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 June 30, ~~2021~~2022


☐			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) 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

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	☐

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 July ~~30, 2021,~~29, 2022, the number of shares of the ~~Registrant’s~~registrant’s common stock outstanding was approximately ~~104.8~~91.3 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 six months ended June 30, ~~2021~~2022 and June 30, ~~2020~~2021

Consolidated Statements of Comprehensive Income for the three and six months ended June 30, ~~2021~~2022 and June 30, ~~2020~~2021

Consolidated Balance Sheets as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021

Consolidated Statements of Cash Flow for the six months ended June 30 ~~2021~~, 2022 and June 30 ~~2020~~, 2021

Consolidated Statements of Equity for the three and six months ended June 30, ~~2021~~2022 and June 30, ~~2020~~2021

Notes to Condensed Consolidated Financial Statements

Item 2.

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

2321

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

4138

Item 4.

Controls and Procedures

4138

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 June 30,				Six months ended June 30,					Three months ended June 30,				Six months ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Dialysis patient service revenues	Dialysis patient service revenues	$	2,817,957	$	2,758,197	$	5,532,544	$	5,471,478	Dialysis patient service revenues	$	2,810,099	$	2,817,957	$	5,526,380	$	5,532,544
Other revenues	Other revenues	98,553		121,782		203,967		249,738		Other revenues	116,658		98,553		217,932		203,967
Total revenues	Total revenues	2,916,510		2,879,979		5,736,511		5,721,216		Total revenues	2,926,757		2,916,510		5,744,312		5,736,511
Operating expenses:	Operating expenses:									Operating expenses:
Patient care costs	Patient care costs	1,965,277		1,984,564		3,903,607		3,960,013		Patient care costs	2,016,788		1,965,277		4,035,317		3,903,607
General and administrative	General and administrative	298,091		316,209		579,517		579,785		General and administrative	315,219		298,091		610,039		579,517
Depreciation and amortization	Depreciation and amortization	169,689		157,376		335,390		312,055		Depreciation and amortization	171,176		169,689		344,120		335,390
Equity investment income		(7,023)		(4,342)		(15,081)		(22,185)
Loss on changes in ownership interest, net		0		16,252		0		16,252
Equity investment income, net										Equity investment income, net	(9,141)		(7,023)		(16,187)		(15,081)

Total operating expenses	Total operating expenses	2,426,034		2,470,059		4,803,433		4,845,920		Total operating expenses	2,494,042		2,426,034		4,973,289		4,803,433
Operating income	Operating income	490,476		409,920		933,078		875,296		Operating income	432,715		490,476		771,023		933,078
Debt expense	Debt expense	(73,324)		(81,381)		(140,338)		(169,984)		Debt expense	(82,586)		(73,324)		(156,377)		(140,338)
Debt refinancing charges		0		0		0		(2,948)
Other income, net		15,188		9,545		16,356		5,195
Income from continuing operations before income taxes		432,340		338,084		809,096		707,559

Other (loss) income, net										Other (loss) income, net	(1,284)		15,188		(3,070)		16,356
Income before income taxes										Income before income taxes	348,845		432,340		611,576		809,096
Income tax expense	Income tax expense	81,309		83,212		166,520		174,772		Income tax expense	64,229		81,309		121,242		166,520
Net income from continuing operations		351,031		254,872		642,576		532,787
Net income from discontinued operations, net of tax		0		0		0		9,980

Net income	Net income	351,031		254,872		642,576		542,767		Net income	284,616		351,031		490,334		642,576
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	(57,211)		(53,270)		(111,353)		(101,572)		Less: Net income attributable to noncontrolling interests	(59,807)		(57,211)		(103,403)		(111,353)
Net income attributable to DaVita Inc.	Net income attributable to DaVita Inc.	$	293,820	$	201,602	$	531,223	$	441,195	Net income attributable to DaVita Inc.	$	224,809	$	293,820	$	386,931	$	531,223

Earnings per share attributable to DaVita Inc.:	Earnings per share attributable to DaVita Inc.:									Earnings per share attributable to DaVita Inc.:
Basic net income from continuing operations		$	2.76	$	1.65	$	4.94	$	3.49

Basic net income	Basic net income	$	2.76	$	1.65	$	4.94	$	3.57	Basic net income	$	2.38	$	2.76	$	4.06	$	4.94
Diluted net income from continuing operations		$	2.64	$	1.62	$	4.72	$	3.44

Diluted net income	Diluted net income	$	2.64	$	1.62	$	4.72	$	3.52	Diluted net income	$	2.30	$	2.64	$	3.90	$	4.72

Weighted average shares for earnings per share:	Weighted average shares for earnings per share:									Weighted average shares for earnings per share:
Basic shares	Basic shares	106,364		122,074		107,606		123,485		Basic shares	94,457		106,364		95,382		107,606
Diluted shares	Diluted shares	111,423		124,068		112,555		125,479		Diluted shares	97,772		111,423		99,121		112,555

Amounts attributable to DaVita Inc.:
Net income from continuing operations		$	293,820	$	201,602	$	531,223	$	431,215
Net income from discontinued operations		0		0		0		9,980
Net income attributable to DaVita Inc.		$	293,820	$	201,602	$	531,223	$	441,195

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

(dollars in thousands)


		Three months ended June 30,				Six months ended June 30,					Three months ended June 30,				Six months ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Net income	Net income	$	351,031	$	254,872	$	642,576	$	542,767	Net income	$	284,616	$	351,031	$	490,334	$	642,576
Other comprehensive income (loss), net of tax:
Unrealized (losses) gains on interest rate cap agreements:
Unrealized (losses) gains		(2,059)		(1,824)		2,823		(14,842)
Other comprehensive (loss) income, net of tax:										Other comprehensive (loss) income, net of tax:
Unrealized gains (losses) on interest rate cap agreements:										Unrealized gains (losses) on interest rate cap agreements:
Unrealized gains (losses)										Unrealized gains (losses)	13,217		(2,059)		54,349		2,823
Reclassifications of net realized losses into net income	Reclassifications of net realized losses into net income	1,033		1,623		2,066		3,246		Reclassifications of net realized losses into net income	1,033		1,033		2,066		2,066
Unrealized gains (losses) on foreign currency translation		57,910		5,619		(4,634)		(76,013)
Other comprehensive income (loss)		56,884		5,418		255		(87,609)
Unrealized (losses) gains on foreign currency translation:										Unrealized (losses) gains on foreign currency translation:	(91,176)		57,910		(28,964)		(4,634)
Other comprehensive (loss) income										Other comprehensive (loss) income	(76,926)		56,884		27,451		255
Total comprehensive income	Total comprehensive income	407,915		260,290		642,831		455,158		Total comprehensive income	207,690		407,915		517,785		642,831
Less: Comprehensive income attributable to noncontrolling interests	Less: Comprehensive income attributable to noncontrolling interests	(57,211)		(53,270)		(111,353)		(101,572)		Less: Comprehensive income attributable to noncontrolling interests	(59,807)		(57,211)		(103,403)		(111,353)
Comprehensive income attributable to DaVita Inc.	Comprehensive income attributable to DaVita Inc.	$	350,704	$	207,020	$	531,478	$	353,586	Comprehensive income attributable to DaVita Inc.	$	147,883	$	350,704	$	414,382	$	531,478

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

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


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	1,043,632	$	324,958	Cash and cash equivalents	$	262,605	$	461,900
Restricted cash and equivalents	Restricted cash and equivalents	162,846		176,832		Restricted cash and equivalents	93,132		93,060
Short-term investments	Short-term investments	36,701		20,101		Short-term investments	100,489		22,310
Accounts receivable	Accounts receivable	1,947,466		1,824,282		Accounts receivable	2,093,830		1,957,583
Inventories	Inventories	115,369		111,625		Inventories	109,522		107,428
Other receivables	Other receivables	541,430		544,376		Other receivables	502,921		427,321
Prepaid and other current assets	Prepaid and other current assets	69,360		76,387		Prepaid and other current assets	63,539		72,517
Income tax receivable	Income tax receivable	61,782		70,163		Income tax receivable	38,070		25,604
Total current assets	Total current assets	3,978,586		3,148,724		Total current assets	3,264,108		3,167,723
Property and equipment, net of accumulated depreciation of $4,760,572 and $4,480,429, respectively		3,485,600		3,521,824
Property and equipment, net of accumulated depreciation of $4,989,142 and $4,763,135, respectively						Property and equipment, net of accumulated depreciation of $4,989,142 and $4,763,135, respectively	3,304,596		3,479,972
Operating lease right-of-use assets	Operating lease right-of-use assets	2,865,320		2,863,089		Operating lease right-of-use assets	2,771,757		2,824,787
Intangible assets, net of accumulated amortization of $73,215 and $70,141, respectively		162,484		166,585
Intangible assets, net of accumulated amortization of $44,985 and $60,730, respectively						Intangible assets, net of accumulated amortization of $44,985 and $60,730, respectively	184,740		177,693
Equity method and other investments	Equity method and other investments	245,389		257,491		Equity method and other investments	253,457		238,881
Long-term investments	Long-term investments	33,777		32,193		Long-term investments	44,562		49,514
Other long-term assets	Other long-term assets	95,490		79,501		Other long-term assets	257,577		136,677
Goodwill	Goodwill	6,943,665		6,919,109		Goodwill	7,019,778		7,046,241
		$	17,810,311	$	16,988,516		$	17,100,575	$	17,121,488
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Accounts payable	Accounts payable	$	376,264	$	434,253	Accounts payable	$	402,308	$	402,049
Other liabilities	Other liabilities	837,284		810,529		Other liabilities	752,717		709,345
Accrued compensation and benefits	Accrued compensation and benefits	593,859		685,555		Accrued compensation and benefits	559,791		659,960
Current portion of operating lease liabilities	Current portion of operating lease liabilities	382,342		369,497		Current portion of operating lease liabilities	398,421		394,357
Current portion of long-term debt	Current portion of long-term debt	184,435		168,541		Current portion of long-term debt	197,510		179,030
Income tax payable	Income tax payable	11,856		7,768		Income tax payable	—		53,792
Total current liabilities	Total current liabilities	2,386,040		2,476,143		Total current liabilities	2,310,747		2,398,533
Long-term operating lease liabilities	Long-term operating lease liabilities	2,727,323		2,738,670		Long-term operating lease liabilities	2,606,391		2,672,713
Long-term debt	Long-term debt	8,798,263		7,917,263		Long-term debt	9,064,916		8,729,150
Other long-term liabilities	Other long-term liabilities	157,687		150,060		Other long-term liabilities	105,137		119,158
Deferred income taxes	Deferred income taxes	851,961		809,600		Deferred income taxes	852,389		830,954
Total liabilities	Total liabilities	14,921,274		14,091,736		Total liabilities	14,939,580		14,750,508
Commitments and contingencies	Commitments and contingencies					Commitments and contingencies
Noncontrolling interests subject to put provisions	Noncontrolling interests subject to put provisions	1,426,211		1,330,028		Noncontrolling interests subject to put provisions	1,385,821		1,434,832
Equity:	Equity:					Equity:
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		Preferred stock ($0.001 par value, 5,000 shares authorized; none issued)	—		—
Common stock ($0.001 par value, 450,000 shares authorized; 110,644 and 105,625 shares issued and outstanding at June 30, 2021, respectively, and 109,933 shares issued and outstanding at December 31, 2020)		111		110
Common stock ($0.001 par value, 450,000 shares authorized; 98,179 and 92,206 shares issued and outstanding at June 30, 2022, respectively, and 97,289 shares issued and outstanding at December 31, 2021)						Common stock ($0.001 par value, 450,000 shares authorized; 98,179 and 92,206 shares issued and outstanding at June 30, 2022, respectively, and 97,289 shares issued and outstanding at December 31, 2021)	98		97
Additional paid-in capital	Additional paid-in capital	523,038		597,073		Additional paid-in capital	578,272		540,321
Retained earnings	Retained earnings	1,383,760		852,537		Retained earnings	741,268		354,337
Treasury stock (5,019 and zero shares, respectively)		(563,230)		0
Treasury stock (5,973 and zero shares, respectively)						Treasury stock (5,973 and zero shares, respectively)	(603,058)		—
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(65,899)		(66,154)		Accumulated other comprehensive loss	(111,796)		(139,247)
Total DaVita Inc. shareholders' equity	Total DaVita Inc. shareholders' equity	1,277,780		1,383,566		Total DaVita Inc. shareholders' equity	604,784		755,508
Noncontrolling interests not subject to put provisions	Noncontrolling interests not subject to put provisions	185,046		183,186		Noncontrolling interests not subject to put provisions	170,390		180,640
Total equity	Total equity	1,462,826		1,566,752		Total equity	775,174		936,148
		$	17,810,311	$	16,988,516		$	17,100,575	$	17,121,488

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED STATEMENTS OF CASH FLOW

(unaudited)

(dollars in thousands)


		Six months ended June 30,					Six months ended June 30,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	642,576	$	542,767	Net income	$	490,334	$	642,576
Adjustments to reconcile net income to net cash provided by operating activities:	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	Depreciation and amortization	335,390		312,055		Depreciation and amortization	344,120		335,390
Debt refinancing charges		0		884

Stock-based compensation expense	Stock-based compensation expense	51,717		42,125		Stock-based compensation expense	50,109		51,717
Deferred income taxes	Deferred income taxes	40,685		132,101		Deferred income taxes	9,069		40,685
Equity investment income, net		(2,764)		(6,494)
Loss on sales of business interests, net		0		16,252
Equity investment loss (income), net						Equity investment loss (income), net	90		(2,764)

Other non-cash charges, net	Other non-cash charges, net	1,274		(5,885)		Other non-cash charges, net	(32,858)		1,274
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:					Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
Accounts receivable	Accounts receivable	(117,171)		15,194		Accounts receivable	(132,043)		(117,171)
Inventories	Inventories	(3,270)		(696)		Inventories	(1,927)		(3,270)
Other receivables and prepaid and other current assets	Other receivables and prepaid and other current assets	14,465		(131,988)		Other receivables and prepaid and other current assets	(61,811)		14,465
Other long-term assets	Other long-term assets	(13,706)		1,950		Other long-term assets	(49,093)		(13,706)
Accounts payable	Accounts payable	(47,390)		(15,858)		Accounts payable	24,517		(47,390)
Accrued compensation and benefits	Accrued compensation and benefits	(90,381)		(19,325)		Accrued compensation and benefits	(102,513)		(90,381)
Other current liabilities	Other current liabilities	25,090		146,490		Other current liabilities	42,517		25,090
Income taxes	Income taxes	10,753		(4,800)		Income taxes	(63,638)		10,753
Other long-term liabilities	Other long-term liabilities	(13,232)		(13,269)		Other long-term liabilities	(6,557)		(13,232)
Net cash provided by operating activities	Net cash provided by operating activities	834,036		1,011,503		Net cash provided by operating activities	510,316		834,036
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Additions of property and equipment	Additions of property and equipment	(294,438)		(291,667)		Additions of property and equipment	(265,461)		(294,438)
Acquisitions	Acquisitions	(23,890)		(44,267)		Acquisitions	(9,491)		(23,890)
Proceeds from asset and business sales	Proceeds from asset and business sales	29,774		70,615		Proceeds from asset and business sales	114,829		29,774
Purchase of debt investments held-to-maturity	Purchase of debt investments held-to-maturity	(7,923)		(142,483)		Purchase of debt investments held-to-maturity	(89,530)		(7,923)
Purchase of other debt and equity investments	Purchase of other debt and equity investments	(2,164)		(3,034)		Purchase of other debt and equity investments	(3,010)		(2,164)
Proceeds from debt investments held-to-maturity	Proceeds from debt investments held-to-maturity	7,923		7,621		Proceeds from debt investments held-to-maturity	8,415		7,923
Proceeds from sale of other debt and equity investments	Proceeds from sale of other debt and equity investments	11,908		3,438		Proceeds from sale of other debt and equity investments	3,775		11,908

Purchase of equity method investments	Purchase of equity method investments	(6,029)		(8,101)		Purchase of equity method investments	(23,806)		(6,029)
Distributions from equity method investments	Distributions from equity method investments	1,140		739		Distributions from equity method investments	1,047		1,140
Net cash used in investing activities	Net cash used in investing activities	(283,699)		(407,139)		Net cash used in investing activities	(263,232)		(283,699)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Borrowings	Borrowings	1,611,086		2,324,300		Borrowings	1,182,911		1,611,086
Payments on long-term debt	Payments on long-term debt	(754,407)		(635,695)		Payments on long-term debt	(841,687)		(754,407)
Deferred financing costs		(9,089)		(20,375)
Deferred financing and debt redemption costs						Deferred financing and debt redemption costs	—		(9,089)
Purchase of treasury stock	Purchase of treasury stock	(560,507)		(321,798)		Purchase of treasury stock	(617,432)		(560,507)
Distributions to noncontrolling interests	Distributions to noncontrolling interests	(99,362)		(118,553)		Distributions to noncontrolling interests	(118,315)		(99,362)
Net payments related to stock purchases and awards	Net payments related to stock purchases and awards	(43,605)		(2,106)		Net payments related to stock purchases and awards	(47,866)		(43,605)
Contributions from noncontrolling interests	Contributions from noncontrolling interests	15,925		20,582		Contributions from noncontrolling interests	9,116		15,925

Proceeds from sales of additional noncontrolling interests						Proceeds from sales of additional noncontrolling interests	3,673		—
Purchases of noncontrolling interests	Purchases of noncontrolling interests	(4,493)		(6,782)		Purchases of noncontrolling interests	(15,365)		(4,493)
Net cash provided by financing activities		155,548		1,239,573
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(444,965)		155,548
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,197)		(16,936)		Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,342)		(1,197)
Net increase in cash, cash equivalents and restricted cash		704,688		1,827,001
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		704,688		1,827,001
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		$	1,206,478	$	3,035,719
Net (decrease) increase in cash, cash equivalents and restricted cash						Net (decrease) increase in cash, cash equivalents and restricted cash	(199,223)		704,688
Cash, cash equivalents and restricted cash at beginning of the year						Cash, cash equivalents and restricted cash at beginning of the year	554,960		501,790
Cash, cash equivalents and restricted cash at end of the period						Cash, cash equivalents and restricted cash at end of the period	$	355,737	$	1,206,478

See notes to condensed consolidated financial statements.

DAVITA INC.

