UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~September 30, 2020~~March 31, 2021



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number: 1-14106

DAVITA INC.



Delaware						51-0354549
(State of incorporation)						(I.R.S. Employer Identification No.)



2000 16th Street
Denver,	CO	80202

Telephone number (~~720~~) (720) 631-2100

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

Trading symbol(s):

Name of each exchange on which registered:

Common Stock, $0.001 par value

DVA

NYSE

~~Title of each class:~~

~~Trading symbol(s):~~

~~Name of each exchange on which registered:~~

~~Common Stock, $0.001 par value~~

~~DVA~~

~~NYSE~~

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer			☒			Accelerated filer	☐

Non-accelerated filer			☐			Smaller reporting company	☐

~~Large accelerated filer~~			☒	~~Accelerated filer~~	☐

~~Non-accelerated filer~~	☐	~~Smaller reporting company~~	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

As of ~~October 28, 2020,~~April 26, 2021, the number of shares of the Registrant’s common stock outstanding was approximately ~~112.0~~106.2 million shares.

DAVITA INC.

INDEX

Page No.

PART I. FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements:

Consolidated Statements of Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and March 31, 2020 ~~and September 30, 2019~~

Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and March 31, 2020 ~~and September 30, 2019~~

Consolidated Balance Sheets as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020

Consolidated Statements of Cash ~~Flows~~Flow for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and March 31, 2020 ~~and September 30, 2019~~

Consolidated Statements of Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and March 31, 2020 ~~and September 30, 2019~~

Notes to Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

2819

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

4832

Item 4.

Controls and Procedures

4832

PART II. OTHER INFORMATION

Item 1.

Item 1A.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 6.

Note: Items 3, 4 and 5 of Part II are omitted because they are not applicable.

DAVITA INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(dollars and shares in thousands, except per share data)

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Dialysis patient service revenues $ 2,781,650
$ 2,777,192
$ 8,253,128
$ 8,130,697
Other revenues 142,416
126,886
392,154
359,198
Total revenues 2,924,066
2,904,078
8,645,282
8,489,895
Operating expenses and charges:

Patient care costs 1,971,719
1,991,172
5,931,732
5,913,860
General and administrative 363,280
298,736
943,065
824,887
Depreciation and amortization 156,894
155,915
468,949
456,685
Equity investment income (5,496 ) (3,936 ) (27,681 ) (11,158 )
Loss on changes in ownership interest, net 0
0
16,252
0
Goodwill impairment charges 0
83,855
0
124,892
Total operating expenses and charges 2,486,397
2,525,742
7,332,317
7,309,166
Operating income 437,669
378,336
1,312,965
1,180,729
Debt expense (73,658 ) (88,589 ) (243,642 ) (351,774 )
Debt prepayment, refinancing and redemption charges (86,074 ) (21,242 ) (89,022 ) (33,402 )
Other income, net 5,395
5,280
10,590
17,863
Income from continuing operations before income taxes 283,332
273,785
990,891
813,416
Income tax expense 65,792
65,254
240,564
197,938
Net income from continuing operations 217,540
208,531
750,327
615,478
Net (loss) income from discontinued operations, net of tax 0
(6,843 ) 9,980
102,854
Net income 217,540
201,688
760,307
718,332
Less: Net income attributable to noncontrolling interests (58,866 ) (58,418 ) (160,438 ) (152,222 )
Net income attributable to DaVita Inc. $ 158,674
$ 143,270
$ 599,869
$ 566,110

Earnings per share attributable to DaVita Inc.:

Basic net income from continuing operations per share $ 1.31
$ 1.00
$ 4.81
$ 2.88
Basic net income per share $ 1.31
$ 0.95
$ 4.89
$ 3.51
Diluted net income from continuing operations per share $ 1.28
$ 0.99
$ 4.72
$ 2.87
Diluted net income per share $ 1.28
$ 0.95
$ 4.80
$ 3.50

Weighted average shares for earnings per share:

Basic 120,905,038
150,675,465
122,582,099
161,147,122
Diluted 123,953,879
151,295,950
124,927,380
161,636,011

Amounts attributable to DaVita Inc.:
Net income from continuing operations $ 158,674
$ 150,113
$ 589,889
$ 464,590
Net (loss) income from discontinued operations 0
(6,843 ) 9,980
101,520
Net income attributable to DaVita Inc. $ 158,674
$ 143,270
$ 599,869
$ 566,110


	Three months ended March 31,
	2021		2020
Dialysis patient service revenues	$	2,714,587	$	2,713,281
Other revenues	105,414		127,956
Total revenues	2,820,001		2,841,237
Operating expenses:
Patient care costs	1,938,330		1,975,449
General and administrative	281,426		263,576
Depreciation and amortization	165,701		154,679
Equity investment income	(8,058)		(17,843)


Total operating expenses	2,377,399		2,375,861
Operating income	442,602		465,376
Debt expense	(67,014)		(88,603)
Debt refinancing charges	0		(2,948)
Other income (loss), net	1,168		(4,350)
Income from continuing operations before income taxes	376,756		369,475
Income tax expense	85,211		91,560
Net income from continuing operations	291,545		277,915
Net income from discontinued operations, net of tax	0		9,980
Net income	291,545		287,895
Less: Net income attributable to noncontrolling interests	(54,142)		(48,302)
Net income attributable to DaVita Inc.	$	237,403	$	239,593

Earnings per share attributable to DaVita Inc.:
Basic net income from continuing operations	$	2.18	$	1.84
Basic net income	$	2.18	$	1.92
Diluted net income from continuing operations	$	2.09	$	1.81
Diluted net income	$	2.09	$	1.89

Weighted average shares for earnings per share:
Basic shares	109,014		124,902
Diluted shares	113,852		126,895

Amounts attributable to DaVita Inc.:
Net income from continuing operations	$	237,403	$	229,613
Net income from discontinued operations	0		9,980
Net income attributable to DaVita Inc.	$	237,403	$	239,593

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

(dollars in thousands)

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Net income $ 217,540
$ 201,688
$ 760,307
$ 718,332
Other comprehensive income (loss), net of tax:

Unrealized losses on interest rate cap agreements:

Unrealized losses (1,628 ) (1,060 ) (16,470 ) (1,672 )
Reclassifications of net realized losses into net income 1,034
1,569
4,280
4,782
Unrealized gains (losses) on foreign currency translation:

Foreign currency translation adjustments 13,171
(44,502 ) (62,842 ) (45,790 )
Other comprehensive income (loss) 12,577
(43,993 ) (75,032 ) (42,680 )
Total comprehensive income 230,117
157,695
685,275
675,652
Less: Comprehensive income attributable to noncontrolling interests (58,866 ) (58,418 ) (160,438 ) (152,222 )
Comprehensive income attributable to DaVita Inc. $ 171,251
$ 99,277
$ 524,837
$ 523,430


	Three months ended March 31,
	2021		2020
Net income	$	291,545	$	287,895
Other comprehensive loss, net of tax:
Unrealized gains (losses) on interest rate cap agreements:
Unrealized gains (losses)	4,882		(13,018)
Reclassifications of net realized losses into net income	1,033		1,623
Unrealized losses on foreign currency translation	(62,544)		(81,632)
Other comprehensive loss	(56,629)		(93,027)
Total comprehensive income	234,916		194,868
Less: Comprehensive income attributable to noncontrolling interests	(54,142)		(48,302)
Comprehensive income attributable to DaVita Inc.	$	180,774	$	146,566

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(dollars and shares in thousands, except per share data)


	September 30, 2020			December 31, 2019				March 31, 2021		December 31, 2020
ASSETS							ASSETS
Cash and cash equivalents	$	710,514		$	1,102,372		Cash and cash equivalents	$	884,205	$	324,958
Restricted cash and equivalents	106,823			106,346			Restricted cash and equivalents	176,835		176,832
Short-term investments	19,360			11,572			Short-term investments	11,060		20,101
Accounts receivable	1,804,390			1,795,598			Accounts receivable	2,040,813		1,824,282
Inventories	106,254			97,949			Inventories	116,322		111,625
Other receivables	548,381			489,695			Other receivables	535,521		544,376
Prepaid and other current assets	58,512			66,866			Prepaid and other current assets	73,765		76,387
Income tax receivable	75,441			19,772			Income tax receivable	28,160		70,163
Total current assets	3,429,675			3,690,170			Total current assets	3,866,681		3,148,724
Property and equipment, net of accumulated depreciation of $4,368,659 and $3,969,566, respectively	3,417,919			3,473,384
Property and equipment, net of accumulated depreciation of $4,622,798 and $4,480,429, respectively							Property and equipment, net of accumulated depreciation of $4,622,798 and $4,480,429, respectively	3,490,442		3,521,824
Operating lease right-of-use assets	2,834,163			2,830,047			Operating lease right-of-use assets	2,868,292		2,863,089
Intangible assets, net of accumulated amortization of $75,727 and $81,922, respectively	118,078			135,684
Intangible assets, net of accumulated amortization of $69,691 and $70,141, respectively							Intangible assets, net of accumulated amortization of $69,691 and $70,141, respectively	150,706		166,585
Equity method and other investments	252,483			241,983			Equity method and other investments	257,513		257,491
Long-term investments	29,867			36,519			Long-term investments	31,891		32,193
Other long-term assets	96,110			115,972			Other long-term assets	90,534		79,501
Goodwill	6,868,377			6,787,635			Goodwill	6,891,209		6,919,109
	$	17,046,672		$	17,311,394			$	17,647,268	$	16,988,516
LIABILITIES AND EQUITY							LIABILITIES AND EQUITY
Accounts payable	$	388,504		$	403,840		Accounts payable	$	348,105	$	434,253
Other liabilities	879,792			756,174			Other liabilities	846,710		810,529
Accrued compensation and benefits	701,968			695,052			Accrued compensation and benefits	550,671		685,555
Current portion of operating lease liabilities	365,190			343,912			Current portion of operating lease liabilities	372,737		369,497
Current portion of long-term debt	163,787			130,708			Current portion of long-term debt	168,191		168,541
Income tax payable	0			42,412			Income tax payable	28,310		7,768
Total current liabilities	2,499,241			2,372,098			Total current liabilities	2,314,724		2,476,143
Long-term operating lease liabilities	2,710,550			2,723,800			Long-term operating lease liabilities	2,739,311		2,738,670
Long-term debt	7,866,545			7,977,526			Long-term debt	8,829,765		7,917,263
Other long-term liabilities	147,371			160,809			Other long-term liabilities	150,724		150,060
Deferred income taxes	765,691			577,543			Deferred income taxes	830,369		809,600
Total liabilities	13,989,398			13,811,776			Total liabilities	14,864,893		14,091,736
Commitments and contingencies							Commitments and contingencies
Noncontrolling interests subject to put provisions	1,303,934			1,180,376			Noncontrolling interests subject to put provisions	1,349,160		1,330,028
Equity:							Equity:
Preferred stock ($0.001 par value, 5,000,000 shares authorized; none issued)	0			0
Common stock ($0.001 par value, 450,000,000 shares authorized; 126,065,294 and 113,781,317 shares issued and outstanding at September 30, 2020, respectively, and 125,842,853 shares issued and outstanding at December 31, 2019)	126			126
Preferred stock ($0.001 par value, 5,000 shares authorized; none issued)							Preferred stock ($0.001 par value, 5,000 shares authorized; none issued)	0		0
Common stock ($0.001 par value, 450,000 shares authorized; 110,027 and 107,078 shares issued and outstanding at March 31, 2021, respectively, and 109,933 shares issued and outstanding at December 31, 2020)							Common stock ($0.001 par value, 450,000 shares authorized; 110,027 and 107,078 shares issued and outstanding at March 31, 2021, respectively, and 109,933 shares issued and outstanding at December 31, 2020)	110		110
Additional paid-in capital	694,132			749,043			Additional paid-in capital	603,172		597,073
Retained earnings	2,031,607			1,431,738			Retained earnings	1,089,940		852,537
Treasury stock (12,283,977 and zero shares, respectively)	(1,028,578		)	0
Treasury stock (2,949 and zero shares, respectively)							Treasury stock (2,949 and zero shares, respectively)	(322,333)		0
Accumulated other comprehensive loss	(122,530		)	(47,498		)	Accumulated other comprehensive loss	(122,783)		(66,154)
Total DaVita Inc. shareholders' equity	1,574,757			2,133,409			Total DaVita Inc. shareholders' equity	1,248,106		1,383,566
Noncontrolling interests not subject to put provisions	178,583			185,833			Noncontrolling interests not subject to put provisions	185,109		183,186
Total equity	1,753,340			2,319,242			Total equity	1,433,215		1,566,752
	$	17,046,672		$	17,311,394			$	17,647,268	$	16,988,516

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED STATEMENTS OF CASH ~~FLOWS~~FLOW

(unaudited)

(dollars in thousands)


	Nine months ended September 30,							Three months ended March 31,
	2020			2019				2021		2020
Cash flows from operating activities:							Cash flows from operating activities:
Net income	$	760,307		$	718,332		Net income	$	291,545	$	287,895
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	468,949			456,685			Depreciation and amortization	165,701		154,679
Debt prepayment, refinancing and redemption charges	86,957			33,402
Impairment charges	0			124,892
Debt refinancing charges							Debt refinancing charges	0		884

Stock-based compensation expense	67,217			47,811			Stock-based compensation expense	23,595		19,870
Deferred income taxes	191,783			72,590			Deferred income taxes	18,688		103,301
Equity investment income, net	3,026			5,131			Equity investment income, net	(2,924)		(9,482)
Loss on sales of business interests, net	16,252			23,022

Other non-cash charges, net	(7,980		)	24,291			Other non-cash charges, net	3,979		5,055
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:							Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
Accounts receivable	(12,405		)	(182,684		)	Accounts receivable	(224,274)		(32,966)
Inventories	(8,445		)	9,519			Inventories	(5,303)		1,835
Other receivables and other current assets	(62,025		)	51,319
Other receivables and prepaid and other current assets							Other receivables and prepaid and other current assets	13,756		(24,965)
Other long-term assets	(1,853		)	2,324			Other long-term assets	(6,521)		2,673
Accounts payable	445			(106,662		)	Accounts payable	(75,504)		(24,045)
Accrued compensation and benefits	(12,124		)	(57,930		)	Accrued compensation and benefits	(126,330)		(96,428)
Other current liabilities	123,833			140,046			Other current liabilities	26,970		3,982
Income taxes	(100,160		)	57,279			Income taxes	62,719		(32,616)
Other long-term liabilities	(19,547		)	(27,542		)	Other long-term liabilities	(11,793)		709
Net cash provided by operating activities	1,494,230			1,391,825			Net cash provided by operating activities	154,304		360,381
Cash flows from investing activities:							Cash flows from investing activities:
Additions of property and equipment	(449,896		)	(547,183		)	Additions of property and equipment	(144,913)		(154,942)
Acquisitions	(112,597		)	(77,348		)	Acquisitions	(3,668)		(34,107)
Proceeds from asset and business sales	83,339			3,863,619			Proceeds from asset and business sales	16,337		31,518
Purchase of debt investments held-to-maturity	(147,829		)	(98,322		)	Purchase of debt investments held-to-maturity	(5,349)		(5,049)
Purchase of other debt and equity investments	(3,388		)	(5,160		)	Purchase of other debt and equity investments	(1,779)		(2,633)
Proceeds from debt investments held-to-maturity	148,341			0			Proceeds from debt investments held-to-maturity	5,349		5,049
Proceeds from sale of other debt and equity investments	3,434			5,893			Proceeds from sale of other debt and equity investments	11,879		3,268
Purchase of equity method investments	(9,613		)	(8,770		)	Purchase of equity method investments	(3,200)		(6,174)
Distributions from equity method investments	902			1,296			Distributions from equity method investments	978		445
Net cash (used in) provided by investing activities	(487,307		)	3,134,025
Net cash used in investing activities							Net cash used in investing activities	(124,366)		(162,625)
Cash flows from financing activities:							Cash flows from financing activities:
Borrowings	3,826,484			38,519,991			Borrowings	1,606,969		570,779
Payments on long-term debt	(3,927,411		)	(40,485,415		)	Payments on long-term debt	(698,298)		(104,592)
Deferred financing and debt redemption costs	(105,705		)	(84,588		)
Deferred financing costs							Deferred financing costs	(8,346)		(350)
Purchase of treasury stock	(1,025,878		)	(1,837,022		)	Purchase of treasury stock	(316,250)		(321,798)
Distributions to noncontrolling interests	(179,098		)	(157,170		)	Distributions to noncontrolling interests	(53,867)		(58,131)
Stock award exercises and other share issuances, net	3,838			7,333
Net (payments) receipts related to stock purchases and awards							Net (payments) receipts related to stock purchases and awards	(2,524)		2,397
Contributions from noncontrolling interests	32,854			44,095			Contributions from noncontrolling interests	10,689		9,387

Purchases of noncontrolling interests	(6,782		)	(10,988		)	Purchases of noncontrolling interests	(1,095)		(700)
Net cash used in financing activities	(1,381,698		)	(4,003,764		)
Net cash provided by financing activities							Net cash provided by financing activities	537,278		96,992
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(16,606		)	(4,178		)	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(7,966)		(14,978)
Net (decrease) increase in cash, cash equivalents and restricted cash	(391,381		)	517,908
Less: Net decrease in cash, cash equivalents and restricted cash from discontinued operations	0			(423,813		)
Net (decrease) increase in cash, cash equivalents and restricted cash from continuing operations	(391,381		)	941,721
Net increase in cash, cash equivalents and restricted cash							Net increase in cash, cash equivalents and restricted cash	559,250		279,770
Less: Net increase in cash, cash equivalents and restricted cash from discontinued operations							Less: Net increase in cash, cash equivalents and restricted cash from discontinued operations	0		0
Net increase in cash, cash equivalents and restricted cash from continuing operations							Net increase in cash, cash equivalents and restricted cash from continuing operations	559,250		279,770
Cash, cash equivalents and restricted cash of continuing operations at beginning of the year	1,208,718			415,420			Cash, cash equivalents and restricted cash of continuing operations at beginning of the year	501,790		1,208,718
Cash, cash equivalents and restricted cash of continuing operations at end of the period	$	817,337		$	1,357,141		Cash, cash equivalents and restricted cash of continuing operations at end of the period	$	1,061,040	$	1,488,488

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)

(dollars and shares in thousands)


	Three months ended March 31, 2021
	Non- controlling interests subject to put provisions		DaVita Inc. Shareholders’ Equity														Non- controlling interests not subject to put provisions

			Common stock			Additional paid-in capital		Retained earnings		Treasury stock			Accumulated other comprehensive loss
			Shares	Amount						Shares	Amount				Total
Balance at December 31, 2020	$	1,330,028	109,933	$	110	$	597,073	$	852,537	0	$	0	$	(66,154)	$	1,383,566	$	183,186
Comprehensive income:
Net income	35,600							237,403							237,403		18,542
Other comprehensive loss													(56,629)		(56,629)
Stock award plans			94			(6,270)									(6,270)
Stock-settled stock-based compensation expense						23,555									23,555
Changes in noncontrolling interest from:
Distributions	(34,259)																(19,608)
Contributions	7,695																2,994

Partial purchases	(201)					(889)									(889)		(5)
Fair value remeasurements	10,297					(10,297)									(10,297)
Purchase of treasury stock										(2,949)	(322,333)				(322,333)
Balance at March 31, 2021	$	1,349,160	110,027	$	110	$	603,172	$	1,089,940	(2,949)	$	(322,333)	$	(122,783)	$	1,248,106	$	185,109

Three months ended September 30, 2020
Non-
controlling
interests
subject to
put provisions DaVita Inc. Shareholders’ Equity Non-
controlling
interests not
subject to
put provisions

Common stock Additional
paid-in
capital Retained
earnings Treasury stock Accumulated
other
comprehensive
loss
Shares Amount Shares Amount Total
Balance at June 30, 2020 $ 1,241,937
126,037
$ 126
$ 719,102
$ 1,872,933
(4,052 ) $ (303,139 ) $ (135,107 ) $ 2,153,915
$ 179,902
Comprehensive income:
Net income 40,854
158,674
158,674
18,012
Other comprehensive loss 12,577
12,577

Stock unit shares issued 5
10
10

Stock appreciation rights shares
issued 23
(944 ) (944 )
Stock-settled stock-based
compensation expense 24,913
24,913

Changes in noncontrolling
interest from:

Distributions (38,154 ) (22,391 )
Contributions 10,348
1,924
Acquisitions and divestitures 1,136
Fair value remeasurements 48,949
(48,949 ) (48,949 )
Purchase of treasury stock (8,232 ) (725,439 ) (725,439 )
Balance at September 30, 2020 $ 1,303,934
126,065
$ 126
$ 694,132
$ 2,031,607
(12,284 ) $ (1,028,578 ) $ (122,530 ) $ 1,574,757
$ 178,583


	Three months ended March 31, 2020
	Non- controlling interests subject to put provisions		DaVita Inc. Shareholders’ Equity														Non- controlling interests not subject to put provisions

			Common stock			Additional paid-in capital		Retained earnings		Treasury stock			Accumulated other comprehensive loss
			Shares	Amount						Shares	Amount				Total
Balance at December 31, 2019	$	1,180,376	125,843	$	126	$	749,043	$	1,431,738	0	$	0	$	(47,498)	$	2,133,409	$	185,833
Comprehensive income:
Net income	32,176							239,593							239,593		16,126
Other comprehensive loss													(93,027)		(93,027)
Stock award plan			14			(320)									(320)
Stock-settled stock-based compensation expense						19,797									19,797
Changes in noncontrolling interest from:
Distributions	(37,566)																(20,565)
Contributions	5,283																4,104

Partial purchases	(255)					(445)									(445)
Fair value remeasurements	48,022					(48,022)									(48,022)
Purchase of treasury stock										(4,052)	(303,139)				(303,139)
Balance at March 31, 2020	$	1,228,036	125,857	$	126	$	720,053	$	1,671,331	(4,052)	$	(303,139)	$	(140,525)	$	1,947,846	$	185,498

Nine months ended September 30, 2020
Non-
controlling
interests
subject to
put provisions DaVita Inc. Shareholders’ Equity Non-
controlling
interests not
subject to
put provisions

Common stock Additional
paid-in
capital Retained
earnings Treasury stock Accumulated
other
comprehensive
loss
Shares Amount Shares Amount Total
Balance at December 31, 2019 $ 1,180,376
125,843
$ 126
$ 749,043
$ 1,431,738
0
$ 0
$ (47,498 ) $ 2,133,409
$ 185,833
Comprehensive income:
Net income 107,737
599,869
599,869
52,701
Other comprehensive loss (75,032 ) (75,032 )
Stock unit shares issued 166
(7,141 ) (7,141 )
Stock appreciation rights shares
issued 56
(2,004 ) (2,004 )
Stock-settled stock-based
compensation expense 66,591
66,591

Changes in noncontrolling
interest from:

Distributions (115,289 ) (63,809 )
Contributions 24,443
8,411
Acquisitions and divestitures (3,214 ) (247 )
Partial purchases (6,673 ) 4,197
4,197
(4,306 )
Fair value remeasurements 116,554
(116,554 ) (116,554 )
Purchase of treasury stock (12,284 ) (1,028,578 ) (1,028,578 )
Balance at September 30, 2020 $ 1,303,934
126,065
$ 126
$ 694,132
$ 2,031,607
(12,284 ) $ (1,028,578 ) $ (122,530 ) $ 1,574,757
$ 178,583

Three months ended September 30, 2019
Non-
controlling
interests
subject to
put provisions DaVita Inc. Shareholders’ Equity Non-
controlling
interests not
subject to
put provisions

Common stock Additional
paid-in
capital Retained
earnings Treasury stock Accumulated
other
comprehensive
loss
Shares Amount Shares Amount Total
Balance at June 30, 2019 $ 1,185,733
166,533
$ 167
$ 989,021
$ 3,205,910
(2,060 ) $ (112,189 ) $ (33,611 ) $ 4,049,298
$ 193,771
Comprehensive income:
Net income 38,778
143,270
143,270
19,640
Other comprehensive loss (43,993 ) (43,993 )
Stock unit shares issued 8
0

Stock-settled stock-based
compensation expense 18,724
18,724

Changes in noncontrolling interest
from:
Distributions (37,868 ) (23,588 )
Contributions 8,946
3,868
Acquisitions and divestitures (91 ) 10
Partial purchases 8
(202 ) (202 ) 246
Fair value remeasurements 100,553
(100,553 ) (100,553 )
Purchase of treasury stock (30,592 ) (1,747,968 ) (1,747,968 )
Balance at September 30, 2019 $ 1,296,059
166,541
$ 167
$ 906,990
$ 3,349,180
(32,652 ) $ (1,860,157 ) $ (77,604 ) $ 2,318,576
$ 193,947

Nine months ended September 30, 2019
Non-
controlling
interests
subject to
put provisions DaVita Inc. Shareholders’ Equity Non-
controlling
interests not
subject to
put provisions

Common stock Additional
paid-in
capital Retained
earnings Treasury stock Accumulated
other
comprehensive
loss
Shares Amount Shares Amount Total
Balance at December 31, 2018 $ 1,124,641
166,387
$ 166
$ 995,006
$ 2,743,194
0
$ 0
$ (34,924 ) $ 3,703,442
$ 204,956
Cumulative effect of change
in accounting principle (38 ) 39,876
39,876
(6 )
Comprehensive income:
Net income 102,078
566,110
566,110
50,144
Other comprehensive loss (42,680 ) (42,680 )
Stock unit shares issued 154
1
(3,246 ) (3,245 )
Stock-settled stock-based
compensation expense 47,723
47,723

Changes in noncontrolling interest
from:
Distributions (98,103 ) (59,067 )
Contributions 24,714
19,381
Acquisitions and divestitures 1,782
(1,981 )
Partial purchases (2,240 ) 10,732
10,732
(19,480 )
Fair value remeasurements 143,225
(143,225 ) (143,225 )
Purchase of treasury stock (32,652 ) (1,860,157 ) (1,860,157 )
Balance at September 30, 2019 $ 1,296,059
166,541
$ 167
$ 906,990
$ 3,349,180
(32,652 ) $ (1,860,157 ) $ (77,604 ) $ 2,318,576
$ 193,947

See notes to condensed consolidated financial statements

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(dollars and shares in thousands, except per share data)

Unless otherwise indicated in this Quarterly Report on Form 10-Q "the Company", "we", "us", "our" and similar terms refer to DaVita Inc. and its consolidated subsidiaries.


1.	~~Condensed consolidated interim financial statements~~

1. Condensed consolidated interim financial statements

The unaudited condensed consolidated interim financial statements included in this report are prepared by the Company. In the opinion of management, all adjustments necessary for a fair presentation of the results of operations are reflected in these condensed consolidated interim financial statements. All significant intercompany accounts and transactions have been eliminated. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities, ~~revenues~~contingencies and ~~expenses.~~noncontrolling interests subject to put provisions. The most significant estimates and assumptions underlying these financial statements and accompanying notes generally involve revenue recognition and accounts receivable, impairments of goodwill, accounting for income taxes, certain fair value estimates and loss contingencies. The results of operations reflected in these interim financial statements may not necessarily be indicative of annual operating results. These condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019 (10-K)~~2020 (2020 10-K). Prior period classifications have been conformed to the current period presentation. The Company has evaluated subsequent events through the date these condensed consolidated interim financial statements were issued and has included all necessary adjustments and disclosures.


2.	~~Revenue recognition~~

2. Revenue recognition

The following table summarizes the Company's segment revenues by primary payor source:

Three months ended September 30, 2020 Three months ended September 30, 2019
U.S. dialysis Other - Ancillary services Consolidated U.S. dialysis Other - Ancillary services Consolidated
Dialysis patient service revenues:
Medicare and Medicare Advantage $ 1,510,982
$ $ 1,510,982
$ 1,558,890
$ $ 1,558,890
Medicaid and Managed Medicaid 193,254

193,254
176,292

176,292
Other government 114,327
98,044
212,371
116,984
90,947
207,931
Commercial 858,247
43,845
902,092
828,953
37,276
866,229
Other revenues:
Medicare and Medicare Advantage

111,248
111,248

65,759
65,759
Medicaid and Managed Medicaid

412
412

227
227
Commercial

7,799
7,799

33,503
33,503
Other⁽¹⁾
17,409
9,895
27,304
10,308
20,784
31,092
Eliminations of intersegment revenues (37,317 ) (4,079 ) (41,396 ) (32,362 ) (3,483 ) (35,845 )
Total $ 2,656,902
$ 267,164
$ 2,924,066
$ 2,659,065
$ 245,013
$ 2,904,078


	Three months ended March 31, 2021						Three months ended March 31, 2020
	U.S. dialysis		Other - Ancillary services		Consolidated		U.S. dialysis		Other - Ancillary services		Consolidated
Dialysis patient service revenues:
Medicare and Medicare Advantage(1)	$	1,480,297	$		$	1,480,297	$	1,531,033	$		$	1,531,033
Medicaid and Managed Medicaid	187,243				187,243		171,467				171,467
Other government(1)	80,184		106,830		187,014		83,099		94,574		177,673
Commercial	835,479		51,498		886,977		825,582		39,467		865,049
Other revenues:
Medicare and Medicare Advantage			85,595		85,595				98,478		98,478
Medicaid and Managed Medicaid			300		300				366		366
Commercial			6,034		6,034				10,521		10,521
Other(2)	6,675		11,162		17,837		5,442		17,602		23,044
Eliminations of intersegment revenues	(27,003)		(4,293)		(31,296)		(32,242)		(4,152)		(36,394)
Total	$	2,562,875	$	257,126	$	2,820,001	$	2,584,381	$	256,856	$	2,841,237


~~(1)~~	~~Other consists of management service fees earned in the respective Company line of business as well as other revenue from the Company's ancillary services.~~

(1)During the first quarter of 2021, the Company realigned the classification of revenue previously disclosed in the “Other government” category to the “Medicare and Medicare Advantage” category for certain government-reimbursed plans which have structure and payment characteristics similar to traditional Medicare Advantage plans. The classification of revenue for these plans for the three months ended March 31, 2020 has also been recast to conform to the current period presentation.

