation of the hardware? My second question is, what's the limiting factor of greater growth in home? Is it educating the caregivers or is it more the patient worries is something that is wrong or sort of something else just to see one of the limiting factors to get more to the 25%? And apologies for the background noise.

Joe, do you want to take the System One question?

Yes. Sure. I think that the -- the biggest difference -- so I heard the first question is what's different about the NxStage System versus some of the others that are out there. I think that -- the first is just the level of data experience, all of those sorts of things that go on that are associated with tens of thousands of patients and millions of treatments. So there's a level of kind of comfort and experience with the machine. But beyond that, there are really some material differences that are very, very important to doing therapy at home. The first is the portability. This allows incredible flexibility, the ability to travel, the kind of even the flexibility within an individual home. I mentioned before that 70% of patients actually take advantage of travel. And our research has repeatedly confirmed that this is the single most important feature to patients. And it's not surprising that peritoneal dialysis has been adopted to the degree it has because it also gives the sort of portability, the sort of flexibility. We're the only system in this country that allows that. The new competition has gone in a different way, particularly with respect to how it deals with water and dialysate and the competition that's been most present in the U.S. is decidedly not portable at a 200-pound plus weight. So it's just -- it's a different strategy from a design perspective that we've chosen and we feel very comfortable that we've chosen a good direction. The second is reliability. This is so, so, so essential at home. One of the biggest ways to kill a home program is if the patients have to go back into the center routinely because lack of reliability in the machine at home. And one of the hallmarks of the System One is our reliability, the rock solid reliability that's been refined over the years. But as a backup to that, it's a service swap model, where we replace a nonworking machine within 24 hours versus having to have a service technician go and perform the repairs, which is at a minimum expensive also relatively patient unfriendly and in today's labor environment is a real challenge. So this -- the reliability in the way that we handle reliability events when they happen is really important differentiation of our system. And then lastly is really the modularity, particularly with the fluids. Our cartridge is fully integrated. There's no connection simplifies setup and really reduces clinical risk of the patient and then the modularity allows for kind of robust treatments to happen on travel and if there are disturbances to the water supply for some reason. And so I -- this portability, reliability and modularity. These are reasons that the most dominant therapy at home PD has been successful. And so what the System One does is apply the kind of the best of some of the operational characteristics of peritoneal dialysis with the clinical flexibility and advantages of hemodialysis, particularly more frequent hemodialysis.

James, this is Frank. I'll just quickly make a couple of comments to you, the second part of your question, and that is barriers that might be out there to the 25%. I think for both patients and providers getting a clear comfort that home is a preferential treatment as a change of paradigm for 50 years. We've been doing in-center hemodialysis. And for many of our providers, they want to make sure they've got adequate support staff for things that might come up in whatever time of day or night that a patient is dialyzing. Patients having confidence that they can actually participate actively in their care is something we've got to help encourage more of and recognize that we have expectations for them that they are participatory in that care. And I think these are all things that overcome with time, maturity of the systems, intuitiveness of the systems and maturity of how we support the infrastructure, whether it's through connected health or whether it's through other policies that recognize that this type of therapy where a patient is actively participating in their care, whether it's physically at their home, whether it's in a third-party place that's not a health care facility or whether it's in a true health care facility is a distinct paradigm shift.

We can take the next question.

The next question is from Veronika Dubajova from Citi.

I'll keep it to 2 as well, please. My first one, it's a little bit of a follow-on to James' question. I think, Frank, in the past, you've talked about the PD to in-center HHD switch rates being fairly high. So most of the PD patients, even in your own clinics were ending up in center after they were no longer eligible to -- for PD therapy. I'm trying -- it'd be great to hear if you've made any progress and move the needle on that? And how much more work you think you have to do so that most of your PD patients are converting to home HD as opposed to in-center HD once they're no longer PD eligible. So that's my first question. And then my second question is just sort of more actually on the physical footprint. And I think this has been a debate we've been trying to figure out an answer to, and I haven't so far, I'm just yet to, but maybe you can elucidate for us. If we do win at the place where 25% of your patients are on home HD, what would you think should happen to your physical footprint in terms of the number of clinics that you'd need to operate in the U.S. to satisfy that type of demand?