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)

(dollars and shares in thousands)


		Three months ended June 30, 2021																																											Three months ended June 30, 2022
		Non- controlling interests subject to put provisions				DaVita Inc. Shareholders’ Equity																																			Non- controlling interests not subject to put provisions				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														Common stock								Additional paid-in capital				Retained earnings				Treasury stock								Accumulated other comprehensive loss
						Shares		Amount									Shares								Amount								Total															Shares			Amount								Shares								Amount					Total
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
Balance at March 31, 2022																																											Balance at March 31, 2022			$	1,390,757			97,342				$	97		$	595,403				$	516,459			(2,104)				$	(233,318)			$	(34,870)			$	843,771			$	174,552
Comprehensive income:	Comprehensive income:																																										Comprehensive income:
Net income	Net income	44,992															293,820																				293,820					12,219		Net income		45,571																224,809																224,809			14,236
Other comprehensive income																															56,884					56,884
Stock award plans						617		1					(44,907)																							(44,906)

Other comprehensive loss																																											Other comprehensive loss																														(76,926)				(76,926)

Stock award plan																																											Stock award plan						837				1			(50,885)																					(50,884)
Stock-settled stock-based compensation expense	Stock-settled stock-based compensation expense												26,958																							26,958							Stock-settled stock-based compensation expense													25,590																					25,590
Changes in noncontrolling interest from:	Changes in noncontrolling interest from:																																										Changes in noncontrolling interest from:
Distributions	Distributions	(29,983)																																								(15,512)		Distributions		(34,378)																																			(18,485)
Contributions	Contributions	3,094																																							2,142		Contributions		4,107																																			80
Acquisitions and divestitures	Acquisitions and divestitures																																								1,249		Acquisitions and divestitures		(29)											56																					56
Partial purchases	Partial purchases	(351)											(2,886)																							(2,886)					(161)		Partial purchases		(10,596)											(1,496)																					(1,496)
Fair value remeasurements	Fair value remeasurements	59,299											(59,299)																							(59,299)							Fair value remeasurements		(9,604)											9,604																					9,604
Other																																											Other		(7)																																			7
Purchase of treasury stock	Purchase of treasury stock																					(2,070)				(240,897)										(240,897)							Purchase of treasury stock																						(3,869)				(369,740)								(369,740)
Balance at June 30, 2021		$	1,426,211			110,644		$	111				$	523,038			$	1,383,760				(5,019)				$	(563,230)				$	(65,899)				$	1,277,780				$	185,046

Balance at June 30, 2022																																											Balance at June 30, 2022		$	1,385,821			98,179				$	98		$	578,272				$	741,268			(5,973)				$	(603,058)			$	(111,796)			$	604,784		$	170,390


	Six months ended June 30, 2022
	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, 2021	$	1,434,832	97,289	$	97	$	540,321	$	354,337	—	$	—	$	(139,247)	$	755,508	$	180,640
Comprehensive income:
Net income	73,952							386,931							386,931		29,451

Other comprehensive income													27,451		27,451

Stock award plan			890	1		(54,373)									(54,372)
Stock-settled stock-based compensation expense						50,216									50,216
Changes in noncontrolling interest from:
Distributions	(77,259)																(41,056)
Contributions	7,304																1,812
Acquisitions and divestitures	2,392					939									939
Partial purchases	(11,418)					(3,270)									(3,270)
Fair value remeasurements	(44,439)					44,439									44,439
Other	457														0		(457)
Purchase of treasury stock										(5,973)	(603,058)				(603,058)
Balance at June 30, 2022	$	1,385,821	98,179	$	98	$	578,272	$	741,268	(5,973)	$	(603,058)	$	(111,796)	$	604,784	$	170,390

See notes to condensed consolidated financial statements.

Six months ended June 30, 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 80,592 531,223 531,223 30,761
Other comprehensive income 255 255
Stock award plans 711 1 (51,177) (51,176)
Stock-settled stock-based
compensation expense 50,513 50,513
Changes in noncontrolling
interest from:
Distributions (64,242) (35,120)
Contributions 10,789 5,136
Acquisitions and divestitures 0 1,249
Partial purchases (552) (3,775) (3,775) (166)
Fair value remeasurements 69,596 (69,596) (69,596)
Purchase of treasury stock (5,019) (563,230) (563,230)
Balance at June 30, 2021 $ 1,426,211 110,644 $ 111 $ 523,038 $ 1,383,760 (5,019) $ (563,230) $ (65,899) $ 1,277,780 $ 185,046

Three months ended June 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 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
Comprehensive income:
Net income 34,707 201,602 201,602 18,563
Other comprehensive income 5,418 5,418
Stock award plan 180 (7,891) (7,891)
Stock-settled stock-based
compensation expense 21,881 21,881
Changes in noncontrolling
interest from:
Distributions (39,569) (20,853)
Contributions 8,812 2,383
Acquisitions and divestitures (3,214) (1,383)
Partial purchases (6,418) 4,642 4,642 (4,306)
Fair value remeasurements 19,583 (19,583) (19,583)
Purchase of treasury stock 0 0 0
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
DAVITA INC.

CONSOLIDATED STATEMENTS OF EQUITY

Six months ended June 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 66,883 441,195 441,195 34,689
Other comprehensive loss (87,609) (87,609)
Stock award plan 194 (8,211) (8,211)
Stock-settled stock-based
compensation expense 41,678 41,678
Changes in noncontrolling
interest from:
Distributions (77,135) (41,418)
Contributions 14,095 6,487
Acquisitions and divestitures (3,214) (1,383)
Partial purchases (6,673) 4,197 4,197 (4,306)
Fair value remeasurements 67,605 (67,605) (67,605)
Purchase of treasury stock (4,052) (303,139) (303,139)
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
(unaudited)

(dollars and shares in thousands)


	Three months ended June 30, 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 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
Comprehensive income:
Net income	44,992							293,820							293,820		12,219
Other comprehensive income													56,884		56,884

Stock award plans			617	1		(44,907)									(44,906)
Stock-settled stock-based compensation expense						26,958									26,958
Changes in noncontrolling interest from:
Distributions	(29,983)																(15,512)
Contributions	3,094																2,142
Acquisitions and divestitures																	1,249
Partial purchases	(351)					(2,886)									(2,886)		(161)
Fair value remeasurements	59,299					(59,299)									(59,299)
Purchase of treasury stock										(2,070)	(240,897)				(240,897)


Balance at June 30, 2021	$	1,426,211	110,644	$	111	$	523,038	$	1,383,760	(5,019)	$	(563,230)	$	(65,899)	$	1,277,780	$	185,046


	Six months ended June 30, 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	—	$	—	$	(66,154)	$	1,383,566	$	183,186
Comprehensive income:
Net income	80,592							531,223							531,223		30,761
Other comprehensive income													255		255

Stock award plans			711	1		(51,177)									(51,176)
Stock-settled stock-based compensation expense						50,513									50,513
Changes in noncontrolling interest from:
Distributions	(64,242)																(35,120)
Contributions	10,789																5,136
Acquisitions and divestitures																	1,249
Partial purchases	(552)					(3,775)									(3,775)		(166)
Fair value remeasurements	69,596					(69,596)									(69,596)
Purchase of treasury stock										(5,019)	(563,230)				(563,230)


Balance at June 30, 2021	$	1,426,211	110,644	$	111	$	523,038	$	1,383,760	(5,019)	$	(563,230)	$	(65,899)	$	1,277,780	$	185,046

See notes to condensed consolidated financial ~~statements~~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

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, contingencies and 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,~~certain fair value estimates, 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, ~~2020 (2020~~2021 (2021 10-K). Prior period classifications ~~have been conformed~~conform 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

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


		Three months ended June 30, 2021						Three months ended June 30, 2020							Three months ended June 30, 2022						Three months ended June 30, 2021
		U.S. dialysis		Other - Ancillary services		Consolidated		U.S. dialysis		Other - Ancillary services		Consolidated			U.S. dialysis		Other — Ancillary services		Consolidated		U.S. dialysis		Other — Ancillary services		Consolidated
Dialysis patient service revenues:	Dialysis patient service revenues:													Dialysis patient service revenues:
Medicare and Medicare Advantage~~(1)~~	Medicare and Medicare Advantage~~(1)~~	$	1,562,164	$		$	1,562,164	$	1,547,113	$		$	1,547,113	Medicare and Medicare Advantage~~(1)~~	$	1,529,534	$		$	1,529,534	$	1,562,164	$		$	1,562,164
Medicaid and Managed Medicaid	Medicaid and Managed Medicaid	194,641				194,641		182,324				182,324		Medicaid and Managed Medicaid	186,873				186,873		194,641				194,641
Other government~~(1)~~	Other government~~(1)~~	82,317		118,464		200,781		86,954		90,813		177,767		Other government~~(1)~~	86,079		116,653		202,732		82,317		118,464		200,781
Commercial	Commercial	830,801		50,817		881,618		850,558		35,557		886,115		Commercial	854,662		55,708		910,370		830,801		50,817		881,618
Other revenues:	Other revenues:													Other revenues:
Medicare and Medicare Advantage	Medicare and Medicare Advantage			80,211		80,211				99,829		99,829		Medicare and Medicare Advantage			93,262		93,262				80,211		80,211
Medicaid and Managed Medicaid	Medicaid and Managed Medicaid			305		305				283		283		Medicaid and Managed Medicaid			232		232				305		305
Commercial	Commercial			1,189		1,189				9,050		9,050		Commercial			8,207		8,207				1,189		1,189
Other~~(2)~~(1)	Other~~(2)~~(1)	6,415		10,503		16,918		7,995		9,103		17,098		Other~~(2)~~(1)	6,092		8,844		14,936		6,415		10,503		16,918
Eliminations of intersegment revenues	Eliminations of intersegment revenues	(21,317)		0		(21,317)		(35,429)		(4,171)		(39,600)		Eliminations of intersegment revenues	(19,389)		0		(19,389)		(21,317)		—		(21,317)
Total	Total	$	2,655,021	$	261,489	$	2,916,510	$	2,639,515	$	240,464	$	2,879,979	Total	$	2,643,851	$	282,906	$	2,926,757	$	2,655,021	$	261,489	$	2,916,510

(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 June 30, 2020 has also been recast to conform to the current period presentation.

~~(2)~~Other primarily consists of management service fees earned in the respective Company line of business as well as other non-patient service revenue from the Company's U.S. ancillary ~~services.~~services and international operations.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

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


		Six months ended June 30, 2021						Six months ended June 30, 2020							Six months ended June 30, 2022						Six months ended June 30, 2021
		U.S. dialysis		Other - Ancillary services		Consolidated		U.S. dialysis		Other - Ancillary services		Consolidated			U.S. dialysis		Other - Ancillary services		Consolidated		U.S. dialysis		Other - Ancillary services		Consolidated
Dialysis patient service revenues:	Dialysis patient service revenues:													Dialysis patient service revenues:
Medicare and Medicare Advantage~~(1)~~	Medicare and Medicare Advantage~~(1)~~	$	3,042,461	$		$	3,042,461	$	3,078,146	$		$	3,078,146	Medicare and Medicare Advantage~~(1)~~	$	2,993,621	$		$	2,993,621	$	3,042,461	$		$	3,042,461
Medicaid and Managed Medicaid	Medicaid and Managed Medicaid	381,884				381,884		353,791				353,791		Medicaid and Managed Medicaid	376,528				376,528		381,884				381,884
Other government~~(1)~~	Other government~~(1)~~	162,501		225,293		387,794		170,052		185,387		355,439		Other government~~(1)~~	166,879		233,548		400,427		162,501		225,293		387,794
Commercial	Commercial	1,666,280		102,315		1,768,595		1,676,140		75,024		1,751,164		Commercial	1,689,240		108,132		1,797,372		1,666,280		102,315		1,768,595
Other revenues:	Other revenues:													Other revenues:
Medicare and Medicare Advantage	Medicare and Medicare Advantage			165,807		165,807				198,307		198,307		Medicare and Medicare Advantage			176,859		176,859				165,807		165,807
Medicaid and Managed Medicaid	Medicaid and Managed Medicaid			605		605				649		649		Medicaid and Managed Medicaid			769		769				605		605
Commercial	Commercial			7,223		7,223				19,571		19,571		Commercial			9,546		9,546				7,223		7,223
Other~~(2)~~(1)	Other~~(2)~~(1)	13,091		21,665		34,756		13,438		26,705		40,143		Other~~(2)~~(1)	12,068		18,680		30,748		13,091		21,665		34,756
Eliminations of intersegment revenues	Eliminations of intersegment revenues	(48,320)		(4,294)		(52,614)		(67,670)		(8,324)		(75,994)		Eliminations of intersegment revenues	(41,558)		0		(41,558)		(48,320)		(4,294)		(52,614)
Total	Total	$	5,217,897	$	518,614	$	5,736,511	$	5,223,897	$	497,319	$	5,721,216	Total	$	5,196,778	$	547,534	$	5,744,312	$	5,217,897	$	518,614	$	5,736,511

(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 six months ended June 30, 2020 has also been recast to conform to the current period presentation.

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 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. AThe Company maintains a usual and customary fee schedule ~~is maintained~~ for ~~the Company’s~~its 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 revenues earned by the Company's non-dialysis ancillary services as well as 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~~consolidate. Other 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. The Company's U.S. ancillary service revenues include revenues earned under risk-based arrangements in the Company's integrated kidney care (IKC) business, including value-based care (VBC) arrangements. Under its VBC arrangements, the Company assumes full or shared financial risk for the total medical cost of care for patients below or above a benchmark. The benchmarks against which the Company incurs profit or loss on these contracts are typically based on the underlying premiums paid to the insuring entity (our counterparty), with adjustments where applicable, or on trended or adjusted medical cost targets.

~~DAVITA INC.~~

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

~~(unaudited)~~

~~(dollars and shares in thousands, except 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.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

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

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

Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Net income attributable to DaVita Inc.:
Continuing operations $ 293,820 $ 201,602 $ 531,223 $ 431,215
Discontinued operations 0 0 0 9,980
Net income attributable to DaVita Inc. $ 293,820 $ 201,602 $ 531,223 $ 441,195
Weighted average shares outstanding:
Basic shares 106,364 122,074 107,606 123,485
Assumed incremental from stock plans 5,059 1,994 4,949 1,994
Diluted shares 111,423 124,068 112,555 125,479
Basic net income attributable to DaVita Inc.:
Continuing operations per share $ 2.76 $ 1.65 $ 4.94 $ 3.49
Discontinued operations per share 0 0 0 0.08
Basic net income per share attributable to DaVita Inc. $ 2.76 $ 1.65 $ 4.94 $ 3.57
Diluted net income attributable to DaVita Inc.:
Continuing operations per share $ 2.64 $ 1.62 $ 4.72 $ 3.44
Discontinued operations per share 0 0 0 0.08
Diluted net income per share attributable to DaVita Inc. $ 2.64 $ 1.62 $ 4.72 $ 3.52
Anti-dilutive stock-settled awards excluded from calculation(1)
141 3,216 84 3,211


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021


Net income attributable to DaVita Inc.	$	224,809	$	293,820	$	386,931	$	531,223

Weighted average shares outstanding:
Basic shares	94,457		106,364		95,382		107,606
Assumed incremental from stock plans	3,315		5,059		3,739		4,949
Diluted shares	97,772		111,423		99,121		112,555



Basic net income per share attributable to DaVita Inc.	$	2.38	$	2.76	$	4.06	$	4.94



Diluted net income per share attributable to DaVita Inc.	$	2.30	$	2.64	$	3.90	$	4.72

Anti-dilutive stock-settled awards excluded from calculation(1)	1,201		141		686		84

(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

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


		June 30, 2021						December 31, 2020							June 30, 2022						December 31, 2021
		Debt securities		Equity securities		Total		Debt securities		Equity securities		Total			Debt securities		Equity securities		Total		Debt securities		Equity securities		Total
Certificates of deposit and other time deposits	Certificates of deposit and other time deposits	$	8,222	$	0	$	8,222	$	8,217	$	0	$	8,217	Certificates of deposit and other time deposits	$	104,837	$	—	$	104,837	$	23,226	$	—	$	23,226
Investments in mutual funds and common stocks	Investments in mutual funds and common stocks	0		62,256		62,256		0		44,077		44,077		Investments in mutual funds and common stocks	—		40,214		40,214		—		48,598		48,598
		$	8,222	$	62,256	$	70,478	$	8,217	$	44,077	$	52,294		$	104,837	$	40,214	$	145,051	$	23,226	$	48,598	$	71,824
Short-term investments	Short-term investments	$	8,222	$	28,479	$	36,701	$	8,217	$	11,884	$	20,101	Short-term investments	$	89,830	$	10,659	$	100,489	$	8,227	$	14,083	$	22,310
Long-term investments	Long-term investments	0		33,777		33,777		0		32,193		32,193		Long-term investments	15,007		29,555		44,562		14,999		34,515		49,514
		$	8,222	$	62,256	$	70,478	$	8,217	$	44,077	$	52,294		$	104,837	$	40,214	$	145,051	$	23,226	$	48,598	$	71,824

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~~held-to-maturity and recorded at amortized cost, which approximated their fair values at June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

Equity securities: ~~For the quarter ended June 30, 2021~~The Company holds certain ~~of the Company’s~~ equity investments ~~previously accounted for under the adjusted cost method now~~that have readily determinable fair values from public markets. As a result, these investments were reclassified from equity method and other investments to short-term investments during the quarter ended June 30, 2021. The Company recognized $8,328 in net unrealized gains on these investments during the three months ended June 30, 2021, which were valued at $25,579 as of June 30, 2021. The Company's remaining short-term and long-term equity investments are held within a trust to fund existing obligations associated with the Company’s non-qualified deferred compensation plans.

~~5. Goodwill~~

~~Changes in goodwill by reportable segments were as follows:~~

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 3,481 24,842 28,323
Foreign currency and other adjustments 0 (3,767) (3,767)
Balance at June 30, 2021 $ 6,313,409 $ 630,256 $ 6,943,665
Balance at June 30, 2021:
Goodwill $ 6,313,409 $ 762,407 $ 7,075,816
Accumulated impairment charges 0 (132,151) (132,151)
$ 6,313,409 $ 630,256 $ 6,943,665

~~The Company did not recognize any goodwill impairment charges during the six months ended June 30, 2021 and 2020.~~

As dialysis treatments are an essential, life-sustaining service for patients who depend on them, the Company's operations have continued 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 such as the Delta variant), its impact on the chronic kidney disease (CKD) patient population and the Company's patient population, the availability, acceptance, impact and efficacy of COVID-19 vaccines and other treatments, or therapies, the pandemic’s continuing impact on the U.S.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

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

5. Goodwill

Changes in goodwill by reportable segments were as follows:


	U.S. dialysis		Other — Ancillary services		Consolidated
Balance at December 31, 2020	$	6,309,928	$	609,181	$	6,919,109
Acquisitions	91,979		81,265		173,244
Divestitures	(1,745)		—		(1,745)
Foreign currency and other adjustments	—		(44,367)		(44,367)
Balance at December 31, 2021	$	6,400,162	$	646,079	$	7,046,241
Acquisitions	—		(1,145)		(1,145)
Divestitures	(87)		(3,126)		(3,213)
Foreign currency and other adjustments	—		(22,105)		(22,105)
Balance at June 30, 2022	$	6,400,075	$	619,703	$	7,019,778

Balance at June 30, 2022:
Goodwill	$	6,400,075	$	736,265	$	7,136,340
Accumulated impairment charges	—		(116,562)		(116,562)
	$	6,400,075	$	619,703	$	7,019,778

The Company did not recognize any goodwill impairment charges during the six months ended June 30, 2022 and 2021.