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares~~(2)Other consists of management service fees earned in ~~thousands, except per share data)~~

Nine months ended September 30, 2020 Nine months ended September 30, 2019
U.S. dialysis Other - Ancillary services Consolidated U.S. dialysis Other - Ancillary services Consolidated
Dialysis patient service revenues:
Medicare and Medicare Advantage $ 4,530,510
$ $ 4,530,510
$ 4,572,599
$ $ 4,572,599
Medicaid and Managed Medicaid 547,045
547,045
490,723
490,723
Other government 342,996
283,431
626,427
333,675
264,191
597,866
Commercial 2,534,388
118,869
2,653,257
2,458,360
103,760
2,562,120
Other revenues:
Medicare and Medicare Advantage 309,555
309,555
191,472
191,472
Medicaid and Managed Medicaid 1,061
1,061
327
327
Commercial 27,370
27,370
98,428
98,428
Other⁽¹⁾
30,846
36,600
67,446
20,715
59,204
79,919
Eliminations of intersegment revenues (104,987 ) (12,402 ) (117,389 ) (93,337 ) (10,222 ) (103,559 )
Total $ 7,880,798
$ 764,484
$ 8,645,282
$ 7,782,735
$ 707,160
$ 8,489,895


~~(1)~~	~~Other consists of management service fees earned in~~ the respective ~~Company line of business as well as other revenue from the Company's ancillary services.~~

~~The~~ Company ~~had 0 allowance for doubtful accounts related to performance obligations satisfied in years prior to January 1, 2018~~line of business as ~~of September 30, 2020 and had a balance of $8,328~~well as ~~of December 31, 2019.~~other revenue from the Company's ancillary services.

There are significant uncertainties associated with estimating revenue, which generally take several years to resolve. These estimates are subject to ongoing insurance coverage changes, geographic coverage differences, differing interpretations of contract coverage and other payor issues, as well as patient issues, including ~~without limitation,~~ determination of applicable primary and secondary coverage, changes in patient insurance coverage and coordination of benefits. As these estimates are refined over time, both positive and negative adjustments to revenue are recognized in the current period.

Dialysis patient service revenues. Revenues are recognized based on the Company’s estimate of the transaction price the Company expects to collect as a result of satisfying its performance obligations. Dialysis patient service revenues are recognized in the period services are provided based on these estimates. Revenues consist primarily of payments from government and commercial health plans for dialysis services provided to patients. A usual and customary fee schedule is

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

maintained for the Company’s dialysis treatments and related lab services; however, actual collectible revenue is normally recognized at a discount from the fee schedule.

Other revenues. Other revenues consist of fees for management and administrative support services provided to outpatient dialysis businesses that the Company does not own or in which the Company owns a noncontrolling interest as well as revenues associated with the Company's non-dialysis ancillary services. Revenues associated with dialysis management services, integrated care services, clinical research programs, physician services, and end stage renal disease (ESRD) seamless care organizations are estimated and recognized in the period services are provided.

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except~~3. Earnings per share ~~data)~~


3.	~~Earnings per share~~

Basic earnings per share is calculated by dividing net income attributable to the Company by the weighted average number of common shares outstanding. Weighted average common shares outstanding include restricted stock unit awards that are no longer subject to forfeiture because the recipients have satisfied either the explicit vesting terms or retirement eligibility requirements.

Diluted earnings per share includes the dilutive effect of outstanding stock-settled stock appreciation rights and unvested stock units as computed under the treasury stock method.

The reconciliations of the numerators and denominators used to calculate basic and diluted earnings per share were as follows:

Three months ended
September 30, Nine months ended
September 30,
2020 2019 2020 2019
Net income attributable to DaVita Inc. from:
Continuing operations $ 158,674
$ 150,113
$ 589,889
$ 464,590
Discontinued operations 0
(6,843 ) 9,980
101,520
Net income attributable to DaVita Inc. $ 158,674
$ 143,270
$ 599,869
$ 566,110

Weighted average shares - basic 120,905
150,675
122,582
161,147
Assumed incremental shares from stock plans 3,049
621
2,345
489
Weighted average shares - diluted 123,954
151,296
124,927
161,636

Basic net income attributable to DaVita Inc. from:
Continuing operations per share $ 1.31
$ 1.00
$ 4.81
$ 2.88
Discontinued operations per share 0
(0.05 ) 0.08
0.63
Basic net income per share attributable to DaVita Inc. $ 1.31
$ 0.95
$ 4.89
$ 3.51

Diluted net income attributable to DaVita Inc. from:
Continuing operations per share $ 1.28
$ 0.99
$ 4.72
$ 2.87
Discontinued operations per share 0
(0.04 ) 0.08
0.63
Diluted net income per share attributable to DaVita Inc. $ 1.28
$ 0.95
$ 4.80
$ 3.50

Anti-dilutive stock-settled awards excluded from calculations⁽¹⁾
2,765
7,293
3,063
6,414


	Three months ended March 31,
	2021		2020
Net income attributable to DaVita Inc.:
Continuing operations	$	237,403	$	229,613
Discontinued operations	0		9,980
Net income attributable to DaVita Inc.	$	237,403	$	239,593

Weighted average shares outstanding:
Basic shares	109,014		124,902
Assumed incremental from stock plans	4,838		1,993
Diluted shares	113,852		126,895

Basic net income attributable to DaVita Inc.:
Continuing operations per share	$	2.18	$	1.84
Discontinued operations per share	0		0.08
Basic net income per share attributable to DaVita Inc.	$	2.18	$	1.92

Diluted net income attributable to DaVita Inc.:
Continuing operations per share	$	2.09	$	1.81
Discontinued operations per share	0		0.08
Diluted net income per share attributable to DaVita Inc.	$	2.09	$	1.89

Anti-dilutive stock-settled awards excluded from calculation(1)	27		3,207


~~(1)~~	Shares associated with stock-settled stock appreciation rights and performance stock units were excluded from the diluted denominator calculations because they are anti-dilutive under the treasury stock method.

(1)Shares associated with stock awards excluded from the diluted denominator calculation because they were anti-dilutive under the treasury stock method.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

4. Short-term and long-term investments


4.	~~Short-term and long-term investments~~

The Company’s short-term and long-term debt and equity investments, ~~consist~~consisting of ~~the following:~~debt instruments classified as held-to-maturity and equity investments with readily determinable fair values or redemption values, were as follows:

September 30, 2020 December 31, 2019
Debt
securities Equity
securities Total Debt
securities Equity
securities Total
Certificates of deposit and other time deposits $ 8,212
$ 0
$ 8,212
$ 8,140
$ 0
$ 8,140
Investments in mutual funds and common stock 0
41,015
41,015
0
39,951
39,951
$ 8,212
$ 41,015
$ 49,227
$ 8,140
$ 39,951
$ 48,091
Short-term investments $ 8,212
$ 11,148
$ 19,360
$ 8,140
$ 3,432
$ 11,572
Long-term investments 0
29,867
29,867
0
36,519
36,519
$ 8,212
$ 41,015
$ 49,227
$ 8,140
$ 39,951
$ 48,091


	March 31, 2021						December 31, 2020
	Debt securities		Equity securities		Total		Debt securities		Equity securities		Total
Certificates of deposit and other time deposits	$	8,221	$	0	$	8,221	$	8,217	$	0	$	8,217
Investments in mutual funds and common stock	0		34,730		34,730		0		44,077		44,077
	$	8,221	$	34,730	$	42,951	$	8,217	$	44,077	$	52,294
Short-term investments	$	8,221	$	2,839	$	11,060	$	8,217	$	11,884	$	20,101
Long-term investments	0		31,891		31,891		0		32,193		32,193
	$	8,221	$	34,730	$	42,951	$	8,217	$	44,077	$	52,294

Debt securities: The Company's short-term debt investments are principally bank certificates of deposit with contractual maturities longer than three months but shorter than one year. These debt securities are accounted for as held to maturity and recorded at amortized cost, which approximated their fair values at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

Equity securities: The Company's equity investments in mutual funds and common stock are held within a trust to fund existing obligations associated with several of the Company’s non-qualified deferred compensation plans. During the nine months ended September 30, 2020, the Company recognized pre-tax net gains of $1,110 in other income associated with changes in the fair value of these equity securities, comprised of pre-tax realized gains of $1,639 and a net decrease in unrealized gains of $529. During the nine months ended September 30, 2019, the Company recognized pre-tax net gains of $2,776 in other income associated with changes in the fair value of these equity securities, comprised of pre-tax realized gains of $586 and a net increase in unrealized gains of $2,190.


5.	~~Equity method and other investments~~

The Company maintains equity method and minor adjusted cost method investments in the private securities of certain other healthcare and healthcare-related businesses. The Company classifies these investments as "Equity method and other investments" on its consolidated balance sheet.

~~The Company's equity method and other investments were comprised of the following:~~5. Goodwill

September 30, 2020 December 31, 2019
APAC joint venture $ 124,209
$ 116,924
Other equity method partnerships 110,169
114,611
Adjusted cost method investments 18,105
10,448
$ 252,483
$ 241,983

During the nine months ended September 30, 2020 and 2019, the Company recognized equity investment income of $27,681 and $11,158, respectively, from its equity method investments in nonconsolidated businesses.

Equity investments in nonconsolidated businesses over which the Company maintains significant influence, but which do not have readily determinable fair values, are carried on the equity method. The Company's largest equity method investment is its ownership interest in DaVita Care Pte. Ltd. (the APAC joint venture, or APAC JV), which is 75%-owned by the Company and 25%-owned by an unrelated noncontrolling investor. As described in Note 9 to the Company's consolidated financial statements included in the 10-K, the Company does not consolidate the APAC JV.

The Company's other equity method investments include legal entities over which the Company has significant influence but in which it does not maintain a controlling financial interest. Almost all of these are U.S. partnerships in the form of limited liability companies. The Company's ownership interests in these partnerships vary, but typically range from 30% to 50%. During the nine months ended September 30, 2020 and 2019, 0 significant impairments or other valuation adjustments were recognized on these investments.

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~


6.	~~Goodwill~~

Changes in goodwill by reportable segments were as follows:

U.S. dialysis Other - Ancillary services Consolidated
Balance at December 31, 2018 $ 6,275,004
$ 566,956
$ 6,841,960
Acquisitions 18,089
72,137
90,226
Impairment charges 0
(124,892 ) (124,892 )
Foreign currency and other adjustments (5,993 ) (13,666 ) (19,659 )
Balance at December 31, 2019 $ 6,287,100
$ 500,535
$ 6,787,635
Acquisitions 24,377
85,871
110,248
Divestitures (1,549 ) (6,744 ) (8,293 )
Foreign currency and other adjustments 0
(21,213 ) (21,213 )
Balance at September 30, 2020 $ 6,309,928
$ 558,449
$ 6,868,377

Balance at September 30, 2020
Goodwill $ 6,309,928
$ 688,881
$ 6,998,809
Accumulated impairment charges 0
(130,432 ) (130,432 )
$ 6,309,928
$ 558,449
$ 6,868,377


	U.S. dialysis		Other - Ancillary services		Consolidated
Balance at December 31, 2019	$	6,287,100	$	500,535	$	6,787,635
Acquisitions	24,377		105,680		130,057
Divestitures	(1,549)		(6,744)		(8,293)
Foreign currency and other adjustments	0		9,710		9,710
Balance at December 31, 2020	$	6,309,928	$	609,181	$	6,919,109
Acquisitions	0		5,456		5,456
Foreign currency and other adjustments	0		(33,356)		(33,356)
Balance at March 31, 2021	$	6,309,928	$	581,281	$	6,891,209

Balance at March 31, 2021:
Goodwill	$	6,309,928	$	711,854	$	7,021,782
Accumulated impairment charges	0		(130,573)		(130,573)
	$	6,309,928	$	581,281	$	6,891,209

The Company did not recognize any goodwill impairment charges during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020.

As dialysis treatments are an essential, life-sustaining service for patients who depend on them, the Company's operations have continued ~~and are currently expected to continue~~ throughout the novel coronavirus (COVID-19) pandemic. However, the ultimate impact of the dynamic and evolving COVID-19 pandemic on the Company will depend on future developments that are highly uncertain and difficult to predict, including among other things the ultimate severity and duration of the pandemic, further spread or resurgence of the virus (including as a result of the emergence of new strains of the virus), its impact on the chronic kidney disease (CKD) patient population and the Company's patient population, the availability, acceptance, impact orand efficacy of COVID-19 vaccines and other treatments, ~~therapies~~ or ~~vaccines,~~therapies, the pandemic’s continuing impact on the U.S. and global economies and unemployment, the responses of the Company's competitors to the pandemic and related changes in the marketplace, and the timing, scope and effectiveness of federal, state and local governmental responses. While the Company does not currently expect a material adverse impact to its business as a result of this public health crisis, there can be no assurance that the COVID-19 pandemic will not have a material adverse impact on one or more of the Company's businesses.

~~During the nine months ended September 30, 2019, the Company recognized goodwill impairment charges of $119,476~~

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in its Germany kidney care business. Of this amount, $41,037 was recognized in the first quarter of 2019 and resulted primarily from a change in relevant discount rates, a decline in then current and expected future patient census and an increase in then current and expected future costs, principally due to wage increases expected to result from legislation announced at that time. An incremental charge of $78,439 was recognized during the third quarter of 2019 and resulted from changes and developments in the Company's outlook for this business since its last assessment at that time. These primarily concerned developments in the business in response to evolving market conditions and changes in the Company's expected timing and ability to mitigate them, which was based on results of in-depth operating and strategic reviews completed by the Company’s new Germany management team during the third quarter of 2019. During the nine months ended September 30, 2019, the Company also recognized a goodwill impairment charge of $5,416 in its German other health operations.thousands, except per share data)

Developments, events, changes in operating performance and other changes in circumstances since the dates of the Company’s last annual goodwill impairment assessments have not caused management to believe it is more likely than not that the fair values of any of the Company's reporting units would be less than their respective carrying amounts as of ~~September 30, 2020.~~March 31, 2021. Except for the Company's Germany kidney care reporting unit as described further in Note 10 to the Company's consolidated financial statements included in the 2020 10-K, NaN of the Company's various other reporting units were considered at risk of significant goodwill impairment as of ~~September 30,~~March 31, 2021.

6. Long-term debt

Long-term debt was comprised of the following:


						As of March 31, 2021
	March 31, 2021		December 31, 2020		Maturity date	Interest rate		Estimated fair value(1)
Senior Secured Credit Facilities:
Term Loan A	$	1,662,500	$	1,684,375	8/12/2024	LIBOR + 1.50%		$	1,666,656
Term Loan B-1	2,708,836		2,715,694		8/12/2026	LIBOR + 1.75%		$	2,698,678
Revolving line of credit	0		75,000		8/12/2024	LIBOR + 1.50%
Senior Notes:
4.625% Senior Notes	2,750,000		1,750,000		6/1/2030	4.625	%	$	2,801,150
3.75% Senior Notes	1,500,000		1,500,000		2/15/2031	3.750	%	$	1,436,220
Acquisition obligations and other notes payable(2)	152,531		164,160		2021-2036	4.95	%	$	152,531
Financing lease obligations(3)	289,324		274,292		2022-2038	4.83	%
Total debt principal outstanding	9,063,191		8,163,521
Discount, premium and deferred financing costs(4)	(65,235)		(77,717)
	8,997,956		8,085,804
Less current portion	(168,191)		(168,541)
	$	8,829,765	$	7,917,263

(1)For the Company's senior secured credit facilities and senior notes, fair value estimates are based upon bid and ask quotes, typically a level 2 input. For acquisition obligations and other notes payable, the carrying values presented approximate their estimated fair values, based on estimates of their present values using level 2 interest rate inputs.

(2)The interest rate presented for acquisition obligations and other notes payable is their weighted average interest rate based on the current fixed and LIBOR interest rate components in effect as of March 31, 2021.

(3)Financing lease obligations are measured at their approximate present values at inception. The interest rate presented is the weighted average discount rate embedded in financing leases outstanding. The term of one ground lease runs to 2070, in addition to the other lease maturity dates presented in the table above.

(4)As of March 31, 2021, the carrying amount of the Company's senior secured credit facilities includes a discount of $5,212 and deferred financing costs of $33,650 and the carrying amount of the Company's senior notes includes a premium of $(17,327) and deferred financing costs of $43,700. As of December 31, 2020, the carrying amount of the Company's senior secured credit facilities included a discount of $5,461 and deferred financing costs of $35,825, and the carrying amount of the Company's senior notes included deferred financing costs of $36,431.

During the first three months of 2021, the Company made regularly scheduled mandatory principal payments under its senior secured credit facilities totaling $21,875 on Term Loan A and $6,858 on Term Loan B-1.

On February 26, 2021, the Company completed an unregistered add-on offering of $1,000,000 aggregate principal amount to the existing 4.625% senior notes due June 1, 2030 (the Additional 2030 Notes) pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. The Additional 2030 Notes were issued at an offering price of 101.750% of face amount, plus an interest payment advance to the Company for interest that would have accrued from December 1, 2020 (the last interest payment date) through the closing date. These Additional 2030 Notes will then bear full six months' semi-annual coupon interest payments beginning June 1, 2021. The terms of the Additional 2030 Notes, other than their issue date, offering price and first interest payment date, are identical to the terms of the $1,750,000 principal amount of the Company’s 4.625% Senior Notes due June 1, 2030 previously issued by the Company on June 9, 2020.

The Additional 2030 Notes are unsecured senior obligations and rank equally in right of payment with the Company's existing and future unsecured senior indebtedness. During the three months ended March 31, 2021, the Company incurred $8,346 in fees and other professional expenses associated with this transaction, which were capitalized and will amortize over the term of the Additional

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

2030 Notes.


7.	~~Income taxes~~

As of September 30, 2020, the Company’s total liability for unrecognized tax benefits relating to tax positions that do not meet the more-likely-than-not threshold was $70,129, of which $65,883 would impact the Company's effective tax rate if recognized. The total balance increased $1,915 from the DecemberMarch 31, ~~2019 balance of $68,214.~~

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in its income tax expense. At September 30, 2020 and December 31, 2019, the Company had approximately $16,961 and $14,428, respectively, accrued for interest and penalties related to unrecognized tax benefits, net of federal tax benefits.


8.	~~Long-term debt~~

~~Long-term debt was comprised of the following:~~

As of September 30, 2020
September 30, 2020 December 31, 2019 Maturity date Interest rate
Estimated fair value⁽¹⁾
Senior Secured Credit Facilities:
Term Loan A⁽²⁾
$ 1,706,250
$ 1,739,063
8/12/2024 LIBOR + 1.75% $ 1,689,188
Term Loan B-1⁽³⁾
2,722,552
0
8/12/2026 LIBOR + 1.75% $ 2,681,713
Term Loan B⁽³⁾
0
2,743,125
8/12/2026
Revolving line of credit⁽²⁾
0
0
8/12/2024 LIBOR + 1.75%
Senior Notes:
4 ⅝% Senior Notes 1,750,000
0
6/1/2030 4.625 % $ 1,799,018
3 ¾% Senior Notes 1,500,000
0
2/15/2031 3.750 % $ 1,445,625
5 ⅛% Senior Notes 0
1,750,000
7/15/2024
5% Senior Notes 0
1,500,000
5/1/2025
Acquisition obligations and other notes payable⁽⁴⁾
157,864
180,352
2020-2036 5.01 % $ 157,864
Financing lease obligations⁽⁵⁾
274,611
268,534
2021-2038 5.16 %
Total debt principal outstanding 8,111,277
8,181,074

Discount and deferred financing costs (80,945 ) (72,840 )
8,030,332
8,108,234

Less current portion (163,787 ) (130,708 )
$ 7,866,545
$ 7,977,526


~~(1)~~	For the Company's senior secured credit facilities and senior notes, fair value estimates are based upon bid and ask quotes, typically a level 2 input. For the acquisition obligations and other notes payable, the carrying values presented here approximate their estimated fair values, based on estimates of their present values using level 2 interest rate inputs.

~~(2)~~

The Company's interest rate on its Term Loan A and revolving line of credit is subject to adjustment depending upon the Company's leverage ratio under the credit agreement governing its senior secured credit facilities. Based on the Company's leverage ratio as of September 30, 2020, the Company’s interest rate will be adjusted in the fourth quarter of 2020 to be LIBOR plus 1.50% for its Term Loan A and revolving line of credit.


~~(3)~~	On ~~February 13, 2020~~, the Company entered into an amendment to the credit agreement governing its senior secured credit facilities to refinance the senior secured Term Loan B with a $2,743,125 senior secured Term Loan B-1.


~~(4)~~	The interest rate presented for acquisition obligations and other notes payable is their weighted average interest rate based on the current interest rates in effect and assuming no changes to the LIBOR based interest rates.


~~(5)~~	Financing lease obligations are measured at their approximate present values at inception. The interest rate presented is the weighted average discount rate embedded in financing leases outstanding. The term of one ground lease runs to 2070, in addition to the other lease maturity dates presented in the table above.

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

~~Scheduled maturities of long-term debt at September 30, 2020 were as follows:~~

2020 (remainder of the year) $ 52,092
2021 $ 148,821
2022 $ 170,566
2023 $ 228,303
2024 $ 1,421,461
2025 $ 63,571
Thereafter $ 6,026,463

On ~~February 13, 2020~~, the Company entered into an amendment (the Repricing Amendment) to refinance and reprice its senior secured Term Loan B with a senior secured Term Loan B-1 that bears interest at a rate equal to LIBOR plus an applicable margin of 1.75% and matures on ~~August 12, 2026~~. The Repricing Amendment did not change the interest rate on the Term Loan A or the revolving line of credit. NaN additional debt was incurred, nor any additional proceeds received, by the Company in connection with the Repricing Amendment. The majority of the Company's Term Loan B debt was considered modified. As a result, the Company recognized debt refinancing charges of $2,948 in the nine months ended September 30, 2020, comprised partially of fees incurred on this transaction and partially of deferred financing costs written off for the portion of debt considered extinguished and reborrowed. For the portion of the Term Loan B debt that was considered extinguished and reborrowed in this refinancing, the Company recognized $68,842 in constructive financing cash outflows and financing cash inflows on the statement of cash flows, even though no funds were actually paid or received. Another $55,895 of the debt considered extinguished in this refinancing represented a non-cash financing activity.

During the first nine months of 2020, the Company made regularly scheduled mandatory principal payments under its senior secured credit facilities totaling $32,813 on Term Loan A and $20,573 on Term Loan B-1.

~~On June 9, 2020, the Company issued $1,750,000 aggregate principal amount of 4.625% senior notes due 2030 (the~~

4 ⅝% Senior Notes) in a private offering pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. The 4 ⅝% Senior Notes pay interest on June 1 and December 1 of each year beginning ~~December 1, 2020~~. The 4 ⅝% Senior Notes are unsecured senior obligations and rank equally in right of payment with the Company's existing and future unsecured senior indebtedness. The 4 ⅝% Senior Notes are guaranteed by each of the Company’s domestic subsidiaries that guarantee its senior secured credit facilities. The Company may redeem up to 40% of the aggregate principal amount of the

4 ⅝% Senior Notes at any time prior to June 1, 2023 at 104.625% of the aggregate principal amount from the proceeds of one or more equity offerings, plus accrued and unpaid interest. In addition, the Company may redeem the 4 ⅝% Senior Notes at any time prior to June 1, 2025 at a make whole redemption price plus accrued and unpaid interest, or on and after such date at certain redemption prices specified in the indenture governing the 4 ⅝% Senior Notes plus accrued and unpaid interest. The

4 ⅝% Senior Notes contain restrictive covenants that limit the ability of the Company and its guarantors to, among other things, create certain liens, enter into certain sale/leaseback transactions, or merge, consolidate or sell all or substantially all of their assets. The 4 ⅝% Senior Notes and related subsidiary guarantees do not have any registration or similar rights and are not expected to be registered for exchange on public markets. During the nine months ended September 30, 2020, the Company incurred $20,386 in fees, discounts and other professional expenses associated with this transaction that were capitalized and will amortize over the term of the 4 ⅝% Senior Notes.

On July 15, 2020, the Company used the net proceeds from the 4 ⅝% Senior Notes offering, together with cash on hand, to redeem in full all $1,750,000 aggregate principal amount outstanding of its 5 ⅛% Senior Notes plus accrued interest and redemption premium. In connection with this redemption, the Company incurred debt redemption premium charges of $29,890 and deferred financing cost write-offs of $9,764.

~~On August 11, 2020, the Company issued $1,500,000 aggregate principal amount of 3.75% senior notes due 2031 (the~~

3 ¾% Senior Notes) in a private offering pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. The 3 ¾% Senior Notes pay interest on February 15 and August 15 of each year beginning February 15, 2021. The

3 ¾% Senior Notes are unsecured senior obligations and rank equally in right of payment with the Company's existing and future unsecured senior indebtedness. The 3 ¾% Senior Notes are guaranteed by each of the Company’s domestic subsidiaries that guarantee its senior secured credit facilities. The Company may redeem up to 40% of the aggregate principal amount of the

3 ¾% Senior Notes at any time prior to August 15, 2023 at 103.75% of the aggregate principal amount from the proceeds of one or more equity offerings, plus accrued and unpaid interest. In addition, the Company may redeem the 3 ¾% Senior Notes at

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

any time prior to February 15, 2026 at a make whole redemption price plus accrued and unpaid interest, or on and after such date at certain redemption prices specified in the indenture governing the 3 ¾% Senior Notes plus accrued and unpaid interest. The 3 ¾% Senior Notes contain restrictive covenants that limit the ability of the Company and its guarantors to, among other things, create certain liens, enter into certain sale/leaseback transactions, or merge, consolidate or sell all or substantially all of their assets. The 3 ¾% Senior Notes and related subsidiary guarantees do not have any registration or similar rights and are not expected to be registered for exchange on public markets. During the nine months ended September 30, 2020, the Company incurred $17,793 in fees, discounts and other professional expenses associated with this transaction that were capitalized and will amortize over the term of the 3 ¾% Senior Notes.

On August 21, 2020, the Company used the net proceeds from the 3 ¾% Senior Notes offering, together with cash on hand, to redeem in full all $1,500,000 aggregate principal amount outstanding of its 5% Senior Notes plus accrued interest and redemption premium. In connection with this redemption, the Company incurred debt redemption premium charges of $37,500 and deferred financing cost write-offs of $8,866.

~~The Company's 2015 interest rate cap agreements expired on~~ ~~June 30, 2020~~ ~~and the Company's 2019 cap agreements became effective on~~ ~~June 30, 2020. As of September 30, 2020,~~2021, the Company's 2019 interest rate cap agreements have the economic effect of capping the Company's maximum exposure to LIBOR variable interest rate changes on equivalent amounts of the Company's floating rate debt, including all of ~~the~~ Term Loan B-1 and a portion of ~~the~~ Term Loan A. The remaining ~~$928,802~~$871,336 outstanding principal balance of ~~the~~ Term Loan A is subject to LIBOR-based interest rate volatility. These cap agreements are designated as cash flow hedges and, as a result, changes in the fair values of the cap agreements are reported in other comprehensive income. The original premiums paid for the caps are amortized to debt expense on a straight-line basis over the term of each cap agreement starting from its effective date. These cap agreements do not contain credit risk-contingent features.

The following table summarizes the Company’s interest rate cap agreements outstanding as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, which are classified in "Other long-term assets" on its consolidated balance sheet:

Nine months ended
September 30, 2020 Fair value
Notional amount LIBOR maximum rate Effective date Expiration date Debt expense Recorded OCI loss September 30, 2020 December 31, 2019
2019 cap agreements $ 3,500,000
2.00% 6/30/2020 6/30/2024 $ 1,378
$ 21,946
$ 2,506
$ 24,452
2015 cap agreements $ 3,500,000
3.50% 6/29/2018 6/30/2020 $ 4,326
$ 0
$ 0
$ 0


						Three months ended March 31, 2021				Fair value
	Notional amount		LIBOR maximum rate	Effective date	Expiration date	Debt expense		Recorded OCI gain		March 31, 2021		December 31, 2020
2019 cap agreements	$	3,500,000	2.00%	6/30/2020	6/30/2024	$	1,377	$	6,505	$	9,176	$	2,671

~~The following table summarizes the effects of~~See Note 9 for further details on amounts reclassified from accumulated other comprehensive loss and recorded as debt expense related to the Company’s interest rate cap agreements for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~

Amount of unrealized losses in OCI on interest rate cap agreements Income statement
location Reclassification from accumulated other comprehensive loss into net income
Three months ended
September 30, Nine months ended
September 30, Three months ended
September 30, Nine months ended
September 30,
Derivatives designated
as cash flow hedges 2020 2019 2020 2019 2020 2019 2020 2019
Interest rate cap agreements $ (2,169 ) $ (1,420 ) $ (21,946 ) $ (2,244 ) Debt expense $ 1,378
$ 2,101
$ 5,704
$ 6,428
Related income tax 541
360
5,476
572
Related income tax (344 ) (532 ) (1,424 ) (1,646 )
Total $ (1,628 ) $ (1,060 ) $ (16,470 ) $ (1,672 ) $ 1,034
$ 1,569
$ 4,280
$ 4,782

~~See Note 13 to these condensed consolidated financial statements for further details on amounts recorded and reclassified from accumulated other comprehensive loss.~~2020.

