OAKLAND — In initiative-happy California, one set of ads stands out — those involving dialysis clinics, an industry that’s historically been a lower-profile player in politics.
The ads are unusual not only because of their unlikely topic but their volume, which is high because industry opponents of a labor ballot measure are spending more than any group opposing the other 11 proposals California voters must decide on.
The massive spending gap between the $100 million opponents, including DaVita Inc., have raised and the $8.9 million by supporters led by SEIU United Healthcare Workers West means that the dialysis industry has flooded airwaves as it defends itself against organized labor. The same chain of events played out two years ago, resulting in a resounding defeat for the union’s ballot initiative.
California’s ballot wars have escalated in recent years as industries see little problem spending more than $100 million — and nearly twice that amount in the gig industry’s case — to persuade the electorate. Businesses and organizations that don’t get their way in the state Capitol often use the ballot to change state laws or as leverage to pressure lawmakers and other powerful interests. Proposition 23 is the third most expensive ballot initiative in 2020, according to data compiled by POLITICO.
While SEIU-UHW says it is committed to passing Prop 23, political strategists suggest that labor backers may simply be playing the long game by placing an initiative on the ballot every two years challenging the industry. Win or lose, the union is putting pressure on dialysis companies to spend gobs of money each general election.
“The threat of a ballot measure is something UHW has used strategically,” said Brian Brokaw, a Democratic strategist in Sacramento who is not involved in the Prop. 23 campaign. “In order for a threat to actually be credible, sometimes you have to put it on the ballot. But appearing on a ballot and actually running a campaign to support something are two different things.”
Proposition 23 faces long odds not just because of the industry’s $100 million war chest, but also because it involves a regulatory matter on a crowded ballot — a perfect recipe for voter rejection.
Two years ago, Californians voted 60-40 to reject Prop. 8, another SEIU-UHW-backed initiative that would have capped dialysis profits. But to get that win, the dialysis industry, led by the dominant franchises DaVita Inc. and Fresenius Medical Care, invested about $111 million to defeat it, or nearly six times what the proponents spent.
One day after that Nov. 6, 2018 election, the union vowed to refile the initiative in California and other states. SEIU-UHW did file another initiative, but Prop 23 looks dramatically different, focusing on requirements that clinics must meet such as staffing one doctor on site.
John Logan, director of labor employment studies at San Francisco State University, said unions have long used non-traditional tactics like ballot-box campaigns to get companies to the negotiating table.
“They don’t have to invest any of their money to support it, but the other side has to spend tens of millions because it would be a disaster if it were to pass,” he said.
That David-and-Goliath theme is playing out again this time. The industry has amassed more than $104 million so far to defeat the initiative, compared to nearly $9 million on the yes side.
SEIU-UHW knows it’s going to be vastly outspent by the industry, but says it is not part of a strategy to get the dialysis companies to bargain with them. Union officials acknowledged they want to organize the clinics, but say it’s an uphill battle and that they haven’t spoken with the clinic operators in more than five years. They say they’re in this to improve patient care.
“We have our sights set on them,” SEIU-UHW President Dave Regan said. “Part of what we view our mission, our charge and our work is we want to be an organization that puts a spotlight on the worst actors in the health care industry and, frankly, DaVita and Fresenius are at the front of that line.”
SEIU-UHW and other health care unions, including the California Nurses Association, have long used patient care as the centerpiece of campaigns against health care entities — both at the ballot box and through legislative efforts.
“The whole idea of using non-traditional tactics to achieve greater leverage in unionizing has been around for years,” SF State’s Logan said. “SEIU, in particular, is one of a number of unions that have used corporate campaigning very extensively and quite successfully over a number of years.”
SEIU-UHW, since 2012, has filed some 23 local and state initiatives. In recent years, they’ve launched a flurry of measures, targeting a number of California hospitals to limit prices and impose executive salary caps, though many failed to qualify or were abandoned.
Still, the union counts as victories its campaign to increase the minimum wage, which in 2016 helped spark a legislative deal. And the failure of Prop. 8 led to a 2019 law authored by Assemblymember Jim Wood (D-Santa Rosa), which was designed to control health costs by deterring dialysis clinics from encouraging their patients to enroll in health plans that offer higher reimbursement rates.
But the new law, which was supposed to go into effect this year, is on hold while an industry lawsuit winds through the courts.
The dialysis industry has come under scrutiny for its relationship with the nonprofit American Kidney Fund, which has steered patients toward higher-paying commercial insurance instead of Medicare, resulting in higher clinic reimbursements. DaVita and Fresenius have provided the bulk of funding for AKF, according to an audit of the nonprofit.
That financial situation led to the Wood legislation and fueled the union’s 2018 ballot initiative drive targeting dialysis revenues.
The Yes on Prop. 23 campaign, endorsed by the California Democratic Party and the California Labor Federation, now contends the multibillion-dollar industry has put the lives of California’s more than 70,000 dialysis patients at risk through substandard care and staffing.
The No on Prop. 23 campaign refutes those claims, emphasizing that the “special interest proposition” would increase health care costs by millions and force clinics to close, jeopardizing access to care most acutely in low-income communities. It notes that no other state requires a doctor to be on site during dialysis treatment.
Brokaw described the dialysis industry as a “non-traditional boogie man.”
“These dialysis clinics literally provide a life-saving service so it’s not like you’re taking on the tobacco industry,” he said. But, nonetheless, the campaign is a tactic of “extracting many, many pounds of flesh from your opponent at a smaller cost to yourself. And there is some value strategically in doing that.”
Regan didn’t rule out a run at the industry again if Prop. 23 falls short.
“We’ll see what we do in 2021, but this is an industry that needs to be reformed, to modify their business practices and to improve,” he said, adding that SEIU-UHW has cost the dialysis industry about a quarter of a billion to fight back. “The reason they’re willing to spend it is this business is so lucrative for all the wrong reasons, and it’s obviously in their interest to do this.”