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 this COVID-19 pandemic on the Company will depend on future developments that are highly uncertain and difficult to predict, 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 such as the Omicron variant and its subvariants; COVID-19's impact on the chronic kidney disease (CKD) patient population and the Company's patient population, including on the mortality of these patients; the availability, acceptance, impact and efficacy of COVID-19 vaccines, treatments, and therapies; the pandemic's continuing impact on the Company's revenue and non-acquired growth due to lower treatment volumes, the U.S. and global economies, labor market conditions, interest rates, inflation and ~~unemployment,~~monetary policies, as well as the Company's ability to successfully implement cost savings initiatives in response; the potential negative impact on the Company's commercial mix or the number of patients covered by commercial insurance plans; continued increased COVID-19-related costs; supply chain challenges and disruptions; the responses of the Company's competitors to the pandemic and related changes in the ~~marketplace, and~~marketplace; the timing, scope and effectiveness of federal, state and local ~~governmental responses.~~government responses to the pandemic; and any potential changes to the extensive set of federal, state and local laws, regulations and requirements that govern the Company's business. 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.

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 June 30, ~~2021.~~2022. 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~~2021 10-K, ~~NaN~~none of the Company's various other reporting units were considered at risk of significant goodwill impairment as of June 30, ~~2021.~~2022.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

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

6. ~~Income taxes~~

The Company's effective tax rate was 18.8% and 24.6% for the three months ended June 30, 2021 and 2020, respectively, and 20.6% and 24.7% for the six months ended June 30, 2021 and 2020, respectively. The decrease in the Company's effective tax rate for the three and six months ended June 30, 2021 compared to the prior year is primarily due to an increase in tax benefits from stock-based compensation deductions in the second quarter of 2021 as well as a reduction in nondeductible advocacy expenses in 2021.

7. Long-term debt

Long-term debt was comprised of the following:


							As of June 30, 2021										As of June 30, 2022
		June 30, 2021		December 31, 2020		Maturity date	Interest rate		Estimated fair value(1)			June 30, 2022		December 31, 2021		Maturity date	Interest rate		Estimated fair value(1)
Senior Secured Credit Facilities:	Senior Secured Credit Facilities:										Senior Secured Credit Facilities:
Term Loan A	Term Loan A	$	1,640,625	$	1,684,375	8/12/2024	LIBOR + 1.50%		$	1,640,625	Term Loan A	$	1,553,125	$	1,596,875	8/12/2024	LIBOR+1.75%		$	1,537,594
Term Loan B-1	Term Loan B-1	2,701,978		2,715,694		8/12/2026	LIBOR + 1.75%		$	2,691,846	Term Loan B-1	2,674,547		2,688,263		8/12/2026	LIBOR+1.75%		$	2,497,358
Revolving line of credit	Revolving line of credit	0		75,000		8/12/2024	LIBOR + 1.50%				Revolving line of credit	425,000		—		8/12/2024	LIBOR+1.75%		$	425,000
Senior Notes:	Senior Notes:										Senior Notes:
4.625% Senior Notes	4.625% Senior Notes	2,750,000		1,750,000		6/1/2030	4.625	%	$	2,825,625	4.625% Senior Notes	2,750,000		2,750,000		6/1/2030	4.625	%	$	2,158,750
3.75% Senior Notes	3.75% Senior Notes	1,500,000		1,500,000		2/15/2031	3.750	%	$	1,443,750	3.75% Senior Notes	1,500,000		1,500,000		2/15/2031	3.75	%	$	1,074,375
Acquisition obligations and other notes payable(2)	Acquisition obligations and other notes payable(2)	151,425		164,160		2021-2036	4.99	%	$	151,425	Acquisition obligations and other notes payable(2)	125,035		130,599		2022-2036	5.24	%	$	125,035
Financing lease obligations(3)	Financing lease obligations(3)	301,535		274,292		2022-2038	4.68	%			Financing lease obligations(3)	285,279		299,128		2023-2038	4.54	%
Total debt principal outstanding	Total debt principal outstanding	9,045,563		8,163,521							Total debt principal outstanding	9,312,986		8,964,865
Discount, premium and deferred financing costs(4)	Discount, premium and deferred financing costs(4)	(62,865)		(77,717)							Discount, premium and deferred financing costs(4)	(50,560)		(56,685)
		8,982,698		8,085,804								9,262,426		8,908,180
Less current portion	Less current portion	(184,435)		(168,541)							Less current portion	(197,510)		(179,030)
		$	8,798,263	$	7,917,263							$	9,064,916	$	8,729,150

(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~~variable interest rate components in effect as of June 30, ~~2021.~~2022.

(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 June 30, 2022, the carrying amount of the Company's senior secured credit facilities have been reduced by a discount of $3,983 and deferred financing costs of $22,983, and the carrying amount of the Company's senior notes have been reduced by deferred financing costs of $38,558 and increased by a debt premium of $14,964. As of December 31, 2021, the carrying amount of the Company's senior secured credit facilities iswere reduced by a discount of ~~$4,965~~$4,473 and deferred financing costs of ~~$31,488~~$27,207, and the carrying amount of the Company's senior notes iswere reduced by deferred financing costs of ~~$43,266~~$40,914 and increased by a debt premium of ~~$16,854. As of December 31, 2020, the carrying amount of the Company's senior secured~~$15,909.

~~DAVITA INC.~~

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

~~(unaudited)~~

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

~~credit facilities is reduced by a discount of $5,461 and deferred financing costs of $35,825, and the carrying amount of the Company's senior notes is reduced by deferred financing costs of $36,431.~~

During the first six months of ~~2021,~~2022, the Company made regularly scheduled mandatory principal payments under its senior secured credit facilities totaling $43,750 on Term Loan A and $13,716 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, and began bearing full six months' semi-annual coupon interest payments as of 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 six months ended June 30, 2021, the Company incurred $9,089 in fees and other professional expenses associated with this transaction, which were capitalized and will amortize over the term of the Additional 2030 Notes.

As of June 30, ~~2021,~~2022, 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 Term Loan B-1 and a portion of Term Loan A. The remaining ~~$842,603~~$727,672 outstanding principal balance of Term Loan A isand the $425,000 balance outstanding on the revolving line of credit are subject to LIBOR-based interest rate volatility. These cap agreements are designated as cash flow hedges and, as a result, changes in ~~the~~their 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.

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 interest rate cap agreements outstanding as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, which are classified in "Other long-term assets" on its consolidated balance sheet:

Six months ended
June 30, 2021 Fair value
Notional amount LIBOR maximum rate Effective date Expiration date Debt expense Recorded OCI gain June 30,
2021 December 31, 2020
2019 cap agreements $ 3,500,000 2.00% 6/30/2020 6/30/2024 $ 2,754 $ 3,761 $ 6,432 $ 2,671


						Six months ended June 30, 2022				Fair value
	Notional amount		LIBOR maximum rate	Effective date	Expiration date	Debt expense		Recorded OCI gain		June 30, 2022		December 31, 2021
2019 cap agreements	$	3,500,000	2.00%	6/30/2020	6/30/2024	$	2,754	$	72,416	$	84,619	$	12,203

See Note 109 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 six months ended June 30, ~~2021~~2022 and ~~2020.~~2021.

The Company’s weighted average effective interest rate on its senior secured credit facilities at the end of the second quarter of ~~2021~~2022 was ~~2.16%~~3.77%, based on the current margins in effect for its senior secured credit facilities as of June 30, ~~2021,~~2022, as ~~described~~detailed in the table above.

The Company’s overall weighted average effective interest rate for the three and six months ended June 30, ~~2021~~2022 was ~~3.36%~~3.68% and ~~3.22%~~3.41%, ~~respectively,~~ and as of June 30, ~~2021~~2022 was ~~3.33%~~4.10%.

As of June 30, ~~2021,~~2022, the Company’s interest rates were fixed on approximately ~~51%~~50% of its total debt.

As of June 30, ~~2021,~~2022, the Company had ~~an undrawn~~$575,000 available and $425,000 drawn on its $1,000,000 revolving line of credit under its senior secured credit facilities. Credit available under this facility is reduced by the amount of any letters of credit outstanding under this facility, of which there were ~~NaN~~none as of June 30, ~~2021.~~2022. The Company also had approximately ~~$69,405 of outstanding~~$108,070 in letters of credit outstanding under a separate bilateral secured letter of credit facility as of June 30, ~~2021.~~2022.

8.7. Commitments and contingencies

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

~~DAVITA INC.~~

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

~~(unaudited)~~

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

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, 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 June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, 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 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.

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

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

Certain Governmental Inquiries and 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 government’s investigation covers the period from January 1, 2006 through December 31, 2018. In December 2017, the Company finalized and executed a settlement agreement that resolved certain of the issues in the 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 is ongoing with respect to issues related to DaVita Rx’s historic relationships with certain pharmaceutical manufacturers, and in July 2018 the Office of Inspector General (OIG) served the Company with a subpoena seeking additional documents and information relating to those relationships. On September 15, 2021, the U.S. Attorney’s Office notified the U.S. District Court, Northern District of Texas, of its decision and the decision of 31 states not to elect to intervene at this time in the matter of U.S. ex rel. Doe v. DaVita Inc., et al. The court then unsealed the complaint, which alleges violations of the FCA, by order dated September 17, 2021. The complaint was not served on the Company. In December 2021, the private party relator filed a notice of voluntary dismissal of all claims and the court entered an order dismissing the claims without prejudice. The Company is continuing to cooperate with the government in this investigation.

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, May 2019, and July 2021, 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~~

~~DAVITA INC.~~

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

~~(unaudited)~~

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

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. The Company is ~~cooperating~~continuing to cooperate 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~~2020 and an additional subpoena ~~as revised, requests~~in September 2021. Those subpoenas request 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 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~~continuing to cooperate 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~~an FCA 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~~continuing to cooperate 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~~ongoing discussions with regulators and to develop over the course of time. In addition to the inquiries and proceedings specifically identified above, the Company

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

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

frequently is subject to other inquiries by state or federal government agencies, 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, an impact on the Company's various relationships and/or contracts related to the Company's business, 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.

Other Proceedings

2021 Antitrust Indictment and Putative Class Action Suit: On July 14, 2021, an indictment was returned by a grand jury in the U.S. District Court, District of Colorado against the Company and its former chief executive officer in the matter of U.S. v. DaVita Inc., et al. ~~The two count indictment alleges~~alleging that purported agreements entered into by ~~its~~DaVita's former chief executive officer not to solicit senior-level employees ~~violate~~violated Section 1 of the Sherman Act. On ~~July 16,~~April 15, 2022, a jury returned a verdict in the Company’s favor, acquitting both the Company and its former chief executive officer on all counts. On April 20, 2022, the court entered judgments of acquittal and closed the case. On August 9, 2021, DaVita and its former chief executive officer were added as defendants in a ~~former DaVita employee filed a~~consolidated putative class action complaint in the matter of ~~Pena v. Surgical Care Affiliates, LLC~~, ~~et al.~~In re Outpatient Medical Center Employee Antitrust Litigation in the U.S. District Court, Northern District of ~~Illinois based on~~Illinois. This class action complaint asserts that the ~~allegations in~~defendants violated Section 1 of the ~~matter of~~ ~~U.S. v. DaVita Inc., et al. The complaint~~Sherman Act and seeks to bring an action on behalf of ~~the defendant and similarly situated~~certain groups of individuals ~~including without limitation those~~ employed by the Company between February 1, 2012 ~~through June 30, 2019 as senior-level employees.~~and January 5, 2021. On October 18, 2021, the Company filed a motion to dismiss the class action complaint. The Company disputes the allegations in ~~the indictment and~~ the class action complaint, as well as the asserted violations of the Sherman Act, and intends to defend ~~these actions~~this action accordingly.

Marietta Memorial Hospital Employee Health Benefit Plan, et al. v. DaVita Inc. et al. No. 20-1641: On November 5, 2021, the United States Supreme Court granted certiorari of an appeal by an employer group health plan, the plan sponsor, and the plan’s advisor of the U.S. Court of Appeals for the Sixth Circuit (Sixth Circuit) decision in the Company's favor. The questions presented involved whether the health plan violates the Medicare Secondary Payor Act (MSPA) by "taking into account" that plan beneficiaries are eligible for Medicare and/or by "differentiating" between the benefits that the plan offers to patients with dialysis versus others. On December 23, 2021, the Solicitor General on behalf of the United States filed an amicus brief supporting the petitioners' request to overturn the Sixth Circuit decision. On January 19, 2022, the Company filed its brief in support of the Sixth Circuit decision. On June 21, 2022, the United States Supreme Court reversed the Sixth Circuit decision and held that the employee health plan for Marietta Memorial Hospital did not violate the MSPA. The case will be remanded back to the lower court for resolution of the outstanding claims.

Additionally, 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,

~~DAVITA INC.~~

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

~~(unaudited)~~

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

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 8,7, 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, may impact the Company's various relationships and/or contracts related to the Company's business or otherwise harm the Company’s business, results of operations, financial condition, cash flows or reputation.

~~Resolved Matters~~

~~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 violatedfederal 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."

While the Company continues to dispute the allegations, it reached an agreement to resolve this matter without admitting to any liability. Settlement of this matter was covered primarily with insurance proceeds. The Company contributed an amount that did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows. On April 13, 2021, the court granted final approval of the 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.

While the defendants continue to dispute the allegations, an agreement was reached to resolve this matter without admitting to any liability and the court approved the settlement on January 29, 2021. As part of the settlement, the Company agreed to certain corporate governance policies, but did not make any financial contribution towards the settlement.

* * *

Other Commitments

The Company also has certain potential commitments to provide working capital funding, if necessary, to 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 of approximately $11,455.~~

1514

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

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

9.equity interest or which are wholly-owned by third parties of approximately $12,425.

In addition, on May 25, 2022, the Company entered into an agreement with Medtronic, Inc. and one of its subsidiaries (collectively, Medtronic) to form a new, independent kidney care-focused medical device company (NewCo). The transaction is expected to close in 2023, subject to customary closing conditions and regulatory approvals. At close, the Company will make a cash payment to Medtronic of approximately $75,000, subject to certain customary adjustments prior to the closing, and will contribute certain other non-cash assets to NewCo valued at approximately $25,000. Additionally, at close, the Company and Medtronic each will contribute approximately $200,000 in cash to launch NewCo. The Company also agreed to pay Medtronic additional consideration of up to $300,000 if certain regulatory and commercial milestones are achieved between 2024 and 2028.

8. Shareholders' equity

Stock-based compensation

During the six months ended June 30, ~~2021,~~2022, the Company granted ~~714~~993 restricted and performance stock units with an aggregate grant-date fair value of ~~$78,287~~$110,414 and a weighted-average expected life of approximately 3.5 years and ~~132~~130 stock-settled stock appreciation rights with an aggregate grant-date fair value of ~~$4,250~~$4,573 and a weighted-average expected life of approximately 4.5 years.

As of June 30, ~~2021,~~2022, the Company had ~~$204,649~~$191,666 in total estimated but unrecognized stock-based compensation expense under the Company's equity compensation and employee stock purchase plans. The Company expects to recognize this expense over a weighted average remaining period of 1.4 years.

Share repurchases

The following table summarizes the Company's common stock repurchases during the three and six months ended June 30, ~~2021~~2022 and ~~2020:~~2021:


											Three months ended June 30,				Six months ended June 30,
		Three months ended June 30,				Six months ended June 30,					2022		2021		2022		2021
Open market repurchases:	Open market repurchases:	2021		2020		2021		2020		Open market repurchases:
Shares		2,070		0		5,019		4,052
Shares repurchased										Shares repurchased	3,869		2,070		5,973		5,019
Amount paid	Amount paid	$	240,897	$	0	$	563,230	$	303,139	Amount paid	$	369,740	$	240,897	$	603,058	$	563,230
Average paid per share	Average paid per share	$	116.38	$	0	$	112.21	$	74.81	Average paid per share	$	95.56	$	116.38	$	100.96	$	112.21

The Company repurchased ~~890~~901 shares of its common stock for ~~$107,199~~$74,761 at an average cost of ~~$120.50~~$82.94 per share subsequent to June 30, ~~2021~~2022 through ~~August 2, 2021.~~July 29, 2022.

~~Effective on December 10, 2020,~~The Company is authorized to make purchases from time to time in the ~~Company's Board of Directors (Board) terminated all remaining prior~~open market or in privately negotiated transactions, including without limitation, through accelerated share repurchase ~~authorizations available to~~transactions, derivative transactions, tender offers, Rule 10b5-1 plans or any combination of the ~~Company~~foregoing, depending upon market conditions and ~~approved a new share repurchase authorization of $2,000,000.~~ other considerations.

As of ~~August 2, 2021,~~July 29, 2022, the Company had a total of ~~$1,259,527~~$1,706,120 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.

~~10. Accumulated other comprehensive loss~~

Three months ended June 30, 2021 Six months ended June 30, 2021
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 $ (6,551) $ (116,232) $ (122,783) $ (12,466) $ (53,688) $ (66,154)
Unrealized (losses) gains (2,744) 57,910 55,166 3,761 (4,634) (873)
Related income tax 685 0 685 (938) 0 (938)
(2,059) 57,910 55,851 2,823 (4,634) (1,811)
Reclassification into net income 1,377 0 1,377 2,754 0 2,754
Related income tax (344) 0 (344) (688) 0 (688)
1,033 0 1,033 2,066 0 2,066
Ending balance $ (7,577) $ (58,322) $ (65,899) $ (7,577) $ (58,322) $ (65,899)

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

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

Three months ended June 30, 2020 Six months ended June 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 $ (12,828) $ (127,697) $ (140,525) $ (1,433) $ (46,065) $ (47,498)
Unrealized (losses) gains (2,431) 5,619 3,188 (19,777) (76,013) (95,790)
Related income tax 607 0 607 4,935 0 4,935
(1,824) 5,619 3,795 (14,842) (76,013) (90,855)
Reclassification into net income 2,163 0 2,163 4,326 0 4,326
Related income tax (540) 0 (540) (1,080) 0 (1,080)
1,623 0 1,623 3,246 0 3,246
Ending balance $ (13,029) $ (122,078) $ (135,107) $ (13,029) $ (122,078) $ (135,107)
9. Accumulated other comprehensive loss


	Three months ended June 30, 2022						Six months ended June 30, 2022
	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	$	40,987	$	(75,857)	$	(34,870)	$	(1,178)	$	(138,069)	$	(139,247)
Unrealized gains (losses)	17,610		(91,176)		(73,566)		72,416		(28,964)		43,452
Related income tax	(4,393)		—		(4,393)		(18,067)		—		(18,067)
	13,217		(91,176)		(77,959)		54,349		(28,964)		25,385
Reclassification into net income	1,377		—		1,377		2,754		—		2,754
Related income tax	(344)		—		(344)		(688)		—		(688)
	1,033		—		1,033		2,066		—		2,066
Ending balance	$	55,237	$	(167,033)	$	(111,796)	$	55,237	$	(167,033)	$	(111,796)


	Three months ended June 30, 2021						Six months ended June 30, 2021
	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	$	(6,551)	$	(116,232)	$	(122,783)	$	(12,466)	$	(53,688)	$	(66,154)
Unrealized (losses) gains	(2,744)		57,910		55,166		3,761		(4,634)		(873)
Related income tax	685		—		685		(938)		—		(938)
	(2,059)		57,910		55,851		2,823		(4,634)		(1,811)
Reclassification into net income	1,377		—		1,377		2,754		—		2,754
Related income tax	(344)		—		(344)		(688)		—		(688)
	1,033		—		1,033		2,066		—		2,066
Ending balance	$	(7,577)	$	(58,322)	$	(65,899)	$	(7,577)	$	(58,322)	$	(65,899)

The interest rate cap agreement net realized losses reclassified into net income are recorded as debt expense in the corresponding consolidated statements of income. See Note 76 for further details.