The Company’s weighted average effective interest rate on ~~the~~its senior secured credit facilities at the end of the ~~third~~first quarter of ~~2020~~2021 was ~~2.11%~~1.97%, based on the current margins in effect for ~~the~~ Term Loan A and Term Loan B-1 as of ~~September 30, 2020,~~March 31, 2021, as described above.

The Company’s overall weighted average effective interest rate for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 was ~~3.31% and 3.76%, respectively,~~3.08% and as of ~~September 30, 2020~~March 31, 2021 was ~~3.11%~~3.18%.

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

As of ~~September 30, 2020,~~March 31, 2021, the Company’s interest rates ~~are~~were fixed on approximately ~~45%~~51% of its total debt.

As of ~~September 30, 2020,~~March 31, 2021, the Company had an undrawn $1,000,000 revolving line of credit under its senior secured credit facilities. ~~Availability~~Credit available under this ~~revolving line of credit~~facility is reduced by the amount of any letters of credit ~~outstanding. There are currently~~outstanding under this facility, but there were 0 such letters of credit outstanding ~~under the senior secured credit facilities.~~as of March 31, 2021. The Company ~~has~~also had approximately ~~$64,634~~$64,650 of outstanding letters of credit under a separate bilateral secured letter of credit ~~facility.~~facility as of March 31, 2021.


9.	~~Contingencies~~

7.Commitments andcontingencies

The majority of the Company’s revenues are from government programs and may be subject to adjustment as a result of: (i) examination by government agencies or contractors, for which the resolution of any matters raised may take extended periods of time to finalize; (ii) differing interpretations of government regulations by different Medicare contractors or regulatory authorities; (iii) differing opinions regarding a patient’s medical diagnosis or the medical necessity of services provided; and (iv) retroactive applications or interpretations of governmental requirements. In addition, the Company’s revenues from commercial payors may be subject to adjustment as a result of potential claims for refunds, as a result of government actions or as a result of other claims by commercial payors.

The Company operates in a highly regulated industry and is a party to various lawsuits, demands, claims, qui tam suits, governmental investigations (which frequently arise from qui tam suits) and audits (including, without limitation, investigations or other actions resulting from its obligation to self-report suspected violations of law) and other legal ~~proceedings.~~proceedings, including, without limitation, those described below. The Company records accruals for certain legal proceedings and regulatory matters to the extent that the Company determines an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company’s total recorded accruals with respect to legal proceedings and regulatory matters, net of anticipated third party recoveries, were immaterial. While these accruals reflect the Company’s best estimate of the probable loss for those matters as of the dates of those accruals, the recorded amounts may differ materially from the actual amount of the losses for those matters, and any anticipated third party recoveries for any such losses may not ultimately be recoverable. Additionally, in some cases, no estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal proceedings and regulatory matters, which also may be impacted by various factors, including, without limitation, that they may involve indeterminate

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

claims for monetary damages or may involve fines, penalties or non-monetary remedies; present novel legal theories or legal uncertainties; involve disputed facts; represent a shift in regulatory policy; are in the early stages of the proceedings; or may result in a change of business practices. Further, there may be various levels of judicial review available to the Company in connection with any such proceeding.

The following is a description of certain lawsuits, claims, governmental investigations and audits and other legal proceedings to which the Company is subject.

Certain Governmental Inquiries and ~~Certain~~ Related Proceedings

2016 U.S. Attorney Texas Investigation: In February 2016, DaVita Rx, LLC (DaVita Rx), a wholly-owned subsidiary of the Company, received a Civil Investigative Demand (CID) from the U.S. Attorney’s Office, Northern District of Texas. The government is conducting a federal False Claims Act (FCA) investigation concerning allegations that DaVita Rx presented or caused to be presented false claims for payment to the government for prescription medications, as well as an investigation into the Company’s relationships with pharmaceutical manufacturers. The ~~CID~~government’s investigation covers the period from January 1, 2006 through ~~the present. In connection with the Company’s ongoing efforts working with the government, the Company learned that a~~ ~~qui tam~~ complaint had been filed covering some of the issues in the CID and practices that had been identified by the Company in a self-disclosure filed with the Office of Inspector General (OIG) for the U.S. Department of Health and Human Services (HHS) in February 2016.December 31, 2018. In December 2017, the Company finalized and executed a settlement agreement ~~with~~that resolved certain of the ~~government and relators~~issues in the ~~qui tam~~ ~~matter~~government’s investigation and that included total monetary consideration of $63,700, as previously disclosed, of which $41,500 was an incremental cash payment and $22,200 was for amounts previously refunded, and all of which was previously accrued. The government’s investigation ~~into certain of the Company's~~is ongoing with respect to issues related to DaVita Rx’s historic relationships with certain pharmaceutical manufacturers, ~~is ongoing,~~ and in July 2018 the ~~OIG~~Office of Inspector General (OIG) served the Company with a subpoena seeking additional documents and information relating to those relationships. The Company is continuing to cooperate with the government in this investigation.

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

2017 U.S. Attorney Colorado Investigation: In November 2017, the U.S. Attorney’s Office, District of Colorado informed the Company of an investigation it was conducting into possible federal healthcare offenses involving DaVita Kidney Care, as well as several of the Company’s wholly-owned subsidiaries. In addition to DaVita Kidney Care, the matter currently includes an investigation into DaVita Rx, DaVita Laboratory Services, Inc. (DaVita Labs), and RMS Lifeline Inc. (Lifeline). In each of August 2018 and May 2019, the Company received a CID pursuant to the FCA from the U.S. Attorney's Office relating to this investigation. In May 2020, the Company sold its interest in Lifeline, but the Company retained certain liabilities of the Lifeline business, including those related to this investigation. The Company is continuing to cooperate with the government in this investigation.

2018 U.S. Attorney Florida Investigation: In March 2018, DaVita Labs received two CIDs from the U.S. Attorney’s Office, Middle District of Florida that were identical in nature but directed to the two different labs. According to the face of the CIDs, the U.S. Attorney’s Office is conducting an investigation as to whether the Company’s subsidiary submitted claims for blood, urine, and fecal testing, where there were insufficient test validation or stability studies to ensure accurate results, in violation of the FCA. In October 2018, DaVita Labs received a subpoena from the OIG in connection with this matter requesting certain patient records linked to clinical laboratory tests. On September 30, 2019, the U.S. Attorney’s Office notified the U.S. District Court, Middle District of Florida, of its decision not to elect to intervene at this time in the matter of U.S. ex rel. Lorne Holland, et al. v. DaVita Healthcare Partners, Inc., et al. The court then unsealed the complaint, which alleges violations of the FCA, by order dated the same day. In January 2020, the private party relators served the Company and DaVita Labs with an amended complaint. On February 24, 2020, the Company and DaVita Labs filed a motion to dismiss the amended complaint. On June 25, 2020, the court denied the motion to dismiss. The Company and DaVita Labs answered the complaint on July 23, 2020. The Company and DaVita Labs dispute these allegations and intend to defend this action accordingly.

2020 U.S. Attorney New Jersey Investigation: In March 2020, the U.S. Attorney’s Office, District of New Jersey served the Company with a subpoena and a CID relating to an investigation being conducted by that office and the U.S. Attorney’s Office, Eastern District of Pennsylvania. The subpoena and CID request information on several topics, including certain of the Company’s joint venture arrangements with physicians and physician groups, medical director agreements, and compliance with its five-year Corporate Integrity Agreement, the term of which expired October 22, ~~2019~~.2019. The Company is cooperating with the government in this investigation.

2020 California Department of Insurance Investigation: In April 2020, the California Department of Insurance (CDI) sent the Company an Investigative Subpoena relating to an investigation being conducted by that office. CDI issued a superseding subpoena in September 2020. The subpoena, as revised, requests information on a number of topics, including but not limited to the Company’s communications with patients about insurance plans and financial assistance from the American

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

Kidney Fund (AKF), analyses of the potential impact of patients’ decisions to change insurance providers, and documents relating to donations or contributions to the AKF. The Company is cooperating with CDI in this investigation.

2020 Department of Justice Investigation: In October 2020, the Company received a CID from the Department of Justice pursuant to a False Claims Act investigation concerning allegations that DaVita Medical Group (DMG) may have submitted undocumented or unsupported diagnosis codes in connection with Medicare Advantage beneficiaries. The CID covers the period from January 1, 2015 through June 19, 2019, the date the Company completed the divestiture of DMG to Collaborative Care Holdings, LLC. The Company is cooperating with the government in this investigation.

* * *

Although the Company cannot predict whether or when proceedings might be initiated or when these matters may be resolved (other than as may be described above), it is not unusual for inquiries such as these to continue for a considerable period of time through the various phases of document and witness requests and on-going discussions with regulators and to develop over the course of time. In addition to the inquiries and proceedings specifically identified above, the Company frequently is subject to other inquiries by state or federal government agencies, ~~and/or private civil~~ many of which relate to qui tam complaints filed by relators. Negative findings or terms and conditions that the Company might agree to accept as part of a negotiated resolution of pending or future government inquiries or relator proceedings could result in, among other things, substantial financial penalties or awards against the Company, substantial payments made by the Company, harm to the Company’s reputation, required changes to the Company’s business practices, exclusion from future participation in the Medicare, Medicaid and other federal health care programs and, if criminal proceedings were initiated against the Company, members of its board of directors or management, possible criminal penalties, any of which could have a material adverse effect on the Company.

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

Shareholder and Derivative Claims

Peace Officers’ Annuity and Benefit Fund of Georgia Securities Class Action Civil Suit: On February 1, 2017, the Peace Officers’ Annuity and Benefit Fund of Georgia filed a putative federal securities class action complaint in the U.S. District Court for the District of Colorado against the Company and certain executives. The complaint covers the time period of August 2015 to October 2016 and alleges, generally, that the Company and its executives violated federal securities laws concerning the Company’s financial results and revenue derived from patients who received charitable premium assistance from an industry-funded non-profit organization. The complaint further alleges that the process by which patients obtained commercial insurance and received charitable premium assistance was improper and "created a false impression of DaVita’s business and operational status and future growth prospects." In November 2017, the ~~Court~~court appointed the lead plaintiff and an amended complaint was filed on January 12, 2018. On March 27, 2018, the Company and various individual defendants filed a motion to dismiss. On March 28, 2019, the ~~U.S. District Court for the District of Colorado~~court denied the motion to dismiss. The Company answered the complaint on May 28, 2019. On January 31, 2020, the plaintiffs filed a motion for class certification and the Company filed its opposition on June 29, 2020.

While the Company continues to dispute the allegations, in July 2020, it reached an agreement in principle to resolve this matter without admitting to any liability. Settlement of this matter ~~on the agreed terms is expected to be~~was covered primarily with insurance ~~proceeds, with the~~proceeds. The Company ~~contributing~~contributed an amount that ~~would~~did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows. ~~A motion for preliminary~~On April 13, 2021, the court granted final approval of the ~~settlement was granted by the Court on October 27, 2020. The settlement is subject to, among other things, final approval by the Court.~~settlement.

In re DaVita Inc. Stockholder Derivative Litigation: On August 15, 2017, the U.S. District Court for the District of Delaware consolidated 3 previously disclosed shareholder derivative lawsuits: the Blackburn Shareholder action filed on February 10, 2017, the Gabilondo Shareholder action filed on May 30, 2017, and the City of Warren Police and Fire Retirement System Shareholder action filed on June 9, 2017. The complaint covers the time period from 2015 to present and alleges, generally, breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, corporate waste, and misrepresentations and/or failures to disclose certain information in violation of the federal securities laws in connection with an alleged practice to direct patients with government-subsidized health insurance into private health insurance plans to maximize the Company’s profits. An amended complaint was filed in September 2017, and on December 18, 2017, the Company filed a motion to dismiss and a motion to stay proceedings in the alternative. On April 25, 2019, the court denied the Company's motion to dismiss. The Company answered the complaint on May 28, 2019.

While the defendants continue to dispute the allegations, in July 2020, an agreement in principle was reached to resolve this matter without admitting to any liability. The Company’s Board of Directors (Board) approved the settlement on October

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

20, 2020. The ~~settlement is now subject to, among other things, approval by the Court. A motion for preliminary approval of~~court approved the settlement ~~was filed~~ on ~~October 23, 2020.~~January 29, 2021. As part of the settlement, the Company agreed to certain corporate governance policies, but ~~will~~did not make any financial contribution towards the settlement.

Other Proceedings

In addition to the foregoing, from time to time the Company is subject to other lawsuits, demands, claims, governmental investigations and audits and legal proceedings that arise due to the nature of its business, including, without limitation, contractual disputes, such as with payors, suppliers and others, employee-related matters and professional and general liability claims. From time to time, the Company also initiates litigation or other legal proceedings as a plaintiff arising out of contracts or other matters.

* * *

Other than as may be described above, the Company cannot predict the ultimate outcomes of the various legal proceedings and regulatory matters to which the Company is or may be subject from time to time, including those described in this Note ~~9 to these condensed consolidated financial statements,~~7, or the timing of their resolution or the ultimate losses or impact of developments in those matters, which could have a material adverse effect on the Company’s revenues, earnings and cash flows. Further, any legal proceedings or regulatory matters involving the Company, whether meritorious or not, are time consuming, and often require management’s attention and result in significant legal expense, and may result in the diversion of significant operational resources, or otherwise harm the Company’s business, results of operations, financial condition, cash flows or reputation.

Other Commitments

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~


~~10.~~	~~Other commitments~~

The Company also has certain ~~other~~ potential commitments to provide ~~operating~~working capital funding, if necessary, to ~~a number of~~certain nonconsolidated outpatient dialysis businesses that the Company manages and in which the Company owns a noncontrolling equity interest or which are wholly-owned by third parties ~~or businesses in which the Company maintains a noncontrolling equity interest~~ of approximately ~~$8,945.~~$8,449.


~~11.~~	~~Long-term incentive compensation~~

Long-term incentive program (LTIP) compensation includes both stock-based awards (principally stock-settled stock appreciation rights, restricted stock units, and performance stock units) as well as long-term performance-based cash awards. Long-term incentive compensation expense, which is primarily general and administrative in nature, is attributed to the Company’s U.S. dialysis business, corporate administrative support, and ancillary services.

The Company’s stock-based compensation expense for stock-settled awards is measured at the estimated fair value of awards on the date of grant and recognized on a cumulative straight-line basis over the vesting terms of the awards unless the stock awards are based on non-market based performance metrics, in which case expense is adjusted for the expected ultimate shares to be issued as of the end of each reporting period. 8. Shareholders' equity

Stock-based compensation ~~expense for cash-settled awards is based on their estimated fair values as of the end of each reporting period. The expense for all LTIP awards is recognized net of expected forfeitures.~~

On June 11, 2020, the Company’s stockholders approved the DaVita Inc. 2020 Incentive Award Plan (the 2020 Plan). Prior to June 11, 2020 stock-based awards were granted under the DaVita Healthcare Partners Inc. 2011 Incentive Award Plan (the 2011 Plan). At the time of approval of the 2020 Plan there were 8,730 shares of common stock available for issuance under the 2020 Plan, which consisted of 5,000 newly authorized shares as well as 3,730 shares that were rolled over from the 2011 Plan. The 2020 Plan provides for the grant of stock appreciation rights, nonqualified stock options, incentive stock options, restricted stock units, restricted stock, performance stock awards, dividend equivalents, stock payments, deferred stock unit awards, deferred stock awards and performance cash awards. The 2020 Plan mandates a maximum award term of 10 years for stock appreciation rights and stock options and stipulates that awards of these types be granted with a base or exercise price per share of not less than the fair market value of the Company's common stock on the date of grant. Shares available under the 2020 Plan are also stated on a full value share basis rather than on an option-equivalent basis. The 2020 Plan therefore provides that shares available for issuance under the plan are reduced by only 1 share available for every 4 shares underlying stock appreciation rights and stock options, and are reduced by 1 share available for every 1 share underlying stock-based awards other than stock appreciation rights and stock options.

During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, the Company granted ~~991~~706 restricted and performance stock units with an aggregate grant-date fair value of ~~$75,945~~$77,279 and a weighted-average expected life of approximately ~~3.4~~3.5 years and ~~2,765~~132 stock-settled stock appreciation rights with an aggregate grant-date fair value of ~~$73,833~~$4,250 and a weighted-average expected life of approximately ~~4.8~~4.5 years.

For the nine months ended September 30, 2020 and 2019, the Company recognized $74,492 and $82,469, respectively, in total LTIP expense, of which $67,217 and $43,666, respectively, represented stock-based compensation expense for stock appreciation rights, restricted stock units, performance stock units and discounted employee stock plan purchases, which are primarily included in general and administrative expense. The estimated tax benefits recorded for stock-based compensation for the nine months ended September 30, 2020 and 2019 was $8,794 and $6,798, respectively.

As of ~~September 30, 2020,~~March 31, 2021, the Company had ~~$207,513~~$230,270 in total estimated but unrecognized stock-based compensation expense under the ~~Company’s~~Company's equity compensation and employee stock purchase plans. The Company expects to recognize this expense over a weighted average remaining period of 1.5 years. The Company 0 longer has any long-term performance-based cash awards outstanding in its principal U.S. dialysis business as the performance and accrual period for these awards ended December 31, 2019 with a final payout of $66,302 in 2020.

~~For the nine months ended September 30, 2020 and 2019, the Company recognized $5,049 and $2,791, respectively, in actual tax benefits upon the settlement of stock awards.~~Share repurchases

On November 4, 2019, the independent members of the Board approved an award of 2,500 premium-priced stock-settled stock appreciation rights (Premium-Priced Award) to the Company’s Chief Executive Officer (CEO), which award was subject to stockholder approval of a related amendment to the 2011 Plan. The Company's stockholders approved that amendment to the

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

2011 Plan on January 23, 2020, authorizing the grant to the Company's CEO. Since stockholder approval occurred in 2020, subsequent to the Board approval, this award had both a service inception and grant date of ~~January 23, 2020~~ ~~for accounting purposes.~~

~~The base price of the Premium-Priced Award is $67.80 per share, which is a 20% premium to the clearing price of the Company's 2019 modified "Dutch auction" tender offer. The award vests 50% on each of~~ ~~November 4, 2022~~ ~~and~~ ~~November 4, 2023, and expires on~~ ~~November 4, 2024. The award includes a requirement that the CEO hold any shares acquired upon exercise of this award, net of shares used to cover related taxes, until~~ ~~November 4, 2024~~ ~~(that is, for the full term of the award), subject to lapse of the holding period upon a change in control of the Company or due to the CEO's death or termination due to disability.~~


~~12.~~	~~Share repurchases~~

The following table summarizes the Company's common stock repurchases during the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Open market repurchases:
Shares 250
8,790
4,302
10,850
Amount paid $ 21,259
$ 514,082
$ 324,398
$ 626,271
Average paid per share $ 85.04
$ 58.49
$ 75.40
$ 57.72

Tender Offer⁽¹⁾:

Shares 7,982
21,802
7,982
21,802
Amount paid $ 704,180
$ 1,233,886
$ 704,180
$ 1,233,886
Average paid per share $ 88.22
$ 56.60
$ 88.22
$ 56.60

Total :
Shares 8,232
30,592
12,284
32,652
Amount paid $ 725,439
$ 1,747,968
$ 1,028,578
$ 1,860,157
Average paid per share $ 88.13
$ 57.14
$ 83.73
$ 56.97


	Three months ended March 31, 2021					Three months ended March 31, 2020
	Shares repurchased	Amount paid		Average paid per share		Shares repurchased	Amount paid		Average paid per share
Open market repurchases	2,949	$	322,333	$	109.28	4,052	$	303,139	$	74.81


~~(1)~~	The aggregate amount paid for shares repurchased pursuant to the Company's Tender Offers during the three and nine months ended September 30, 2020 and 2019 includes their clearing prices of $88.00 and $56.50 per share, respectively, plus related fees and expenses of $1,792 and $2,074, respectively.

In the third quarter of 2020, the Company used cash on hand to repurchase 7,982 shares of common stock under the modified “Dutch auction” tender offer (the Tender Offer) for a total cost of $704,180, including fees and expenses.

~~In addition, the~~ Company repurchased ~~1,828~~991 shares of its common stock for ~~$160,783~~$108,892 at an average cost of ~~$87.96~~$109.91 per share subsequent to ~~September 30, 2020~~March 31, 2021 through ~~October~~April 28, ~~2020.~~2021.

Effective ason December 10, 2020, the Company's Board of ~~the close of business on November 4, 2019, the Board~~Directors (Board) terminated all remaining prior share repurchase authorizations available to the Company and approved a new share repurchase authorization of $2,000,000. As of ~~October~~April 28, ~~2020,~~2021, the Company had a total of ~~$515,926~~$1,498,730 available under the current authorization for additional share repurchases. Although this share repurchase authorization does not have an expiration date, the Company remains subject to share repurchase limitations including under the terms of its current senior secured credit facilities.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)


~~13.~~	~~Accumulated other comprehensive loss~~

Three months ended September 30, 2020 Nine months ended September 30, 2020
Interest
rate cap
agreements Foreign
currency
translation
adjustments Accumulated
other
comprehensive
loss Interest
rate cap
agreements Foreign
currency
translation
adjustments Accumulated
other
comprehensive
loss
Beginning balance $ (13,029 ) $ (122,078 ) $ (135,107 ) $ (1,433 ) $ (46,065 ) $ (47,498 )
Unrealized (losses) gains (2,169 ) 13,171
11,002
(21,946 ) (62,842 ) (84,788 )
Related income tax 541
0
541
5,476
0
5,476
(1,628 ) 13,171
11,543
(16,470 ) (62,842 ) (79,312 )
Reclassification into net income 1,378
0
1,378
5,704
0
5,704
Related income tax (344 ) 0
(344 ) (1,424 ) 0
(1,424 )
1,034
0
1,034
4,280
0
4,280
Ending balance $ (13,623 ) $ (108,907 ) $ (122,530 ) $ (13,623 ) $ (108,907 ) $ (122,530 )

9. Accumulated other comprehensive loss

Three months ended September 30, 2019 Nine months ended September 30, 2019
Interest
rate cap
agreements Foreign
currency
translation
adjustments Accumulated
other
comprehensive
loss Interest
rate cap
agreements Foreign
currency
translation
adjustments Accumulated
other
comprehensive
loss
Beginning balance $ (6,360 ) $ (27,251 ) $ (33,611 ) $ (8,961 ) $ (25,963 ) $ (34,924 )
Unrealized losses (1,420 ) (44,502 ) (45,922 ) (2,244 ) (45,790 ) (48,034 )
Related income tax 360
0
360
572
0
572
(1,060 ) (44,502 ) (45,562 ) (1,672 ) (45,790 ) (47,462 )
Reclassification into net income 2,101
0
2,101
6,428
0
6,428
Related income tax (532 ) 0
(532 ) (1,646 ) 0
(1,646 )
1,569
0
1,569
4,782
0
4,782
Ending balance $ (5,851 ) $ (71,753 ) $ (77,604 ) $ (5,851 ) $ (71,753 ) $ (77,604 )


	Three months ended March 31, 2021						Three months ended March 31, 2020
	Interest rate cap agreements		Foreign currency translation adjustments		Accumulated other comprehensive loss		Interest rate cap agreements		Foreign currency translation adjustments		Accumulated other comprehensive loss
Beginning balance	$	(12,466)	$	(53,688)	$	(66,154)	$	(1,433)	$	(46,065)	$	(47,498)
Unrealized gains (losses)	6,505		(62,544)		(56,039)		(17,346)		(81,632)		(98,978)
Related income tax	(1,623)		0		(1,623)		4,328		0		4,328
	4,882		(62,544)		(57,662)		(13,018)		(81,632)		(94,650)
Reclassification into net income	1,377		0		1,377		2,163		0		2,163
Related income tax	(344)		0		(344)		(540)		0		(540)
	1,033		0		1,033		1,623		0		1,623
Ending balance	$	(6,551)	$	(116,232)	$	(122,783)	$	(12,828)	$	(127,697)	$	(140,525)

The ~~reclassification of~~interest rate cap agreement net ~~cap~~ realized losses reclassified into net income are recorded as debt expense in the corresponding consolidated statements of income. See Note ~~8 to these condensed consolidated financial statements~~6 for further details.


~~14.~~	~~Acquisitions and divestitures~~

10. Acquisitions and divestitures

Routine acquisitions

During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, the Company acquired dialysis businesses consisting of ~~8 dialysis centers located in the U.S. and 36~~2 dialysis centers located outside the U.S. for a total of ~~$112,597~~$3,668 in net cash, ~~$6,917 in~~contingent earn-out obligations of $538 and deferred purchase price ~~obligations,~~ and ~~$21,021 in earn-out obligations and~~liabilities assumed ~~liabilities.~~of $1,094. The assets and liabilities for these acquisitions were recorded at their estimated fair values at the dates of the acquisitions and are included in the Company’s condensed consolidated financial statements, as are their operating results, from the designated effective dates of the acquisitions.

The initial purchase price allocations for these transactions have been recorded at estimated fair values based on ~~the best~~ information available to management and will be finalized when certain information arranged to be obtained has been received. In particular, certain income tax amounts are pending final evaluation and quantification of any pre-acquisition tax ~~contingencies and filing of final tax returns.~~contingencies. In addition, valuation of intangibles, leases and certain other working capital items ~~fixed assets and intangibles~~relating to several of these acquisitions are pending final ~~audits and related valuation reports.~~quantification.

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

~~The following table summarizes the assets acquired and liabilities assumed in these transactions at their estimated acquisition date fair values:~~

Current assets $ 17,606
Property and equipment 15,714
Intangible and other long-term assets 14,969
Goodwill 110,248
Deferred income taxes 1,513
Current liabilities (17,786 )
Noncontrolling interests (1,729 )

$ 140,535

Amortizable intangible assets acquired during the nine months ended September 30, 2020 primarily represent non-compete agreements which had weighted-average estimated useful lives of approximately five years. The total estimated amount of goodwillGoodwill deductible for tax purposes associated with ~~these~~ acquisitions completed during the three months ended March 31, 2021 was ~~approximately $91,157.~~

~~Sale of RMS Lifeline~~

~~The Company also divested its vascular access business, RMS Lifeline, Inc., effective May 1, 2020 and recognized a loss on sale of approximately $16,252.~~$5,456.

Contingent earn-out obligations

The Company has several contingent earn-out obligations associated with acquisitions that could result in the Company paying the former owners of acquired companies a total of up to ~~$37,467~~approximately $40,173 if certain performance targets or quality margins are met ~~primarily~~ over the next one year to five years.

Contingent earn-out obligations are remeasured to fair value at each reporting date until the contingencies are resolved with changes in the liability due to the remeasurement recognized in earnings. As of ~~September 30, 2020,~~March 31, 2021, the Company estimated the fair value of these contingent earn-out obligations ~~is $26,314,~~to be $28,225, of which ~~$7,400~~$11,613 is included in other current liabilities and the remaining ~~$18,914~~$16,612 is included in other long-term liabilities in the Company’s consolidated balance sheet.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

The following is a reconciliation of changes in contingent earn-out obligations for the three ~~and nine month periods~~months ended ~~September 30, 2020:~~March 31, 2021:

Three months ended September 30, 2020 Nine months ended September 30, 2020
Beginning balance $ 24,057
$ 24,586
Acquisitions 5,815
11,676
Foreign currency translation (975 ) (6,358 )
Fair value remeasurements (1,990 ) (2,630 )
Payments or other settlements (593 ) (960 )
Ending balance $ 26,314
$ 26,314


	Three months ended March 31, 2021
Beginning balance	$	30,248
Acquisitions	538
Foreign currency translation	(2,080)
Fair value remeasurements	(214)
Payments	(267)
Ending balance	$	28,225

~~15.~~Discontinued operations ~~previously held for sale~~

~~DaVita Medical Group~~

On June 19, 2019,, the Company completed the sale of its DaVita Medical Group (DMG) business to Collaborative Care Holdings, LLC (Optum), a subsidiary of UnitedHealth Group Inc.~~, for an aggregate~~ At close of the DMG sale, the Company's ultimate net sale proceeds remained subject to resolution of certain post-closing purchase price ~~of $4,340,000, prior to certain closing and post-closing~~ adjustments ~~specified~~described in the ~~related~~ equity purchase agreement, ~~dated as of~~ ~~December 5, 2017, as amended as of September 20, 2018 and as of December 11, 2018 (as amended, the equity purchase agreement).~~

The Company recorded a preliminary estimated pre-tax net loss of approximately $23,022 on the sale of its DMG business in 2019. This preliminary net loss was based on initial estimates of the Company's expected aggregate proceeds from the sale, net of transaction costs and obligations, as well as the estimated values of DMG net assets sold as of the closing date. These estimated net proceeds included $4,465,476 in cash received from Optum at closing, or $3,824,509 net of cash and

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

~~restricted cash included~~which adjustments were finalized in the ~~DMG net assets sold. During~~fourth quarter of 2020. In the ~~nine months ended September 30,~~first quarter of 2020, the Company recognized $9,980 in additional tax benefits under the Coronavirus Aid, Relief, and Economic Security Act related to its period of DMG ownership, which ~~have been~~were recognized as an adjustment to the Company's loss on sale of the DMG business.

