Operations and Business Environment - Fresenius Medical Care

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02. 4 Our Fiscal Year 98 as well as by the application of internal standards as defined by written process and work instructions. Regular audits are carried out by authorized quality management staff at each of the Group’s sites to ensure adherence to guidelines. The audits include all areas and aspects affecting quality, from the management and administration to development, production and customer satisfaction. In 2006, our production site for dialyzers in St. Wendel successfully passed an FDA (Food and Drug Administration) GMP Audit conducted by TÜV-Süd Product Service Munich under the mutual recognition agreement between the European Union and the U.S. Major Customers. DaVita, the world’s second-largest provider in the dialysis care sector and one of our largest customers in dialysis product business, has entered into a product supply agreement with Gambro. This contract could result in the expiration of current supply contracts between Fresenius Medical Care and DaVita. From our point of view, the risk related to this is small since DaVita contributes only about 1% of Fresenius Medical Care’s overall sales and Gambro currently faces import restrictions by the U.S. FDA for certain products for the U.S. Services. Performing medical procedures on patients at our dialysis clinics presents inherent risks. Operational risks include, for example, the need for hygienic conditions. We counteract these risks by using strict organizational and operational procedures, continuous personnel training and patient-oriented methods. Our ISO 9001 certified clinic-quality management system is linked with our Integrated Management System (IMS) as detailed on page 85 . The ISO 9001 certificate attests to “Good Dialysis Practice.” In the U.S., we achieve the standards outlined in the Kidney Disease Outcome Quality Initiative (KDOQI) and the Center for Medicare and Medicaid Services (CMS) clinical performance measures using our internal Quality Enhancement Program. In addition to internal assessments of treatment data, annual internal audits of our processes are a solid foundation for continuous improvement. Our clinic quality management system is also audited each year by external certification institutes such as the German TÜV or Medicare (CMS) and CMS Networks throughout the U.S. As a consequence, quality flaws and risks can be identified quickly and remedied in a timely manner. The IMS also covers environmental management, taking into account that the manufacture of dialysis products requires the use of environmental resources and that the operation of dialysis services produces clinical waste. An environmental management system, certified under the ISO 14001 standards, has been introduced for production sites and dialysis clinics to help protect the environment and resources while identifying potential savings for raw materials. Please see page 85 for further details. The merger of a large number of facilities from Renal Care Group (RCG) into our North America segment could affect the quality of care provided in the facilities and the number of patient referrals to all North American facilities in the future. However, our management in the U.S. has developed a very effective integration plan that calls for the diligent incorporation of the large number of new patients and facilities into our organization. We have in place operating structures to maintain the current high quality of care provided in the whole organization. Debtors. The risk of late or non-payment is reduced by evaluating the credit standing of new customers and reviewing the credit limits of our existing ones. Outstanding payments are monitored while assessing the Fresenius Medical Care 2006
possibility of default. Please see page 11 in the financial report for further details on accounts receivable and allowances for doubtful accounts. Other Operative Risks. Potential risks, such as those arising from the introduction of a new production site or new technologies, are countered through careful planning and continual progress reviews. For the construction of new production sites, we use internal milestones which are monitored constantly. Further risk management measures limit the effect of environmental factors on dialysis services. Many of our own dialysis clinics have emergency generators that allow the continuation of life-saving dialysis treatments even in the case of a complete loss of electricity. In the U.S., for example, an emergency Fresenius Medical Care team steps in during natural disasters such as hurricanes to professionally coordinate relief efforts and allow dialysis treatment for patients in the affected region. Other Risks We confront potential risks outside the operating business using the following active quality-control measures: Strategy. Fresenius Medical Care has developed a longterm growth strategy, GOAL 10, which is explained in detail on page 50. The Management Board and Supervisory Board as well as the Senior Management of Fresenius Medical Care meet regularly to discuss, monitor, review and – if necessary – redefine the growth strategy of the Company. The acquisition of Renal Care Group in 2006 has been discussed intensely in connection with the growth strategy of Fresenius Medical Care. Due to our underlying growth performance and the general scope of the revenue contribution of Renal Care Group, the longterm revenue target of Fresenius Medical Care had to be adapted accordingly. Therefore, we decided to upgrade our guidance on revenue for 2010. Please see page 50 for more details. GOAL 10 also includes the horizontal expansion of Fresenius Medical Care in the field of dialysis-related drugs. Although renal drugs such as PhosLo have a proven track record in the treatment of patients with end-stage renal disease, they may also have an impact on the risk exposure of Fresenius Medical Care. Research and Development. Failing to achieve goals is an inherent risk in the development of new products and therapies. Comprehensive, cost-intensive preclinical and clinical studies are necessary before a new product can receive regulatory approval. Fresenius Medical Care counteracts risks from research and development projects by regularly analyzing and assessing development trends and examining the progress of research projects. Fresenius Medical Care strictly complies with legal regulations governing clinical and chemical-pharmaceutical research and development. Our dialysis products research team develops new products and technologies in close cooperation with representatives of the medical and scientific community. In case a marketable product emerges or is nearing completion, commercial relationships are evaluated. For further details on the risk on xenotransplantation please see the “Dialysis Market” section starting on page 58 . Personnel Risks. Fresenius Medical Care has developed guidelines and codes of conduct for its employees worldwide to establish authoritative standards for our internal and external communication. With these 99 Fresenius Medical Care 2006
Page 1 and 2: 02. 1-6 With more than 56,000 emplo
Page 3 and 4: Our Fiscal year 02. 1 02. 1 Operati
Page 5 and 6: Path 2: Acquisitions. We intend to
Page 7 and 8: In addition, our development depart
Page 9 and 10: on the basis of growing clinical ex
Page 11 and 12: Asia While Japan’s gross domestic
Page 13 and 14: dialysis and about 165,000 receive
Page 15 and 16: As in previous years, many healthca
Page 17 and 18: Dialysis machines constitute anothe
Page 19 and 20: Comparison of the Actual Business R
Page 21 and 22: The Management’s General Assessme
Page 23 and 24: In terms of dialysis products, we w
Page 25 and 26: Europe, including the Middle East a
Page 27 and 28: egarding stock options and the incr
Page 29 and 30: Financing Detailed information on f
Page 31 and 32: of existing production facilities i
Page 33 and 34: The Group has no significant accrua
Page 35 and 36: is among our most important goals.
Page 37 and 38: departments enter into outline cont
Page 39 and 40: Quality and Environmental Managemen
Page 41 and 42: Clinical Databases Clinical databas
Page 43 and 44: In addition, we received regulatory
Page 45 and 46: combines RCG’s industry-leading s
Page 47 and 48: - In April 2006, new guidelines wer
Page 49 and 50: titative appraisals of the likeliho
Page 51: Risks in the Healthcare Industry Ri
Page 55 and 56: to page 95 of the Consolidated Fina
Page 57 and 58: 02. 6 Outlook Business Policy Frese
Page 59 and 60: dialysis will remain the treatment
Page 61 and 62: Employees At this point, Fresenius

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