~~11.~~10. Acquisitions and divestitures

Routine acquisitions

During the six months ended June 30, ~~2021,~~2022, the Company acquired dialysis businesses consisting of ~~1 dialysis center located in the U.S. and 7~~5 dialysis centers located outside the U.S. for a total ~~of $23,890 in~~ net cash of $9,491, contingent earn-out obligations of ~~$2,694~~$523 and deferred purchase price and liabilities assumed of ~~$3,301.~~$5,784. 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 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. In addition, valuation of intangibles, leases and certain other working capital items relating to ~~several of~~ these acquisitions are pending final quantification.

The ~~following table summarizes the assets acquired and liabilities assumed in these transactions and~~amount of goodwill recognized ~~at their acquisition dates at estimated fair values, as well as the estimated fair value of the noncontrolling interests assumed in these transactions:~~


~~Current assets~~	$	~~3,832~~
~~Property and equipment~~	~~1,853~~
~~Other long-term assets~~	~~2,259~~
~~Indefinite-lived licenses~~	~~1,593~~
~~Goodwill~~	~~28,323~~
~~Liabilities assumed~~	~~(6,726)~~
~~Noncontrolling interests~~	~~(1,249)~~
	$	~~29,885~~

~~Goodwill deductible for tax purposes associated with acquisitions completed~~or adjusted during the six months ended June 30, ~~2021~~2022 that is deductible for tax purposes was ~~$27,159.~~$(1,145).

1716

DAVITA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(unaudited)

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

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~~businesses a total of up to approximately ~~$42,581~~$64,846 if certain performance targets or quality margins are met 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 June 30, ~~2021,~~2022, the Company estimated the fair value of these contingent earn-out obligations to be ~~$28,342,~~$29,299, of which ~~$11,389~~$10,047 is included in other current liabilities and the remaining ~~$16,953~~$19,252 is included in other long-term liabilities in the Company’s consolidated balance sheet.

The following is a reconciliation of changes in contingent earn-out ~~obligations for the three and six months ended June 30, 2021:~~obligations:

Three months ended
June 30, 2021 Six months ended
June 30, 2021
Beginning balance $ 28,225 $ 30,248
Acquisitions 2,156 2,694
Foreign currency translation 3,055 975
Fair value remeasurements 60 (154)
Payments (5,154) (5,421)
Ending balance $ 28,342 $ 28,342

~~Discontinued operations~~

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. At close of the DMG sale, the Company's ultimate net sale proceeds remained subject to resolution of certain post-closing purchase price adjustments described in the equity purchase agreement, which adjustments were finalized in the fourth quarter of 2020. During the first six months 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 were recognized as an adjustment to the Company's loss on sale of the DMG business.


	Three months ended June 30, 2022		Six months ended June 30, 2022
Beginning balance	$	34,193	$	33,600
Acquisitions	278		523
Foreign currency translation	(2,104)		1,144
Fair value remeasurements	(2,799)		(2,779)
Payments	(269)		(3,189)
Ending balance	$	29,299	$	29,299

~~12.~~11. Variable interest entities (VIEs)

At June 30, ~~2021,~~2022, these condensed consolidated financial statements include total assets of VIEs of ~~$316,881~~$297,501 and total liabilities and noncontrolling interests of VIEs to third parties of ~~$206,326.~~$194,322. 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~~2021 10-K.

~~13.~~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 classified assets, liabilities and temporary equities that are measured at fair value on a recurring basis into the appropriate fair value hierarchy levels as defined by the Financial Accounting Standards Board (FASB).

The following table summarizes the Company’s assets, liabilities and temporary equities measured at fair value on a recurring basis as of June 30, 2022:


	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	$	40,214	$	40,214	$	—	$	—
Interest rate cap agreements	$	84,619	$	—	$	84,619	$	—
Liabilities
Contingent earn-out obligations	$	29,299	$	—	$	—	$	29,299
Temporary equity
Noncontrolling interests subject to put provisions	$	1,385,821	$	—	$	—	$	1,385,821

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 assets, liabilities and temporary equities measured at fair value on a recurring basis as of June 30, 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 $ 62,256 $ 62,256 $ 0 $ 0
Interest rate cap agreements $ 6,432 $ 0 $ 6,432 $ 0
Liabilities
Contingent earn-out obligations $ 28,342 $ 0 $ 0 $ 28,342
Temporary equity
Noncontrolling interests subject to put provisions $ 1,426,211 $ 0 $ 0 $ 1,426,211

For reconciliations of changes in contingent earn-out obligations and noncontrolling interests subject to put provisions during the three and six months ended June 30, ~~2021,~~2022, see Note 1110 and the consolidated statement of equity, respectively.

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

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 76 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), revenue and certain operating metrics. The estimated fair values of these contingent earn-out obligations are 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 1110 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 June 30, ~~2021,~~2022, 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 ~~$180,000.~~$175,000. See ~~Note~~Notes 17 and ~~Note~~ 24 to the Company's consolidated financial statements included in the ~~2020~~2021 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 76 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 June 30, ~~2021~~2022 at their approximate fair values due to the short-term nature of their settlements.

~~DAVITA INC.~~

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

~~(unaudited)~~

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

~~14.~~13. Segment reporting

The Company’s ~~operations~~operating divisions are comprised of its U.S. dialysis and related lab services business (its U.S. dialysis business), its ~~various~~U.S. integrated kidney care business, its U.S. other ancillary services ~~including~~and its international operations (collectively, its ancillary services), ~~and~~as well as its corporate administrative support.

The Company’s separate operating segments include its U.S. dialysis and related lab services business, ~~each of~~ its U.S. integrated kidney care business, its U.S. other ancillary services, 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 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 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~~2021 10-K for further description of how the Company determines and measures results for its operating segments.

2018

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~~margin (loss), and a reconciliation of segment operating ~~income (loss)~~margin to consolidated income before income taxes:


		Three months ended June 30,				Six months ended June 30,					Three months ended June 30,				Six months ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Segment revenues:	Segment revenues:									Segment revenues:
U.S. dialysis	U.S. dialysis									U.S. dialysis
Dialysis patient service revenues:	Dialysis patient service revenues:									Dialysis patient service revenues:
External sources	External sources	$	2,648,676	$	2,631,827	$	5,204,936	$	5,211,067	External sources	$	2,637,738	$	2,648,676	$	5,184,700	$	5,204,936
Intersegment revenues	Intersegment revenues	21,247		35,122		48,190		67,062		Intersegment revenues	19,410		21,247		41,568		48,190

U.S. dialysis patient service revenues	U.S. dialysis patient service revenues	2,669,923		2,666,949		5,253,126		5,278,129		U.S. dialysis patient service revenues	2,657,148		2,669,923		5,226,268		5,253,126
Other revenues(1):
Other revenues:										Other revenues:
External sources	External sources	6,345		7,688		12,961		12,830		External sources	6,113		6,345		12,078		12,961
Intersegment revenues	Intersegment revenues	70		307		130		608		Intersegment revenues	(21)		70		(10)		130
Total U.S. dialysis revenues	Total U.S. dialysis revenues	2,676,338		2,674,944		5,266,217		5,291,567		Total U.S. dialysis revenues	2,663,240		2,676,338		5,238,336		5,266,217
Other—Ancillary services	Other—Ancillary services									Other—Ancillary services
Dialysis patient service revenues	Dialysis patient service revenues	169,281		126,370		327,608		260,411		Dialysis patient service revenues	172,361		169,281		341,680		327,608
Other external sources	Other external sources	92,208		114,094		191,006		236,908		Other external sources	110,545		92,208		205,854		191,006
Intersegment revenues	Intersegment revenues	0		4,171		4,294		8,324		Intersegment revenues	—		—		—		4,294
Total ancillary services revenues	Total ancillary services revenues	261,489		244,635		522,908		505,643		Total ancillary services revenues	282,906		261,489		547,534		522,908
Total net segment revenues	Total net segment revenues	2,937,827		2,919,579		5,789,125		5,797,210		Total net segment revenues	2,946,146		2,937,827		5,785,870		5,789,125
Elimination of intersegment revenues	Elimination of intersegment revenues	(21,317)		(39,600)		(52,614)		(75,994)		Elimination of intersegment revenues	(19,389)		(21,317)		(41,558)		(52,614)
Consolidated revenues	Consolidated revenues	$	2,916,510	$	2,879,979	$	5,736,511	$	5,721,216	Consolidated revenues	$	2,926,757	$	2,916,510	$	5,744,312	$	5,736,511
Segment operating income (loss):
Segment operating margin (loss):										Segment operating margin (loss):
U.S. dialysis	U.S. dialysis	$	533,779	$	522,630	$	1,013,686	$	1,014,236	U.S. dialysis	$	472,801	$	533,779	$	879,241	$	1,013,686
Other—Ancillary services	Other—Ancillary services	(17,808)		(39,622)		(29,668)		(42,268)		Other—Ancillary services	(9,113)		(17,808)		(41,418)		(29,668)
Total segment operating income		515,971		483,008		984,018		971,968
Reconciliation of segment operating income to consolidated income from continuing operations before income taxes:
Total segment operating margin										Total segment operating margin	463,688		515,971		837,823		984,018
Reconciliation of segment operating income to consolidated income before income taxes:										Reconciliation of segment operating income to consolidated income before income taxes:
Corporate administrative support	Corporate administrative support	(25,495)		(73,088)		(50,940)		(96,672)		Corporate administrative support	(30,973)		(25,495)		(66,800)		(50,940)
Consolidated operating income	Consolidated operating income	490,476		409,920		933,078		875,296		Consolidated operating income	432,715		490,476		771,023		933,078
Debt expense	Debt expense	(73,324)		(81,381)		(140,338)		(169,984)		Debt expense	(82,586)		(73,324)		(156,377)		(140,338)
Debt refinancing charges		0		0		0		(2,948)
Other income, net		15,188		9,545		16,356		5,195
Consolidated income from continuing operations before income taxes		$	432,340	$	338,084	$	809,096	$	707,559

Other (loss) income, net										Other (loss) income, net	(1,284)		15,188		(3,070)		16,356
Consolidated income before income taxes										Consolidated income before income taxes	$	348,845	$	432,340	$	611,576	$	809,096

~~(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.

2119

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 June 30,				Six months ended June 30,					Three months ended June 30,				Six months ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
U.S. dialysis	U.S. dialysis	$	159,856	$	148,312	$	315,802	$	294,612	U.S. dialysis	$	160,612	$	159,856	$	322,632	$	315,802
Other—Ancillary services	Other—Ancillary services	9,833		9,064		19,588		17,443		Other—Ancillary services	10,564		9,833		21,488		19,588
		$	169,689	$	157,376	$	335,390	$	312,055		$	171,176	$	169,689	$	344,120	$	335,390

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


		Six months ended June 30,					Six months ended June 30,
		2021		2020				2022		2021
U.S. dialysis	U.S. dialysis	$	271,884	$	280,801	U.S. dialysis		$	237,686	$	271,884
Other—Ancillary services	Other—Ancillary services	22,554		10,866		Other—Ancillary services		27,775		22,554
								$	265,461	$	294,438
		$	294,438	$	291,667

A summary of assets by reportable segment ~~was~~were as follows:


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
U.S. dialysis	U.S. dialysis	$	16,084,542	$	15,344,647	U.S. dialysis	$	15,325,222	$	15,375,000
Other—Ancillary services	Other—Ancillary services	1,725,769		1,643,869		Other—Ancillary services	1,775,353		1,746,488
Consolidated assets	Consolidated assets	$	17,810,311	$	16,988,516	Consolidated assets	$	17,100,575	$	17,121,488

~~15.~~14. New accounting standards

~~New standards recently adopted~~

~~In December 2019, the FASB issued 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. The amendments in this ASU became effective for the Company beginning on January 1, 2021. The adoption of ASU No. 2019-12 did not have a material impact on the 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 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. Effective January 1, 2022 certain LIBOR tenors that do not affect the Company, including the one-week and two-month U.S. dollar LIBOR rate, ceased or became non-representative. The remaining U.S. dollar LIBOR tenors will cease or become non-representative effective July 1, 2023. This change will have no impact on the Company's ability to borrow. The Company is currently assessing the ~~effect~~other effects this guidance may have on its consolidated financial statements.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Acquired Contract Assets and Contract Liabilities. ASU 2021-08 requires application of ASC 606, Revenue from Contracts with Customers, to recognize and measure assets and liabilities from contracts with customers acquired in a business combination. This ASU creates an exception to the general recognition and measurement principle in ASC 805 and will result in recognition of contract assets and contract liabilities consistent with those recorded by the acquiree immediately before the acquisition date. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted for all entities. The Company does not expect the adoption of this standard to have a material impact on the Company's consolidated financial statements.

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 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 and expense offsets, revenues, ~~potential need, ability or willingness to use any funds under government relief programs,~~billings and collections, availability or cost of supplies, treatment volumes, mix expectation, such as the percentage or number of patients under commercial insurance, the availability, acceptance, impact, administration and efficacy of COVID-19 vaccines, treatments and ~~other treatments or~~ therapies, the continuing impact on the U.S. and global economies, unemployment and labor market conditions, 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, expectations related to value-based care, ~~and~~ integrated kidney care and Medicare Advantage plan enrollment, 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" 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; the government’s response to the COVID-19 ~~pandemic;~~pandemic, including, among other things, federal, state and local vaccine mandates or surveillance testing requirements and the extent to which they may ultimately be applicable to us; the pandemic's continuing impact on the U.S. and global economies, unemployment and other labor market conditions, interest rates, inflation and evolving monetary policies; the availability, acceptance, impact and efficacy of COVID-19 vaccines, ~~and other~~ treatments orand therapies; further spread or resurgence of the virus, including as a result of the emergence of new strains of the virus, such as the ~~Delta variant;~~Omicron variant and its subvariants; the continuing impact of the pandemic on our revenue and non-acquired growth due to lower treatment volumes; ~~the pandemic's continuing~~COVID-19's impact on the ~~U.S.~~chronic kidney disease (CKD) population and ~~global economies, unemployment, inflation and evolving monetary policies;~~our patient population including on the mortality of these patients; any potential negative impact on our commercial mix ~~which may persist even after~~or the ~~pandemic subsides;~~number of our patients covered by commercial insurance plans; continued increased COVID-19-related costs; our ability to successfully implement planned cost savings initiatives in response to COVID-19-related impacts on us; supply chain challenges and ~~continuing COVID-19-related costs, such as increased costs~~disruptions, including with respect to ~~procure equipment and~~our clinical ~~supplies~~supplies; and higher salary and wage expense driven in part by labor market conditions and a high demand for our clinical personnel, any of which may also have the effect of heightening many of the other risks and uncertainties discussed ~~below;~~

•below, and in many cases, the ~~concentration~~impact of ~~profits generated by higher-paying commercial payor plans for which there is continued downward pressure~~the pandemic and the aforementioned global economic conditions on ~~average realized payment rates, and a reduction in~~our business may persist after 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;

•our ability to successfully implement our strategies with respect to home-based dialysis, value-based care and/or integrated kidney care in a complex and highly regulated environment, including, among other things, maintaining our existing business, recovering our investments, entering into agreements on competitive terms and further developing our integrated care and other capabilities to provide competitive programs at scale;pandemic subsides;

•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 or that select higher-paying commercial plans, ~~or that are enrolled in or select~~including for example Medicare Advantage ~~plans~~("MA") plans; or other material impacts to our ~~business;~~business or operations; 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, without limitation, those related to healthcare and/or labor matters, such as AB 290 and the Dialysis Clinic Requirements Initiative in California;

•the concentration of profits generated by higher-paying commercial payor plans for which there is continued downward pressure on average realized payment rates; 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, as a result of our making incorrect assumptions about how our patients will respond to any change in financial assistance from charitable organizations; as a result of payors' implementing restrictive plan designs, including, without limitation, actions taken in response to the U.S. Supreme Court’s decision in Marietta Memorial Hospital Employee Health Benefit Plan, et al. v. DaVita Inc. et al. ("Marietta"); how and whether regulators and legislators will respond to the Marietta decision including, without limitation, whether they will issue regulatory guidance or adopt new legislation; how courts will interpret other anti-discriminatory provisions that may apply to restrictive plan designs; whether there could be other potential negative impacts of the Marietta decision; and the timing of each of these items;

•our ability to successfully implement our strategies with respect to integrated kidney care and value-based care initiatives and home based dialysis in the desired time frame and in a complex, dynamic and highly regulated environment, including, among other things, maintaining our existing business; meeting growth expectations; recovering our investments; entering into agreements with payors, third party vendors and others on terms that are competitive and, as appropriate, prove actuarially sound; structuring operations, agreements and arrangements to comply with evolving rules and regulations; finding, training and retaining appropriate staff; and further developing our integrated care and other capabilities to provide competitive programs at scale;

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

•our ability to attract, retain and ~~related developments on~~motivate teammates and our ability to manage operating cost increases or productivity decreases whether due to union organizing activities, legislative or other changes, demand for labor, volatility and uncertainty in the labor market, the current ~~healthcare~~challenging and highly competitive labor market conditions, or other reasons;

•U.S. and global economic and marketplace conditions, interest rates, inflation, unemployment, labor market conditions, and onevolving monetary policies, and our ~~business,~~ability to respond to these changing conditions, including ~~with respect~~our ability 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 and the current presidential administration and congressional majority;successfully implement cost savings initiatives in response;

•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;

•legal and compliance risks, such as our continued compliance with complex, and at times, evolving government regulations and requirements;

•the impact of the political environment and related developments on the current healthcare marketplace and on our business, including with respect to 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 and the current presidential administration and congressional majority;

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

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

•our ability to attract, retain and motivate teammates and our ability to manage operating cost increases or productivity decreases whether due to union organizing activities, legislative or other changes, demand for labor or other reasons;rates;

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

•continued increased competition from dialysis providers and others, and other potential marketplace changes, including without limitation increased investment in and availability of funding to new entrants in the dialysis and pre-dialysis marketplace;

•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;

•our aspirations, goals and disclosures related to environmental, social and governance (ESG) matters, including evolving regulatory requirements affecting ESG standards, measurements and reporting requirements; the availability of suppliers that can meet our sustainability standards; and our ability to recruit, develop and retain diverse talent in our labor markets; and

•the other risk factors, trends and uncertainties set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2020 (2020~~2021 (2021 10-K), our Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2021~~2022 and this Quarterly Report on Form 10-Q, and the risks and uncertainties discussed in any subsequent reports that we ~~have filed~~file or ~~furnished~~furnish with the Securities and Exchange Commission (SEC) from time to time.