The ultimate net proceeds from the DMG sale, as well as the value of its previously held for sale net assets sold, remain subject to estimate revisions and post-closing adjustments pursuant to the equity purchase agreement, which could be material. The Company continues to work with Optum concerning what, if any, net working capital adjustment or other potential adjustments to the purchase price are appropriate, via the process set forth in the equity purchase agreement. Under the equity purchase agreement, the Company also has certain indemnification obligations that could require payments to the buyer relating to the Company's previous ownership and operation of the DMG business. Potential payments under these provisions, if any, remain subject to significant uncertainties and could have a material adverse effect on the net proceeds ultimately retained by the Company or the total amount of its loss on the sale of this business.

~~The following table presents the financial results of discontinued operations related to DMG:~~11. Variable interest entities (VIEs)

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Revenues $ 0
$ 0
$ 0
$ 2,713,059
Expenses 0
1,996
0
2,541,783
Income (loss) from discontinued operations before taxes 0
(1,996 ) 0
171,276
Gain (loss) on sale of discontinued operations before taxes 0
0
9,980
(23,022 )
Income tax expense 0
4,847
0
45,400
Net (loss) income from discontinued operations, net of tax $ 0
$ (6,843 ) $ 9,980
$ 102,854

~~The following table presents cash flows of discontinued operations related to DMG:~~

Nine months ended September 30,
2020 2019
Net cash provided by operating activities from discontinued operations $ 0
$ 97,005
Net cash used in investing activities from discontinued operations $ 0
$ (43,442 )


~~16.~~	~~Variable interest entities (VIEs)~~

At ~~September 30, 2020,~~March 31, 2021, these condensed consolidated financial statements include total assets of VIEs of ~~$299,290~~$300,849 and total liabilities and noncontrolling interests of VIEs to third parties of ~~$220,060.~~$207,527. There have been no material changes in the nature of the Company's arrangements with VIEs or its judgments concerning them from those described in Note 23 to the Company's consolidated financial statements included in the 2020 10-K.


~~17.~~	~~Fair values of financial instruments~~

12. Fair values of financial instruments

The Company measures the fair value of certain assets, liabilities and noncontrolling interests subject to put provisions (redeemable equity interests classified as temporary equity) based upon certain valuation techniques that include observable or unobservable inputs and assumptions that market participants would use in pricing these assets, liabilities, temporary equity and commitments. The Company has also ~~classifies~~classified assets, liabilities and temporary equities that are measured at fair value on a recurring basis ~~based on~~into the appropriate fair value hierarchy levels as defined by the Financial Accounting Standards Board (FASB).

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

The following table summarizes the Company’s ~~fair value classifications for~~ assets, liabilities and temporary equities ~~that are~~ measured at fair value on a recurring basis as of ~~September 30, 2020:~~March 31, 2021:

Total Quoted prices in
active markets
for identical assets
(Level 1) Significant other
observable inputs
(Level 2) Significant
unobservable
inputs
(Level 3)
Assets

Investments in equity securities $ 41,015
$ 41,015
$ 0
$ 0
Interest rate cap agreements $ 2,506
$ 0
$ 2,506
$ 0
Liabilities

Contingent earn-out obligations $ 26,314
$ 0
$ 0
$ 26,314
Temporary equity

Noncontrolling interests subject to put provisions $ 1,303,934
$ 0
$ 0
$ 1,303,934


	Total		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Investments in equity securities	$	34,730	$	34,730	$	0	$	0
Interest rate cap agreements	$	9,176	$	0	$	9,176	$	0
Liabilities
Contingent earn-out obligations	$	28,225	$	0	$	0	$	28,225
Temporary equity
Noncontrolling interests subject to put provisions	$	1,349,160	$	0	$	0	$	1,349,160

For reconciliations of changes in contingent earn-out obligations and noncontrolling interests subject to put provisions during the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, see Note 1410 and the consolidated statement of equity, respectively.

Investments in equity securities represent investments in various open-ended registered investment companies (mutual funds) and common stock ~~and~~which are held within a trust to fund existing obligations associated with several of the Company's non-qualified deferred compensation plans. These investments are recorded at fair value estimated based on reported market prices or redemption prices, as applicable. See Note 4 ~~to these condensed consolidated financial statements~~ for further discussion.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

Interest rate cap agreements are recorded at fair value estimated from valuation models utilizing the income approach and commonly accepted valuation techniques that use inputs from closing prices for similar assets and liabilities in active markets as well as other relevant observable market inputs at quoted intervals such as current interest rates, forward yield curves, implied volatility and credit default swap pricing. The Company does not believe the ultimate amount that could be realized upon settlement of these interest rate cap agreements would be materially different from the fair value estimates currently reported. See Note ~~8 to these condensed consolidated financial statements~~6 for further discussion.

The estimated fair value measurements of contingent earn-out obligations are primarily based on unobservable inputs, including projected earnings before interest, taxes, depreciation, and amortization (EBITDA) and revenue. The estimated fair ~~value~~values of these contingent earn-out obligations isare remeasured as of each reporting date and could fluctuate based upon any significant changes in key assumptions, such as changes in the Company's credit risk adjusted rate that is used to discount obligations to present value. See Note ~~14 to these condensed consolidated financial statements~~10 for further discussion.

The estimated fair value of noncontrolling interests subject to put provisions is based principally on the higher of either estimated liquidation value of net assets or a multiple of earnings for each subject dialysis partnership, based on historical earnings, revenue mix, and other performance indicators that can affect future results. The multiples used for these valuations are derived from observed ownership transactions for dialysis businesses between unrelated parties in the U.S. in recent years, and the specific valuation multiple applied to each dialysis partnership is principally determined by its recent and expected revenue mix and contribution margin. As of ~~September 30, 2020,~~March 31, 2021, an increase or decrease in the weighted average multiple used in these valuations of one times EBITDA would change the estimated fair value of these noncontrolling interests by approximately ~~$150,000.~~$170,000. See Note 17 and Note 24 to the Company's consolidated financial statements included in the 2020 10-K for further discussion of the Company’s methodology for estimating the fair value of noncontrolling interests subject to put obligations.

The Company's fair value estimates for its senior secured credit facilities and senior notes are based upon bid and ask quotes for these instruments, typically a level 2 input. See Note ~~8 to these condensed consolidated financial statements~~6 for further discussion of the Company's debt.

Other financial instruments consist primarily of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable, other accrued liabilities, lease liabilities and debt. The balances of financial instruments other than debt and lease liabilities are presented in these condensed consolidated financial statements at ~~September 30, 2020~~March 31, 2021 at their approximate fair values due to the short-term nature of their settlements.

13. Segment reporting

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~


~~18.~~	~~Segment reporting~~

The Company’s operations are comprised of its U.S. dialysis and related lab services business (its U.S. dialysis business), its various ancillary services ~~and strategic initiatives~~ including its international operations (collectively, its ancillary services), and its corporate administrative support.

On ~~June 19, 2019~~, the Company completed the sale of its DMG division to Optum, a subsidiary of UnitedHealth Group Inc. As a result of this transaction, DMG's results of operations have been reported as discontinued operations for all periods presented.

The Company’s separate operating segments include its U.S. dialysis and related lab services business, each of its ancillary services, ~~and strategic initiatives,~~ its kidney care operations in each foreign sovereign jurisdiction, its other health operations in each foreign sovereign jurisdiction, and its equity method investment in the ~~APAC JV.~~Asia Pacific joint venture (APAC JV). The U.S. dialysis and related lab services business qualifies as a separately reportable segment, and all other ancillary services ~~and strategic initiatives~~ operating segments, including the international operating segments, have been combined and disclosed in the other segments category. See Note 25 to the Company's consolidated financial statements included in the 2020 10-K for further description of how the Company determines and measures results for its operating segments.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

The following is a summary of segment net revenues, segment operating income (loss), and a reconciliation of segment operating income (loss) to consolidated income before income taxes:

Three months ended
September 30, Nine months ended
September 30,
2020 2019 2020 2019
Segment revenues:
U.S. dialysis
Dialysis patient service revenues:
External sources $ 2,639,761
$ 2,648,969
$ 7,850,828
$ 7,762,746
Intersegment revenues 37,049
32,150
104,111
92,611
U.S. dialysis patient service revenues 2,676,810
2,681,119
7,954,939
7,855,357
Other revenues⁽¹⁾:

External sources 17,141
10,096
29,970
19,989
Intersegment revenues 268
212
876
726
Total U.S. dialysis revenues 2,694,219
2,691,427
7,985,785
7,876,072
Other—Ancillary services
Dialysis patient service revenues 141,889
128,223
402,300
367,951
Other external sources 125,275
116,790
362,184
339,209
Intersegment revenues 4,079
3,483
12,402
10,222
Total ancillary services revenues 271,243
248,496
776,886
717,382
Total net segment revenues 2,965,462
2,939,923
8,762,671
8,593,454
Elimination of intersegment revenues (41,396 ) (35,845 ) (117,389 ) (103,559 )
Consolidated revenues $ 2,924,066
$ 2,904,078
$ 8,645,282
$ 8,489,895
Segment operating income (loss):

U.S. dialysis $ 470,596
$ 500,742
$ 1,484,833
$ 1,416,680
Other—Ancillary services (7,086 ) (97,725 ) (49,354 ) (170,405 )
Total segment operating income 463,510
403,017
1,435,479
1,246,275
Reconciliation of segment operating income to consolidated
income from continuing operations before income taxes:
Corporate administrative support (25,841 ) (24,681 ) (122,514 ) (65,546 )
Consolidated operating income 437,669
378,336
1,312,965
1,180,729
Debt expense (73,658 ) (88,589 ) (243,642 ) (351,774 )
Debt prepayment, refinancing and redemption charges (86,074 ) (21,242 ) (89,022 ) (33,402 )
Other income, net 5,395
5,280
10,590
17,863
Consolidated income from continuing operations
before income taxes $ 283,332
$ 273,785
$ 990,891
$ 813,416


	Three months ended March 31,
	2021		2020
Segment revenues:
U.S. dialysis
Dialysis patient service revenues:
External sources	$	2,556,259	$	2,579,240
Intersegment revenues	26,944		31,941


U.S. dialysis patient service revenues	2,583,203		2,611,181
Other revenues(1):
External sources	6,616		5,141
Intersegment revenues	59		301
Total U.S. dialysis revenues	2,589,878		2,616,623
Other—Ancillary services
Dialysis patient service revenues	158,328		134,041
Other external sources	98,798		122,815
Intersegment revenues	4,293		4,152
Total ancillary services revenues	261,419		261,008
Total net segment revenues	2,851,297		2,877,631
Elimination of intersegment revenues	(31,296)		(36,394)
Consolidated revenues	$	2,820,001	$	2,841,237
Segment operating income (loss):
U.S. dialysis	$	479,906	$	491,607
Other—Ancillary services	(11,860)		(2,646)
Total segment operating income	468,046		488,961
Reconciliation of segment operating income to consolidated income from continuing operations before income taxes:
Corporate administrative support	(25,444)		(23,585)
Consolidated operating income	442,602		465,376
Debt expense	(67,014)		(88,603)
Debt refinancing charges	0		(2,948)
Other income (loss), net	1,168		(4,350)
Consolidated income from continuing operations before income taxes	$	376,756	$	369,475


~~(1)~~	Includes management fee revenue from providing management and administrative services to dialysis ventures in which the Company owns a noncontrolling equity investment or which are wholly-owned by third parties.

(1)Includes management fee revenue from providing management and administrative services to dialysis ventures in which the Company owns a noncontrolling equity investment or which are wholly-owned by third parties.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

(dollars and shares in thousands, except per share data)

Depreciation and amortization expense by reportable segment was as follows:


	Three months ended March 31,
	2021		2020
U.S. dialysis	$	155,946	$	146,300
Other—Ancillary services	9,755		8,379
	$	165,701	$	154,679

A summary of assets by reportable segment was as follows:

September 30, 2020 December 31, 2019
U.S. dialysis (including equity investments of $125,525
and $124,188, respectively)
$ 15,549,310
$ 15,778,880
Other—Ancillary services (including equity investments
of $126,958 and $117,795, respectively)
1,497,362
1,532,514
Consolidated assets $ 17,046,672
$ 17,311,394

~~Depreciation and amortization expense by reportable segment was as follows:~~

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
U.S. dialysis $ 148,221
$ 147,607
$ 442,833
$ 433,008
Other—Ancillary services 8,673
8,308
26,116
23,677
$ 156,894
$ 155,915
$ 468,949
$ 456,685


	March 31, 2021		December 31, 2020
U.S. dialysis	$	16,036,940	$	15,344,647
Other—Ancillary services	1,610,328		1,643,869
Consolidated assets	$	17,647,268	$	16,988,516

Expenditures for property and equipment by reportable segment were as follows:


	Nine months ended September 30,					Three months ended March 31,
	2020		2019			2021		2020
U.S. dialysis	$	430,646	$	477,533	U.S. dialysis	$	133,804	$	148,763
Other—Ancillary services	19,250		31,184		Other—Ancillary services	11,109		6,179
DMG—Discontinued operations	0		38,466
	$	449,896	$	547,183
						$	144,913	$	154,942


~~19.~~	~~Changes in DaVita Inc.’s ownership interests in consolidated subsidiaries~~

~~The effects of changes in DaVita Inc.’s ownership interests in consolidated subsidiaries on the Company’s consolidated equity were as follows:~~

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Net income attributable to DaVita Inc. $ 158,674
$ 143,270
$ 599,869
$ 566,110
Changes in paid-in capital for:
Purchases of noncontrolling interests 0
(202 ) 4,197
10,732
Net transfers to noncontrolling interests 0
(202 ) 4,197
10,732
Net income attributable to DaVita Inc., net of transfers to noncontrolling interests $ 158,674
$ 143,068
$ 604,066
$ 576,842
14. New accounting standards


~~20.~~	~~New accounting standards~~

New standards recently ~~adopted~~

~~In June 2016, the FASB issued ASU No. 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.~~ The amendments in this ASU amend the impairment model to utilize an expected loss methodology in place of the incurred loss methodology for financial instruments and off-balance sheet credit exposures. The amendment requires entities to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. The amendments in this ASU became effective for the Company beginning on January 1, 2020 and were applied using a modified retrospective basis. The adoption of ASU No. 2016-13 did not have a material impact on the Company's consolidated financial statements.

~~In August 2018, the FASB issued ASU No. 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework -Changes to the Disclosure Requirements for Fair Value Measurement. The applicable amendments in this ASU remove~~

~~DAVITA INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)~~

~~(unaudited)~~

~~(dollars and shares in thousands, except per share data)~~

requirements for disclosures concerning transfers between fair value measurement levels 1, 2 and 3 and disclosures concerning valuation processes for level 3 fair value measurements. The applicable amendments in this ASU also add a requirement to separately disclose the changes in unrealized gains and losses included in other comprehensive income for the reporting period for level 3 items measured at fair value on a recurring basis, and require disclosure of the range and weighted average of significant unobservable inputs used to develop level 3 fair value measurements. The amendments in this ASU became effective for the Company beginning on January 1, 2020 and were applied on a prospective basis. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements when adopted January 1, 2020.

~~In August 2018, the FASB issued ASU No. 2018-15,~~ ~~Intangibles-Goodwill and Other-Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~. ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted this ASU as of January 1, 2020, using the prospective transition approach, which allows the Company to change the accounting method without restating prior periods or booking cumulative adjustments. The adoption of ASU No. 2018-15 did not have a material impact on the Company's consolidated financial statements.

~~New standards not yet~~ adopted

In December 2019, the FASB issued ~~ASU~~Accounting Standards Update (ASU) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU No. 2019-12 attempts to simplify aspects of accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. ASU No. 2019-12 is effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year. Early adoption is permitted for all entities. The ~~Company is currently assessing~~adoption of ASU No. 2019-12 did not have a material impact on the ~~effect this guidance may have on its~~Company's consolidated financial statements.

New standards not yet adopted

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU No. 2020-04 provides optional expedients and exceptions for applying U.S. generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued. The amendments in this ASU were effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently assessing the effect this guidance may have on its consolidated financial statements.


~~21.~~	~~Condensed consolidating financial statements~~

The Company previously disclosed certain condensed consolidating financial statement information for DaVita Inc. and the guarantor and non-guarantor subsidiaries for the Company's previously outstanding publicly traded notes due in 2024 and 2025 in its interim and annual consolidated financial statements in accordance with Rule 3-10 of SEC Regulation S-X (Rule 3-10).

In the third quarter of 2020 the Company redeemed its publicly traded notes due in 2024 and 2025, and the Company's current notes outstanding due in 2030 and 2031 do not have any registration or similar rights and are not expected to be registered for exchange on public markets. These private notes are not subject to the disclosure requirements of Rule 3-10. The Company has therefore discontinued its disclosure of certain condensed consolidating financial statement information related to the issuer, guarantors and non-guarantors under these notes.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-looking statements

This Quarterly Report on Form 10-Q, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains statements that are forward-looking statements within the meaning of the federal securities ~~laws. All statements in this report, other than statements of historical fact, are forward-looking statements~~laws and as such are intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. These forward-looking statements could include, among other things, DaVita's response to and the expected future impacts of the novel coronavirus (COVID-19), including statements about our balance sheet and liquidity, our expenses ~~revenues, billings~~ and ~~collections and future results,~~expense offsets, revenues, potential need, ability or willingness to use any funds under ~~the CARES Act or other~~ government relief programs, availability or cost of supplies, treatment volumes, mix expectation, such as the percentage or number of patients under commercial insurance, the availability, acceptance, impact and administration of COVID-19 vaccines and other treatments or therapies, and overall impact on our patients and teammates, as well as other statements regarding our future operations, financial condition and prospects, expenses, strategic initiatives, government and commercial payment rates, and our ongoing stock repurchase program. All statements in this report, other than statements of historical fact, are forward-looking statements. Without limiting the foregoing, statements including the words "expect," "intend," "will," “could,” "plan," "anticipate," ~~"believe,"~~"believe" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on DaVita's current expectations and are based solely on information available as of the date of this report. DaVita undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of changed circumstances, new information, future events or otherwise, except as may be required by law. Actual future events and results could differ materially from any forward-looking statements due to numerous factors that involve substantial known and unknown risks and uncertainties. These risks and uncertainties include, among other things:

•the continuing impact of the dynamic and evolving COVID-19 pandemic, including, without limitation, on our patients, teammates, physician partners, suppliers, business, operations, reputation, financial condition and results of ~~operations,~~operations; the government’s response to the COVID-19 pandemic; the availability, acceptance, impact and efficacy of COVID-19 vaccines and other treatments or therapies; further spread or resurgence of the virus, including as a result of the emergence of new strains of the virus; the continuing impact of the pandemic on our revenue and non-acquired growth due to lower treatment volumes; the consequences of an extended economic downturn resulting from the impacts of COVID-19, such as a potential negative impact on our commercial mix, which may persist even after the pandemic subsides; and continuing COVID-19-related costs, such as costs to procure equipment and clinical supplies and higher salary and wage expense, any of which may also have the effect of heightening many of the other risks and uncertainties discussed below;

~~our need, ability and willingness to utilize any funds received under the CARES Act or other government programs, and the consequences of our decisions with respect thereto;~~

•the concentration of profits generated by higher-paying commercial payor plans for which there is continued downward pressure on average realized payment rates, and a reduction in the number or percentage of our patients under such plans, including, without limitation, as a result of restrictions or prohibitions on the use and/or availability of charitable premium assistance, which may result in the loss of revenues or patients, or our making incorrect assumptions about how our patients will respond to any change in financial assistance from charitable organizations;

•noncompliance by us or our business associates with any privacy or security laws or any security breach by us or a third party involving the misappropriation, loss or other unauthorized use or disclosure of confidential information;

•the extent to which the ongoing implementation of healthcare reform, or changes in or new legislation, regulations or guidance, enforcement thereof or related litigation result in a reduction in coverage or reimbursement rates for our services, a reduction in the number of patients enrolled in higher-paying commercial plans or that are enrolled in or select Medicare Advantage plans or other material impacts to our business; or our making incorrect assumptions about how our patients will respond to any such developments;

•a reduction in government payment rates under the Medicare End Stage Renal Disease program or other government-based programs and the impact of the Medicare Advantage benchmark structure;

•risks arising from potential changes in laws, regulations or requirements applicable to us, such as potential and proposed federal and/or state legislation, regulation, ballot, executive action or other initiatives, including ~~such initiatives~~those related to healthcare and/or labor matters, such as ~~AB290~~AB 290 and ~~Proposition 23~~AB 650 in ~~California;~~California and HB 2322 in Oregon;

•the impact of ~~the upcoming election cycle,~~ the political environment and related developments on the current healthcare marketplace and on our business, including with respect to the future of the Affordable Care Act, the exchanges and many other core aspects of the current healthcare marketplace, as well as the composition of the U.S. Supreme ~~Court;~~Court and the new presidential administration and congressional majority;

•our ability to successfully implement our ~~strategy~~strategies with respect to home-based dialysis, value-based care and/or integrated kidney care, including maintaining our existing business and further developing our capabilities in a complex and highly regulated environment;

•changes in pharmaceutical practice patterns, reimbursement and payment policies and processes, or pharmaceutical pricing, including with respect to ~~calcimimetics;~~hypoxia inducible factors;

•legal and compliance risks, such as our continued compliance with complex government regulations;

•continued increased competition from dialysis providers and others, and other potential marketplace changes;

•our ability to maintain contracts with physician medical directors, changing affiliation models for physicians, and the emergence of new models of care introduced by the government or private sector that may erode our patient base and reimbursement rates, such as accountable care organizations, independent practice associations and integrated delivery systems;

•our ability to complete acquisitions, mergers or dispositions that we might announce or be considering, on terms favorable to us or at all, or to integrate and successfully operate any business we may acquire or have acquired, or to successfully expand our operations and services in markets outside the United States, or to businesses outside of dialysis;

uncertainties related to potential payments and/or adjustments under certain provisions of the equity purchase agreement for the sale of our DaVita Medical Group (DMG) business, such as post-closing adjustments and indemnification obligations;

•the variability of our cash flows, including without limitation any extended billing or collections cycles; the risk that we may not be able to generate or access sufficient cash in the future to service our indebtedness or to fund our other liquidity needs; and the risk that we may not be able to refinance our indebtedness as it becomes due, on terms favorable to us or at all;

•factors that may impact our ability to repurchase stock under our stock repurchase program and the timing of any such stock repurchases, as well as our use of a considerable amount of available funds to repurchase stock;

•risks arising from the use of accounting estimates, judgments and interpretations in our financial statements;

•impairment of our goodwill, investments or other assets; and

•uncertainties associated with the other risk factors set forth in ~~DaVita Inc.'s~~our Annual Report on Form 10-K for the year ended December 31, ~~2019, Quarterly Reports on Form 10-Q for the quarters ended March 31,~~ 2020 ~~and June 30, 2020 and this Quarterly Report on Form 10-Q,~~(2020 10-K) and the risks and uncertainties discussed in any subsequent reports that ~~DaVita has~~we have filed or furnished with the Securities and Exchange Commission from time to time.

The following should be read in conjunction with our condensed consolidated financial statements.

Company Overview

Our principal business is to provide dialysis and related lab services to patients in the United States, which we refer to as our U.S. dialysis business. We also operate various ancillary services ~~and strategic initiatives~~ including our international operations, which we collectively refer to as our ancillary services, as well as our corporate administrative support. Our U.S. dialysis business is a leading provider of kidney dialysis services in the U.S. for patients suffering from chronic kidney failure, also known as end stage renal disease (ESRD) or end stage kidney disease (ESKD).

On June 19, 2019, we completed the sale of our DaVita Medical Group (DMG) business to Optum, a subsidiary of UnitedHealth Group Inc. As a result of this transaction, DMG's results of operations have been reported as discontinued operations for all periods presented and DMG is not included below in this Management's Discussion and Analysis.

COVID-19 and its impact on our business

~~As a caregiving organization, we are exposed to and~~We expect that COVID-19 will continue to ~~be impacted by the effects of the novel coronavirus (COVID-19) pandemic. DaVita’s teammates include, among others, dialysis nurses, patient care technicians, social workers, dieticians~~impact our business and ~~other caregivers who are on the front lines of the ongoing COVID-19 pandemic providing essential, life-sustaining care for our patients. During this time of great challenge, our top priorities~~financial performance during 2021 and we continue to ~~be the health, safety and well-being of~~closely monitor these various impacts on our patients, teammates, ~~and~~ physician partners, suppliers, vendors, business partners and ~~helping~~the economic and political environment. The magnitude of these impacts remains difficult to ~~ensure that~~predict and subject to significant uncertainty due to a number of factors, including, among others, the ultimate severity and duration of the pandemic; further spread or resurgence of the virus, including as a result of the emergence of new strains of the virus; its impact on the chronic kidney disease (CKD) patient population and our ~~patients have~~patient population; the ~~ability~~availability, acceptance, impact and efficacy of COVID-19 vaccines and other treatments or therapies; the pandemics' continuing impact on the U.S. and global economies and unemployment; the responses of our competitors to ~~maintain continuity of care throughout this crisis, whether~~the pandemic and related changes in the ~~acute, outpatient or home setting. We have implemented additional protocols in coordination with~~marketplace; and the ~~Centers for Disease Control~~timing, scope and ~~Prevention (CDC) on infection control~~effectiveness of federal, state and ~~clinical best practices in response~~local government responses. The continued impacts and disruptions to COVID-19, and continue to monitor the efficacy of these protocols as the pandemic continues. In addition, we have been collaborating with the U.S. Department of Health and Human Services, the Centers for Medicare and Medicaid Services (CMS), the CDC, the American Society of Nephrology, and dialysis providers nationwide to help ensure that the dialysis community is able to support patients nationwide.

~~We have also maintained~~our business process continuity during the pandemic by enabling most back office teammates to work remotely, and as of the date of this report, we have not experienced any material deterioration of our liquidity position as a result of the COVID-19 ~~crisis.~~

~~We are closely monitoring the long-term impact of the~~ pandemic ~~and the resulting economic downturn on all aspects of our business, including the~~could have a material adverse impact on our patients, teammates, physician partners, suppliers, ~~vendors~~business, operations, reputation, financial condition, results of operations, cash flows and/or liquidity.

Operational and ~~business partners. We have dedicated and continue to dedicate substantial resources in response to~~Financial Impacts

In the first quarter of 2021, treatment volumes reflected continued pressure primarily driven by the ongoing impact of COVID-19 ~~and have~~on mortality rates for dialysis patients that has had and expect to continue to have, extended, significant additional costs as a result of COVID-19. For example, we have had, and expect to continue to have, increased costs and risk associated with a high demand for our skilled clinical personnel. Additionally, the steps we have taken designed to help safely maintain continuity of care for our patients and help protect our caregivers, such as our policies to implement dedicated care shifts for patients with confirmed or suspected COVID-19 and other enhanced clinical practices, have increased, and are expected to continue to increase, our expenses and use of personal protective equipment. Our response to COVID-19 has resulted in higher salary and wage expense, and we have provided, and may provide in the future, substantial financial support to our teammates to cover some of the costs related to COVID-19. Furthermore, the effort needed to procure certain of our equipment and clinical supplies, including personal protective equipment, and associated costs have increased, and we currently expect that these increased costs will continue while the pandemic persists. These efforts are part of a wider Prepare, Prevent, Respond and Recover protocol that we have implemented in connection with the pandemic, which also includes operational initiatives such as the redistribution of teammates, machines and supplies across the country as needed and increased investment in and utilization of telehealth capabilities. Our response protocol generally has allowed us to maintain continuity of care for our patients, but if the pandemic requires us to maintain certain restrictive operational initiatives for an extended period of time, it may adversely impact our strategic initiatives, including our home dialysis business strategy and efforts to build on our abilities to offer home dialysis options. Certain temporary changes made in response to the COVID-19 pandemic could become permanent, which could have an adverse impact on our business. In addition, any staffing, equipment or clinical supply shortages, disruptions or delays or associated price increases could impact our ability to provide dialysis services or the cost of providing those services. Our COVID-19 response has temporarily reduced certain other expenses, such as those related to teammate travel and health benefits.

~~We have experienced and expect to continue to experience~~ a negative impact on ~~revenue and non-acquired growth from COVID-19 due to lower treatment volumes, including from the impact of changes in rates of mortality, as well as a decrease in new~~our patient ~~admissions due to the impact of COVID-19 on the chronic kidney disease (CKD) population.~~census. Because ~~our~~ ESRD patients may be older and generally have comorbidities, several of which are risk factors for COVID-19, we believe the mortality rate of infected patients is, and will continue to be, higher in the dialysis population than in the general ~~population.~~population, and COVID-19 also could impact the CKD population differently. COVID-19 case counts and new infections within our dialysis population have significantly declined from the peak prevalence rates experienced during the winter surge in late 2020 and early 2021. Over the longer term, we believe that changes in mortality in both the CKD and ESRD populations due to COVID-19 will depend primarily on the infection rate, case fatality rate, ~~and~~the age and health status of affected patients, the access to and efficacy of vaccinations as well as willingness to be vaccinated. We expect that these changes ~~may~~are likely to continue to negatively impact our

revenue and non-acquired growth even as the pandemic subsides. However, determining the extent to which these impacts should be directly attributable to COVID-19 is difficult ~~in part~~ due to ~~competing considerations~~testing and reporting limitations, and other factors that may drive treatment volumes and new admissions over time, such as the number of transplants or deferred ~~admissions, as well as due to testing and reporting limitations. At this time we cannot reasonably estimate the~~admissions. The magnitude ~~or duration~~ of these cumulative impacts has been substantial, and depending on the ultimate severity and duration of the pandemic, could be material.

