A patient gets dialysis at DaVita Dialysis Center in Inglewood. Irfan Khan | Los Angeles Times | Getty Images

Dialysis giant DaVita could end up losing up to $400 million and be forced to shutter clinics if California voters approve a ballot measure in Tuesday's midterm elections. The Colorado-based company, which operates half of all the chronic dialysis clinics in the state, has shelled out $66.6 million of the more than $110 million spent by the industry lobbying against Proposition 8. The measure would cap the amount of money dialysis providers in the state can earn on certain patients. DaVita operates 292 clinics in California and more than 2,500 clinics nationwide. It reported revenue of more than $2.8 billion in the second quarter. There's "certainly a possibility" that it could pass, said Frank Morgan, managing director and health services equity researcher at RBC Capital Markets. He has a market perform rating on the stock. If the measure passes, "it would be extremely disruptive to the industry and the state."

Dialysis is big business

Pushed by the Service Employees International Union, the measure applies to rates charged to patients who don't have federal insurance provided by Medicare or Medicaid. The programs cover treatment for the majority of people on dialysis in the state, often paying a predetermined set fee for treatment. But individual health insurers usually have to negotiate rates with dialysis providers, sometimes paying several times that charged to Medicare. The ballot proposition would limit the revenue earned, or roughly the rates privately insured patients are charged, for dialysis treatment to 115 percent of the costs to provide the care. Anything above would be put to dialysis providers, which would be forced to give insurers or patients rebates to make up the difference. Supporters of the proposal say one way the reimbursements could help patients is in the form of lower premiums, Erin Trish, a research professor at the USC Price School of Public Policy, told CNBC. "Ultimately, the heart of this proposition is kind of rooted in a belief that the private payments are too high," said Trish, whose research focuses on U.S. health insurance markets. "It's not fair that the rates are so much higher than Medicare." DaVita spokeswoman Alicia Patterson said "Prop 8 will limit patients' access to life-saving dialysis." She also pointed to a coalition of 160 medical professionals, clinics and business groups that say it could have far-reaching implications across the state, including clinic closures. The "No Prop 8" group calls it a dangerous measure that could jeopardize access to dialysis care that patients need to survive. "California Proposition 8 sets severely low limits on what insurance companies are required to pay for dialysis care," the coalition says on its website. "These limits do not cover the cost of providing care, forcing many dialysis clinics to cut back services or even close."

Taking on the proposition