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

2422

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~~our U.S. integrated kidney care (IKC) business, our other U.S. ancillary services, ~~including~~and 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 presentedCOVID-19, General Economic and ~~DMG is not included below in this Management's Discussion~~Marketplace Conditions, and ~~Analysis.~~Legal and Regulatory Developments

The COVID-19 ~~and its impact on our business~~

~~We expect that COVID-19 will continue~~pandemic continues to impact our business and ~~financial performance during 2021 and~~operations. In addition, we continue to ~~closely monitor~~be impacted by general conditions in the global economy, including challenges with respect to supply chains, inflation and wage pressure, among other things. Certain of these ~~various~~ impacts could be further intensified by concurrent global events such as COVID-19 lockdowns in portions of China or the ongoing conflict between Russia and Ukraine, the latter of which has resulted in increasing levels of sociopolitical and economic uncertainty and volatility in Europe and across the globe. In addition, we are monitoring the situation around the recent spread of the monkeypox virus and have worked with the Centers for Disease Control and Prevention to develop related protocols.Legal and regulatory developments may also impact our business and operations, such as the recent U.S. Supreme Court ruling related to the Medicare Secondary Payer Act (MSPA), as well as the commencement of price transparency regulation enforcement.

Operational and Financial Impacts

As part of our continued focus on the health, safety and well-being of our patients, teammates and physician partners, ~~suppliers, vendors, business partners~~we have continued to dedicate substantial resources in response to COVID-19, including the implementation of additional protocols and initiatives to help safely maintain continuity of care for our patients and help protect our caregivers. Cases resulting from the ~~economic~~Omicron variant and ~~political environment.~~subvariants required us to continue to implement dedicated care shifts for patients with confirmed or suspected COVID-19 and other enhanced clinical practices, including procuring additional equipment and clinical supplies, such as personal protective equipment (PPE).

During the second quarter of 2022, these ongoing clinical measures have continued to strain staffing in an already challenging labor market. Additionally, as a result of these ongoing COVID-19-related clinical measures, in combination with general labor, supply chain and inflationary pressures, we have incurred higher incentive pay, increased utilization of contract labor, and inefficient productivity. In addition, during 2022, we have experienced and expect to continue to experience increased labor costs. The cumulative impact of the foregoing will continue to put additional pressure on our cost structure, some of which is expected to abate with the decline of the impact of COVID-19. Potential staffing shortages or disruptions, if material, could ultimately lead to the unplanned closures of certain centers or adversely impact clinical operations, and may otherwise have a material adverse impact on our ability to provide dialysis services or the cost of providing those services, among other things. Prolonged volatility, uncertainty, labor supply shortages and other challenging labor market conditions, including, among other things, due to inflationary pressures or evolving monetary policies that may be independent of the COVID-19 pandemic, could also have an adverse impact on our growth and ability to execute on our other strategic initiatives and a material adverse impact on our labor costs.

These inflationary pressures and evolving monetary policies, as well as ongoing global supply chain challenges, also have more broadly impacted our supply and other costs, and may continue to drive certain increased expenses, including, among other things, with respect to other medical and other supplies and interest expense. We continue to identify and implement cost savings opportunities to help mitigate these pressures, including potential cost savings related to G&A efficiencies, capacity utilization improvement and procurement, including certain pharmaceutical supplies. However, there is no assurance that these initiatives will achieve expectations or otherwise be successful, or succeed in helping offset the impact of these challenging conditions, which could impact our ability to provide dialysis services or the cost of providing those services, among other things, and ultimately could have a material adverse impact on our results of operations, financial condition and cash flows. Our COVID-19 response has reduced certain expenses, such as those related to teammate travel, though it remains uncertain how much of these reductions, if any, will persist as our teammates return to their respective office locations.

In the second quarter, treatment volumes continued to reflect the ongoing impact of COVID-19 on mortality rates and missed treatments for dialysis patients which has had a negative impact on our patient census. While the mortality rates associated with the latest Omicron and subvariants surge preliminarily appear to be lower than in prior surges, the magnitude of the case increases has resulted in an increased level of excess patient mortalities through the course of this surge. We expect that the impact of COVID-19 is likely to continue to negatively impact our revenue and non-acquired growth for a period of time even as the pandemic subsides due to the compounding impact of mortalities, among other things. Depending on the ultimate severity and duration of the pandemic, the magnitude of these cumulative impacts ~~remains~~could have a material adverse

impact on our results of operations, financial condition and cash flows. In light of the cumulative impact of these excess mortalities and these other marketplace dynamics and economic conditions that have, in some cases, been intensified by the pandemic, we are seeking to identify and implement cost savings opportunities as noted above, and any failure on our part to appropriately adjust our business and operations in this manner could have a material adverse effect on our business, results of operations, financial condition and cash flows and could materially harm our reputation.

Federal, State and Local Government COVID-19 Response

Federal COVID-19 relief legislation suspended the 2% Medicare sequestration from May 1, 2020 through December 31, 2021. The Protecting Medicare and American Farmers from Sequester Cuts Act, signed into law on December 10, 2021, extended the suspension of the 2% Medicare sequestration from December 31, 2021 through March 31, 2022, with 1% Medicare sequestration in effect from April 1, 2022 through June 30, 2022 and 2% Medicare sequestration in effect beginning July 1, 2022. While in effect, the suspension of sequestration significantly increased our revenues.

We believe the ultimate impact of the COVID-19 public health crisis on the Company will depend on future developments that are highly uncertain and difficult to 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, such as the ~~Delta variant; COVID-19’s~~Omicron variant and its subvariants; COVID-19's impact on the chronic kidney disease (CKD) patient population and our patient ~~population;~~population, including on the mortality of these patients; the availability, acceptance, impact and efficacy of COVID-19 vaccines, ~~and other~~ treatments orand therapies; the ~~pandemic's~~pandemic’s continuing impact on our revenue and non-acquired growth due to lower treatment volumes, the U.S. and global economies, labor market conditions, interest rates, inflation and ~~unemployment;~~monetary policies, as well as our ability to successfully implement cost-savings initiatives in response; the potential negative impact on our commercial mix or the number of patients covered by commercial insurance plans; continued increased COVID-19-related costs; supply chain challenges and disruptions; 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 government responses. The continued impacts and disruptions to our business as a result of the COVID-19 pandemic could have a material adverse impact on our patients, teammates, physician partners, suppliers, business, operations, reputation, financial condition, results of operations, cash flows and/or liquidity.

~~Operational and Financial Impacts~~

In the first six months of 2021, treatment volumes reflected continued pressure primarily driven by the ongoing impact of COVID-19 on mortality rates for dialysis patients that has had a negative impact on our patient census. Because 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 has been higher in the dialysis population than in the general 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 in light of vaccination efforts. Although we have experienced an uptick in case counts over the last several weeks, we have had lower mortality counts on an absolute basis over the quarter to date, which we believe may be attributable to our vaccinated patients being protected from more severe cases of COVID-19. 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, the age and health status of affected patients, the access to and continued efficacy of vaccinations as well as willingness to be vaccinated. We expect that the impact of COVID-19 is 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 due to 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. The magnitude of these cumulative impacts has been significant, and depending on the ultimate severity and duration of the pandemic, could be material.

~~We continued to experience increased costs in the first six months of 2021 due in part~~responses to the ~~protocols~~continuing pandemic; and initiatives we implemented in response to COVID-19 to help us safely maintain continuity of care for patients. Among other things, we continued to experience significant cost inflation on PPE in the first six months of 2021, though certain costs related to our COVID-19 response have decreased since the peak of the 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 and more teammates return to their respective office locations.

In addition, the COVID-19 pandemic and efforts to contain the virus 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 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 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 June 30, 2021, our commercial mix in the second quarter of 2021 was improved as compared to our commercial mix in the second quarter of 2020. The ultimate impact of COVID-19 on our commercial mix will depend on future developments that are highly uncertain and difficult to predict. As referenced above, despite improving indicators in certain sectors of the U.S. economy as compared to earlier periods of the pandemic, the labor market continues to experience volatility and uncertainty. This volatility and uncertainty has impacted, and may continue to impact, our ability to attract and retain employees, particularly clinical personnel. Prolonged volatility and uncertainty in the labor market, including, among other things, due to inflationary pressures or evolving monetary policies, could have an adverse impact on our labor costs and our ability to execute on our strategic initiatives, and ultimately could have a material adverse impact our results of operations, financial condition and cash flows.

~~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~~In many cases, the ~~COVID-19~~impact of the 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~~aforementioned global economic and marketplace conditions on 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 thatbusiness may persist after the vaccines will prove to be as safe and effective as currently understood by the scientific community, particularly as it may relate to variants of the virus. 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. Certain state and federal Occupational Safety and Health Administration (OSHA) agencies have released requirements, or are considering or are in the process of modifying existing requirements associated with the continued protection of employees as it relates to COVID-19. These requirements will result in increased costs related to, among other things, PPE, fit-testing, and paid time off and other increased obligations with which we must comply. 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, our administration of the newly developed COVID-19 vaccines and our efforts to comply with evolving rules and regulations, 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. 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.pandemic subsidies.

For additional 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"~~1. Business of the ~~2020~~2021 10-K under the headings, "COVID-19 and its impact on our business" and "Human Capital ~~Managemen~~Management,~~t",~~" as well as the risk factor in Part I Item 1A. Risk Factors of the ~~2020~~2021 10-K under the heading “"We face various risks related to the dynamic and evolving novel coronavirus pandemic, ~~any~~many of which may have a material adverse impact on us.”"

Financial Results

The discussion below includes analysis of our financial condition and results of operations for the ~~quarter~~three months ended June 30, ~~2021~~2022 compared to the ~~quarters~~three months ended March 31, ~~2021~~2022, and ~~June 30, 2020 and~~the year to date periods for ~~the~~ six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020.~~

2021. The SEC amended its guidance on Management's Discussion and Analysis of Financial Condition and Results of Operations to permit companies to compare their most recently completed quarter to either the corresponding quarter of the prior year or to the immediately preceding sequential quarter to allow for flexibility in comparison of interim periods reported to help companies provide a more tailored and meaningful analysis relevant to their business cycles. Beginning with the first quarter of 2022, our Management’s Discussion and Analysis of Financial Condition and Results of Operations present our results of operations for the most recently completed fiscal year to date period compared to the corresponding year to date period of the prior year, as well as the most recently completed quarter compared to the immediately preceding sequential quarter, and otherwise exclude comparisons of the most recently completed quarter to the corresponding quarter of the prior year.

Consolidated results of operations

The following ~~table summarizes~~tables summarize our revenues and operating income by line of business. See the discussion of our results for each line of business following ~~this table:~~the tables. When multiple drivers are identified in the following discussion of results, they are listed in order of magnitude:


		Three months ended						Q2 2021 vs. Q1 2021				Q2 2021 vs. Q2 2020					Three months ended				Q2 2022 vs. Q1 2022
		June 30, 2021		March 31, 2021		June 30, 2020		Amount		Percent		Amount		Percent			June 30, 2022		March 31, 2022		Amount		Percent
		(dollars in millions)															(dollars in millions)
Revenues:	Revenues:															Revenues:
U.S. dialysis	U.S. dialysis	$	2,676	$	2,590	$	2,675	$	86	3.3	%	$	1	—	%	U.S. dialysis	$	2,663	$	2,575	$	88	3.4	%
Other - ancillary services		261		261		245		—		—	%	16		6.5	%
Other — Ancillary services																Other — Ancillary services	283		265		18		6.8	%
Elimination of intersegment revenues	Elimination of intersegment revenues	(21)		(31)		(40)		10		32.3	%	19		47.5	%	Elimination of intersegment revenues	(19)		(22)		3		13.6	%
Total consolidated revenues	Total consolidated revenues	$	2,917	$	2,820	$	2,880	$	97	3.4	%	$	37	1.3	%	Total consolidated revenues	$	2,927	$	2,818	$	109	3.9	%

Operating income (loss):	Operating income (loss):															Operating income (loss):
U.S. dialysis	U.S. dialysis	$	534	$	480	$	523	$	54	11.3	%	$	11	2.1	%	U.S. dialysis	$	473	$	406	$	67	16.5	%
Other - ancillary services		(18)		(12)		(40)		(6)		(50.0)	%	22		55.0	%
Other — Ancillary services																Other — Ancillary services	(9)		(32)		23		71.9	%
Corporate administrative support	Corporate administrative support	(25)		(25)		(73)		—		—	%	48		65.8	%	Corporate administrative support	(31)		(36)		5		13.9	%
Operating income	Operating income	$	490	$	443	$	410	$	47	10.6	%	$	80	19.5	%	Operating income	$	433	$	338	$	95	28.1	%

Adjusted operating income (loss)(1):
U.S. dialysis		$	534	$	480	$	523	$	54	11.3	%	$	11	2.1	%
Other - ancillary services		(18)		(12)		(23)		(6)		(50.0)	%	5		21.7	%
Corporate administrative support		(25)		(25)		(38)		—		—	%	13		34.2	%
Adjusted operating income		$	490	$	443	$	461	$	47	10.6	%	$	29	6.3	%

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

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


		Six months ended June 30,				YTD Q2 2021 vs. YTD Q2 2020					Six months ended				YTD Q2 2022 vs. YTD Q2 2021
		2021		2020		Amount		Percent			June 30, 2022		June 30, 2021		Amount		Percent
		(dollars in millions)									(dollars in millions)
Revenues:	Revenues:									Revenues:
U.S. dialysis	U.S. dialysis	$	5,266	$	5,292	$	(26)	(0.5)	%	U.S. dialysis	$	5,238	$	5,266	$	(28)	(0.5)	%
Other - ancillary services		523		506		17		3.4	%
Other — Ancillary services										Other — Ancillary services	548		523		25		4.8	%
Elimination of intersegment revenues	Elimination of intersegment revenues	(53)		(76)		23		30.3	%	Elimination of intersegment revenues	(42)		(53)		11		20.8	%
Total consolidated revenues	Total consolidated revenues	$	5,737	$	5,721	$	16	0.3	%	Total consolidated revenues	$	5,744	$	5,737	$	7	0.1	%

Operating income (loss):	Operating income (loss):									Operating income (loss):
U.S. dialysis	U.S. dialysis	$	1,014	$	1,014	$	—	—	%	U.S. dialysis	$	879	$	1,014	$	(135)	(13.3)	%
Other - ancillary services		(30)		(42)		12		28.6	%
Other — Ancillary services										Other — Ancillary services	(41)		(30)		(11)		(36.7)	%
Corporate administrative support	Corporate administrative support	(51)		(97)		46		47.4	%	Corporate administrative support	(67)		(51)		(16)		(31.4)	%
Operating income	Operating income	$	933	$	875	$	58	6.6	%	Operating income	$	771	$	933	$	(162)	(17.4)	%

Adjusted operating income (loss)(1):
U.S. dialysis		$	1,014	$	1,014	$	—	—	%
Other - ancillary services		(30)		(26)		(4)		(15.4)	%
Corporate administrative support		(51)		(62)		11		17.7	%
Adjusted operating income		$	933	$	927	$	6	0.6	%

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

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

2725

U.S. dialysis results of operations

~~Revenues:~~Treatment Volume:


		Three months ended									Q2 2021 vs. Q1 2021				Q2 2021 vs. Q2 2020					Three months ended				Q2 2022 vs. Q1 2022
		June 30, 2021			March 31, 2021			June 30, 2020			Amount		Percent		Amount		Percent			June 30, 2022		March 31, 2022		Amount	Percent
		(dollars in millions, except per treatment data)
Total revenues		$	2,676		$	2,590		$	2,675		$	86	3.3	%	$	1	—	%
Dialysis treatments	Dialysis treatments	7,413,497			7,286,934			7,570,908			126,563		1.7	%	(157,411)		(2.1)	%	Dialysis treatments	7,269,160		7,109,788		159,372	2.2	%
Average treatments per day	Average treatments per day	95,045			94,636			97,063			409		0.4	%	(2,018)		(2.1)	%	Average treatments per day	93,194		92,335		859	0.9	%
Treatment days	Treatment days	78.0			77.0			78.0			1.0		1.3	%	—		—	%	Treatment days	78.0		77.0		1.0	1.3	%
Average patient service revenue per treatment		$	360.14		$	354.50		$	352.26		$	5.64	1.6	%	$	7.88	2.2	%
Normalized non-acquired treatment growth(1)	Normalized non-acquired treatment growth(1)	(1.9)		%	(2.2)		%	1.6		%			0.3	%			(3.5)	%	Normalized non-acquired treatment growth(1)	(1.9)	%	(1.9)	%		—	%

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

(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.


		Six months ended June 30,				YTD Q2 2021 vs. YTD Q2 2020					Six months ended		YTD Q2 2022 vs. YTD Q2 2021
		2021		2020		Amount		Percent			June 30, 2022	June 30, 2021	Amount	Percent
		(dollars in millions, except per treatment data)
Total revenues		$	5,266	$	5,292	$	(26)	(0.5)	%
Dialysis treatments	Dialysis treatments	14,700,431		15,084,229		(383,798)		(2.5)	%	Dialysis treatments	14,378,948	14,700,431	(321,483)	(2.2)	%
Average treatments per day	Average treatments per day	94,841		96,942		(2,101)		(2.2)	%	Average treatments per day	92,767	94,841	(2,074)	(2.2)	%
Treatment days	Treatment days	155.0		155.6		(0.6)		(0.4)	%	Treatment days	155.0	155.0	—	—	%
Average patient service revenue per treatment		$	357.35	$	349.91	$	7.44	2.1	%

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

Our U.S. dialysis treatment volume is directly correlated with our operating revenues ~~for the second quarter of 2021 increased from the first quarter of 2021 primarily due to an increase in dialysis treatments~~ and ~~an increase in our average patient service revenue per treatment.~~expenses. The increase in our U.S. dialysis treatments for the second quarter of 2022 from the first quarter of 2022 was primarily driven by one additional treatment day and fewer missed ~~treatments, the latter of which were higher~~treatments.

The decrease in ~~the first quarter of 2021 primarily due to winter storms. Our~~our U.S. dialysis average patient service revenue per treatment was positively impacted by favorable changes in government mix and rate, including increases due to shifts to Medicare Advantage plans, and normal seasonal improvements driven by patients meeting their co-insurance and deductibles. These increases were partially offset by a decline in hospital inpatient dialysis revenue.

~~U.S. dialysis revenues~~treatments for the ~~second quarter of 2021 slightly increased~~six months ended June 30, 2022 from the second quarter of 2020 primarily due to an increase in our average patient service revenue per treatment, partially offset by a decrease in dialysis treatments. Our U.S. dialysis average patient service revenue per treatment increasesix months ended June 30, 2021 was primarily driven by favorable changes in government rates related to an increase in the Medicare base rate in 2021 and the temporary suspension of Medicare sequestration effective May 1, 2020, as well as favorable changes in government mix due to shifts to Medicare Advantage plans, and increased hospital inpatient dialysis revenue. Our U.S. dialysis treatments decreased primarily due to the impact of increased mortality over recent periods on our patient population, ~~and a decline in non-acquired treatment~~slightly offset by acquisition-related growth. We believe the increased mortality is largely attributable to the impact of COVID-19 on our patient population.