We continued to experience increased costs in the first quarter of 2021 due in part to ~~testing~~the protocols and ~~reporting limitations as well as uncertainty with respect~~initiatives we implemented in response to ~~the severity and duration~~COVID-19 to help us safely maintain continuity of ~~this pandemic, among~~care for patients. Among other things, ~~but~~we continued to incur higher salary and wage expense and experienced significant cost inflation on PPE in the first quarter of 2021, though certain of these ~~adverse impacts could be material.~~costs have decreased as a whole since the peak of the most recent COVID-19 surge in the fourth quarter of 2020. We believe that the cost of these medical supplies will remain elevated at least through the end of the year due to limited supply and high demand. In addition, as we have done in prior periods, we may provide substantial financial support associated with relief reimbursement to our teammates in the future. As our COVID-19 response continues, we expect to continue to incur extended and significant additional costs. On the other hand, our COVID-19 response has reduced certain other expenses, such as those related to teammate travel, though it remains uncertain how much of these reductions, if any, will persist after the pandemic subsides.

In addition, the COVID-19 pandemic and efforts to contain the virus have led to global economic deterioration and rapid and sharp increases in unemployment levels, which ultimately could result in a materially reduced share of our patients being covered by commercial insurance plans, with more patients being covered by lower-paying government insurance programs or being uninsured. These effects may persist after the pandemic subsides ~~and~~as, among other things, our patients could experience permanent changes in their insurance coverage as a result of changes to their employment status. In the event such a material reduction occurs ~~we believe that~~in the share of our patients covered by commercial insurance plans, it would have a material adverse impact on

our business, results of operations, financial condition and cash flows. Despite the broader economic conditions in the U.S. in the three months ended March 31, 2021, our commercial mix in the first quarter of 2021 was slightly improved as compared to our commercial mix in the first quarter of 2020, which we believe was largely due to the fact that older, higher-risk patients who tend to disproportionately have government health insurance coverage, have been more adversely impacted by COVID-19 to date. The ultimate impact of COVID-19 on our commercial mix will depend on future developments that are highly uncertain and difficult to predict.

Federal, State and Local Government Response

The government response to COVID-19 has been wide-ranging and will continue to develop over time, particularly in light of the new federal administration. As a result, we may not be able to accurately predict the nature, timing or extent of the impact of such changes on the markets in which we conduct business or on the other participants that operate in those markets, or any potential changes to the extensive set of federal, state and local laws, regulations and requirements that govern our business. We have worked with certain government agencies to respond to the COVID-19 pandemic, and in certain cases have sought waivers of regulatory requirements. We also have contracted with the federal government for direct administration of COVID-19 vaccines to our patients and teammates at our clinics. These vaccines are currently available under emergency use authorizations, and there can be no assurance that our patients and caregivers will choose to receive a COVID-19 vaccine or that the vaccines will prove to be as safe and effective as currently understood by the scientific community. In addition, we may encounter difficulties with the availability and storage of the vaccines, or experience other complications related to administering the vaccines, some of which have multiple dose requirements. We operate in a complex and highly regulated environment, and the novel nature of our COVID-19 response, including, for example, with respect to regulatory waivers and our administration of the newly developed COVID-19 vaccines, may increase our exposure to legal, regulatory and clinical risks.

Federal COVID-19 relief legislation suspended the 2% Medicare sequestration from May 1, 2020 through March 31, 2021, and in the three months ended March 31, 2021 our revenues increased due to this suspension as further described below. The Medicare Sequester Relief Act, signed into law on April 14, 2021, extended the suspension of the 2% Medicare sequestration from March 31, 2021 until December 31, 2021. While in effect, the suspension of sequestration has significantly increased, and will continue to significantly increase our revenues. At the state government level, a bill was recently introduced in California in connection with the ongoing COVID-19 state of emergency that would require health care employers with more than 100 employees to pay all non-executive employees a recognition bonus each quarter in 2022, with the amounts specified by employee status (i.e., full-time, part-time, per diem). The bill, AB 650, which was sponsored by the Service Employees International Union-United Healthcare Workers West, remains subject to change through the course of the legislative process. Additionally, though not directly related to COVID-19, another bill, HB 2322, was recently introduced in Oregon that specifically targets the dialysis industry and would impose a rate cap on private pay reimbursement for dialysis. If signed into law and implemented in substantially their current forms, these bills could have a significant adverse impact on our business, results of operations, financial condition and cash flows. ~~The global nature of the pandemic may have varying impacts on our ongoing operations outside the United States as well as our ability to expand our operations into other parts of the world.~~

We believe the ultimate impact of this public health crisis on the Company will depend on future developments that are highly uncertain and difficult to predict, including among other things the severity and duration of the pandemic, further spread or resurgence of the virus, its impact on the CKD patient population and our patient population, the availability, impact or efficacy of COVID-19 treatments, therapies or vaccines, the pandemic’s continuing impact on the U.S. and global economies and unemployment, the responses of our competitors to the pandemic and related changes in the marketplace, and the timing, scope and effectiveness of federal, state and local governmental responses. At this time, we cannot reasonably estimate the ultimate impact the COVID-19 pandemic will have on us, but the adverse impact could be material. In addition, the COVID-19 pandemic heightens many of the other risks and uncertainties discussed in "Part II Item 1A Risk Factors" in this Quarterly Report on Form 10-Q and in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020, and in “Part I, Item 1A Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019.

A significant initial part of the federal government response to the COVID-19 pandemic was the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion economic stimulus package that was signed into law on March 27, 2020. The CARES Act authorized $100 billion in funding to be distributed to healthcare providers through the federal Public Health and Social Services Emergency Fund (Provider Relief Fund). Under the CARES Act, in April 2020 the government distributed approximately $250 million to the Company and its affiliated joint ventures from the Provider Relief Fund, and these funds were only to be used for healthcare related expenses or lost revenues attributable to COVID-19. While we elected not to accept the funds available to us through this government financial support and returned these funds in May 2020, competitors that accept and use such funds may have a competitive advantage, and there can be no assurance that we will be able to continue to forgo the receipt of financial or other assistance under the CARES Act or similar subsequent legislation or that similar assistance will be available from the government if we have a need for such assistance in the future.

The CARES Act also included a provision that suspended the 2% Medicare sequestration from May 1, 2020 through December 31, 2020, and in the three and nine months ended September 30, 2020 our revenues increased due to this suspension as further described below. We continue to estimate that this temporary suspension will increase our revenues while it remains in effect.

For additional ~~information on the potential impact~~discussion of the COVID-19 pandemic and our response, including its impact on us and related risks and uncertainties, please see the discussion in Part I Item 1 "Business" of the 2020 10-K under the headings, "COVID-19 and its impact on our business" and "Human Capital Management", as well as the risk ~~factors~~factor in ~~"Part II~~Part I Item 1A1A. Risk ~~Factors" in our Quarterly Report~~Factors of the 2020 10-K under the heading “We face various risks related to the dynamic and evolving novel coronavirus pandemic, any of which may have a material adverse impact on ~~Form 10-Q for the quarter ended March 31, 2020.~~us.”

Financial Results

The discussion below includes analysis of our financial condition and results of operations for the quarter ended ~~September 30, 2020~~March 31, 2021 compared to the quarters ended ~~June 30,~~December 31, 2020 and ~~September 30, 2019 and for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.~~March 31, 2020.

Consolidated results of operations

The following table summarizes our revenues ~~operating income~~ and ~~adjusted~~ operating income by line of business. See the discussion of our results for each line of business following this table:


	Three months ended									Q3 2020 vs. Q2 2020					Q3 2020 vs. Q3 2019						Three months ended						Q1 2021 vs. Q4 2020				Q1 2021 vs. Q1 2020
	September 30, 2020			June 30, 2020			September 30, 2019			Amount			Percent		Amount			Percent			March 31, 2021		December 31, 2020		March 31, 2020		Amount		Percent		Amount		Percent
	(dollars in millions)																				(dollars in millions)
Revenues:																				Revenues:
U.S. dialysis	$	2,694		$	2,675		$	2,691		$	19		0.7	%	$	3		0.1	%	U.S. dialysis	$	2,590	$	2,674	$	2,617	$	(84)	(3.1)	%	$	(27)	(1.0)	%
Other - ancillary services	271			245			248			26			10.6	%	23			9.3	%	Other - ancillary services	261		276		261		(15)		(5.4)	%	—		—	%
Elimination of intersegment revenues	(41		)	(40		)	(36		)	(1		)	(2.5	)%	(5		)	(13.9	)%	Elimination of intersegment revenues	(31)		(45)		(36)		14		31.1	%	5		13.9	%
Total consolidated revenues	$	2,924		$	2,880		$	2,904		$	44		1.5	%	$	20		0.7	%	Total consolidated revenues	$	2,820	$	2,905	$	2,841	$	(85)	(2.9)	%	$	(21)	(0.7)	%

Operating income (loss):																				Operating income (loss):
U.S. dialysis	$	471		$	523		$	501		$	(52	)	(9.9	)%	$	(30	)	(6.0	)%	U.S. dialysis	$	480	$	433	$	492	$	47	10.9	%	$	(12)	(2.4)	%
Other - ancillary services	(7		)	(40		)	(98		)	33			82.5	%	91			92.9	%	Other - ancillary services	(12)		(27)		(3)		15		55.6	%	(9)		(300.0)	%
Corporate administrative support	(26		)	(73		)	(25		)	47			64.4	%	(1		)	(4.0	)%	Corporate administrative support	(25)		(24)		(24)		(1)		(4.2)	%	(1)		(4.2)	%
Operating income	$	438		$	410		$	378		$	28		6.8	%	$	60		15.9	%	Operating income	$	443	$	382	$	465	$	61	16.0	%	$	(22)	(4.7)	%

Adjusted operating income (loss)⁽¹⁾:
U.S. dialysis	$	471		$	523		$	501		$	(52	)	(9.9	)%	$	(30	)	(6.0	)%
Other - ancillary services	(7		)	(23		)	(14		)	16			69.6	%	7			50.0	%
Corporate administrative support	(26		)	(38		)	(25		)	12			31.6	%	(1		)	(4.0	)%
Adjusted operating income	$	438		$	461		$	462		$	(23	)	(5.0	)%	$	(24	)	(5.2	)%

Certain columns, rows or percentages may not sum ~~or recalculate~~ due to the ~~use~~presentation of rounded numbers.


~~(1)~~	~~For a reconciliation of adjusted operating income (loss) by reportable segment, see "Reconciliations of Non-GAAP measures" section below.~~

Nine months ended YTD Q3 2020 vs. YTD Q3 2019
September 30, 2020 September 30, 2019 Amount Percent
(dollars in millions)
Revenues:
U.S. dialysis $ 7,986
$ 7,876
$ 110
1.4 %
Other - ancillary services 777
717
60
8.4 %
Elimination of intersegment revenues (117 ) (104 ) (13 ) (12.5 )%
Total consolidated revenues $ 8,645
$ 8,490
$ 155
1.8 %

Operating income (loss):
U.S. dialysis $ 1,485
$ 1,417
$ 68
4.8 %
Other - ancillary services (49 ) (170 ) 121
71.2 %
Corporate administrative support (123 ) (66 ) (57 ) (86.4 )%
Operating income $ 1,313
$ 1,181
$ 132
11.2 %

Adjusted operating income (loss)⁽¹⁾:

U.S. dialysis $ 1,485
$ 1,417
$ 68
4.8 %
Other - ancillary services (33 ) (46 ) 13
28.3 %
Corporate administrative support (88 ) (66 ) (22 ) (33.3 )%
Adjusted operating income $ 1,364
$ 1,306
$ 58
4.4 %

~~Certain columns, rows or percentages may not sum or recalculate due to the use of rounded numbers.~~


~~(1)~~	~~For a reconciliation of adjusted operating income (loss) by reportable segment, see "Reconciliations of Non-GAAP measures" section below.~~

U.S. dialysis results of operations

Revenues:

Three months ended Q3 2020 vs. Q2 2020 Q3 2020 vs. Q3 2019
September 30, 2020 June 30, 2020 September 30, 2019 Amount Percent Amount Percent
(dollars in millions, except per treatment data)
Total revenues $ 2,694
$ 2,675
$ 2,691
$ 19
0.7 % $ 3
0.1 %
Dialysis treatments 7,656,173
7,570,908
7,673,191
85,265
1.1 % (17,018 ) (0.2 )%
Average treatments per day 96,914
97,063
97,129
(149 ) (0.2 )% (215 ) (0.2 )%
Treatment days 79.0
78.0
79.0
1.0
1.3 % —
— %
Average patient service
revenue per treatment $ 349.63
$ 352.26
$ 349.41
$ (2.63 ) (0.7 )% $ 0.22
0.1 %
Normalized non-acquired
treatment growth⁽¹⁾
0.6 % 1.6 % 2.2 %


	Three months ended									Q1 2021 vs. Q4 2020				Q1 2021 vs. Q1 2020
	March 31, 2021			December 31, 2020			March 31, 2020			Amount		Percent		Amount		Percent
	(dollars in millions, except per treatment data)
Total revenues	$	2,590		$	2,674		$	2,617		$	(84)	(3.1)	%	$	(27)	(1.0)	%
Dialysis treatments	7,286,934			7,574,217			7,513,321			(287,283)		(3.8)	%	(226,387)		(3.0)	%
Average treatments per day	94,636			95,876			96,821			(1,240)		(1.3)	%	(2,185)		(2.3)	%
Treatment days	77.0			79.0			77.6			(2.0)		(2.5)	%	(0.6)		(0.8)	%
Average patient service revenue per treatment	$	354.50		$	351.78		$	347.54		$	2.72	0.8	%	$	6.96	2.0	%
Normalized non-acquired treatment growth(1)	(2.2)		%	(0.3)		%	2.3		%			(1.9)	%			(4.5)	%


~~(1)~~	Normalized non-acquired treatment growth reflects year over year growth in treatment volume, adjusted to exclude acquisitions and other similar transactions, and further adjusted to normalize for the number and mix of treatment days in a given quarter versus the prior year quarter.

Nine months ended September 30, YTD Q3 2020 vs. YTD Q3 2019
2020 2019 Amount Percent
(dollars in millions, except per treatment data)
Total revenues $ 7,986
$ 7,876
$ 110
1.4 %
Dialysis treatments 22,740,403
22,491,237
249,166
1.1 %
Average treatments per day 96,933
96,281
652
0.7 %
Treatment days 234.6
233.6
1.0
0.4 %
Average patient service revenue per treatment $ 349.82
$ 349.26
$ 0.56
0.2 %
(1)Normalized non-acquired treatment growth reflects year over year growth in treatment volume, adjusted to exclude acquisitions and other similar transactions, and further adjusted to normalize for the number and mix of treatment days in a given quarter versus the prior year quarter.

U.S. dialysis revenues for the ~~third~~first quarter of ~~2020 increased~~2021 decreased from the ~~second~~fourth quarter of 2020 primarily due to ~~an increase~~a decrease in dialysis treatments, partially offset by ~~a decrease~~an increase in our average patient service revenue per treatment. The ~~increase~~decrease in our U.S. dialysis treatments was primarily driven by ~~volume growth from one additional~~two fewer treatment ~~day.~~days, higher mortality and missed treatments caused by the winter storms in the first quarter of 2021. We believe the increased mortality is largely attributable to the impact of COVID-19 on our patient population. Our U.S. dialysis average patient service revenue per treatment was ~~negatively~~positively impacted by ~~lower commercial revenue per treatment, unfavorable~~favorable changes in government ~~payor~~rates related to an increase in the Medicare base rate in 2021 and the inclusion of calcimimetics in the Medicare bundle, favorable changes in government mix due to shifts to Medicare Advantage plans, as well as favorable changes in commercial mix and ~~a decline in calcimimetics~~increased hospital inpatient dialysis revenue ~~per treatment,~~driven by COVID-19, partially offset by ~~an increase in inpatient dialysis service revenue~~a seasonal decline from co-insurance and ~~an increase in Medicare rates due to the temporary suspension of Medicare sequestration.~~deductibles.

U.S. dialysis revenues for the ~~third~~first quarter of 2021 decreased from the first quarter of 2020 ~~increased from the third quarter of 2019~~ primarily due to a decrease in dialysis treatments, partially offset by an increase in our average patient service revenue per ~~treatment, partially offset by~~treatment. Our U.S. dialysis treatments decreased primarily due to a decline in non-acquired dialysis treatments due to higher mortality, and a decrease in ~~dialysis treatments.~~treatment days. Our U.S. dialysis average patient service revenue per treatment increased primarily due to an increase in inpatient dialysis revenue, as well as increases in Medicare rates due to the temporary suspension of Medicare sequestration and a base rate increase in 2020, partially offset by a decline in calcimimetics revenue per treatment and lower commercial revenue per treatment. Our U.S. dialysis treatments decreased primarily due to the deconsolidation of two dialysis partnerships, as described below under the heading "Equity investment income" and a decline in non-acquired dialysis treatments due to mortality.

U.S. dialysis revenues for the nine months ended September 30, 2020 increased from the nine months ended September 30, 2019 primarily due to an increase in dialysis treatments and an increase in our average patient service revenue per treatment. The increase in our U.S. dialysis treatments was driven by one additional treatment day in the nine months ended September 30, 2020 and acquired and non-acquired growth, partially offset by the deconsolidation of the two dialysis partnerships, as described below under the heading "Equity investment income". Our U.S. dialysis average patient service revenue per treatment increased driven by favorable changes in government ~~and commercial revenue per treatment, including~~rates related to an increase in Medicare ~~rates due to a~~ base rate ~~increase~~ in ~~2020~~2021 and the temporary suspension of Medicare sequestration, as well as ~~an increase~~favorable changes in ~~inpatient dialysis services revenue, partially offset by a decline~~government mix due to shifts to Medicare Advantage plans and favorable changes in ~~calcimimetics revenue per treatment.~~

In July 2020, CMS issued a proposed rule to update the Medicare ESRD Prospective Payment System payment rate and policies. Among other things, the proposed rule outlines the inclusion of calcimimetics in the ESRD bundled payment, the transitional drug add-on payment for certain new renal dialysis drugs and biological products, and amends the reportingcommercial mix.

measures in the ESRD Quality Incentive Program. CMS estimates that the overall impact of the proposed rule will increase ESRD facilities’ average reimbursement by 1.6% in 2021. CMS, through the Center for Medicare and Medicaid Innovation, published the final ESRD Treatment Choices mandatory payment model (ETC) on September 18, 2020. The ETC will be administered through CMMI and is proposed to launch in 30% of dialysis clinics across the country, with a currently listed implementation date of January 1, 2021.

Operating ~~expenses and charges:~~expenses:


	Three months ended									Q3 2020 vs. Q2 2020					Q3 2020 vs. Q3 2019						Three months ended						Q1 2021 vs. Q4 2020				Q1 2021 vs. Q1 2020
	September 30, 2020			June 30, 2020			September 30, 2019			Amount			Percent		Amount			Percent			March 31, 2021		December 31, 2020		March 31, 2020		Amount		Percent		Amount		Percent
	(dollars in millions, except per treatment data)																				(dollars in millions, except per treatment data)
Patient care costs	$	1,781		$	1,802		$	1,813		$	(21	)	(1.2	)%	$	(32	)	(1.8	)%	Patient care costs	$	1,739	$	1,856	$	1,783	$	(117)	(6.3)	%	$	(44)	(2.5)	%
General and administrative⁽¹⁾	303			210			235			93			44.3	%	68			28.9	%
General and administrative																				General and administrative	221		241		204		(20)		(8.3)	%	17		8.3	%
Depreciation and amortization	148			148			148			—			—	%	—			—	%	Depreciation and amortization	156		152		146		4		2.6	%	10		6.8	%
Equity investment income	(9		)	(8		)	(5		)	(1		)	12.5	%	(4		)	80.0	%	Equity investment income	(6)		(7)		(9)		1		14.3	%	3		33.3	%
Total operating expenses and charges	$	2,224		$	2,152		$	2,191		$	72		3.3	%	$	33		1.5	%	Total operating expenses and charges	$	2,110	$	2,241	$	2,125	$	(131)	(5.8)	%	$	(15)	(0.7)	%
Patient care costs per treatment	$	232.57		$	238.02		$	236.32		$	(5.45	)	(2.3	)%	$	(3.75	)	(1.6	)%	Patient care costs per treatment	$	238.69	$	245.06	$	237.35	$	(6.37)	(2.6)	%	$	1.34	0.6	%

Certain columns, rows or percentages may not sum ~~or recalculate~~ due to the ~~use~~presentation of rounded numbers.


~~(1)~~	General and administrative expenses for the three months ended September 30, 2020 includes advocacy costs of approximately $66 million to counter union policy efforts, including a California ballot initiative.

Nine months ended September 30, YTD Q3 2020 vs. YTD Q3 2019
2020 2019 Amount Percent
(dollars in millions, except per treatment data)
Patient care costs $ 5,366
$ 5,396
$ (30 ) (0.6 )%
General and administrative⁽¹⁾
718
648
70
10.8 %
Depreciation and amortization 443
433
10
2.3 %
Equity investment income (25 ) (17 ) (8 ) (47.1 )%
Total operating expenses and charges $ 6,501
$ 6,459
$ 42
0.7 %
Patient care costs per treatment $ 235.97
$ 239.90
$ (3.93 ) (1.6 )%

~~Certain columns, rows or percentages may not sum or recalculate due to the use of rounded numbers.~~


~~(1)~~	General and administrative expenses for the nine months ended September 30, 2020 includes advocacy costs of approximately $67 million to counter union policy efforts, including a California ballot initiative.

Patient care costs.U.S. dialysis patient care costs are those costs directly associated with operating and supporting our dialysis centers and consist principally of compensation expenses including labor and benefits, pharmaceuticals, medical supplies and other operating costs of ~~the~~our dialysis centers.

U.S. dialysis patient care costs per treatment for the ~~third~~first quarter of ~~2020~~2021 decreased from the ~~second~~fourth quarter of 2020 primarily due to a decrease in COVID-19-related ~~costs~~expenses, including ~~compensation expense, and~~ a decrease in compensation and medical supply expenses that had been driven higher in the fourth quarter of 2020 by the winter COVID-19 surge, a decrease in utilities expense driven by our virtual power purchase arrangements, as well as decreases in health benefit expenses, pharmaceutical ~~intensity.~~unit costs and other direct operating expenses associated with our dialysis centers. These decreases were partially offset by ~~increases~~an increase in ~~health benefit expenses~~labor costs due to ~~increased claims volume~~lower productivity levels at our dialysis centers and ~~other direct dialysis center operating expenses.~~a seasonal increase in payroll taxes.

U.S. dialysis patient care costs per treatment for the ~~third~~first quarter of 2021 increased from the first quarter of 2020 ~~decreased from the third quarter of 2019~~ primarily due to an increase in labor costs driven by lower productivity levels at our dialysis centers, an increase in COVID-19-related expenses, including an increase in medical supply expense, as well as higher other direct operating expenses associated with our dialysis centers. These increases were partially offset by a decrease in pharmaceutical unit costs and intensity, a decrease in ~~other direct dialysis center operating expenses, as well as decreases in travel~~utilities expense ~~related to COVID-19,~~driven by our virtual power purchase arrangements, decreased health benefit expenses due to reduced claims volume and ~~payroll taxes. These decreases were partially offset by an increase~~a decline in ~~labor costs and costs related to COVID-19, including medical supplies.~~

U.S. dialysis patient care costs per treatment for the nine months ended September 30, 2020 decreased from the nine months ended September 30, 2019 primarily due to decreases in pharmaceutical unit costs, other direct dialysis center operating

~~expenses, health benefit expenses due to reduced claims volume and~~ travel ~~expenses. These decreases were partially offset by an increase in labor costs and costs related to COVID-19, including compensation and medical supplies.~~expense.

General and administrative expenses. U.S. dialysis general and administrative expenses in the first quarter of 2021 decreased from the ~~third~~fourth quarter of 2020 primarily due to decreases in costs related to COVID-19, including a decrease in compensation expenses, as well as decreases in contributions to our charitable foundation and professional fees.

U.S. dialysis general and administrative expenses for the first quarter of 2021 increased from the ~~second~~first quarter of 2020 primarily due to an increase in ~~advocacy~~labor costs related to ~~counter union policy efforts, including a California ballot initiative, as well as increases in contributions to our charitable foundation~~increased headcount and ~~compensation expense.~~

~~U.S. dialysis general~~labor rates, and ~~administrative expenses for the third quarter of 2020~~ increased ~~from the third quarter of 2019 primarily due to an increase in advocacy costs, as described above, as well as increases in contributions to our charitable foundation and compensation expense.~~professional fees. These increases were partially offset by decreases in ~~long-term incentive compensation expense,~~ travel ~~expenses and professional fees.~~

U.S. dialysis general and administrative expenses for the nine months ended September 30, 2020 increased from the nine months ended September 30, 2019 due to an increase in advocacy costs, as described above, as well as increases in contributions to our charitable foundation and compensation expense including costs related to COVID-19. These increases were partially offset by decreases in travel expenses, long-term incentive compensation expense and health benefit expenses.

Depreciation and amortization. Depreciation and amortization expense is directly impacted by the number of dialysis centers we develop and acquire. U.S. dialysis depreciation and amortization expenses for the quarter ended ~~September 30, 2020~~March 31, 2021 compared to the quarters ended ~~June 30,~~December 31, 2020 and ~~September 30, 2019 was relatively flat, and~~March 31, 2020 increased ~~for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019,~~ primarily due to growth in the number of dialysis centers we ~~operate.~~operated in the first quarter of 2021.

Equity investment income. U.S. dialysis equity investment income for the ~~third~~first quarter of 2021 decreased from the fourth quarter of 2020 and from the first quarter of 2020 primarily due to a decrease in profitability at our nonconsolidated joint ventures.

Operating income:


	Three months ended						Q1 2021 vs. Q4 2020				Q1 2021 vs. Q1 2020
	March 31, 2021		December 31, 2020		March 31, 2020		Amount		Percent		Amount		Percent
	(dollars in millions)
Operating income	$	480	$	433	$	492	$	47	10.9	%	$	(12)	(2.4)	%

U.S. dialysis operating income for the first quarter of 2021 increased from the ~~second~~fourth quarter of 2020 primarily due to an increase ~~in the profitability of certain non-consolidated dialysis partnerships.~~

U.S. dialysis equity investment income for the third quarter of 2020 increased from the third quarter of 2019 primarily due to the deconsolidation of two of our near 50%-owned dialysis partnerships at year-end 2019, based on a reassessment of relative rights and powers over these partnerships. Our portion of these partnerships' earnings are now recognized in equity investment income. This increase also resulted from an increase in the profitability of certain other non-consolidated dialysis partnerships.

U.S. dialysis equity investment income for the nine months ended September 30, 2020 increased from the nine months ended September 30, 2019 primarily due to the deconsolidation of two dialysis partnerships at year-end 2019, as described above.

~~Operating income:~~

Three months ended Q3 2020 vs. Q2 2020 Q3 2020 vs. Q3 2019
September 30, 2020 June 30, 2020 September 30, 2019 Amount Percent Amount Percent
(dollars in millions)
Operating income $ 471
$ 523
$ 501
$ (52 ) (9.9 )% $ (30 ) (6.0 )%

Nine months ended September 30, YTD Q3 2020 vs. YTD Q3 2019
2020 2019 Amount Percent
(dollars in millions)
Operating income $ 1,485
$ 1,417
$ 68
4.8 %

~~U.S. dialysis operating income for the third quarter of 2020 decreased from the second quarter of 2020 primarily due to a decrease~~ in our average patient service revenue per treatment, as described above, as well as ~~increases~~decreases in ~~advocacy~~COVID-19-related expenses, health benefits expense, utilities expense, pharmaceutical unit costs ~~contributions to our charitable foundation, health benefit expenses~~ and other direct operating expenses associated with our dialysis ~~center operating expenses.~~centers, as described above. Operating income was ~~positively~~negatively impacted by ~~one additional treatment day~~a decrease in dialysis treatments, and ~~decreases~~increases in ~~COVID-19-related~~labor costs and ~~pharmaceutical intensity.~~payroll taxes, as described above.

U.S. dialysis operating income for the ~~third~~first quarter of ~~2020~~2021 decreased from the ~~third~~first quarter of ~~2019~~2020 primarily due to a decrease in dialysis treatments, as described above, ~~an increase in advocacy costs, a decline in calcimimetics margin~~ and increases in ~~COVID-19-related costs,~~ labor costs, COVID-19-related expenses and ~~contributions to~~other direct operating expenses associated with our ~~charitable foundation.~~dialysis centers, as described above. These decreases to operating income were partially offset by an increase in our average patient service revenue per treatment, as described above, ~~a decrease~~

and decreases in pharmaceutical unit costs and intensity, ~~as well as decreases in other direct dialysis center operating expenses and~~utilities expense, health benefit expenses ~~long-term incentive compensation~~and travel expense, ~~travel expenses and professional fees.~~

U.S. dialysis operating income for the nine months ended September 30, 2020 increased from the nine months ended September 30, 2019 primarily due to one additional treatment day in the nine months ended September 30, 2020. The increase in operating income also resulted from an increase in our average patient service revenue per treatment, as described above, as well as decreases in pharmaceutical unit costs, health benefit expenses, other direct dialysis center operating expenses, travel expense and long-term incentive compensation. These increases to operating income were partially offset by an increase in advocacy costs, a decline in calcimimetics margin, an increase in COVID-19-related costs, including compensation expense, and an increase in contributions to our charitable foundation.above.

