(FMS) - Get Report

is looking a little tainted itself.

The giant company specializes in dialysis, a process that removes impurities from the blood of kidney failure patients. But now Fresenius has something else to clean up.

The company revealed on Tuesday that it has fielded another subpoena from government prosecutors looking into its business practices. The company said it must now turn over a "broad range of documents" about everything from its business development activities to its compensation for medical directors to its physician relationships and joint-venture arrangements.

The latest subpoena, issued by the U.S. attorney's office in St. Louis, comes just five months after federal prosecutors in New York began questioning the company about its operations. The company already has paid a big fine for allegedly violating government rules in the past.

Still, Fresenius this week continued to express confidence in its compliance program while promising to cooperate with government authorities in the joint civil and criminal investigation.

"In light of our system of internal controls and the procedures we follow under our corporate compliance program and the Corporate Integrity Agreement, I am confident of our position on these issues and other regulatory compliance matters," Fresenius CEO Ben Lipps said in a prepared statement on Wednesday. But "we understand and respect that the government has the right and responsibility to investigation allegations or concerns."

Investors seemed to shrug off the news. Shares of Fresenius fell less than 1% to $27.15 during the Wednesday morning session.

Healthy Outlook

Analysts tend to favor dialysis companies despite their regulatory problems.

This week, in fact, Banc of America analyst Gary Taylor raised his price target on a Fresenius competitor due in part to favorable industry fundamentals. Taylor now has a Street-high price target of $55 for


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and continues to recommend buying the stock.

DaVita, up 19 cents on Wednesday, currently fetches $42.44 a share.

Taylor likes DaVita, specifically, because he believes the company's pending acquisition of Gambro will go smoothly. He notes that DaVita CEO Kent Thiry already has overseen half of Gambro's dialysis clinics during a previous job. He now sees opportunities for margin improvement at those clinics going forward.

Taylor also foresees serious growth opportunities for the dialysis business as a whole.

"Chronic kidney failure, also known as end-stage renal disease (ESRD), is a significant disease in the U.S. with a rising incidence rate," Taylor wrote on Monday. "The growth in the overall ESRD population is expected to continue its steady climb over the next few decades, as the general population and the primary causes of ESRD continue to afflict more people."

Already, Taylor notes, the number of reported dialysis patients increased by nearly tenfold between 1978 -- when the government began tracking the figure -- and 2001. Moreover, he says, the number actually doubled between 1990 and 2001 alone.

Due to current health trends, Taylor sees that growth continuing. He points out that diabetes and hypertension -- both causes of renal failure -- have become increasingly more common due to the rise in obese adults. Thus, he views the dialysis group as an unusually stable area of the health care services industry.

Side Effects

Still, such investments can bring headaches. Virtually all of the major dialysis players currently face government scrutiny. And Fresenius itself paid a $486 million fine -- including $385 million recovered under the False Claims Act -- in 2000 for alleged wrongdoing.

Patrick Burns, a spokesman for Taxpayers Against Fraud, hopes to see an even bigger penalty this time around.

"If either of the two fraud cases swirling around them can be proved, the government needs to bring on more heat so that the company will see the light," Burns said. "The goal with the False Claims Act is to get companies to change the way they do business, and that includes an end to all bribes and kickbacks.

"This is Ethics 101, and Fresenius appears to be failing."

Burns points to the company's track record as evidence. When operating as National Medical Care, he says, the company paid kickbacks to doctors, prescribed unnecessary treatments and billed the government "exorbitant sums" far in excess of the costs of the services provided. But a competitor ultimately blew the whistle on the company, he says, and triggered a government probe.

Even so, he says, the resulting punishment may not have worked.

"Their last settlement for $385 million was apparently not enough to get them to change the way they do business," he said. "Fresenius appears to be either a slow learner or a quick forgetter."