~~U.S. dialysis revenues for the six months ended June 30, 2021 decreased from the six months ended June 30, 2020 primarily~~Revenues:


	Three months ended				Q2 2022 vs. Q1 2022
	June 30, 2022		March 31, 2022		Amount		Percent
	(dollars in millions, except per treatment data)
Total revenues	$	2,663	$	2,575	$	88	3.4	%
Average patient service revenue per treatment	$	365.54	$	361.35	$	4.19	1.2	%

Certain columns, rows or percentages may not sum due to ~~a decrease in~~the presentation of rounded numbers.


	Six months ended				YTD Q2 2022 vs. YTD Q2 2021
	June 30, 2022		June 30, 2021		Amount		Percent
	(dollars in millions, except per treatment data)
Total revenues	$	5,238	$	5,266	$	(28)	(0.5)	%
Average patient service revenue per treatment	$	363.47	$	357.35	$	6.12	1.7	%

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

U.S. dialysis ~~treatments, partially offset by an increase in our~~ average patient service revenue per ~~treatment. The decrease in our U.S. dialysis treatments was driven by 0.6 fewer~~ treatment ~~days in~~for the ~~six months ended June 30, 2021~~second quarter of 2022 compared to ~~the six months ended June 30, 2020, increased mortality and missed treatments the latter of which were higher in~~ the first quarter of ~~2021~~2022 increased, primarily due to ~~winter storms. We believe~~normal seasonal improvements driven by patients meeting their co-insurance and deductibles, as well as the ~~increased mortality is largely attributable~~continued shift to ~~the impact of COVID-19 on our patient population.~~Medicare Advantage plans. Our U.S. dialysis average patient service revenue per treatment ~~increased primarily due to favorable changes~~was negatively impacted by a seasonal decrease in hospital inpatient treatments and decreased government ~~rates~~rate related to the reinstatement of 1% Medicare sequestration beginning April 1, 2022.

U.S. dialysis average patient service revenue per treatment for the six months ended June 30, 2022 increased compared to the six months ended June 30, 2021 primarily driven by an increase in commercial mix and rate, an increase in the Medicare base rate in ~~2021~~2022 and the ~~temporary suspension of Medicare sequestration, as well as favorable changes in government mix due to shifts~~continued shift to Medicare Advantage plans, ~~increased hospital inpatient revenue and favorable changes in commercial mix.~~partially offset by the reinstatement of 1% Medicare sequestration as described above.

In ~~July 2021,~~June 2022, CMS issued a proposed rule to update the Medicare ESRD Prospective Payment System payment rate and policies. Among other things, the proposed rule would ~~modify ESRD Treatment Choices Model policies to decrease disparities~~

~~in rates of home dialysis and kidney transplants among ESRD patients with lower socioeconomic status,~~ update the Acute Kidney Injury dialysis payment rate for renal dialysis services furnished by ESRD facilities and ~~amend the reporting measures in~~requirements for the ESRD Quality Incentive Program, ~~including proposals to address circumstances caused by COVID-19.~~as well as refine the ESRD Treatment Choices Model. CMS estimates that the overall impact of the proposed rule will increase ESRD facilities’ average reimbursement by ~~1.2%~~3.1% in ~~2022.~~2023.

Operating expenses:


		Three months ended						Q2 2021 vs. Q1 2021				Q2 2021 vs. Q2 2020					Three months ended				Q2 2022 vs. Q1 2022
		June 30, 2021		March 31, 2021		June 30, 2020		Amount		Percent		Amount		Percent			June 30, 2022		March 31, 2022		Amount		Percent
		(dollars in millions, except per treatment data)															(dollars in millions, except per treatment data)
Patient care costs	Patient care costs	$	1,756	$	1,739	$	1,802	$	17	1.0	%	$	(46)	(2.6)	%	Patient care costs	$	1,796	$	1,796	$	—	—	%
General and administrative(1)	General and administrative(1)	235		221		210		14		6.3	%	25		11.9	%	General and administrative(1)	241		217		24		11.1	%
Depreciation and amortization	Depreciation and amortization	160		156		148		4		2.6	%	12		8.1	%	Depreciation and amortization	161		162		(1)		(0.6)	%
Equity investment income	Equity investment income	(9)		(6)		(8)		(3)		50.0	%	(1)		12.5	%	Equity investment income	(7)		(6)		(1)		16.7	%
Total operating expenses and charges	Total operating expenses and charges	$	2,143	$	2,110	$	2,152	$	33	1.6	%	$	(9)	(0.4)	%	Total operating expenses and charges	$	2,190	$	2,169	$	21	1.0	%
Patient care costs per treatment	Patient care costs per treatment	$	236.90	$	238.69	$	238.02	$	(1.79)	(0.7)	%	$	(1.12)	(0.5)	%	Patient care costs per treatment	$	247.14	$	252.61	$	(5.47)	(2.2)	%

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

Six months ended June 30, YTD Q2 2021 vs. YTD Q2 2020
2021 2020 Amount Percent
(dollars in millions, except per treatment data)
Patient care costs $ 3,496 $ 3,585 $ (89) (2.5) %
General and administrative 456 414 42 10.1 %
Depreciation and amortization 316 295 21 7.1 %
Equity investment income (15) (17) 2 11.8 %
Total operating expenses and charges $ 4,253 $ 4,277 $ (24) (0.6) %
Patient care costs per treatment $ 237.79 $ 237.69 $ 0.10 — %

(1)General and administrative expenses for the three months ended June 30, 2022 includes advocacy costs of approximately $23 million to counter union policy efforts, including a California ballot initiative.


	Six months ended				YTD Q2 2022 vs. YTD Q2 2021
	June 30, 2022		June 30, 2021		Amount		Percent
	(dollars in millions, except per treatment data)
Patient care costs	$	3,593	$	3,496	$	97	2.8	%
General and administrative(1)	458		456		2		0.4	%
Depreciation and amortization	323		316		7		2.2	%
Equity investment income	(14)		(15)		1		6.7	%
Total operating expenses and charges	$	4,359	$	4,253	$	106	2.5	%
Patient care costs per treatment	$	249.85	$	237.79	$	12.06	5.1	%

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

(1)General and administrative expenses for the six months ended June 30, 2022 includes advocacy costs of approximately $23 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 our dialysis centers.

U.S. dialysis patient care costs per treatment for the second quarter of ~~2021~~2022 decreased from the first quarter of ~~2021~~2022 primarily driven by decreases in labor costs driven by a decline in hospital inpatient treatments, a seasonal decrease in payroll taxes as well as declines in professional fees and health benefit expenses. These decreases were partially offset by increases indue to decreased other direct operating expenses associated with our dialysis centers, including decreased utilities expense ~~resulting from the lower expense in the first quarter of 2021 that was related~~due to seasonality and our virtual power purchase ~~arrangements, as well as increases in medical supply expense and insurance expense.~~

~~U.S. dialysis~~arrangements. In addition, our fixed other direct operating expenses positively impacted patient care costs per treatment ~~for~~due to increased treatments in the second quarter of ~~2021 decreased from the second quarter~~2022. Other drivers of ~~2020~~this change include declines in compensation expenses primarily ~~due~~related to seasonal decreases in ~~COVID-19-related costs, including compensation expense,~~payroll taxes, as well as decreases in health benefit expenses, professional fees, pharmaceutical unit costs and ~~intensity and decreased professional fees.~~medical supplies expense. These decreases were partially offset by increases in other direct operating expenses associated with our dialysis centers, medical supply expense, health benefit expenses due to lower than normal claims volume in the second quarter of 2020 due to COVID-19, andincreased insurance ~~expenses.~~expense.

U.S. dialysis patient care costs per treatment for the six months ended June 30, ~~2021~~2022 increased from the six months ended June 30, ~~2020~~2021 primarily due to increased compensation expenses driven by increased wage rates and increases in other direct operating expenses associated with our dialysis centers, ~~medical supply~~which include increases in utilities expense ~~labor costs related to increased wage rates, health benefit expenses due to~~resulting from lower ~~than normal claims volume~~expense in the ~~six months ended June 30, 2020 due~~first half of 2021 related to COVID-19 and insurance expenses. These increases were partially offset by decreases in COVID-19-related costs, including compensation, as well as decreases in pharmaceutical unit costs and intensity, utilities expense driven by our virtual power purchase ~~arrangements~~arrangements. In addition, our fixed other direct operating expenses negatively impacted patient care costs per treatment due to decreased treatments in 2022. Other drivers of this change

include increases in insurance expense and costs related to travel and management meetings, partially offset by decreased pharmaceutical unit costs and professional fees.

General and administrative expenses. U.S. dialysis general and administrative expenses in the second quarter of ~~2021~~2022 increased from the first quarter of ~~2021~~2022 primarily due to ~~contributions~~increased advocacy costs to ~~our charitable foundation,~~counter union policy efforts, including a California ballot initiative, increased ~~labor costs and long-term incentive~~ compensation expense ~~partially offset by a decline in professional fees.~~

~~U.S. dialysis general and administrative expenses for the second quarter of 2021~~including increased ~~from the second quarter of 2020 primarily due to contributions to our charitable foundation and increases in labor costs, health benefits, long-term incentive compensation and occupancy expenses.~~wage rates, as well as increased travel costs. These increases were ~~partially~~ offset by ~~decreases in COVID-19-related costs, including compensation expense.~~gains recognized on the sale of our self-developed properties.

U.S. dialysis general and administrative expenses for the six months ended June 30, ~~2021~~2022 increased from the six months ended June 30, ~~2020~~2021 primarily due to increases in ~~labor~~advocacy costs, as described above, travel costs and compensation expenses. U.S. dialysis general and administrative expenses were positively impacted by the gains on sale, as described above, and decreases in professional fees and contributions to our charitable foundation and increases in health benefits, payroll taxes and long-term incentive compensation expense. These increases were partially offset by decreases in COVID-19-related costs, including compensation, and travel including meeting costs.foundation.

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 June 30, ~~2021~~2022 decreased compared to the quarter ended March 31, ~~2021 increased~~2022 primarily due to ~~growth~~a decline in ~~the number of dialysis centers we operated in the second quarter of 2021 as well as~~ depreciation ~~expenses~~and amortization related to corporate technology projects, partially offset by increased depreciation from the ~~completion~~rollout of ~~an information technology project.~~our new clinical system in May 2022.

U.S. dialysis depreciation and amortization expenses for the ~~quarter ended June 30, 2021 compared to the quarter ended June 30, 2020 and for the~~ six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020~~2021 increased primarily related to increased depreciation and amortization for ~~the same reasons as described above,~~hardware associated with our new clinical system and other corporate technology projects, as well as the development of new centers, partially offset by a decline in accelerated depreciation ~~related to~~for expected center closures. Beginning in the third quarter of 2022 we expect depreciation and amortization expenses to increase as a result of recognizing a full quarter of depreciation for our new clinical system.

Equity investment income. U.S. dialysis equity investment income was relatively flat for the second quarter of ~~2021 increased from~~2022 compared to the first quarter of ~~2021~~2022 and ~~from the second quarter of 2020 primarily due to an increase in profitability at our nonconsolidated joint ventures.~~

~~U.S. dialysis equity investment income for~~ the six months ended June 30, ~~2021 decreased from~~2022 compared to the six months ended June 30, ~~2020 primarily due to a decrease in profitability at our nonconsolidated joint ventures.~~2021.

Operating income:

Three months ended Q2 2021 vs. Q1 2021 Q2 2021 vs. Q2 2020
June 30,
2021 March 31,
2021 June 30,
2020 Amount Percent Amount Percent
(dollars in millions)
Operating income $ 534 $ 480 $ 523 $ 54 11.3 % $ 11 2.1 %


	Three months ended				Q2 2022 vs. Q1 2022
	June 30, 2022		March 31, 2022		Amount		Percent
	(dollars in millions)
Operating income	$	473	$	406	$	67	16.5	%

Six months ended June 30, YTD Q2 2021 vs. YTD Q2 2020
2021 2020 Amount Percent
(dollars in millions)
Operating income $ 1,014 $ 1,014 $ — — %


	Six months ended				YTD Q2 2022 vs. YTD Q2 2021
	June 30, 2022		June 30, 2021		Amount		Percent
	(dollars in millions)
Operating income	$	879	$	1,014	$	(135)	(13.3)	%

U.S. dialysis operating income for the second quarter of ~~2021~~2022 increased from the first quarter of ~~2021~~2022 primarily due to an increase in dialysis treatments, an increase in our average patient service revenue per treatment, ~~as described above,~~gains on sale and ~~decreases in payroll taxes, labor costs, professional fees and health benefit expenses. Operating income was negatively impacted by increases in~~decreased other direct operating expenses associated with our dialysis centers, ~~including utilities expense, medical supply expense, insurance expense and contributions to our charitable foundation and long-term incentive compensation expense.~~

~~U.S. dialysis operating income for the second quarter~~each described above. Other drivers of ~~2021 increased from the second quarter of 2020 primarily due to an increase in our average patient service revenue per treatment, and~~this change include decreases in ~~COVID-19 related costs, as described above,~~health benefit expenses, professional fees, pharmaceutical unit costs and ~~intensity and professional fees.~~compensation expenses, as described above. Operating income was negatively impacted by ~~a decrease in dialysis treatments, as described above, and~~ increases in ~~other direct operating expenses associated with our dialysis centers, health benefit expenses, medical supply expense, labor~~advocacy costs to counter union policy efforts, insurance expense ~~contributions to our charitable foundation,~~ and ~~long-term incentive compensation expense.~~travel costs.

U.S. dialysis operating income for the six months ended June 30, ~~2021 was relatively flat~~2022 decreased from the six months ended June 30, ~~2020~~2021 primarily due to a decrease in dialysis treatments and increases in compensation expenses, advocacy costs and other direct operating expenses associated with our dialysis centers, as described above. Other drivers of this change included increases in costs related to travel and management meetings and insurance expense. Operating income was positively impacted by an increase in our average patient service revenue per treatment and gains on sale, each described above, as well as decreases in professional fees and pharmaceutical unit costs and ~~intensity, COVID-19 related costs, as described above, utilities expense and travel costs. These increases~~contributions to ~~operating income were partially offset by a decrease in dialysis treatments, and increases in other direct operating expenses associated with~~ our ~~dialysis centers, labor costs, medical supply expense, health benefits expenses and insurance expense.~~charitable foundation.

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Other—Ancillary services

Our other operations include ancillary services that are primarily aligned with our core business of providing dialysis services to our network of patients. As of June 30, ~~2021,~~2022, these consisted ~~primarily~~principally of our U.S. integrated kidney care ~~and disease management,~~(IKC) business, certain U.S. other ancillary businesses (including our clinical research programs, transplant software business, and ~~physician services, as well as~~venture investment group), and our international operations.

These ancillary services ~~including our international operations,~~ generated revenues of approximately ~~$261~~$283 million and ~~$523~~$548 million in the second quarter of ~~2021~~2022 and six months ended June 30, ~~2021,~~2022, respectively, representing approximately 9%10% of our consolidated revenues in both periods.

As part of our growth strategy, we have invested, and expect to continue to invest, significant resources in the further development of ~~value-based care and~~ our integrated care ~~business.~~business and value-based care initiatives. There can be no assurances that we will be able to successfully implement our strategies with respect to value-based care and integrated kidney care in the desired time frame and in a complex, ~~evolving~~dynamic and highly regulated environment, and we face risks including, among other things, those related to maintaining our existing business, recovering our investments, entering into agreements with payors, physicians, third party vendors and others on terms that are competitive, ~~terms,~~and as appropriate, that prove actuarially sound; structuring these agreements and arrangements to comply with evolving rules and regulations, including, among other things, rules and regulations related to the use of protected health information; and further developing our operational, IT and other capabilities to enable us to provide competitive programs at scale. If our value-based care and integrated kidney care programs are unsuccessful, it could result in a loss of our investments and have a material adverse effect on our growth strategy, and could have an adverse impact on our business, results of operations, financial condition and cash flows.

Furthermore, if any of our other ancillary services, such as our international operations, are unsuccessful, itthis 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 or loss of investment. 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 or product lines to our business and to pursue ~~other ancillary service~~opportunities. While these opportunities ~~in the future as circumstances warrant, which~~ could include, among other things, healthcare services not related to ~~dialysis.~~dialysis, we have focused our ongoing efforts on opportunities with strong strategic links to kidney care, dialysis or integrated kidney care.

As of June 30, ~~2021,~~2022, our international dialysis operations provided dialysis and administrative services through a total of ~~331~~349 outpatient dialysis centers located in ~~ten~~11 countries outside of the United States.

Ancillary services results of operations


		Three months ended						Q2 2021 vs. Q1 2021				Q2 2021 vs. Q2 2020					Three months ended				Q2 2022 vs. Q1 2022
		June 30, 2021		March 31, 2021		June 30, 2020		Amount		Percent		Amount		Percent			June 30, 2022		March 31, 2022		Amount		Percent
		(dollars in millions)															(dollars in millions)
Revenues:	Revenues:															Revenues:
U.S. ancillary		$	88	$	99	$	116	$	(11)	(11.1)	%	$	(28)	(24.1)	%
Integrated kidney care																Integrated kidney care	$	103	$	87	$	16	18.4	%
Other U.S. ancillary																Other U.S. ancillary	5		5		—		—	%
International	International	174		162		129		12		7.4	%	45		34.9	%	International	175		173		2		1.2	%
Total ancillary services revenues	Total ancillary services revenues	$	261	$	261	$	245	$	—	—	%	$	16	6.5	%	Total ancillary services revenues	$	283	$	265	$	18	6.8	%

Operating (loss) income:	Operating (loss) income:															Operating (loss) income:
U.S. ancillary		$	(28)	$	(25)	$	(41)	$	(3)	(12.0)	%	$	13	31.7	%
Integrated kidney care																Integrated kidney care	$	(21)	$	(37)	$	16	43.2	%
Other U.S. ancillary																Other U.S. ancillary	(2)		(3)		1		33.3	%
International(1)	International(1)	10		13		1		(3)		(23.1)	%	9		900.0	%	International(1)	15		8		7		87.5	%
Total ancillary services operating loss	Total ancillary services operating loss	$	(18)	$	(12)	$	(40)	$	(6)	(50.0)	%	$	22	55.0	%	Total ancillary services operating loss	$	(9)	$	(32)	$	23	71.9	%

Adjusted operating (loss) income(2):
U.S. ancillary		$	(28)	$	(25)	$	(25)	$	(3)	(12.0)	%	$	(3)	(12.0)	%
International(1)		10		13		1		(3)		(23.1)	%	9		900.0	%
Total ancillary services adjusted operating loss		$	(18)	$	(12)	$	(23)	$	(6)	(50.0)	%	$	5	21.7	%

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

(1)The reported operating income for the three months ended June 30, ~~2021,~~2022 and March 31, ~~2021 and June 30, 2020,~~2022 includes foreign currency ~~(losses)~~ gains embedded in equity method income recognized from our APAC ~~joint venture~~JV of approximately ~~$(0.1) million, $2.7~~$2.1 million and ~~$(3.7)~~$0.3 million, respectively.

