Physician Saw Opportunity in Kidney Dialysis - The Wall Street Journal

Edward B. Hager was a co-founder of a pioneering provider of kidney dialysis, a business that grew far faster than expected.

Photo: David Hume Kennerly

Edward B. Hager was a prominent kidney doctor and Harvard Medical School instructor in the late 1960s when he saw an opportunity to make money while prolonging human lives.

With a medical colleague, Constantine Hampers, Dr. Hager in 1968 founded National Medical Care Inc. to build a chain of facilities providing kidney dialysis and other services. Hospitals lacked capacity to provide dialysis to everyone suffering kidney failure and sometimes had to rely on committees to make life-or-death decisions on which patients would...

Edward B. Hager was a prominent kidney doctor and Harvard Medical School instructor in the late 1960s when he saw an opportunity to make money while prolonging human lives.

With a medical colleague, Constantine Hampers, Dr. Hager in 1968 founded National Medical Care Inc. to build a chain of facilities providing kidney dialysis and other services. Hospitals lacked capacity to provide dialysis to everyone suffering kidney failure and sometimes had to rely on committees to make life-or-death decisions on which patients would get the treatment.

National Medical could charge lower fees than hospitals and still make a profit. Growth of the business proved far greater than expected as the number of kidney patients soared, partly due to rising rates of diabetes. National Medical was valued at about $4 billion in 1996 when it was merged into Fresenius Medical Care, which now operates about 4,100 dialysis clinics world-wide. Fresenius and DaVita Inc. now dominate the U.S. market for dialysis.

For-profit dialysis centers became controversial as regulators and patient advocates sometimes accused them of skimping on quality or discouraging home dialysis treatments. A 1971 editorial cartoon in the Boston Globe depicted dialysis equipment as a slot machine gushing coins into a wheelbarrow for greedy doctors.

"Everybody screams in horror when they see doctors making money by working to develop new systems of healthcare," Dr. Hager told Newsweek in 1972. "But who should do it—the mailman, the stockbroker, the bus driver? With nonprofit institutions, there is no incentive to improve service or keep the costs down."

After the Boston Globe wrote a critical article about National Medical in 1971, Emily Thurow, the wife of the economist Lester Thurow, protested in a letter to the editor. Ms. Thurow, suffering from kidney disease, said it was only because of the doctors' initiative that she was still alive.

Dr. Hager, who later founded and ran biotechnology companies, died Oct. 5 in Peterborough, N.H. He was 90.

His former partner, Dr. Hampers, died in January at age 88.

Treatments for kidney disease have become a major chunk of U.S. healthcare spending. Total Medicare-related spending on people with end-stage renal disease, who need dialysis or transplants to stay alive, in recent years has run at about $50 billion annually, or 1% of the total federal budget, said Ryan McDevitt, an economist at Duke University.

Edward Birge Hager, known as Ted, was born June 19, 1931, in St. Louis. He was the oldest of three children of a salesman, who died when Ted was young, and a homemaker.

After undergraduate studies at Amherst College, Ted Hager enrolled in the Washington University medical school in St. Louis and graduated in 1955. He served in the Army in the late 1950s and was stationed in Germany.

During a fellowship at the Peter Bent Brigham Hospital in Boston in the early 1960s, he worked with doctors who pioneered kidney dialysis and transplants.

Dr. Willem Kolff, a Dutch physician, had used sausage casings and orange-juice cans to devise a dialysis machine during World War II. Improvements by Dr. Belding Scribner of the University of Washington led to more effective machines in the 1960s.

Funds available for dialysis began rising quickly in 1973 after Congress enacted legislation making all dialysis patients eligible for Medicare, regardless of age. At that time, one estimate was that as many as 25,000 people would need dialysis. By the end of 2018, more than 500,000 Americans were receiving dialysis treatments, mostly at centers such as those run by Fresenius and DaVita. U.S. health officials and patient advocates are calling for greater use of devices allowing for home dialysis.

National Medical created a nationwide network of kidney centers and diversified into mental-health treatments and extended-care facilities. Dr. Hager resigned as chairman of National Medical in 1980 to seek the Republican nomination for the U.S. Senate in New Hampshire. He was defeated in the primary.

National Medical was sold to the conglomerate W.R. Grace & Co. and other investors for about $360 million in the mid-1980s and then sold to Fresenius, a German company, a decade later.

In 1981, Dr. Hager founded ImmunoGenetics Inc., a maker of poultry vaccines. Three years later, he founded Novavax Inc., which currently is seeking regulatory approvals for a Covid-19 vaccine.

Dr. Hager's hobby of hunting led to legal trouble. In 1988, a grand jury indicted him in a case involving illegal imports of endangered species into the U.S. He pleaded guilty to importing the pelts of ocelots and other animals shot during a hunting trip in Mexico and was fined $75,000. His lawyer, Robert McDaniel, said Dr. Hager hadn't known it was illegal to import the pelts.

Dr. Hager met Jane Prescott Eastin when she became one of the early employees of National Medical. They married in 1972. She survives him, as do four children, eight grandchildren and a sister.

In a history of National Medical, Tim McFeeley, a lawyer who worked for the company,  described Dr. Hager as an iconoclast who abhorred medical bureaucracies and liked to deflate their pretensions. "Until a few years ago," Dr. Hager sometimes quipped, "patients rarely survived an encounter with a hospital."

Write to James R. Hagerty at bob.hagerty@wsj.com