Other—Ancillary services

Our other operations include ancillary services ~~which~~that are primarily aligned with our core business of providing dialysis services to our network of patients. As of ~~September 30, 2020,~~March 31, 2021, these consisted primarily of integrated care and disease management, ESRD seamless care organizations (ESCOs), clinical research programs and physician services, as well as our international operations. These ancillary services, including our international operations, generated revenues of approximately ~~$271~~$261 million ~~and $777 million of revenues for~~in the three ~~and nine~~ months ended ~~September 30, 2020, respectively,~~March 31, 2021, representing approximately 9% of our consolidated revenues for ~~each~~the period. If any of our ancillary services, ~~or strategic initiatives,~~ such as our international operations, are unsuccessful, it could have a negative impact on our business, results of operations, financial condition and cash flows, and we may determine to exit that line of business, which could result in significant termination costs. In addition, we have in the past and may in the future incur material restructuring, write-off or impairment charges on our investment in one or more of these ancillary services, including goodwill.

We expect to add additional service offerings to our business and to pursue ~~additional strategic initiatives~~other ancillary service opportunities in the future as circumstances warrant, which could include, among other things, healthcare services not related to dialysis.

As of ~~September 30, 2020,~~March 31, 2021, our international dialysis operations provided dialysis and administrative services through a total of ~~291~~323 outpatient dialysis centers located in ~~nine~~ten countries outside of the United States.

Ancillary services results of operations


	Three months ended									Q3 2020 vs. Q2 2020				Q3 2020 vs. Q3 2019					Three months ended						Q1 2021 vs. Q4 2020				Q1 2021 vs. Q1 2020
	September 30, 2020			June 30, 2020			September 30, 2019			Amount		Percent		Amount		Percent			March 31, 2021		December 31, 2020		March 31, 2020		Amount		Percent		Amount		Percent
	(dollars in millions)																		(dollars in millions)
Revenues:																		Revenues:
U.S. ancillary	$	125		$	116		$	118		$	9	7.8	%	$	7	5.9	%	U.S. ancillary	$	99	$	124	$	124	$	(25)	(20.2)	%	$	(25)	(20.2)	%
International	147			129			131			18		14.0	%	16		12.2	%	International	162		152		137		10		6.6	%	25		18.2	%
Total ancillary services revenues	$	271		$	245		$	248		$	26	10.6	%	$	23	9.3	%	Total ancillary services revenues	$	261	$	276	$	261	$	(15)	(5.4)	%	$	—	—	%

Operating (loss) income:																		Operating (loss) income:
U.S. ancillary	$	(14	)	$	(41	)	$	(15	)	$	27	65.9	%	$	1	6.7	%	U.S. ancillary	$	(25)	$	(25)	$	(19)	$	—	—	%	$	(6)	(31.6)	%
International⁽¹⁾	7			1			(83		)	6		600.0	%	90		108.4	%	International(1)	13		(2)		17		15		750.0	%	(4)		(23.5)	%
Total ancillary services operating loss	$	(7	)	$	(40	)	$	(98	)	$	33	82.5	%	$	91	92.9	%	Total ancillary services operating loss	$	(12)	$	(27)	$	(3)	$	15	55.6	%	$	(9)	(300.0)	%

Adjusted operating (loss) income⁽²⁾:
U.S. ancillary	$	(14	)	$	(25	)	$	(15	)	$	11	44.0	%	$	1	6.7	%
International⁽¹⁾	7			1			1			6		600.0	%	6		600.0	%
Total ancillary services adjusted operating loss	$	(7	)	$	(23	)	$	(14	)	$	16	69.6	%	$	7	50.0	%

Certain columns, rows or percentages may not sum ~~or recalculate~~ due to the ~~use~~presentation of rounded numbers.


~~(1)~~	(1)The reported ~~operating income (loss) and adjusted~~ operating income (loss) for ~~the three months ended September 30, 2020, June 30, 2020 and September 30, 2019, include approximately $(3) million, $(4) million and $3 million, respectively, of foreign currency (losses) gains.~~


~~(2)~~	~~For a reconciliation of adjusted operating income (loss) by reportable segment, see the "Reconciliations of non-GAAP measures" section below.~~

Nine months ended September 30, YTD Q3 2020 vs. YTD Q3 2019
2020 2019 Amount Percent
(dollars in millions)
Revenues:
U.S. ancillary $ 365
$ 341
$ 24
7.0 %
International 412
376
36
9.6 %
Total ancillary services revenues $ 777
$ 717
$ 60
8.4 %

Operating (loss) income:
U.S. ancillary $ (74 ) $ (45 ) $ (29 ) (64.4 )%
International⁽¹⁾
25
(125 ) 150
120.0 %
Total ancillary services operating (loss) income $ (49 ) $ (170 ) $ 121
71.2 %

Adjusted operating (loss) income⁽²⁾:

U.S. ancillary $ (58 ) $ (45 ) $ (13 ) (28.9 )%
International⁽¹⁾
25
—
25

Total ancillary services adjusted operating loss $ (33 ) $ (46 ) $ 13
28.3 %

~~Certain columns, rows or percentages may not sum or recalculate due to~~ the ~~use~~three months ended March 31, 2021, December 31, 2020 and March 31, 2020, includes foreign currency gains (losses) embedded in equity method income recognized from our APAC joint venture of ~~rounded numbers.~~approximately $3 million, $(6) million and $10 million, respectively.


~~(1)~~	The reported operating income (loss) and adjusted operating income (loss) for the nine months ended September 30, 2020 and September 30, 2019, include approximately $3 million and $2 million, respectively, of foreign currency gains.


~~(2)~~	~~For a reconciliation of adjusted operating income (loss) by reportable segment, see the "Reconciliations of non-GAAP measures" section below.~~

Revenues:

U.S. ancillary services revenues for the ~~third~~first quarter of ~~2020 increased~~2021 decreased from the ~~second~~fourth quarter of 2020 due to ~~an increase~~a decrease in revenue in our integrated care and disease management business primarily ~~due~~related to ~~revenue increases~~the reduction in members in our special needs plans, and the recognition of certain revenue in the fourth quarter of 2020 in our ESCO ~~business,~~joint ventures that did not recur in the first quarter of 2021. International revenues for the first quarter of 2021 increased from the fourth quarter of 2020 primarily due to acquisition-related growth, partially offset by higher mortality driven by COVID-19.

U.S. ancillary services revenues for the first quarter of 2021 decreased from the first quarter of 2020 due to a decrease in revenues in our integrated care and disease management business primarily related to the reduction in members in our special needs plans, as well as a decrease in revenues in our clinical research programs and our vascular access business due to the sale of RMS Lifeline, Inc. ~~(Lifeline)~~, ~~as described below. In addition,~~our vascular access business, effective May 1, 2020. Our international revenues for the ~~third~~first quarter of ~~2020~~2021 increased from the ~~second~~first quarter of 2020 primarily due to ~~acquired treatment growth.~~acquisition-related growth, partially offset by higher mortality driven by COVID-19.

Operating loss:

U.S. ancillary services ~~revenues~~operating loss for the ~~third~~first quarter of 2021 were relatively flat from the fourth quarter of 2020 ~~increased from the third quarter of 2019 due to an increase~~which was driven by a decrease in ~~revenues at~~operating loss in our integrated care and disease management business primarily due to revenue increases in our special needs plans, as well as an increase in revenues in our ESCO and physician services businesses. These increases were partially offset by a decrease in revenues due to the sale of Lifeline, as described below, and a decrease in revenue in our clinical research programs. Our international revenues for the third quarter of 2020 increased from the third quarter of 2019 primarily due to acquired treatment growth.

U.S. ancillary services and international revenues for the nine months ended September 30, 2020 increased from the nine months ended September 30, 2019 for the same reasons discussed in our comparison of the third quarter of 2020 to third quarter of 2019 above.

~~Charges impacting operating loss:~~

~~Loss on changes in ownership interests, net.~~ ~~We sold 100% of the stock of Lifeline, our vascular access business, effective May 1, 2020 and recognized a loss of approximately $16 million on this transaction.~~

~~Goodwill impairment charges.~~ During the three and nine months ended September 30, 2019, we recognized goodwill impairment charges of $84 million and $125 million, respectively, in our international reporting units. See further discussion of these impairment charges and our reporting units that remain at risk of goodwill impairment in Note 6 to the condensed consolidated financial statements.

~~Operating loss and adjusted operating loss:~~

U.S. ancillary services operating loss and adjusted operating loss for the third quarter of 2020 decreased from the second quarter of 2020. The decrease in operating loss was impacted by the loss on sale of Lifeline, as described above. In addition, both operating loss and adjusted operating loss benefited from increases in revenue in our integrated care and disease management and ESCO businesses, and a decrease in professional fees in our ESCO business, partially offset by an increase in ~~medical costs~~operating loss in our ~~integrated care and disease management business.~~ESCO joint ventures. International operating ~~income~~results for the ~~third~~first quarter of ~~2020~~2021 increased from the ~~second~~fourth quarter of 2020 primarily driven by ~~volume growth~~an increase in equity income from ~~one additional treatment day~~fluctuations in foreign currency at our APAC JV and acquisition-related growth in our international business.

U.S. ancillary services operating loss for the ~~third~~first quarter of 2021 increased from the first quarter of 2020, ~~was relatively flat as compared~~primarily due to ~~the third quarter of 2019, primarily from an increase in operating results in our ESCO businesses offset by~~ a decrease in operating results in our clinical research programs. International operating results and adjusted operating results for the third quarter of 2020 increased compared to the third quarter of 2019. International operating results for the third quarter of 2019 were impacted by goodwill impairment charges, described above, and both operating results and adjusted operating results benefited primarily from acquisition-related growth.

U.S. ancillary services operating loss and adjusted operating loss for the nine months ended September 30, 2020 increased from the nine months ended September 30, 2019. This increase in operating loss was impacted by the loss on sale of Lifeline, as described above. In addition, both operating loss and adjusted operating loss were negatively impacted by an increase in medical costs inat our integrated care and disease management business, partially offset by an increase in revenue in our integrated care and disease management business. International operating results and adjusted operating results for the nine months ended September 30, 2020 increased from the nine months ended September 30, 2019.as described above. International operating results for the ~~nine months ended September 30, 2019, were impacted~~first quarter of 2021 decreased from the first quarter of 2020 primarily due to a decline in equity income from fluctuations in foreign currency at our APAC JV, partially offset by ~~goodwill impairment charges, as described above, and both operating results and adjusted operating results benefited primarily from~~ acquisition-related growth ~~and the timing of certain other periodic expenses.~~in our international business.

Corporate administrative support

Corporate administrative support consists primarily of labor, benefits and long-term incentive compensation expense, as well as professional fees for departments which provide support to all of our various operating lines of business. Corporate administrative support expenses are included in general and administrative expenses on our consolidated income statement.

Three months ended Q3 2020 vs. Q2 2020 Q3 2020 vs. Q3 2019
September 30, 2020 June 30, 2020 September 30, 2019 Amount Percent Amount Percent
(dollars in millions)
Corporate administrative support $ (26 ) $ (73 ) $ (25 ) $ 47
64.4 % $ (1 ) (4.0 )%
Adjusted corporate administrative support⁽¹⁾
$ (26 ) $ (38 ) $ (25 ) $ 12
31.6 % $ (1 ) (4.0 )%

Nine months ended YTD Q3 2020 vs. YTD Q3 2019
September 30, 2020 September 30, 2019 Amount Percent
(dollars in millions)
Corporate administrative support $ (123 ) $ (66 ) $ (57 ) (86.4 )%
Adjusted corporate administrative support⁽¹⁾
$ (88 ) $ (66 ) $ (22 ) (33.3 )%


~~(1)~~	~~For a reconciliation of adjusted operating income (loss) by reportable segment, see the "Reconciliations of non-GAAP measures" section below.~~

~~Charges impacting corporate administrative support:~~

~~Accruals for legal matters.~~ ~~During the second quarter of 2020, we recorded a net charge for legal matters of $35 million which is included in general and administrative expenses.~~


	Three months ended						Q1 2021 vs. Q4 2020				Q1 2021 vs. Q1 2020
	March 31, 2021		December 31, 2020		March 31, 2020		Amount		Percent		Amount		Percent
	(dollars in millions)
Corporate administrative support	$	(25)	$	(24)	$	(24)	$	(1)	(4.2)	%	$	(1)	(4.2)	%

Corporate administrative support expenses for the quarter ended ~~September 30, 2020~~March 31, 2021 compared to the quarter ended ~~June 30,~~December 31, 2020 were impacted by ~~accruals for legal matters, as described above, and a decrease~~an increase in ~~severance accruals recorded in the second quarter of 2020 associated with our senior executive leadership transition.~~professional fees. Corporate administrative support

expenses for the ~~third~~first quarter of ~~2020~~2021 increased from the ~~third~~first quarter of ~~2019~~2020 primarily due to an increase in ~~compensation~~insurance expense.

Corporate administrative support expenses for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 were impacted by accruals for legal matters, as described above, and an increase in severance accruals recorded in the second quarter of 2020 associated with our senior executive leadership transition as well as an increase in long-term compensation expense.

Corporate-level charges

Three months ended Q3 2020 vs. Q2 2020 Q3 2020 vs. Q3 2019
September 30, 2020 June 30, 2020 September 30, 2019 Amount Percent Amount Percent
(dollars in millions)
Debt expense $ (74 ) $ (81 ) $ (89 ) $ (7 ) (8.6 )% $ (15 ) (16.9 )%
Debt prepayment, refinancing and
redemption charges
$ (86 ) $ —
$ (21 ) $ 86

$ 65
309.5 %
Other income, net $ 5
$ 10
$ 5
$ (5 ) (50.0 )% $ —
— %
Effective income tax rate 23.2 % 24.6 % 23.8 % (1.4 )% (0.6 )%
Effective income tax rate from continuing
operations attributable to DaVita Inc.⁽¹⁾
29.2 % 29.2 % 30.3 % — % (1.1 )%
Net income attributable to noncontrolling
interests $ (59 ) $ (53 ) $ (58 ) $ 6
11.3 % $ 1
1.7 %

Nine months ended September 30, YTD Q3 2020 vs. YTD Q3 2019
2020 2019 Amount Percent
(dollars in millions)
Debt expense $ (244 ) $ (352 ) $ (108 ) (30.7 )%
Debt prepayment, refinancing and redemption charges $ (89 ) $ (33 ) $ 56
169.7 %
Other income, net $ 11
$ 18
$ (7 ) (38.9 )%
Effective income tax rate 24.3 % 24.3 % — %
Effective income tax rate from continuing
operations attributable to DaVita Inc.⁽¹⁾
28.9 % 29.8 % (0.9 )%
Net income attributable to noncontrolling
interests $ (160 ) $ (152 ) $ 8
5.3 %


	Three months ended									Q1 2021 vs. Q4 2020				Q1 2021 vs. Q1 2020
	March 31, 2021			December 31, 2020			March 31, 2020			Amount		Percent		Amount		Percent
	(dollars in millions)
Debt expense	$	67		$	60		$	89		$	7	11.7	%	$	(22)	(24.7)	%
Debt refinancing charges	$	—		$	—		$	3		$	—			$	(3)	(100.0)	%
Other income (loss)	$	1		$	6		$	(4)		$	(5)	(83.3)	%	$	5	125.0	%
Effective income tax rate	22.6		%	22.4		%	24.8		%			0.2	%			(2.2)	%
Effective income tax rate from continuing operations attributable to DaVita Inc.(1)	26.4		%	27.5		%	28.5		%			(1.1)	%			(2.1)	%
Net income attributable to noncontrolling interests	$	54		$	61		$	48		$	(7)	(11.5)	%	$	6	12.5	%


~~(1)~~	~~For a reconciliation of our effective income tax rate from continuing operations attributable to DaVita Inc., see "Reconciliations of non-GAAP measures" section below.~~

(1)For a reconciliation of our effective income tax rate from continuing operations attributable to DaVita Inc., see "Reconciliations of Non-GAAP measures" section below.

Debt expense

Debt expense for the ~~third~~first quarter of ~~2020 decreased compared to~~2021 increased from the ~~second~~fourth quarter of 2020 as a result of ~~refinancing~~completing an unregistered add-on offering of $1.0 billion aggregate principal amount to our ~~5 ⅛%~~existing 4.625% senior notes due June 1, 2030 (the Additional 2030 Notes) and ~~5% senior notes with lower cost debt, and a reduction in~~higher average borrowings under the ~~LIBOR component~~revolving line of credit, which increased interest expense for the ~~interest rate on debt under our senior secured credit facilities.~~ quarter.

Debt expense for the ~~third~~first quarter of ~~2020~~2021 decreased ~~compared to~~from the ~~third~~first quarter of ~~2019~~2020 primarily due to a decrease in our overall weighted average effective interest rate on our debt, including as a result of refinancing our ~~5 ⅛%~~5.125% senior notes and 5%5.0% senior notes with lower cost debt, a reduction in the LIBOR component of the interest rate on debt under our senior secured credit facilities and a repricing of the interest rate margin applicable to the Term Loan B component of our senior secured credit facilities.

Debt expense for the nine months ended September 30, 2020 decreased compared to the nine months ended September 30, 2019 for the same reasons described above and from a net reduction in our average debt outstanding.

Our overall weighted average effective interest rate for the ~~third~~first quarter of ~~2020~~2021 was ~~3.31%~~3.08% compared to ~~3.64%~~3.07% for the ~~second~~fourth quarter of 2020 and ~~5.09% in~~4.35% for the ~~third~~first quarter of ~~2019.~~2020. See Note 86 to the condensed consolidated financial statements for further information on the components of our debt.

Debt ~~prepayment,~~ refinancing ~~and redemption~~ charges

~~Debt prepayment, refinancing and redemption charges were $86 million and $89 million in the~~The three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 respectively, as a result of the redemption in full of our $1.75 billion aggregate principal amount outstanding of 5 ⅛% senior notes and $1.50 billion aggregate principal amount outstanding of 5% senior notes. The charges recognized in the three and nine months ended September 30, 2020 represented debt redemption premium charges and deferred financing cost write-offs associated with our prior senior note debt that was paid in full. In addition, the nine months ended September 30, 2020 also includes include $3 million of refinancing charges comprised partially of fees incurred on the repricing of our Term Loan B and partially of deferred financing costs written off for the portion of this debt considered extinguished and reborrowed. ~~See further discussion in Note 8 to the condensed consolidated financial statements.~~

Other income (loss)

Other income (loss) consists primarily of interest income on cash and cash equivalents and short- and long-term investments, realized and unrealized gains and losses recognized on investments, and foreign currency transaction gains and losses.

Other income ~~decreased~~ for the ~~third~~first quarter of ~~2020 compared to~~2021 decreased from the ~~second~~fourth quarter of 2020 primarily due to a decrease in gains recognized on investments in addition to recognized losses on foreign currency transactions ~~and investments, and a decrease~~ in ~~interest income.~~the first quarter of 2021 compared to recognized gains in the fourth quarter of 2020. Other income for the ~~third~~first quarter of 2021 increased from the first quarter of 2020 due to recognized gains on investment in the first quarter of 2021 compared to recognized losses in the ~~third~~first quarter of ~~2019 was relatively flat due~~2020 in addition to a decrease in interest income offset by an increase in gains recognized on foreign currency transactions and investments. Other income decreased for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to a decrease in interest income and an increase in losses recognized on foreign currency transactions.

Effective income tax rate

The effective income tax rate for the ~~third~~first quarter of ~~2020 decreased compared to~~2021 was relatively flat from the ~~second~~fourth quarter of ~~2020 primarily due to an increase in the percentage of our earnings attributable to non-controlling interests for non-income tax paying entities.~~2020. The effective income tax rate from continuing operations attributable to DaVita Inc. for the ~~third~~first quarter of 2021 decreased from the fourth quarter of 2020 ~~was flat compared~~primarily due to ~~the second quarter of 2020.~~a reduction in nondeductible advocacy spend in 2021.

The effective income tax rate and the effective income tax rate from continuing operations attributable to DaVita Inc. for the ~~third~~first quarter of 2021 decreased from the first quarter of 2020 ~~decreased compared to the third quarter of 2019~~ primarily due to ~~goodwill impairment charges recognized during 2019, partially offset by increased~~a reduction in nondeductible advocacy spend and an increase in ~~2020~~

The effective income tax rate for the nine months ended September 30, 2020 was flat compared to the nine months ended September 30, 2019. The effective income tax rate from continuing operations attributable to DaVita Inc. for the nine months ended September 30, 2020 decreased compared to the nine months ended September 30, 2019 primarily due to goodwill impairment chargesequity compensation deductions recognized in ~~2019 and a decrease in our estimated state tax rate, partially offset by increased nondeductible advocacy spend in 2020.~~the first quarter of 2021.

Net income attributable to noncontrolling interests

The ~~increase~~decrease in net income attributable to noncontrolling interests for the ~~third~~first quarter of ~~2020 compared to~~2021 from the ~~second~~fourth quarter of 2020 was primarily due to improved earnings at certain U.S. dialysis partnerships, partially offset by a decrease in reimbursements we made to certain of our U.S. dialysis partnerships for certain COVID-19-related expenses in the second quarter of 2020. The increase in net income attributable to noncontrolling interests for the third quarter of 2020 compared to the third quarter of 2019 was primarily due to improveddecreased earnings at certain U.S. dialysis partnerships. The increase in net income attributable to noncontrolling interests for the ~~nine months ended September 30,~~first quarter of 2021 from the first quarter of 2020 ~~compared to the nine months ended September 30, 2019~~ was primarily due to improved earnings at certain U.S. dialysis partnerships ~~including, among other things,~~and reimbursements we made to certain of our U.S. dialysis partnerships for certain COVID-19-related expenses.

Accounts receivable

Our consolidated accounts receivable balances at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were ~~$1.804~~$2.041 billion and ~~$1.796~~$1.824 billion, respectively, representing approximately ~~57.5~~66 and ~~57.8~~59 days sales outstanding (DSO), respectively, net of allowances for uncollectible accounts. Consolidated DSO ~~was relatively flat~~increased primarily due to ~~improved collections from certain payors offset by a delay~~temporary billing holds related to winter storms and changes in ~~billing to certain other payors.~~calcimimetics reimbursement. Our DSO calculation is based on the current quarter’s average revenues per

day. There were no significant changes in the ~~third~~first quarter of ~~2020~~2021 from the ~~second~~fourth quarter of 2020 in the amount of unreserved accounts receivable over one year old or in the amounts pending approval from third-party payors.

Liquidity and capital resources

The following table shows the summary of our major sources and uses of cash, cash equivalents and restricted cash:


	Nine months ended September 30,						YTD Q3 2020 vs. YTD Q3 2019							Three months ended March 31,	Q1 2021 vs. Q1 2020
	2020			2019⁽¹⁾			Amount			Percent					2021		2020		Amount		Percent
	(dollars in millions)												(dollars in millions and shares in thousands)
Net cash provided by operating activities:												Net cash provided by operating activities:
Net income	$	760		$	718		$	42		5.8	%	Net income			$	292	$	288	$	4	1.4	%
Non-cash items in net income	826			788			38			4.8	%	Non-cash items in net income			209		274		(65)		(23.7)	%
Other working capital changes	(71		)	(89		)	18			(20.2	)%	Other working capital changes			(328)		(205)		(123)		60.0	%
Other	(21		)	(25		)	4			(16.0	)%	Other			(18)		3		(21)		(700.0)	%
	$	1,494		$	1,392		$	102		7.3	%				$	154	$	360	$	(206)	(57.2)	%

Net cash (used in) provided by investing activities:												Net cash (used in) provided by investing activities:
Capital expenditures:												Capital expenditures:
Routine maintenance/IT/other	$	(239	)	$	(245	)	$	6		(2.4	)%	Routine maintenance/IT/other			$	(90)	$	(82)	$	(8)	9.8	%
Development and relocations	(211		)	(302		)	91			(30.1	)%	Development and relocations			(55)		(73)		18		(24.7)	%
Acquisition expenditures	(113		)	(77		)	(36		)	46.8	%	Acquisition expenditures			(4)		(34)		30		(88.2)	%
Proceeds from sale of self-developed properties	79			38			41			107.9	%	Proceeds from sale of self-developed properties			16		27		(11)		(40.7)	%
DMG sale net proceeds received at closing, net of DMG cash divested	—			3,825			(3,825		)	(100.0	)%

Other	(4		)	(105		)	101			(96.2	)%	Other			8		(1)		9		(900.0)	%
	$	(487	)	$	3,134		$	(3,621	)	(115.5	)%				$	(124)	$	(163)	$	39	(23.9)	%

Net cash (used in) provided by financing activities:
Net cash provided by (used in) financing activities:												Net cash provided by (used in) financing activities:
Debt issuances net of (payments) and financing costs	$	(207	)	$	(2,050	)	$	1,843		(89.9	)%	Debt issuances net of (payments) and financing costs			$	900	$	466	$	434	93.1	%
Distributions to noncontrolling interest	(179		)	(157		)	(22		)	14.0	%	Distributions to noncontrolling interest			(54)		(58)		4		(6.9)	%
Contributions from noncontrolling interest	33			44			(11		)	(25.0	)%	Contributions from noncontrolling interest			11		9		2		22.2	%
Share repurchases	(1,026		)	(1,837		)	811			(44.1	)%	Share repurchases			(316)		(322)		6		(1.9)	%
Other	(3		)	(4		)	1			(25.0	)%	Other			(4)		2		(6)		(300.0)	%
	$	(1,382	)	$	(4,004	)	$	2,622		(65.5	)%				$	537	$	97	$	440	453.6	%

Total number of shares repurchased	12,283,977			32,651,726			(20,367,749		)	(62.4	)%	Total number of shares repurchased			2,949		4,052		(1,103)		(27.2)	%

Free cash flow from continuing operations⁽²⁾	$	977		$	711		$	266		37.4	%
Free cash flow(1)												Free cash flow(1)			$	(17)	$	184	$	(201)	(109.2)	%

Certain columns or rows may not sum ~~or recalculate~~ due to the ~~use~~presentation of rounded numbers.


~~(1)~~	~~Represents consolidated cash flow activity, including cash flows related to discontinued operations.~~


~~(2)~~	~~For a reconciliation of our free cash flow from continuing operations, see "Reconciliations of Non-GAAP measures" section below.~~

(1)For a reconciliation of our free cash flow, see "Reconciliations of Non-GAAP measures" section below.

Consolidated cash flows

Consolidated cash flows from operating activities during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 were ~~$1.494 billion, all of which were from continuing operations,~~$154 million, compared to consolidated operating cash flows for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 of ~~$1.392 billion, of which $1.295 billion~~ $360 million~~were from continuing operations.~~. The~~increase~~ decrease in operating cash flows ~~from continuing operations~~ was primarily driven by an increase in ~~operating results~~total DSO of seven days for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 compared toan increase of one day for the ~~nine~~three months ended ~~September 30, 2019, including a reduction~~March 31, 2020, in ~~debt expense as discussed above, as well as the~~addition to timing of other working capital items.

Free cash flow ~~from continuing operations~~ during the ~~nine~~three months ended ~~September 30, 2020 increased~~March 31, 2021 decreased from the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 primarily due to ~~an increase~~a decrease in net cash provided by operating activities as described ~~above, a decrease in capital expenditures and an increase in proceeds from the sale of self-developed properties partially offset by an increase in net distributions to noncontrolling interests.~~

above.

Other significant sources of cash included ~~issuances~~proceeds from the issuance of ~~$1.50~~$1.0 billion in aggregate principal amount of ~~3 ¾% senior notes due 2031 in August 2020 and $1.75 billion in aggregate principal amount of 4 ⅝%~~the Additional 2030 Notes as an add-on offering to our 4.625% senior notes due 2030 ~~in June 2020, as well as a draw~~that were issued at an offering price of ~~$500 million on our revolving line~~101.750% of ~~credit in the first quarter of 2020. Other~~face amount, and other significant uses of cash included the subsequent redemptions in full of $1.50 billion in aggregate principal amount of 5% senior notes due 2025 in August 2020 and $1.75 billion in aggregate principal amount of 5 ⅛% senior notes due 2024 in July 2020, as well as the repayment in full of borrowings under our revolving line of credit induring the ~~second~~first quarter of ~~2020.~~2021. Other net debt payments during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 primarily consisted of regularly scheduled mandatory principal payments under our senior secured credit facilities totaling approximately ~~$33~~$22 million on Term Loan A and ~~$21~~$7 million on Term Loan B-1 and additional required principal payments under other debt arrangements. In addition, we incurred bond issuance costs of approximately ~~$38 million, debt redemption premium charges related to the redemption of our senior notes due in 2024 and 2025 of approximately $67 million and the repricing of our Term Loan B of approximately $3~~$8 million in cash. See further discussion in Note 86 to the condensed consolidated financial statements related to our debt financing activities. ~~Cash flows used for share repurchases decreased in~~For the ~~nine~~three months ended ~~September 30, 2020 compared~~March 31, 2021 we used cash to ~~the same period~~repurchase 2,949,482 shares of ~~2019 primarily due to the smaller size of the Tender Offer in 2020 compared to the Tender Offer in 2019.~~our common stock.