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

3129


		Six months ended June 30,				YTD Q2 2021 vs. YTD Q2 2020					Six months ended				YTD Q2 2022 vs. YTD Q2 2021
		2021		2020		Amount		Percent			June 30, 2022		June 30, 2021		Amount		Percent
		(dollars in millions)									(dollars in millions)
Revenues:	Revenues:									Revenues:
U.S. ancillary		$	187	$	240	$	(53)	(22.1)	%
Integrated kidney care										Integrated kidney care	$	189	$	176	$	13	7.4	%
Other U.S. ancillary										Other U.S. ancillary	10		11		(1)		(9.1)	%
International	International	336		265		71		26.8	%	International	348		336		12		3.6	%
Total ancillary services revenues	Total ancillary services revenues	$	523	$	506	$	17	3.4	%	Total ancillary services revenues	$	548	$	523	$	25	4.8	%

Operating (loss) income:	Operating (loss) income:									Operating (loss) income:
U.S. ancillary		$	(53)	$	(60)	$	7	11.7	%
Integrated kidney care										Integrated kidney care	$	(59)	$	(55)	$	(4)	(7.3)	%
Other U.S. ancillary										Other U.S. ancillary	(6)		2		(8)		(400.0)	%
International(1)	International(1)	24		18		6		33.3	%	International(1)	23		24		(1)		(4.2)	%
Total ancillary services operating (loss) income		$	(30)	$	(42)	$	12	28.6	%
Total ancillary services operating loss										Total ancillary services operating loss	$	(41)	$	(30)	$	(11)	(36.7)	%

Adjusted operating (loss) income(2):
U.S. ancillary		$	(53)	$	(44)	$	(9)	(20.5)	%
International(1)		24		18		6		33.3	%
Total ancillary services adjusted operating loss		$	(30)	$	(26)	$	(4)	(15.4)	%

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

(1)The reported operating income for the six months ended June 30, ~~2021~~2022 and June 30, ~~2020,~~2021 includes foreign currency gains embedded in equity method income recognized from our APAC ~~joint venture~~JV of approximately ~~$2.6~~$2.4 million and ~~$6.1~~$2.6 million, respectively.

~~(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~~IKC revenues for the second quarter of ~~2021 decreased from~~2022 increased compared to the first quarter of ~~2021~~2022 due to a ~~decrease~~net increase in ~~revenue~~shared savings including from our new programs as well as an increase in ~~our integrated care and disease management business primarily related to the reduction in members in~~revenues from our special needs ~~plans, and decreased~~plans. Other U.S. ancillary revenues ~~related~~for the second quarter of 2022 compared to ~~the completion of our ESCO programs in~~ the first quarter of ~~2021.~~2022 were relatively flat. International revenues for the second quarter of ~~2021~~2022 increased from the first quarter of ~~2021~~2022 primarily due to ~~acquisition-related growth.~~increased treatment volume.

~~U.S. ancillary services~~IKC revenues for the ~~second quarter of 2021 decreased from the second quarter of 2020 due to a decrease in revenues in our integrated care and disease management business primarily related~~six months ended June 30, 2022 increased compared to the ~~reduction in members in our special needs plans, and the sale of RMS Lifeline, Inc. (Lifeline), our vascular access business, as described below, as well as a decrease in revenues related~~six months ended June 30, 2021 due to ~~completion of our ESCO programs in the first quarter of 2021, partially offset by~~ an increase in shared savings revenues ~~in our physician services business. Our international revenues for the second quarter of 2021 increased~~including savings from ~~the second quarter of 2020 primarily due to acquisition-related growth.~~

new programs. Other U.S. ancillary services revenues for the six months ended June 30, ~~2021~~2022 decreased ~~from~~compared to the six months ended June 30, ~~2020 due to~~2021 as a ~~decrease in revenues at our integrated care and disease management business primarily due to a reduction in members in our special needs plans,~~result of decreased revenues ~~related to the sale of Lifeline and a decrease in revenue~~ in our clinical research programs, ~~partially~~slightly offset by ~~an increase in~~ revenues infrom our ~~physician services~~newly acquired transplant software business. Our international revenues for the six months ended June 30, ~~2021~~2022 increased from the six months ended June 30, ~~2020~~2021 primarily due to acquisition-related growth.

~~Charges impacting operating~~Operating loss:

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

~~Operating loss and adjusted operating loss:~~

~~U.S. ancillary services operating loss and adjusted~~IKC operating loss for the second quarter of ~~2021 increased~~2022 compared to the first quarter of ~~2021~~2022 decreased due to ~~a decline~~the increase in ~~operating performance~~revenues as described above, partially offset by continued investments in our integrated care ~~and disease management business~~support functions. Other U.S. ancillary services operating loss for the second quarter of 2022 decreased compared to the first quarter of 2022, driven by ~~increased investments to build up our integrated care support functions.~~a benefit received from run-off of a legacy business in the current quarter. International operating income for the second quarter of ~~2021 decreased~~2022 increased from the first quarter of ~~2021~~2022 primarily due to ~~a decline~~changes in ~~equity income resulting from fluctuations in foreign currency at our APAC JV.~~

~~U.S. ancillary services operating loss~~fair value of contingent consideration associated with prior acquisitions, increased treatment volume, as noted above, and adjusted operating loss for the second quarter of 2021 compared to the second quarter of 2020 were impacted by the sale of Lifeline, as described above. These comparative losses were also impacted by a decline in operating results at our integrated care and disease management business due to increased investments to build up our integrated care support function, partially offset by improved operating performance at our physician services business. International operating results for the second quarter of 2021 increased from the second quarter of 2020 primarily due to an increase in equity income resulting from fluctuations in foreign currency at our APAC ~~JV, as well as acquisition-related growth~~JV.

IKC operating loss for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 increased primarily due to continued investments in our ~~international business.~~

integrated care support functions, partially offset by increased revenues, as described above. Other U.S. ancillary services operating ~~losses and adjusted~~loss for the six months ended June 30, 2022 compared to the operating income for the six months ended June 30, 2021 was impacted by revenues, as described above, as well as a benefit received from run-off of a legacy business in the six months ended June 30, 2021. International operating income for the six months ended June 30, 2022 decreased compared to the six months ended June 30, ~~2020 were impacted~~2021 primarily driven by the ~~sale~~impact of ~~Lifeline, as described above. These comparative losses were also impacted by a decline in operating results at~~increased mortality over recent periods on our ~~integrated care and disease management business due to increased investments to build up our integrated care support function,~~patient population, partially offset by improved operating performance at our physician services business. International operating results for the six months ended June 30, 2021 increased from the six months ended June 30, 2020 primarily due to growth in our international business, partially offset by a decrease in equity income resulting from fluctuations in foreign currency at our APAC JV.acquisition-related growth.

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				Q2 2022 vs. Q1 2022
	June 30, 2022		March 31, 2022		Amount		Percent
	(dollars in millions)
Corporate administrative support	$	(31)	$	(36)	$	5	13.9	%

Three months ended Q2 2021 vs. Q1 2021 Q2 2021 vs. Q2 2020
June 30, 2021 March 31, 2021 June 30, 2020 Amount Percent Amount Percent
(dollars in millions)
Corporate administrative support $ (25) $ (25) $ (73) $ — — % $ 48 65.8 %
Adjusted corporate administrative support(1)
$ (25) $ (25) $ (38) $ — — % $ 13 34.2 %

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

Six months ended June 30, YTD Q2 2021 vs. YTD Q2 2020
2021 2020 Amount Percent
(dollars in millions)
Corporate administrative support $ (51) $ (97) $ 46 47.4 %
Adjusted corporate administrative support(1)
$ (51) $ (62) $ 11 17.7 %

~~(1)For a reconciliation of adjusted operating income (loss) by reportable segment, see "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.~~


	Six months ended				YTD Q2 2022 vs. YTD Q2 2021
	June 30, 2022		June 30, 2021		Amount		Percent
	(dollars in millions)
Corporate administrative support	$	(67)	$	(51)	$	(16)	(31.4)	%

Corporate administrative support expenses for the quarter ended June 30, ~~2021~~2022 compared to the quarter ended March 31, ~~2021 were relatively flat. The changes~~2022 decreased primarily due to decreases in ~~corporate~~legal fees and long-term incentive compensation expense. Corporate administrative support expenses ~~for the quarter ended June 30, 2021 compared to the quarter ended June 30, 2020, and~~ for the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020, were impacted by accruals for~~2021 increased primarily due to an increase in legal ~~matters as described above, as well as a decrease in severance accruals associated with our senior executive leadership transition in 2020.~~fees.

Corporate-level charges


		Three months ended									Q2 2021 vs. Q1 2021				Q2 2021 vs. Q2 2020					Three months ended						Q2 2022 vs. Q1 2022
		June 30, 2021			March 31, 2021			June 30, 2020			Amount		Percent		Amount		Percent			June 30, 2022			March 31, 2022			Amount		Percent
		(dollars in millions)																		(dollars in millions)
Debt expense	Debt expense	$	73		$	67		$	81		$	6	9.0	%	$	(8)	(9.9)	%	Debt expense	$	83		$	74		$	9	12.2	%

Other income		$	15		$	1		$	10		$	14	1,400.0	%	$	5	50.0	%
Other (loss) income, net																			Other (loss) income, net	$	(1)		$	(2)		$	1	50.0	%
Effective income tax rate	Effective income tax rate	18.8		%	22.6		%	24.6		%			(3.8)	%			(5.8)	%	Effective income tax rate	18.4		%	21.7		%			(3.3)	%
Effective income tax rate from continuing operations attributable to DaVita, Inc. (1)		21.6		%	26.4		%	29.2		%			(4.8)	%			(7.6)	%
Effective income tax rate attributable to DaVita Inc.(1)																			Effective income tax rate attributable to DaVita Inc.(1)	22.1		%	26.0		%			(3.9)	%
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	$	57		$	54		$	53		$	3	5.6	%	$	4	7.5	%	Net income attributable to noncontrolling interests	$	60		$	44		$	16	36.4	%

(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.


		Six months ended June 30,						YTD Q2 2021 vs. YTD Q2 2020					Six months ended						YTD Q2 2022 vs. YTD Q2 2021
		2021			2020			Amount		Percent			June 30, 2022			June 30, 2021			Amount		Percent
		(dollars in millions)											(dollars in millions)
Debt expense	Debt expense	$	140		$	170		$	(30)	(17.6)	%	Debt expense	$	156		$	140		$	16	11.4	%
Debt refinancing charges		$	—		$	3		$	(3)	(100.0)	%
Other income		$	16		$	5		$	11	220.0	%

Other (loss) income, net												Other (loss) income, net	$	(3)		$	16		$	(19)	(118.8)	%
Effective income tax rate	Effective income tax rate	20.6		%	24.7		%			(4.1)	%	Effective income tax rate	19.8		%	20.6		%			(0.8)	%
Effective income tax rate from continuing operations attributable to DaVita, Inc.(1)		23.8		%	28.8		%			(5.0)	%
Effective income tax rate attributable to DaVita Inc.(1)												Effective income tax rate attributable to DaVita Inc.(1)	23.8		%	23.8		%			—	%
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	$	111		$	102		$	9	8.8	%	Net income attributable to noncontrolling interests	$	103		$	111		$	(8)	(7.2)	%

(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 second quarter of ~~2021~~2022 increased ~~from~~compared to the first quarter of ~~2021 as a result of completing an unregistered add-on offering of $1.0 billion aggregate principal amount~~2022 and the six months ended June 30, 2022 compared to our existing 4.625% senior notes due June 1, 2030 (the Additional 2030 Notes) on February 26, 2021. Debt expense for the second quarter of 2021 decreased from the second quarter of 2020 and decreased for the six months ended June 30, 2021 ~~from the six months ended June 30, 2020~~ primarily due to ~~a decrease~~an increase in our ~~overall~~ weighted average effective interest rate and weighted average outstanding credit facility balance, which included draws on our ~~debt, including as a result~~revolving line of ~~refinancing our 5.125% senior notes and 5.0% senior notes with lower cost debt and a reduction~~credit in the ~~LIBOR component~~first and second quarters of ~~the interest rate on debt under our senior secured credit facilities, partially offset by additional debt expense associated with the Additional 2030 Notes offering completed in February 2021.~~2022.

Our overall weighted average effective interest rate for the ~~second quarter of 2021~~three months ended June 30, 2022 was ~~3.36%~~3.68% compared to ~~3.08%~~3.35% for the ~~first quarter of 2021 and 3.64% for the second quarter of 2020.~~three months ended March 31, 2022. See Note 76 to the condensed consolidated financial statements for further information on the components of our debt.

~~Debt refinancing charges~~

The six months ended June 30, 2020 included refinancing charges of $3 million 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.

~~Other income~~

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

Other income for the second quarter of 2021 increased compared to the first quarter of 2021 primarily due to gains on certain investments that began trading in public markets during the second quarter of 2021, in addition to recognized gains on

3431

~~foreign currency transactions in the second quarter of 2021 compared to recognized losses in the first quarter of 2021.~~ Other (loss) income, net

Other loss decreased for the second quarter of ~~2021 increased compared to~~2022 from the ~~second~~first quarter of ~~2020 due to~~2022, primarily driven by an increase in ~~gains on investments as described above,~~interest income, partially offset by ~~a decrease~~an increase in ~~interest income.~~losses on foreign currency transactions. Other (loss) income ~~increased~~ for the six months ended June 30, ~~2021~~2022 compared to the six months ended June 30, ~~2020 primarily due~~2021 was impacted by losses on investments in 2022 compared to ~~an increase in~~ gains on investments in 2021, as ~~described above and recognized gains~~well as increased losses on foreign currency transactions, ~~in the six months ended June 30, 2021 compared to recognized losses in the six months ended June 30, 2020,~~ partially offset by ~~a decrease~~an increase in interest income.

Effective income tax rate

The effective income tax rate and the effective ~~income~~ tax rate ~~from continuing operations~~ attributable to DaVita Inc. decreased for the second quarter of ~~2021 decreased from~~2022 compared to the first quarter of ~~2021~~2022 primarily due to an increase in recognized tax benefits from stock-based compensation ~~deductions~~and benefits recognized in ~~the second quarter of 2021.~~connection with a partial settlement reached with federal tax authorities for fiscal years 2014-2015.

The effective income tax rate ~~and the effective income tax rate from continuing operations attributable to DaVita Inc. for the second quarter of 2021 and~~ for the six months ended June 30, ~~2021~~2022 decreased from the ~~second quarter of 2020 and~~ six months ended June 30, ~~2020, respectively,~~2021 primarily due to ~~an increase in tax benefits from stock-based compensation deductions~~a change in the ~~second quarter~~portion of earnings attributable to our non-controlling interests. The effective tax rate attributable to DaVita Inc. for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 ~~as well as a reduction in nondeductible advocacy spending in 2021.~~was relatively flat.

Net income attributable to noncontrolling interests

The increase in net income attributable to noncontrolling interests for the second quarter of ~~2021~~2022 from the first quarter of ~~2021~~2022 was ~~primarily~~ due ~~improved~~to increased earnings at certain U.S. dialysis partnerships, primarily driven by ~~one~~an additional treatment day ~~higher revenue per treatment and an increase~~ in ~~treatments per day. The increase in net income attributable to noncontrolling interests for~~ the ~~second quarter of 2021 from the second quarter of 2020 was primarily due to improved earnings at certain U.S. dialysis partnerships driven by higher revenue per treatment. The increase in net~~period. Net income attributable to noncontrolling interests for the six months ended June 30, ~~2021 compared to~~2022 decreased from the six months ended June 30, ~~2020 was~~2021 primarily due to ~~improved~~reduced earnings at certain U.S. dialysis ~~partnerships driven by higher revenue per treatment.~~partnerships.

Accounts receivable

Our consolidated accounts receivable balances at June 30, ~~2021~~2022 and December 31, ~~2020~~2021 were ~~$1.947~~$2.094 billion and ~~$1.824~~$1.958 billion, respectively, representing approximately 66 and 62 ~~and 59~~ days ~~sales~~of revenue outstanding (DSO), ~~respectively, net of allowances for uncollectible accounts.~~respectively. Consolidated DSO increased primarily due to ~~a delay in collections related to certain payors and~~ temporary billing holds ~~related to winter storms.~~and timing of collections. Our DSO calculation is based on the current quarter’s average revenues per day. There were no significant changes ~~in the second quarter of 2021~~ from the first quarter of ~~2021~~2022 to the second quarter of 2022 in the carrying amount of ~~unreserved~~ accounts receivable outstanding over one year ~~old or in the amounts pending approval from third-party payors.~~old.

3532

Liquidity and capital resources

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


			Six months ended June 30,	YTD Q2 2021 vs. YTD Q2 2020					Six months ended June 30,						YTD Q2 2022 vs. YTD Q2 2021
				2021			2020			Amount		Percent			2022		2021		Amount		Percent
		(dollars in millions and shares in thousands)				(dollars in millions and shares in thousands)
Net cash provided by operating activities:	Net cash provided by operating activities:													Net cash provided by operating activities:
Net income	Net income			$	643		$	543		$	100	18.4	%	Net income	$	490	$	643	$	(153)	(23.8)	%
Non-cash items in net income	Non-cash items in net income			426			491			(65)		(13.2)	%	Non-cash items in net income	371		426		(55)		(12.9)	%
Other working capital changes	Other working capital changes			(208)			(11)			(197)		1,790.9	%	Other working capital changes	(295)		(208)		(87)		41.8	%
Other	Other			(27)			(11)			(16)		145.5	%	Other	(56)		(27)		(29)		107.4	%
				$	834		$	1,012		$	(178)	(17.6)	%		$	510	$	834	$	(324)	(38.8)	%

Net cash (used in) provided by investing activities:
Net cash used in investing activities:														Net cash used in investing activities:
Capital expenditures:	Capital expenditures:													Capital expenditures:
Routine maintenance/IT/other				$	(181)		$	(156)		$	(25)	16.0	%
Routine maintenance/information technology/other														Routine maintenance/information technology/other	$	(181)	$	(181)	$	—	—	%
Development and relocations	Development and relocations			(113)			(136)			23		(16.9)	%	Development and relocations	(85)		(113)		28		(24.8)	%
Acquisition expenditures	Acquisition expenditures			(24)			(44)			20		(45.5)	%	Acquisition expenditures	(9)		(24)		15		(62.5)	%
Proceeds from sale of self-developed properties	Proceeds from sale of self-developed properties			29			69			(40)		(58.0)	%	Proceeds from sale of self-developed properties	106		29		77		265.5	%

Other	Other			6			(140)			146		(104.3)	%	Other	(95)		6		(101)		(1,683.3)	%
				$	(284)		$	(407)		$	123	(30.2)	%		$	(263)	$	(284)	$	21	(7.4)	%

Net cash provided by (used in) financing activities:
Debt issuances net of (payments) and financing costs				$	848		$	1,668		$	(820)	(49.2)	%
Net cash (used in) provided by financing activities:														Net cash (used in) provided by financing activities:
Debt issuances, net														Debt issuances, net	$	341	$	848	$	(507)	(59.8)	%
Distributions to noncontrolling interests	Distributions to noncontrolling interests			(99)			(119)			20		(16.8)	%	Distributions to noncontrolling interests	(118)		(99)		(19)		19.2	%
Contributions from noncontrolling interests	Contributions from noncontrolling interests			16			21			(5)		(23.8)	%	Contributions from noncontrolling interests	9		16		(7)		(43.8)	%
Stock award exercises and other share issuances														Stock award exercises and other share issuances	(48)		(44)		(4)		9.1	%
Share repurchases	Share repurchases			(561)			(322)			(239)		74.2	%	Share repurchases	(617)		(561)		(56)		10.0	%
Other	Other			(48)			(8)			(40)		500.0	%	Other	(12)		(4)		(8)		200.0	%
				$	156		$	1,240		$	(1,084)	(87.4)	%		$	(445)	$	156	$	(601)	(385.3)	%

Total number of shares repurchased	Total number of shares repurchased			5,019			4,052			967		23.9	%	Total number of shares repurchased	5,973		5,019		954		19.0	%

Free cash flow(1)	Free cash flow(1)			$	485		$	691		$	(206)	(29.8)	%	Free cash flow(1)	242		485		(243)		(50.1)	%

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

(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 six months ended June 30, ~~2021 were $834 million,~~2022 decreased compared to ~~consolidated~~the six months ended June 30, 2021 primarily due to a decrease in operating ~~cash flows~~results, timing of income tax payments and changes in total DSO, which increased approximately four days for the six months ended June 30, ~~2020 of $1,012 million. The~~ ~~decrease~~ ~~in operating cash flows was primarily driven by~~2022 compared to an increase ~~in total DSO~~ of three days for the six months ended June 30, 2021 ~~compared to a decrease of one day for the six months ended June 30, 2020,~~partially offset by net increases in ~~addition to timing of~~ other working capital items.