By comparison, the same period in ~~2019~~2020 included ~~the receipt~~a net draw on our revolving line of ~~$4.465 billion in preliminary net cash proceeds from Optum at close~~credit of ~~the DMG sale, or $3.825 billion net of cash and restricted cash included in DMG net assets sold, and net payments of $2.050 billion on debt in the nine months ended September 30, 2019.~~$500 million. Net debt payments during the first quarter of 2020 primarily consisted of ~~the~~regularly scheduled mandatory ~~prepayments of term debt~~principal payments under our senior secured credit ~~facility funded by all of~~facilities totaling approximately $11 million on Term Loan A and $7 million on Term Loan B-1 as well as additional required principal payments under other debt arrangements. In addition, we incurred refinancing costs related to the ~~net proceeds from the DMG sale, redemption~~repricing of our ~~senior notes due in 2022, net~~Term Loan B-1 of ~~funding from~~approximately $3 million. For the three months ended March 31, 2020 we used cash to repurchase 4,052,298 shares of our ~~senior secured credit facility and advances on our revolving line of credit.~~common stock.

Dialysis center ~~capacity~~footprint and growth

The table below shows the growth in our dialysis operations by number of dialysis centers owned or operated:


	U.S.								International									U.S.			International
	Three months ended September 30,				Nine months ended September 30,				Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,		Three months ended March 31,
	2020		2019		2020		2019		2020		2019		2020		2019			2021	2020		2021	2020
Number of centers operated at beginning of period	2,795		2,723		2,753		2,664		287		248		259		241		Number of centers operated at beginning of period	2,816	2,753		321	259
Acquired centers	5		2		8		7		11		2		36		9		Acquired centers	—	2		2	22
Developed centers	17		24		67		84		1		1		5		1		Developed centers	18	22		2	2
Net change in non-owned managed or administered centers⁽¹⁾	—		—		—		(1	)	(7	)	(1	)	(6	)	(1	)	Net change in non-owned managed or administered centers(1)	—	—		1	1
Sold and closed centers⁽²⁾	(1	)	(3	)	(5	)	(6	)	—		(1	)	—		(1	)	Sold and closed centers(2)	(1)	(2)		(3)	—
Closed centers⁽³⁾	(7	)	(10	)	(14	)	(12	)	(1	)	—		(3	)	—		Closed centers(3)	(6)	(3)		—	(2)
Number of centers operated at end of period	2,809		2,736		2,809		2,736		291		249		291		249		Number of centers operated at end of period	2,827	2,772		323	282

(1)Represents dialysis centers which we manage or provide administrative services to but in which we own a noncontrolling equity interest or which are wholly-owned by third parties, including our Asia Pacific joint venture centers.


~~(1)~~	Represents dialysis centers which we manage or provide administrative services to but in which we own a noncontrolling equity interest or which are wholly-owned by third parties, including our Asia Pacific joint venture centers.


~~(2)~~	~~Represents dialysis centers that were sold and/or closed for which patients were not retained.~~


~~(3)~~	~~Represents dialysis centers that were closed for which the majority of patients were retained and transferred to one of our other existing outpatient dialysis centers.~~

(2)Represents dialysis centers that were sold and/or closed for which the majority of patients were not retained.

(3)Represents dialysis centers that were closed for which the majority of patients were retained and transferred to one of our other existing outpatient dialysis centers.

Stock repurchases

The following table summarizes our common stock repurchases during the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:


	Three months ended March 31, 2021					Three months ended March 31, 2020
	Shares repurchased	Amount paid (in millions)		Average paid per share		Shares repurchased	Amount paid (in millions)		Average paid per share
Open market repurchases	2,949,482	$	322	$	109.28	4,052,298	$	303	$	74.81

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
(dollars in millions, except for per share data)
Open market repurchases:
Shares 250,000
8,789,775
4,302,298
10,849,751
Amount paid $ 21
$ 514
$ 324
$ 626
Average paid per share $ 85.04
$ 58.49
$ 75.40
$ 57.72

Tender Offer⁽¹⁾:

Shares 7,981,679
21,801,975
7,981,679
21,801,975
Amount paid $ 704
$ 1,234
$ 704
$ 1,234
Average paid per share $ 88.22
$ 56.60
$ 88.22
$ 56.60

Total:
Shares 8,231,679
30,591,750
12,283,977
32,651,726
Amount paid $ 725
$ 1,748
$ 1,029
$ 1,860
Average paid per share $ 88.13
$ 57.14
$ 83.73
$ 56.97


~~(1)~~	The aggregate amount paid for shares repurchased pursuant to our Tender Offers during the three and nine months ended September 30, 2020 and 2019 includes their clearing prices of $88.00 and $56.50 per share, respectively, plus related fees and expenses of $1.8 million and $2.1 million, respectively.

See further discussion onof our stock repurchases in Note 128 to the condensed consolidated financial statements.

Available liquidity

As of ~~September 30, 2020,~~March 31, 2021, we had an undrawn $1.0 billion revolving line of credit under our senior secured credit facilities. Credit available under this revolving line of credit is reduced by the amount of any letters of credit outstanding thereunder, ~~and~~but there are currently no letters of credit outstanding under this facility. We separately have approximately $65 million of outstanding letters of credit under a separate bilateral secured letter of credit facility.

See Note 6 to the condensed consolidated financial statements for components of our long-term debt and their interest rates. We may from time to time seek to obtain funds or refinance existing debt through additional debt financings or other capital alternatives.

~~See Note 8 to the condensed consolidated financial statements for components of our long-term debt and their interest rates.~~

The COVID-19 pandemic and efforts to prevent its spread have dramatically reduced global economic activity and driven increased volatility in the financial markets. We have maintained business process continuity during the COVID-19 pandemic by enabling most back office teammates to work remotely, and as of the date of this report, we have not experienced material deterioration in our liquidity position as a result of the COVID-19 crisis. In addition, we elected not to accept approximately $250 million in funds available to us through the CARES Act Provider Relief Fund and returned the funds we received in May 2020. There can be no assurance that we will be able to continue to forgo the receipt of financial or other assistance under the CARES Act or similar subsequent legislation or that similar assistance will be available from the

government if we have a need for such assistance in the future. The ultimate impact of the pandemic will depend on future developments that are highly uncertain and difficult to predict.

We believe that our cash flow from operations and other sources of liquidity, including from amounts available under our senior secured credit facilities and our access to the capital markets, will be sufficient to fund our scheduled debt service under the terms of our debt agreements and other obligations for the foreseeable future, including the next 12 months. Our primary recurrent sources of liquidity are cash from operations and cash from ~~borrowings.~~borrowings, which are subject to general, economic, financial, competitive, regulatory and other factors that are beyond our control, as described in Item 1A Risk Factors of our 2020 10-K.

Reconciliations of non-GAAP measures

The following tables provide reconciliations of adjusted operating income (loss) to operating income (loss) as presented on a U.S. generally accepted accounting principles (GAAP) basis for our U.S. dialysis reportable segment as well as for our U.S. ancillary services, our international business, and for our total ancillary services which combines them and is disclosed as our other segments category. These non-GAAP or “adjusted” measures are presented because management believes these measures are useful adjuncts to, but not alternatives for, our GAAP results.

Specifically, management uses adjusted operating income (loss) to compare and evaluate our performance period over period and relative to competitors, to analyze the underlying trends in our business, to establish operational budgets and forecasts and for incentive compensation purposes. We believe this non-GAAP measure is also useful to investors and analysts in evaluating our performance over time and relative to competitors, as well as in analyzing the underlying trends in our business. We also believe this presentation enhances a user's understanding of our normal operating income by excluding certain items which we do not believe are indicative of our ordinary results of operations.

~~In addition,~~ our effective income tax rate on income from continuing operations attributable to DaVita Inc. ~~excludes~~excluding noncontrolling owners' income, which primarily relates to non-tax paying entities. We believe this adjusted effective income tax rate is useful to management, investors and analysts in evaluating our performance and establishing expectations for income taxes incurred on our ordinary results attributable to DaVita Inc.

~~Finally,~~In addition, our free cash flow ~~from continuing operations~~ represents net cash provided by operating activities, ~~from continuing operations~~ less distributions to noncontrolling interests and all capital expenditures (including development capital expenditures, routine maintenance and information technology);, plus contributions from noncontrolling interests and proceeds from the sale ~~leaseback proceeds.~~of self-developed properties. Management uses this measure to assess our ability to fund acquisitions and meet our debt service obligations and we believe this measure is equally useful to investors and analysts as an adjunct to cash flows from operating activities ~~from continuing operations~~ and other measures under ~~GAAP.~~U.S. generally accepted accounting principles (GAAP).

These non-GAAP or “adjusted” measures are presented because management believes these measures are useful adjuncts to our GAAP results. It is important to bear in mind that these non-GAAP “adjusted” measures are not measures of financial performance under GAAP and should not be considered in isolation from, nor as substitutes for, their most comparable GAAP measures.

Three months ended September 30, 2020
U.S. dialysis Ancillary services Corporate administration
U.S. International Total Consolidated
(dollars in millions)
Operating income (loss) $ 471
$ (14 ) $ 7
$ (7 ) $ (26 ) $ 438
Loss on changes in ownership interests, net —
—
—
—
—
—
Accrual for legal matters —
—
—
—
—
—
Adjusted operating income (loss) $ 471
$ (14 ) $ 7
$ (7 ) $ (26 ) $ 438


	Three months ended
	March 31, 2021			December 31, 2020			March 31, 2020
	(dollars in millions)
Income from continuing operations before income taxes	$	377		$	327		$	369
Less: Noncontrolling owners' income primarily attributable to non-tax paying entities	(54)			(61)			(48)
Income from continuing operations before income taxes attributable to DaVita Inc.	$	323		$	267		$	321
Income tax expense for continuing operations	$	85		$	73		$	92
Less: Income tax attributable to noncontrolling interests	—			—			—
Income tax expense from continuing operations attributable to DaVita Inc.	$	85		$	73		$	91
Effective income tax rate on income from continuing operations attributable to DaVita Inc.	26.4		%	27.5		%	28.5		%

Certain columns or rows may not sum or recalculate due to the ~~use~~presentation of rounded numbers.

Three months ended June 30, 2020
U.S. dialysis Ancillary services Corporate administration
U.S. International Total Consolidated
(dollars in millions)
Operating income (loss) $ 523
$ (41 ) $ 1
$ (40 ) $ (73 ) $ 410
Loss on changes in ownership interests, net —
16
—
16
—
16
Accrual for legal matters —
—
—
—
35
35
Adjusted operating income (loss) $ 523
$ (25 ) $ 1
$ (23 ) $ (38 ) $ 461


	Three months ended
	March 31, 2021		March 31, 2020
	(dollars in millions)
Net cash provided by operating activities	$	154	$	360
Less: Distributions to noncontrolling interests	(54)		(58)
Plus: Contributions from noncontrolling interests	11		9
Cash provided by operating activities attributable to DaVita Inc.	111		312
Less: Expenditures for routine maintenance and information technology	(90)		(82)
Less: Expenditures for development	(55)		(73)
Plus: Proceeds from sale of self-developed properties	16		27
Free cash flow	$	(17)	$	184

Certain columns or rows may not sum ~~or recalculate~~ due to the ~~use~~presentation of rounded numbers.

Three months ended September 30, 2019
U.S. dialysis Ancillary services Corporate administration Consolidated
U.S. International Total
(dollars in millions)
Operating income (loss) $ 501
$ (15 ) $ (83 ) $ (98 ) $ (25 ) $ 378
Goodwill impairment —
—
84
84
—
84
Adjusted operating income (loss) $ 501
$ (15 ) $ 1
$ (14 ) $ (25 ) $ 462

~~Certain columns or rows may not sum or recalculate due to the use of rounded numbers.~~

Nine months ended September 30, 2020
U.S. dialysis Ancillary services Corporate administration
U.S. International Total Consolidated
(dollars in millions)
Operating income (loss) $ 1,485
$ (74 ) $ 25
$ (49 ) $ (123 ) $ 1,313
Loss on changes in ownership interests, net —
16
—
16
—
16
Accrual for legal matters —
—
—
—
35
35
Adjusted operating income (loss) $ 1,485
$ (58 ) $ 25
$ (33 ) $ (88 ) $ 1,364

~~Certain columns or rows may not sum or recalculate due to the use of rounded numbers.~~

Nine months ended September 30, 2019
U.S. dialysis Ancillary services Corporate administration
U.S. International Total Consolidated
(dollars in millions)
Operating income (loss) $ 1,417
$ (45 ) $ (125 ) $ (170 ) $ (66 ) $ 1,181
Goodwill impairment —
—
125
125
—
125
Adjusted operating income (loss) $ 1,417
$ (45 ) $ —
$ (46 ) $ (66 ) $ 1,306

~~Certain columns or rows may not sum or recalculate due to the use of rounded numbers.~~

Three months ended Nine months ended
September 30, 2020 June 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
(dollars in millions)
Income from continuing operations before income taxes $ 283
$ 338
$ 274
$ 991
$ 813
Less: Noncontrolling owners' income primarily
attributable to non-tax paying entities (59 ) (53 ) (59 ) (161 ) (151 )
Income from continuing operations before income
taxes attributable to DaVita Inc. $ 224
$ 285
$ 215
$ 830
$ 662
Income tax expense for continuing operations $ 66
$ 83
$ 65
$ 241
$ 198
Less: Income tax attributable to noncontrolling interests —
—
—
—
(1 )
Income tax expense from continuing operations
attributable to DaVita Inc. $ 65
$ 83
$ 65
$ 240
$ 197
Effective income tax rate on income from continuing
operations attributable to DaVita Inc. 29.2 % 29.2 % 30.3 % 28.9 % 29.8 %

~~Certain columns or rows may not sum or recalculate due to the use of rounded numbers.~~

Nine months ended
September 30, 2020 September 30, 2019
(dollars in millions)
Net cash provided by continuing operating activities $ 1,494
$ 1,295
Less: Distributions to noncontrolling interests (179 ) (157 )
Plus: Contributions from noncontrolling interests 33
44
Cash provided by continuing operating activities attributable to DaVita Inc. 1,348
1,182
Less: Expenditures for routine maintenance and information technology (239 ) (225 )
Less: Expenditures for development (211 ) (284 )
Plus: Proceeds from sale of self-developed properties 79
38
Free cash flow from continuing operations $ 977
$ 711

~~Certain columns or rows may not sum or recalculate due to the use of rounded numbers.~~

Off-balance sheet arrangements and aggregate contractual obligations

In addition to the debt obligations and operating lease liabilities reflected on our balance sheet, we have commitments associated with letters of credit, as well as ~~potential~~certain working capital funding obligations associated with our equity investments in nonconsolidated ~~businesses and to~~ dialysis ventures that we manage and some that we manage which are wholly-owned by third parties.

We also have potential obligations to purchase the noncontrolling interests held by third parties in many of our majority-owned dialysis partnerships and other nonconsolidated entities. These obligations are in the form of put provisions that are exercisable at the third-party owners’ discretion within specified periods as outlined in each specific put provision. IfFor additional information on these ~~put provisions were exercised,~~obligations and how we would be required to purchase the third-party owners’ equity interests, generally at the appraised fair market value of the equity interests or in certain cases at a predetermined multiple of earnings or cash flows attributablemeasure and report them, see Note 12 to the equity interests put to us, intended to approximate fair value. The methodology we use to estimate the fair values of noncontrolling interests subject to put provisions assumes the higher of either a liquidation value of net assets or an average multiple of earnings, based on historical earnings, patient mixcondensed consolidated financial statements and other performance indicators that can affect future results, as well as other factors. The estimated fair values of noncontrolling interests subject to put provisions are a critical accounting estimate that involves significant judgmentsNote 17 and assumptions and may not be indicative of the actual values at which the noncontrolling interests may ultimately be settled, which could vary significantly from our current estimates. The estimated fair values of noncontrolling interests subject to put provisions can fluctuate and the implicit multiple of earnings at which these noncontrolling interests obligations may be settled will vary significantly depending upon market conditions including potential purchasers’ accessNote 24 to the capital markets, which can impact the level of competition for dialysis and non-dialysis related businesses, the economic performance of these businesses and the restricted marketability of the third-party owners’ equity interests. The amount of noncontrolling interests subject to put provisions that employ a contractually predetermined multiple of earnings rather than fair value are immaterial.

~~We also have certain other potential commitments to provide operating capital to several dialysis businesses that are wholly-owned by third parties or~~consolidated financial statements included in ~~which we own a noncontrolling equity interest as well as to certain medical practices that we operate under management and administrative services agreements.~~our 2020 10-K.

The following is a summary of these off-balance sheet contractual obligations and commitments as of ~~September 30, 2020 (in millions):~~March 31, 2021:


												Remainder of 2021		2022-2024		2025-2026		After 5 years		Total
	Remainder of 2020		2021-2023		2024-2025		After 5 years		Total			(dollars in millions)
Potential cash requirements under other commitments:											Potential cash requirements under other commitments:
Letters of credit	$	65	$	—	$	—	$	—	$	65	Letters of credit	$	65	$	—	$	—	$	—	$	65
Noncontrolling interests subject to put provisions	866		239		115		84		1,304		Noncontrolling interests subject to put provisions	1,015		156		106		72		1,349
Non-owned and minority owned put provisions	99		5		—		—		104		Non-owned and minority owned put provisions	109		5		—		—		114
Operating capital advances	—		3		2		4		9		Operating capital advances	1		3		1		3		8
Purchase commitments	86		717		—		—		803		Purchase commitments	395		817		—		—		1,212
	$	1,116	$	964	$	117	$	88	$	2,285		$	1,585	$	981	$	107	$	75	$	2,748

For information on the maturities and other terms of our long term debt, see Note 86 to the condensed consolidated financial statements.

We have an agreement with Fresenius Medical Care (FMC) to purchase a certain amount of dialysis equipment, parts and supplies from FMC through December 31, 2020. We also have an agreement with Baxter Healthcare Corporation (Baxter) that commits us to purchase a certain amount of hemodialysis and peritoneal dialysis supplies at fixed prices through 2022. If we fail to meet the minimum purchase commitments under these contracts during any year, we are required to pay the difference to the supplier.

In addition to the commitments listed above, in 2017 we entered into a sourcing and supply agreement with Amgen USA Inc. (Amgen) that expires on December 31, 2022. Under the terms of this agreement, we will purchase EPO from Amgen in amounts necessary to meet no less than 90% of our requirements for ~~erythropoiesis stimulating~~erythropoiesis-stimulating agents (ESAs) through the expiration of the ~~contract with Amgen.~~contract. The actual amount of EPO that we will purchase will depend upon the amount of EPO administered during dialysis as prescribed by physicians and the overall number of patients that we serve.

The purchase commitments in the table above represent our agreements with various suppliers to purchase set amounts of dialysis equipment, parts, and supplies. If we fail to meet the minimum purchase commitments under these contracts during any year, we are required to pay the difference to the supplier.

Settlements of existing income tax liabilities for unrecognized tax benefits of approximately ~~$87~~$90 million, including interest, penalties and other long-term tax liabilities, are excluded from the table above as reasonably reliable estimates of their timing cannot be made.

New Accounting Standards

See discussion of new accounting standards in Note 2014 to the condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest rate and foreign currency sensitivity

There has been no material change in the nature of the Company's interest rate risks or foreign currency exchange risks from those described in Part II Item 7A of our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

The tables below provide information about our financial instruments that are sensitive to changes in interest rates as of ~~September 30, 2020.~~March 31, 2021. For further information on the components of the Company's long-term debt and their interest rates, see Note 86 to the condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q at Part I Item 1.

Average interest rate
Expected maturity date
Fair
Value⁽¹⁾
2020 2021 2022 2023 2024 2025 Thereafter Total
(dollars in millions)
Long term debt:
Fixed rate $ 8
$ 27
$ 35
$ 48
$ 28
$ 29
$ 3,444
$ 3,619
4.33 % $ 3,339
Variable rate $ 44
$ 122
$ 136
$ 180
$ 1,393
$ 35
$ 2,582
$ 4,492
2.13 % $ 4,434


	Expected maturity date																Average interest rate		Fair Value(1)
	2021		2022		2023		2024		2025		2026		Thereafter		Total
	(dollars in millions)
Long term debt:
Fixed rate	$	24	$	36	$	47	$	30	$	30	$	41	$	4,423	$	4,631	4.33	%	$	4,329
Variable rate	$	105	$	135	$	179	$	1,393	$	36	$	2,583	$	1	$	4,432	1.99	%	$	4,426


~~(1)~~	~~Represents the fair value of the Company’s long-term debt excluding financing leases. See Note 8 to the condensed consolidated financial statements for further details.~~

(1)Represents the fair value of the Company’s long-term debt excluding financing leases. See Note 6 to the condensed consolidated financial statements for further details.


	Notional Amount		Contract maturity date															Fair Value
			2021		2022		2023		2024		2025		2026		Thereafter		Receive variable
	(dollars in millions)
2019 cap agreements	$	3,500	$	—	$	—	$	—	$	3,500	$	—	$	—	$	—	LIBOR above 2%	$	9.2

Notional Amount Contract maturity date Fair
Value
2020 2021 2022 2023 2024 2025 Thereafter Receive variable
(dollars in millions)
2019 cap agreements $ 3,500
$ —
$ —
$ —
$ —
$ 3,500
$ —
$ —
LIBOR above 2.0% $ 2.5

Item 4. Controls and Procedures

Management has established and maintains disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that it files or submits pursuant to the Securities Exchange Act of 1934 (Exchange Act) as amended ~~(Exchange Act),~~ is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer (CEO) and Chief Financial Officer (CFO) as appropriate to allow for timely decisions regarding required disclosures.

At the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of the Company’s ~~Chief Executive Officer~~CEO and ~~Chief Financial Officer,~~CFO, of the effectiveness of the design and operation of our disclosure controls and procedures in accordance with the Exchange Act ~~requirements.~~requirements as of March 31, 2021. Based upon that evaluation, the ~~Chief Executive Officer~~CEO and ~~Chief Financial Officer~~CFO concluded that the Company’s disclosure controls and procedures ~~are~~were effective as required by the Exchange Act as of such date for ~~timely identification and review of material information required to be included in the Company’s~~our Exchange Act reports, including this report. Management recognizes that these controls and procedures can provide only reasonable assurance of desired outcomes, and that estimates and judgments are still inherent in the process of maintaining effective controls and procedures.

There was no change in ~~our~~the Company's internal control over financial reporting that was identified during the evaluation that occurred during the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II.

OTHER INFORMATION

Item 1. Legal Proceedings

The information required by this Part II, Item 1 is incorporated herein by reference to the information set forth under the caption ~~“Contingencies”~~“Commitments and Contingencies” in Note 97 to the condensed consolidated financial statements included in this report.

Item 1A. Risk Factors

~~In addition~~There have been no material changes to ~~the following risk factor and the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider~~ the risk factors ~~discussed~~previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K ~~(our Form~~(2020 10-K) for the year ended December 31, ~~2019,~~2020 filed with Securities and Exchange Commission. You should carefully consider the risks included in ~~Part II, Item 1A of~~ our 2020 10-K, together with all the other information in this Quarterly Report on Form 10-Q, ~~(our Q1 10-Q) for~~including the ~~quarter ended March 31, 2020 and any subsequent filings with the Securities and Exchange Commission (SEC)~~, which could materially affect our business, financial condition, results of operations or future results. The risks and uncertainties discussed below, in our Form 10-K, our Q1 10-Q and in any subsequent filings with the SEC are not the only ones facing our business. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially adversely affect our business, cash flows, financial condition and/or results of operations. The risk factor below updates, and should be read together with, the risk factors disclosed in Part I, Item 1A of our Form 10-K and Part II, Item 1A of our Q1 10-Q. Please also read the cautionary notice regarding forward-looking statements in Part I, Item 2 of this Quarterly Report on Form 10-Q under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations."

~~Changes in federal and state healthcare legislation or regulations could have a material adverse effect on our business, results of operations, financial condition and cash flows.~~

The extensive federal and state laws, regulations and requirements that govern our business may continue to change over time, and there is no assurance that we will be able to accurately predict the nature, timing or extent of such changes or the impact of such changes on the markets in which we conduct business or on the other participants that operate in those markets.

For example, the government response to the COVID-19 pandemic has been wide-ranging and will continue to develop over time. We believe that associated changes to federal and state laws, regulations and requirements may continue to impact our business in a variety of ways, including with respect to the availability of government financial assistance, social distancing guidelines and other requirements for and/or restrictions on business operations, and temporary regulatory waivers or other changes to regulatory operating guidance at our clinics. Certain temporary changes made in response to the COVID-19 pandemic could become permanent, which could have an adverse impact on our business. For additional detail on the risks we face associated with the ongoing COVID-19 pandemic, see the discussion under the heading “~~Company Overview--COVID-19 and its impact on our business” above and the risk factor in our Q1 10-Q, under the heading “We face various risks related to the dynamic and rapidly evolving novel coronavirus pandemic, any of which may have a material adverse impact on us.~~”

In addition, the regulatory framework of the Patient Protection and Affordable Care Act and the Health Care Reconciliation Act of 2010, as amended (collectively, the ACA), and other healthcare reforms continues to evolve as a result of executive, legislative, regulatory and administrative developments and judicial proceedings. As such, there remains considerable uncertainty surrounding the continued development of the ACA and related regulations, programs and models, as well as similar healthcare reform measures or other changes that may be enacted at the federal and/or state level. There have been multiple attempts to repeal or amend the ACA through legislative action and legal challenges, and the most recent challenge is currently before the U.S. Supreme Court. Recent changes to the composition of the Supreme Court may increase the likelihood that the ACA is repealed or impacted in some manner. In the event the ACA is repealed or significantly altered, it would impact our business in a number of ways, some of which may be material. For example, if an ACA repeal ends Medicaid expansion it could have an adverse impact on coverage available to our patients and if the repeal impacts the Center for Medicare and Medicaid Innovation’s (CMMI’s) authority to implement innovative payment models, we may lose the investment of the resources we have dedicated to those programs. In addition, our revenue and operating income levels are highly sensitive to the percentage of our patients with higher-paying commercial health insurance and any legislative, regulatory or other changes that decrease the accessibility and availability, including the duration, of commercial insurance may have a material adverse impact on our business. The ACA's health insurance exchanges, which provide a marketplace for eligible individuals and small employers to purchase health insurance, initially increased the accessibility and availability of commercial insurance. In the event the exchange markets are significantly impaired as a result of legislative developments or other changes, or if the ACA is repealed in its entirety, it may adversely impact the percentage of our patients with higher-paying commercial health insurance, particularly if patients impacted by the pandemic-related high unemployment levels are unable to turn to the exchanges as an alternative to employer-based coverage.

While there may be material changes to the healthcare environment in the future, including, without limitation, as a result of potential changes to the political environment in connection with the current election year or otherwise, any specific changes and their timing are uncertain. Nevertheless, previously enacted reforms and potential future changes, including among others, any changes in legislation, regulation or market conditions in connection with or resulting from the upcoming elections, could have a material adverse effect on our business, results of operations, financial condition and cash flows. The future of the ACA and other proposed legislative developments or administrative decisions, such as moving to a universal health insurance or "single payor" system whereby health insurance is provided to all Americans by the government under government programs, the availability of a “public health insurance option” similar to Medicare, changes to the eligibility age for Medicare beneficiaries, or the lowering or elimination of cost-sharing reduction subsidies under the ACA, could impact the percentage of our patients with higher-paying commercial health insurance, impact the scope of coverage under commercial health plans and increase our expenses, among other things. Although we cannot predict the short- or long-term effects of legislative or regulatory changes or the potential outcome or impact of the upcoming elections, we believe that future market changes could result in, among other things, more restrictive commercial plans with lower reimbursement rates or higher deductibles and co-payments that patients may not be able to pay. To the extent that changes in statutes, regulations or related guidance or changes in other market conditions result in a reduction in the percentage of our patients with commercial insurance, limit the scope or nature of coverage through the exchanges or other health insurance programs or otherwise reduce reimbursement rates for our services from commercial and/or government payors, it could have a material adverse effect on our business, results of operations, financial condition and cash flows. For additional information on the impact of legislative or regulatory changes on the percentage of our patients with commercial insurance, see the risk factor in our 10-K under the heading ~~"If the number of patients with higher-paying commercial insurance declines, it could have a material adverse effect on our business, results of operations, financial condition and cash flows."~~

Changing legislation and other regulatory and executive developments, including those related to the ACA, have led to the emergence of new models of care and other initiatives in both the government and private sector. Any failure on our part to adequately implement strategic initiatives to adjust to these marketplace developments could have a material adverse impact on our business. For example, the administration’s July 10, 2019 executive order (2019 Executive Order) related to kidney care directed CMS to create payment models to evaluate the effects of creating payment incentives for the greater use of home dialysis and kidney transplants for those already on dialysis. To this end, CMS, through CMMI, published the final ESRD Treatment Choices mandatory payment model (ETC) on September 18, 2020. The ETC will be administered through CMMI and is proposed to launch in 30% of dialysis clinics across the country, with a currently listed implementation date of January 1, 2021. We support the administration’s emphasis on, and encouragement of, home dialysis and kidney transplant; however, we believe that the ETC could have an adverse effect on our business, results of operations, financial condition and cash flows. With home dialysis as a focus of the ETC model and the industry generally, any failure to successfully implement our strategy or build on our abilities to offer home dialysis options could have a material adverse impact on our business, results of operation, financial condition and cash flows. For additional detail on the risks related to our home dialysis services, see the discussion in our 10-K under the heading "If we are not able to successfully implement our strategy with respect to home-based dialysis, including maintaining and further developing our capabilities in a complex and highly regulated environment, it could have a material adverse effect on our business, results of operations, financial condition and cash flows, and could materially harm our reputation."

In connection with the 2019 Executive Order, CMS also announced the implementation of four voluntary payment models with the stated goal of helping healthcare providers reduce the cost and improve the quality of care for patients with late-stage chronic kidney disease and ESRD. CMS has stated these payment models are aimed to prevent or delay the need for dialysis and encourage kidney transplantation. These payment models have a scheduled commencement date of April 2021, but applicants now have the option to delay implementation until January 2022. Though we have applied for, and been provisionally accepted to participate in certain of these voluntary models, we continue to assess these models and their viability for us and the industry. These voluntary models continue CMMI’s prior work with various healthcare providers to develop, refine and implement Accountable Care Organizations (ACOs) and other innovative models of care for Medicare and Medicaid beneficiaries, including, without limitation, the Comprehensive ESRD Care Model (CEC Model) (which includes the development of end stage renal disease (ESRD) Seamless Care Organizations), the Duals Demonstration, and other models. We are currently participating in the CEC Model with CMMI, including with organizations in Arizona, Florida, and adjacent markets in New Jersey and Pennsylvania. We may choose to participate in additional models either as a partner with other providers or independently. Even in areas where we are not directly participating in these or other CMMI models, some of our patients may be assigned to an ACO, another ESRD Care Model, or another program, in which case the quality and cost of care that we furnish will be included in an ACO's, another ESRD Care Model's, or other program's calculations.

In addition to the aforementioned new models of care, federal bipartisan legislation related to full capitation demonstration for ESRD was proposed in late 2017 and formally introduced into Congress in September 2020. As proposed, this legislation, the BETTER Kidney Care Act, would build on prior coordinated care models, such as the CEC Model, and

would establish a demonstration program for the provision of integrated care to Medicare fee-for-service dialysis and transplant patients. We have made and continue to make investments in building our integrated care capabilities, but there can be no assurances that initiatives such as this or similar legislation will be passed into law, and the ongoing COVID-19 pandemic may delay the progress of such initiatives. If such legislation is passed, there can be no assurances that we will be able to successfully execute on the required strategic initiatives that would allow us to provide a competitive and successful integrated care program on the broader scale contemplated by this legislation, and in the desired time frame. Additionally, the ultimate terms and conditions of any such potential legislation remain unclear. For example, our costs of care could exceed our associated reimbursement rates under such legislation. The new and evolving landscape for integrated kidney care also has led to opportunities with relative ease of entry for certain smaller and/or non-traditional providers, which may be enhanced by the ongoing global health crisis, and we may be competing with them for patients in an asymmetrical environment with respect to data and/or regulatory requirements given our status as an ESRD service provider. For additional detail on our evolving competitive environment, see the risk factor in our 10-K under the heading "If we are unable to compete successfully, including, without limitation, implementing our growth strategy and/or retaining patients and physicians willing to serve as medical directors, it could materially adversely affect our business, results of operations, financial condition and cash flows." In general, if we are unable to efficiently adjust to these and other new models of care, it may, among other things, erode our patient base or reimbursement rates, which could have a material adverse impact on our business, results of operation, financial condition and cash flows.

~~CMS has also issued final rules related to the 21~~^st ~~Century Cures Act (the Cures Act). The Cures Act~~ included a provision that, effective January 1, 2021, will allow Medicare-eligible beneficiaries with ESRD to choose coverage under a Medicare Part C Medicare Advantage (MA) managed care plan. This provision could broaden access to certain enhanced benefits offered by MA plans. MA plans usually provide reimbursement to us at a negotiated rate that is generally higher than Medicare fee-for-service rates. We continue to evaluate the potential impact of this change in benefit eligibility, as there is significant uncertainty as to how many or which newly eligible ESRD patients will seek to enroll in MA plans for their ESRD benefits and how quickly any such changes would occur. This uncertainty may be heightened by components of the aforementioned final rules, which include a provision that, among other things, removes the objective time and distance standards relating to network adequacy for outpatient dialysis centers for MA plans. The removal of these standards could result in MA plans seeking to limit provider networks available to dialysis patients. We joined a legal challenge contesting the removal of these objective time and distance standards, but if these rules remain implemented as proposed, MA plans could attempt to limit the number of in-network dialysis alternatives available to patients, which may in turn adversely impact the number of ESRD patients that select MA plans and also may result in the Company not being an in-network provider for significant MA plans. If kidney patients choose not to enroll in MA plans or choose to leave MA plans, whether due to network adequacy standards or otherwise, or if we fail to provide education to kidney patients in the manner specified by CMS, we could be subject to certain clinical, operational, financial and legal risks, which could have a material adverse effect on our business, results of operations, financial condition and cash flows. In addition, we continuously negotiate existing and potential new agreements with commercial payors who aggressively negotiate terms with us, and if we fail to maintain contracts with payors with competitive terms, either with respect to MA plans or otherwise, including, without limitation, reimbursement rates, scope and duration of coverage and in-network benefits, it could have a material adverse effect on our business, results of operations, financial condition and cash flows.

The Cures Act also includes provisions related to data interoperability, information blocking, and patient access. CMS and the Office of the National Coordinator for Health Information Technology (ONC) recently issued final rules related to these provisions, which include, among other things, requirements surrounding information blocking, changes to ONC's Health IT Certification Program and requirements that CMS-regulated payors make relevant claims/care data and provider directory information available through standardized patient access and provider directory application programming interfaces (APIs) that connect to provider electronic health records. We have made and continue to make investments in building data interoperability capabilities, including as part of building on our integrated care capabilities as noted above, and continue to evaluate the potential impact of the CMS and ONC final rules. Any failure to adequately comply with these rules may adversely impact our Medicare business, our ability to scale our integrated care business and our ability to compete with certain smaller and/or non-traditional providers taking advantage of an asymmetrical environment with respect to data and/or regulatory requirements given our status as an ESRD service provider.

There have also been several state initiatives to limit payments to dialysis providers or impose other burdensome operational requirements, which, if passed, could have a material adverse impact on our business, results of operation, financial condition and cash flow. For example, on October 24, 2019, the Service Employees International Union - United Healthcare Workers West (SEIU) proposed a California statewide ballot initiative that seeks to impose certain regulatory requirements on dialysis clinics, including requirements related to physician staffing levels, clinical reporting, clinical treatment options and limitations on the ability to make decisions on closing or reducing services for dialysis clinics. We have incurred substantial costs in connection with our opposition of this new initiative (Proposition 23), which will be included on the ballot for the

November 2020 election. In the event that Proposition 23 is passed and implemented as proposed, it would materially increase our operating and other costs and reduce our revenues, and we expect it would require us to close or consolidate existing dialysis centers, postpone or not build new dialysis centers, reduce shifts or otherwise negatively impact employee relations, treatment growth and productivity, and could otherwise have a material adverse effect on our business, results of operations, financial condition and cash flows. Additionally, there can be no assurances that we would be successful in staffing our clinics to any new, elevated staffing levels required by Proposition 23, in particular given the ongoing nationwide shortage of healthcare workers, especially skilled clinical personnel, and the continuing pandemic. In 2018, initiatives seeking to limit reimbursements to dialysis providers were proposed in Ohio and Arizona; however, neither of these initiatives met the applicable requirements for inclusion on the state ballot for the November 2018 elections. We may face ballot initiatives or other proposed regulations or legislation in the future in these or other states in future years, which may require us to incur further substantial costs and which, if passed, could have a material adverse impact on our business, results of operations, financial condition and cash flows.

There have also been rule making and legislative efforts at both the federal and state level concerning charitable premium assistance. In December 2016, CMS published an interim final rule that questioned the use of charitable premium assistance for ESRD patients and would have established new conditions for coverage standards for dialysis facilities. In January 2017, a federal district court in Texas issued a preliminary injunction on CMS' interim final rule and in June 2017, at the request of CMS, the court stayed the proceedings while CMS pursues new rulemaking options. In June 2019, CMS sent to the White House Office of Management and Budget a proposed rule entitled ~~"Conditions for Coverage for End-Stage Renal Disease Facilities-Third Party Payments."~~ We do not know if or when this proposed rule will be released. In addition, on October 13, 2019, a California bill (AB 290) was signed into law that limits the amount of reimbursement paid to certain providers for services provided to patients with commercial insurance who receive charitable premium assistance. AB 290 was expected to become effective in January 2020. The American Kidney Fund (AKF), an organization that provides charitable premium assistance, announced that it would be withdrawing from California as a result of AB 290. On November 1, 2019, AKF filed a lawsuit in federal court challenging the law on several grounds. A group of providers, including DaVita, also filed a lawsuit challenging the law in federal court on November 5, 2019. The parties to each suit also filed motions for preliminary injunctions shortly after filing the lawsuits, seeking to prevent AB 290’s implementation during litigation. On December 30, 2019, the district court granted a preliminary injunction. The preliminary injunction will remain in place until a final judgment is made in the case. The case has been subject to several extensions of time due to the pandemic such that we do not expect a final decision until 2021.

In the event AB 290 becomes effective and the AKF withdraws from California, we expect an adverse impact on the ability of patients to afford Medicare premiums and Medicare supplemental (Medigap) and commercial coverage, which we expect will in turn result in an adverse impact on our business, results of operations, financial condition and cash flows. In addition, bills similar to AB 290 were introduced in Illinois (SB 650) and Oregon (SB 900) in 2019, but have not been successfully passed to date. If these or similar bills are introduced and implemented in other jurisdictions, and organizations that provide charitable premium assistance in those jurisdictions are similarly impacted, it could in the aggregate have a material adverse impact on our business, results of operations, financial condition and cash flows. For additional information on the impact of decreases to the percentage of our patients with commercial insurance, see the risk factor in our 10-K under the heading ~~"If the number of patients with higher-paying commercial insurance declines, it could have a material adverse effect on our business, results of operations, financial condition and cash flows".~~

Among other things, regulatory guidance, proposed legislation and ballot initiatives and any similar initiatives could restrict or prohibit the ability of patients with access to alternative coverage from selecting a marketplace plan on or off exchange, limit the amount of revenue that a dialysis provider can retain for caring for patients with commercial insurance, impose burdensome operational requirements, affect payments made to providers for services provided to patients who receive charitable premium assistance and/or otherwise restrict or prohibit the use of charitable premium assistance, or reduce the standards for network adequacy. In turn, these potential impacts could cause us to incur substantial costs to oppose any such proposed requirements or measures, impact our dialysis center development plans, and if passed and/or implemented, could adversely impact dialysis centers across the U.S. making certain centers economically unviable, lead to the closure of certain centers, restrict the ability of dialysis patients to obtain and maintain optimal insurance coverage and reduce the number of patients that select commercial insurance plans or MA plans for their dialysis care, among other things. Evolving proposed or issued laws, requirements, rules and guidance that impact our business, including as may be described above, could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Share repurchases

The following table summarizes our repurchases of our common stock during the ~~third~~first quarter of ~~2020:~~2021:

Period Total number
of shares
purchased Average price
paid per share Total number
of shares
purchased as
part of publicly
announced
plans or programs Approximate
dollar value of shares that may yet be purchased under the plans or programs
(in millions)
July 1-31, 2020 —
$ —
—
$ 1,400
August 1-31, 2020 —
—
—
$ 1,400
September 1-30, 2020 8,231,679
88.13
8,231,679
$ 677
8,231,679
$ 88.13
8,231,679

In the third quarter of 2020, we used cash on hand to repurchase 7,981,679 shares of common stock under the modified “Dutch auction” tender offer for a total cost of $704 million, including fees and expenses.


Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs
	(dollars and shares in thousands, except per share data)
January 1-31, 2021	578	$	119.94	578	$	1,860,629
February 1-28, 2021	1,085	106.01		1,085	$	1,745,611
March 1-31, 2021	1,286	107.26		1,286	$	1,607,622
	2,949	$	109.28	2,949

Effective ~~as of the close of business~~ on ~~November 4, 2019,~~December 10, 2020, the Board terminated all remaining prior share repurchase authorizations available to us and approved a new share repurchase authorization of $2.0 billion. We are authorized to make purchases from time to time in the open market or in privately negotiated transactions, including without limitation, through accelerated share repurchase transactions, derivative transactions, tender offers, Rule 10b5-1 plans or any combination of the foregoing, depending upon market conditions and other considerations.

As of ~~October~~April 28, ~~2020,~~2021, we had a total of ~~$516 million~~$1.499 billion available under the current authorization for additional share repurchases. Although this share repurchase authorization does not have an expiration date, we remain subject to share repurchase limitations including under our current senior secured credit facilities.

Items 3, 4 and 5 are not applicable

Item 6. Exhibits


Exhibit
Number

~~Exhibit~~
~~Number~~

~~4.1~~31.1		~~Indenture, dated as of August 11, 2020, by and among DaVita Inc., the subsidiary guarantors party thereto and the Bank of New York Mellon Trust Company, N.A., as trustee.(1)~~

~~4.2~~	~~Form of 3.750% Senior Notes due 2031 (included as Exhibit A to the Indenture included as Exhibit 4.1 hereto).(1)~~

~~10.1~~	Form of Stock Appreciation Rights Agreement (DaVita Inc. 2020 Incentive Award Plan).(2)*

~~10.2~~	Form of Performance-Based Restricted Stock Unit Agreement (DaVita Inc. 2020 Incentive Award Plan).(2)*

~~10.3~~	Form of Restricted Stock Unit Agreement (DaVita Inc. 2020 Incentive Award Plan).(2)*

~~10.4~~	Transition Agreement, dated October 1, 2020, by and between DaVita Inc. and LeAnne Zumwalt.*ü

~~31.1~~	Certification of the Chief Executive Officer, dated ~~October~~April 29, ~~2020,~~2021, pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ü

31.2			Certification of the Chief Financial Officer, dated ~~October~~April 29, ~~2020,~~2021, pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ü

32.1			Certification of the Chief Executive Officer, dated ~~October~~April 29, ~~2020,~~2021, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ü

32.2			Certification of the Chief Financial Officer, dated ~~October~~April 29, ~~2020,~~2021, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ü

101.INS			XBRL Instance Document - the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. ü

101.SCH			Inline XBRL Taxonomy Extension Schema Document. ü

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document. ü

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document. ü

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document. ü

101.PRE			Inline XBRL Taxonomy Extension Presentation, Linkbase Document. ü

104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). ü



ü		Filed or furnished herewith.
*	~~Management contract or executive compensation plan or arrangement.~~

~~(1) Filed on August 11, 2020 as an exhibit to the Company's Current Report on Form 8-K.~~

~~(2) Filed on August 17, 2020 as an exhibit to the Company's Tender Offer Statement on Schedule TO-I.~~

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



			DAVITA INC.

			BY:						/s/ JOHN D. WINSTEL
									John D. Winstel
									Chief Accounting Officer*

Date: ~~October~~April 29, ~~2020~~2021



*			Mr. Winstel has signed both on behalf of the Registrant as a duly authorized officer and as the Registrant’s principal accounting officer.



	Three months ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
Dialysis patient service revenues	$	2,781,650		$	2,777,192		$	8,253,128		$	8,130,697
Other revenues	142,416			126,886			392,154			359,198
Total revenues	2,924,066			2,904,078			8,645,282			8,489,895
Operating expenses and charges:
Patient care costs	1,971,719			1,991,172			5,931,732			5,913,860
General and administrative	363,280			298,736			943,065			824,887
Depreciation and amortization	156,894			155,915			468,949			456,685
Equity investment income	(5,496		)	(3,936		)	(27,681		)	(11,158		)
Loss on changes in ownership interest, net	0			0			16,252			0
Goodwill impairment charges	0			83,855			0			124,892
Total operating expenses and charges	2,486,397			2,525,742			7,332,317			7,309,166
Operating income	437,669			378,336			1,312,965			1,180,729
Debt expense	(73,658		)	(88,589		)	(243,642		)	(351,774		)
Debt prepayment, refinancing and redemption charges	(86,074		)	(21,242		)	(89,022		)	(33,402		)
Other income, net	5,395			5,280			10,590			17,863
Income from continuing operations before income taxes	283,332			273,785			990,891			813,416
Income tax expense	65,792			65,254			240,564			197,938
Net income from continuing operations	217,540			208,531			750,327			615,478
Net (loss) income from discontinued operations, net of tax	0			(6,843		)	9,980			102,854
Net income	217,540			201,688			760,307			718,332
Less: Net income attributable to noncontrolling interests	(58,866		)	(58,418		)	(160,438		)	(152,222		)
Net income attributable to DaVita Inc.	$	158,674		$	143,270		$	599,869		$	566,110

Earnings per share attributable to DaVita Inc.:
Basic net income from continuing operations per share	$	1.31		$	1.00		$	4.81		$	2.88
Basic net income per share	$	1.31		$	0.95		$	4.89		$	3.51
Diluted net income from continuing operations per share	$	1.28		$	0.99		$	4.72		$	2.87
Diluted net income per share	$	1.28		$	0.95		$	4.80		$	3.50

Weighted average shares for earnings per share:
Basic	120,905,038			150,675,465			122,582,099			161,147,122
Diluted	123,953,879			151,295,950			124,927,380			161,636,011

Amounts attributable to DaVita Inc.:
Net income from continuing operations	$	158,674		$	150,113		$	589,889		$	464,590
Net (loss) income from discontinued operations	0			(6,843		)	9,980			101,520
Net income attributable to DaVita Inc.	$	158,674		$	143,270		$	599,869		$	566,110



	Three months ended September 30, 2020
	Non- controlling interests subject to put provisions			DaVita Inc. Shareholders’ Equity																			Non- controlling interests not subject to put provisions

				Common stock			Additional paid-in capital			Retained earnings		Treasury stock					Accumulated other comprehensive loss
				Shares	Amount							Shares		Amount						Total
Balance at June 30, 2020	$	1,241,937		126,037	$	126	$	719,102		$	1,872,933	(4,052	)	$	(303,139	)	$	(135,107	)	$	2,153,915		$	179,902
Comprehensive income:
Net income	40,854									158,674										158,674			18,012
Other comprehensive loss																	12,577			12,577
Stock unit shares issued				5			10													10
Stock appreciation rights shares issued				23			(944		)											(944		)
Stock-settled stock-based compensation expense							24,913													24,913
Changes in noncontrolling interest from:
Distributions	(38,154		)																				(22,391		)
Contributions	10,348																						1,924
Acquisitions and divestitures																							1,136
Fair value remeasurements	48,949						(48,949		)											(48,949		)
Purchase of treasury stock												(8,232	)	(725,439		)				(725,439		)
Balance at September 30, 2020	$	1,303,934		126,065	$	126	$	694,132		$	2,031,607	(12,284	)	$	(1,028,578	)	$	(122,530	)	$	1,574,757		$	178,583



	Nine months ended September 30, 2020
	Non- controlling interests subject to put provisions			DaVita Inc. Shareholders’ Equity																			Non- controlling interests not subject to put provisions

				Common stock			Additional paid-in capital			Retained earnings		Treasury stock					Accumulated other comprehensive loss
				Shares	Amount							Shares		Amount						Total
Balance at December 31, 2019	$	1,180,376		125,843	$	126	$	749,043		$	1,431,738	0		$	0		$	(47,498	)	$	2,133,409		$	185,833
Comprehensive income:
Net income	107,737									599,869										599,869			52,701
Other comprehensive loss																	(75,032		)	(75,032		)
Stock unit shares issued				166			(7,141		)											(7,141		)
Stock appreciation rights shares issued				56			(2,004		)											(2,004		)
Stock-settled stock-based compensation expense							66,591													66,591
Changes in noncontrolling interest from:
Distributions	(115,289		)																				(63,809		)
Contributions	24,443																						8,411
Acquisitions and divestitures	(3,214		)																				(247		)
Partial purchases	(6,673		)				4,197													4,197			(4,306		)
Fair value remeasurements	116,554						(116,554		)											(116,554		)
Purchase of treasury stock												(12,284	)	(1,028,578		)				(1,028,578		)
Balance at September 30, 2020	$	1,303,934		126,065	$	126	$	694,132		$	2,031,607	(12,284	)	$	(1,028,578	)	$	(122,530	)	$	1,574,757		$	178,583



	Three months ended September 30, 2019
	Non- controlling interests subject to put provisions			DaVita Inc. Shareholders’ Equity																			Non- controlling interests not subject to put provisions

				Common stock			Additional paid-in capital			Retained earnings		Treasury stock					Accumulated other comprehensive loss
				Shares	Amount							Shares		Amount						Total
Balance at June 30, 2019	$	1,185,733		166,533	$	167	$	989,021		$	3,205,910	(2,060	)	$	(112,189	)	$	(33,611	)	$	4,049,298		$	193,771
Comprehensive income:
Net income	38,778									143,270										143,270			19,640
Other comprehensive loss																	(43,993		)	(43,993		)
Stock unit shares issued				8																0
Stock-settled stock-based compensation expense							18,724													18,724
Changes in noncontrolling interest from:
Distributions	(37,868		)																				(23,588		)
Contributions	8,946																						3,868
Acquisitions and divestitures	(91		)																				10
Partial purchases	8						(202		)											(202		)	246
Fair value remeasurements	100,553						(100,553		)											(100,553		)
Purchase of treasury stock												(30,592	)	(1,747,968		)				(1,747,968		)
Balance at September 30, 2019	$	1,296,059		166,541	$	167	$	906,990		$	3,349,180	(32,652	)	$	(1,860,157	)	$	(77,604	)	$	2,318,576		$	193,947



	Nine months ended September 30, 2019
	Non- controlling interests subject to put provisions			DaVita Inc. Shareholders’ Equity																			Non- controlling interests not subject to put provisions

				Common stock			Additional paid-in capital			Retained earnings		Treasury stock					Accumulated other comprehensive loss
				Shares	Amount							Shares		Amount						Total
Balance at December 31, 2018	$	1,124,641		166,387	$	166	$	995,006		$	2,743,194	0		$	0		$	(34,924	)	$	3,703,442		$	204,956
Cumulative effect of change in accounting principle	(38		)							39,876										39,876			(6		)
Comprehensive income:
Net income	102,078									566,110										566,110			50,144
Other comprehensive loss																	(42,680		)	(42,680		)
Stock unit shares issued				154	1		(3,246		)											(3,245		)
Stock-settled stock-based compensation expense							47,723													47,723
Changes in noncontrolling interest from:
Distributions	(98,103		)																				(59,067		)
Contributions	24,714																						19,381
Acquisitions and divestitures	1,782																						(1,981		)
Partial purchases	(2,240		)				10,732													10,732			(19,480		)
Fair value remeasurements	143,225						(143,225		)											(143,225		)
Purchase of treasury stock												(32,652	)	(1,860,157		)				(1,860,157		)
Balance at September 30, 2019	$	1,296,059		166,541	$	167	$	906,990		$	3,349,180	(32,652	)	$	(1,860,157	)	$	(77,604	)	$	2,318,576		$	193,947



	September 30, 2020		December 31, 2019
APAC joint venture	$	124,209	$	116,924
Other equity method partnerships	110,169		114,611
Adjusted cost method investments	18,105		10,448
	$	252,483	$	241,983



								As of September 30, 2020
	September 30, 2020			December 31, 2019			Maturity date	Interest rate		Estimated fair value⁽¹⁾
Senior Secured Credit Facilities:
Term Loan A⁽²⁾	$	1,706,250		$	1,739,063		8/12/2024	LIBOR + 1.75%		$	1,689,188
Term Loan B-1⁽³⁾	2,722,552			0			8/12/2026	LIBOR + 1.75%		$	2,681,713
Term Loan B⁽³⁾	0			2,743,125			8/12/2026
Revolving line of credit⁽²⁾	0			0			8/12/2024	LIBOR + 1.75%
Senior Notes:
4 ⅝% Senior Notes	1,750,000			0			6/1/2030	4.625	%	$	1,799,018
3 ¾% Senior Notes	1,500,000			0			2/15/2031	3.750	%	$	1,445,625
5 ⅛% Senior Notes	0			1,750,000			7/15/2024
5% Senior Notes	0			1,500,000			5/1/2025
Acquisition obligations and other notes payable⁽⁴⁾	157,864			180,352			2020-2036	5.01	%	$	157,864
Financing lease obligations⁽⁵⁾	274,611			268,534			2021-2038	5.16	%
Total debt principal outstanding	8,111,277			8,181,074
Discount and deferred financing costs	(80,945		)	(72,840		)
	8,030,332			8,108,234
Less current portion	(163,787		)	(130,708		)
	$	7,866,545		$	7,977,526



2020 (remainder of the year)	$	52,092
2021	$	148,821
2022	$	170,566
2023	$	228,303
2024	$	1,421,461
2025	$	63,571
Thereafter	$	6,026,463



						Nine months ended September 30, 2020				Fair value
	Notional amount		LIBOR maximum rate	Effective date	Expiration date	Debt expense		Recorded OCI loss		September 30, 2020		December 31, 2019
2019 cap agreements	$	3,500,000	2.00%	6/30/2020	6/30/2024	$	1,378	$	21,946	$	2,506	$	24,452
2015 cap agreements	$	3,500,000	3.50%	6/29/2018	6/30/2020	$	4,326	$	0	$	0	$	0



	Amount of unrealized losses in OCI on interest rate cap agreements												Income statement location	Reclassification from accumulated other comprehensive loss into net income
	Three months ended September 30,						Nine months ended September 30,							Three months ended September 30,						Nine months ended September 30,
Derivatives designated as cash flow hedges	2020			2019			2020			2019				2020			2019			2020			2019
Interest rate cap agreements	$	(2,169	)	$	(1,420	)	$	(21,946	)	$	(2,244	)	Debt expense	$	1,378		$	2,101		$	5,704		$	6,428
Related income tax	541			360			5,476			572			Related income tax	(344		)	(532		)	(1,424		)	(1,646		)
Total	$	(1,628	)	$	(1,060	)	$	(16,470	)	$	(1,672	)		$	1,034		$	1,569		$	4,280		$	4,782



Current assets	$	17,606
Property and equipment	15,714
Intangible and other long-term assets	14,969
Goodwill	110,248
Deferred income taxes	1,513
Current liabilities	(17,786		)
Noncontrolling interests	(1,729		)
	$	140,535



	September 30, 2020		December 31, 2019
U.S. dialysis (including equity investments of $125,525 and $124,188, respectively)	$	15,549,310	$	15,778,880
Other—Ancillary services (including equity investments of $126,958 and $117,795, respectively)	1,497,362		1,532,514
Consolidated assets	$	17,046,672	$	17,311,394



	Nine months ended						YTD Q3 2020 vs. YTD Q3 2019
	September 30, 2020			September 30, 2019			Amount			Percent
	(dollars in millions)
Revenues:
U.S. dialysis	$	7,986		$	7,876		$	110		1.4	%
Other - ancillary services	777			717			60			8.4	%
Elimination of intersegment revenues	(117		)	(104		)	(13		)	(12.5	)%
Total consolidated revenues	$	8,645		$	8,490		$	155		1.8	%

Operating income (loss):
U.S. dialysis	$	1,485		$	1,417		$	68		4.8	%
Other - ancillary services	(49		)	(170		)	121			71.2	%
Corporate administrative support	(123		)	(66		)	(57		)	(86.4	)%
Operating income	$	1,313		$	1,181		$	132		11.2	%

Adjusted operating income (loss)⁽¹⁾:
U.S. dialysis	$	1,485		$	1,417		$	68		4.8	%
Other - ancillary services	(33		)	(46		)	13			28.3	%
Corporate administrative support	(88		)	(66		)	(22		)	(33.3	)%
Adjusted operating income	$	1,364		$	1,306		$	58		4.4	%



	Three months ended September 30, 2020
	U.S. dialysis		Ancillary services								Corporate administration
	U.S. dialysis		U.S.			International		Total			Corporate administration			Consolidated
	(dollars in millions)
Operating income (loss)	$	471	$	(14	)	$	7	$	(7	)	$	(26	)	$	438
Loss on changes in ownership interests, net	—		—			—		—			—			—
Accrual for legal matters	—		—			—		—			—			—
Adjusted operating income (loss)	$	471	$	(14	)	$	7	$	(7	)	$	(26	)	$	438



	Three months ended June 30, 2020
	U.S. dialysis		Ancillary services								Corporate administration
	U.S. dialysis		U.S.			International		Total			Corporate administration			Consolidated
	(dollars in millions)
Operating income (loss)	$	523	$	(41	)	$	1	$	(40	)	$	(73	)	$	410
Loss on changes in ownership interests, net	—		16			—		16			—			16
Accrual for legal matters	—		—			—		—			35			35
Adjusted operating income (loss)	$	523	$	(25	)	$	1	$	(23	)	$	(38	)	$	461



																	Average interest rate
	Expected maturity date																		Fair Value⁽¹⁾
	2020		2021		2022		2023		2024		2025		Thereafter		Total				Fair Value⁽¹⁾
	(dollars in millions)
Long term debt:
Fixed rate	$	8	$	27	$	35	$	48	$	28	$	29	$	3,444	$	3,619	4.33	%	$	3,339
Variable rate	$	44	$	122	$	136	$	180	$	1,393	$	35	$	2,582	$	4,492	2.13	%	$	4,434