Free cash flow during the six months ended June 30, ~~2021~~2022 decreased from the six months ended June 30, ~~2020~~2021 primarily due to a decrease in net cash provided by operating activities ~~as described above and a decrease in proceeds from the sale of self-developed properties,~~ partially offset by ~~a decline~~an increase in ~~net distributions to noncontrolling interests.~~proceeds on self-developed properties.

~~Other significant~~Significant sources of cash from financing activities included ~~proceeds from the issuance~~a net draw of ~~$1.0 billion in aggregate principal amount~~$425 million on our revolving line of ~~the Additional 2030 Notes as an add-on offering to our 4.625% senior notes due 2030 that were issued at an offering price of 101.750% of face amount in February 2021. Other significant uses of cash~~credit in the six months ended June 30, ~~2021~~2022. Significant uses of cash during the period included ~~the repayment in full of borrowings under our revolving line of credit. Other~~ net debt payments ~~during the six months ended June 30, 2021 primarily~~which consisted of regularly scheduled mandatory principal payments under our senior secured credit facilities totaling approximately $44 million on Term Loan A and $14 million on Term Loan B-1, as well as additional required ~~principal~~ payments under other debt arrangements. We also incurred bond issuance costs of approximately $9 million in cash during this period. See further discussion in Note 7 to the condensed consolidated financial statements related to our debt

3633

~~financing activities.~~arrangements. In addition, during the six months ended June 30, ~~2021~~2022 we used cash to repurchase ~~5,019,336~~5,972,974 shares of our common stock.

By comparison, the same period in ~~2020~~2021 included ~~our~~the issuance of ~~$1.750~~$1.0 billion in aggregate principal amount of senior notes as an add-on offering to our 4.625% senior notes due 2030 ~~in June 2020 in anticipation~~which were issued at an offering price of ~~redemption~~101.750% of ~~an equal~~the principal amount ~~of 5.125% senior notes~~ in ~~July 2020.~~February 2021. Other net debt payments during the six months ended June 30, ~~2020~~2021 primarily consisted of the repayment in full of $75 million of borrowings under our revolving line of credit, net payments of regularly scheduled mandatory principal ~~payments~~amounts due under our senior secured credit facilities totaling approximately ~~$22~~$44 million on Term Loan A and $14 million on Term Loan B-1 and additional required ~~principal~~ payments under other debt arrangements. In addition, we incurred bond issuance costs of approximately ~~$20~~$9 million ~~and refinancing costs related to the repricing of our Term Loan B-1 of approximately $3 million during this period.~~in cash. For the six months ended June 30, ~~2020~~2021 we also used cash to repurchase ~~4,052,298~~5,019,336 shares of our common stock.

Dialysis center 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 June 30,		Six months ended June 30,		Three months ended June 30,		Six months ended June 30,			Three months ended June 30,		Six months ended June 30,		Three months ended June 30,		Six months ended June 30,
		2021	2020	2021	2020	2021	2020	2021	2020		2022	2021	2022	2021	2022	2021	2022	2021
Number of centers operated at beginning of period	Number of centers operated at beginning of period	2,827	2,772	2,816	2,753	323	282	321	259	Number of centers operated at beginning of period	2,809	2,827	2,815	2,816	346	323	339	321
Acquired centers	Acquired centers	1	1	1	3	5	3	7	25	Acquired centers	—	1	—	1	2	5	5	7
Developed centers	Developed centers	13	28	31	50	2	2	4	4	Developed centers	18	13	27	31	1	2	2	4
Net change in non-owned managed or administered centers(1)	Net change in non-owned managed or administered centers(1)	—	—	—	—	1	—	2	1	Net change in non-owned managed or administered centers(1)	—	—	—	—	—	1	3	2
Sold and closed centers(2)	Sold and closed centers(2)	(3)	(2)	(4)	(4)	—	—	(3)	—	Sold and closed centers(2)	(2)	(3)	(7)	(4)	—	—	—	(3)
Closed centers(3)	Closed centers(3)	(10)	(4)	(16)	(7)	—	—	—	(2)	Closed centers(3)	(15)	(10)	(25)	(16)	—	—	—	—
Number of centers operated at end of period	Number of centers operated at end of period	2,828	2,795	2,828	2,795	331	287	331	287	Number of centers operated at end of period	2,810	2,828	2,810	2,828	349	331	349	331

(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~~APAC JV 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 six months ended June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three months ended June 30,				Six months ended June 30,					Three months ended June 30,				Six months ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Open market repurchases:	Open market repurchases:	(dollars in millions, except for per share data)								Open market repurchases:	(dollars in millions and shares in thousands, except for per share data)
Shares	Shares	2,069,854		—		5,019,336		4,052,298		Shares	3,869		2,070		5,973		5,019
Amount paid	Amount paid	$	241	$	—	$	563	$	303	Amount paid	$	370	$	241	$	603	$	563
Average paid per share	Average paid per share	$	116.38	$	—	$	112.21	$	74.81	Average paid per share	$	95.56	$	116.38	$	100.96	$	112.21

See further discussion of our stock repurchases in Note 98 to the condensed consolidated financial statements.

Available liquidity

As of June 30, ~~2021,~~2022, we had ~~an undrawn~~$575 million available and $425 million drawn on our $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, of which there were none as of June 30, ~~2021.~~2022. We separately ~~have~~had approximately ~~$69~~$108 million ~~of outstanding~~in letters of credit outstanding under a separate bilateral secured letter of credit facility.

See Note 76 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.

The COVID-19 pandemic, ~~and~~ efforts to prevent its spread, and other government actions intended to support those efforts have dramatically impacted 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~~remain 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, 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~~2021 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 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).

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 June 30, 2021
U.S. dialysis Ancillary services Corporate administration
U.S. International Total Consolidated
(dollars in millions)
Operating income (loss) $ 534 $ (28) $ 10 $ (18) $ (25) $ 490
Adjusted operating income (loss) $ 534 $ (28) $ 10 $ (18) $ (25) $ 490


	Three months ended
	June 30, 2022			March 31, 2022
	(dollars in millions)
Income before income taxes	$	349		$	263
Less: Noncontrolling owners' income primarily attributable to non-tax paying entities	(60)			(44)
Income before income taxes attributable to DaVita Inc.	$	289		$	219
Income tax expense	$	64		$	57
Less: Income tax attributable to noncontrolling interests	—			—
Income tax expense attributable to DaVita Inc.	$	64		$	57
Effective income tax rate on income attributable to DaVita Inc.	22.1		%	26.0		%

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

3835

Three months ended March 31 2021
U.S. dialysis Ancillary services Corporate administration
U.S. International Total Consolidated
(dollars in millions)
Operating income (loss) $ 480 $ (25) $ 13 $ (12) $ (25) $ 443
Adjusted operating income (loss) $ 480 $ (25) $ 13 $ (12) $ (25) $ 443


	Six months ended
	June 30, 2022			June 30, 2021
	(dollars in millions)
Income before income taxes	$	612		$	809
Less: Noncontrolling owners' income primarily attributable to non-tax paying entities	(104)			(112)
Income before income taxes attributable to DaVita Inc.	$	508		$	697
Income tax expense	$	121		$	167
Less: Income tax attributable to noncontrolling interests	(1)			—
Income tax expense attributable to DaVita Inc.	$	121		$	166
Effective income tax rate on income attributable to DaVita Inc.	23.8		%	23.8		%

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

Three months ended June 30, 2020
U.S. dialysis Ancillary services Corporate administration Consolidated
U.S. International Total
(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

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

Six months ended June 30, 2021
U.S. dialysis Ancillary services Corporate administration
U.S. International Total Consolidated
(dollars in millions)
Operating income (loss) $ 1,014 $ (53) $ 24 $ (30) $ (51) $ 933
Adjusted operating income (loss) $ 1,014 $ (53) $ 24 $ (30) $ (51) $ 933

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

Six months ended June 30, 2020
U.S. dialysis Ancillary services Corporate administration
U.S. International Total Consolidated
(dollars in millions)
Operating income (loss) $ 1,014 $ (60) $ 18 $ (42) $ (97) $ 875
Loss on changes in ownership interests, net — 16 — 16 — 16
Accrual for legal matters — — — — 35 35
Adjusted operating income (loss) $ 1,014 $ (44) $ 18 $ (26) $ (62) $ 927

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

Three months ended Six months ended
June 30,
2021 March 31,
2021 June 30,
2020 June 30,
2021 June 30,
2020
(dollars in millions)
Income from continuing operations before income taxes $ 432 $ 377 $ 338 $ 809 $ 708
Less: Noncontrolling owners' income primarily attributable to non-tax
paying entities (58) (54) (53) (112) (102)
Income from continuing operations before income taxes attributable
to DaVita Inc. $ 375 $ 323 $ 285 $ 697 $ 606
Income tax expense for continuing operations $ 81 $ 85 $ 83 $ 167 $ 175
Less: Income tax attributable to noncontrolling interests — — — — —
Income tax expense from continuing operations attributable to
DaVita Inc. $ 81 $ 85 $ 83 $ 166 $ 175
Effective income tax rate on income from continuing operations
attributable to DaVita Inc. 21.6 % 26.4 % 29.2 % 23.8 % 28.8 %

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

Six months ended
June 30, 2021 June 30, 2020
(dollars in millions)
Net cash provided by operating activities $ 834 $ 1,012
Less: Distributions to noncontrolling interests (99) (119)
Plus: Contributions from noncontrolling interests 16 21
Cash provided by operating activities from continuing operations 751 914
Less: Expenditures for routine maintenance and information technology (181) (156)
Less: Expenditures for development (113) (136)
Plus: Proceeds from sale of self-developed properties 29 69
Free cash flow $ 485 $ 691


	Six months ended
	June 30, 2022		June 30, 2021
	(dollars in millions)
Net cash provided by operating activities	$	510	$	834
Adjustments to reconcile net cash provided by operating activities to free cash flow:
Distributions to noncontrolling interests	(118)		(99)
Contributions from noncontrolling interests	9		16
Expenditures for routine maintenance and information technology	(181)		(181)
Expenditures for development and relocations	(85)		(113)
Proceeds from sale of self-developed properties	106		29
Free cash flow	$	242	$	485

Certain columns or rows may not sum due to the presentation 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 certain working capital funding obligations associated with our equity investments in nonconsolidated dialysis ventures that we manage and some that we manage which are wholly-owned by third parties. For additional information see Note 7 to the condensed consolidated financial statements.

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. For additional information on these obligations and how we measure and report them, see Note 1312 to the condensed consolidated financial statements and ~~Note~~Notes 17 and ~~Note~~ 24 to the consolidated financial statements included in our ~~2020~~2021 10-K.

~~The following is a summary of these off-balance sheet contractual obligations and commitments as of June 30, 2021:~~

Remainder of 2021 2022-2024 2025-2026 After
5 years Total
(dollars in millions)
Potential cash requirements under other commitments:
Letters of credit $ 69 $ — $ — $ — $ 69
Noncontrolling interests subject to put provisions 1,062 171 114 79 1,426
Non-owned and minority owned put provisions 114 6 — — 120
Operating capital advances 1 4 2 4 11
Purchase commitments 256 1,504 346 — 2,106
$ 1,502 $ 1,685 $ 462 $ 83 $ 3,732

For information on the maturities and other terms of our long term debt, see Note 76 to the condensed consolidated financial statements.

As of June 30, 2022, we have outstanding letters of credit in the aggregate amount of approximately $108 million under a bilateral secured letter of credit facility separate from our senior secured credit facilities.

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 agents (ESAs) through the expiration of the 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~~As of June 30, 2022, we have outstanding 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.~~supplier, as described further in Note 17 to the Company's consolidated financial statements included in the 2021 10-K.

~~Settlements~~

In addition, we have approximately $43 million of existing income tax liabilities for unrecognized tax benefits, ~~of approximately $92 million,~~ including interest, penalties and other long-term tax liabilities. Income tax liabilities were reduced from $88 million as of December 31, 2021 to $43 million as of June 30, 2022, primarily due to a partial settlement reached with federal tax authorities for years 2014-2015.

Finally, on May 25, 2022, we entered into an agreement with Medtronic, Inc. and one of its subsidiaries (collectively, Medtronic) to form a new, independent kidney care-focused medical device company (NewCo). The transaction is expected to close in 2023, subject to customary closing conditions and regulatory approvals. At close, DaVita will make a cash payment to Medtronic of approximately $75 million, subject to certain customary adjustments prior to the closing, and will contribute certain other non-cash assets to NewCo valued at approximately $25 million. Additionally, at close, each of DaVita and Medtronic will contribute approximately $200 million in cash to launch NewCo. DaVita also agreed to pay Medtronic additional consideration of up to $300 million if certain regulatory and commercial milestones are ~~excluded from the table above as reasonably reliable estimates of their timing cannot be made.~~achieved between 2024 and 2028.

New Accounting Standards

See discussion of new accounting standards in Note 1514 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, ~~2020.~~2021.

The tables below provide information about our financial instruments that are sensitive to changes in interest rates as of June 30, ~~2021.~~2022. For further information on the components of the Company's long-term debt and their interest rates, see Note 76 to the condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q at Part I Item 1.


		Expected maturity date																Average interest rate			Fair value(1)			Expected maturity date																	Average interest rate		Fair value(1)
		2021		2022		2023		2024		2025		2026		Thereafter		Total				2022					2023			2024		2025		2026		2027		Thereafter		Total
		(dollars in millions)																						(dollars in millions)
Long term debt:	Long term debt:																									Long term debt:
Fixed rate	Fixed rate	$	35	$	30	$	36	$	31	$	31	$	41	$	4,439	$	4,643	4.43	%		$	4,361	Fixed rate	$	17		$	41	$	32	$	32	$	43	$	30	$	4,416	$	4,611	4.43	%	$	3,309
Variable rate	Variable rate	$	73	$	134	$	179	$	1,394	$	37	$	2,584	$	2	$	4,403	2.18	%		$	4,392	Variable rate	$	80		$	178	$	1,819	$	37	$	2,584	$	3	$	1	$	4,702	3.77	%	$	4,509

(1)Represents the fair value of the Company’s long-term debt excluding financing leases. See Note 76 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% $ 6.4


	Notional amount		Contract maturity date															Fair value
			2022		2023		2024		2025		2026		2027		Thereafter		Receive variable
	(dollars in millions)
2019 cap agreements	$	3,500	$	—	$	—	$	3,500	$	—	$	—	$	—	$	—	LIBOR above 2%	$	84.6

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 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 CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures in accordance with the Exchange Act requirements as of June 30, ~~2021.~~2022. Based upon that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as required by the Exchange Act as of such date for 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 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.

4138

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 “Commitments and ~~Contingencies”~~contingencies” in Note 87 to the condensed consolidated financial statements included in this report.

Item 1A. Risk Factors

~~There have been no material changes~~In addition 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 ~~previously disclosed~~discussed in Part I, Item 1A of our Annual Report on Form 10-K ~~(2020~~(2021 10-K) for the year ended December 31, ~~2020 filed~~2021 and any subsequent filings with the Securities and Exchange ~~Commission. You should carefully consider the~~Commission (SEC), which could materially affect our business, financial condition, results of operations, cash flows or future results. The risks ~~included~~and uncertainties discussed below, in our ~~2020~~2021 10-K 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, ~~all~~ the ~~other information~~risk factors disclosed in Part I, Item 1A of our 2021 10-K. Please also read the ~~Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 and this Quarterly Report on Form 10-Q, including 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."

If the number or percentage of patients with higher-paying commercial insurance declines, if the average rates that commercial payors pay us decline, if commercial plans subject patients to restriction in plan designs, or if we are unable to maintain contracts with payors with competitive terms, 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.

A substantial portion of our U.S. dialysis net patient services revenues for the three and six months ended June 30, 2022 was generated from patients who have commercial payors as their primary payor. The majority of these patients have insurance policies that pay us on terms and at rates that are generally significantly higher than Medicare rates. As such our revenue and net income levels are sensitive to the number of our patients with higher-paying commercial insurance coverage and the percentage of our patients under higher paying commercial plans relative to government-based programs. The payments we receive from commercial payors generate nearly all of our profit and all of our nonacute dialysis profits come from commercial payors.

When traditional or original Medicare ("Medicare") becomes the primary payor for a patient, the payment rate we receive for that patient decreases from the commercial plan rate to the lower Medicare payment rate. If the number of our patients who have Medicare or another government-based program as their primary payor increases, it could negatively impact the percentage of our patients covered under commercial insurance plans. There are a number of factors that could drive a decline in the number or percentage of our patients covered under commercial insurance plans, including, among others, a continued decline in the rate of growth of the ESRD patient population, improved mortality, changes in the patient's or a family member's employment status, reduced availability of commercial health plans or reduced coverage by such plans through the ACA exchanges or otherwise due to changes to the laws, marketplace, healthcare regulatory system or otherwise. Commercial payors could also cease paying in the primary position after providing 30 months of coverage resulting in potentially material reductions in payment as the patient moves to Medicare primary. Declining macroeconomic conditions could also negatively impact the percentage of our patients covered under commercial insurance plans. To the extent there are job losses in the U.S., we could experience a decrease in the number of patients covered under commercial plans and/or an increase in uninsured and underinsured patients independent of whether general economic conditions improve. If we experience higher numbers of uninsured or underinsured patients, it also would result in an increase in uncollectible accounts.

Our arrangements and negotiations with payors also impact the number or percentage of patients with higher-paying commercial insurance. We continuously are in the process of negotiating existing and potential new agreements with commercial payors who aggressively negotiate terms with us, and we can make no assurances about the ultimate results of these negotiations or the timing of any potential rate changes resulting from these negotiations. Sometimes many significant agreements are being renegotiated at the same time. We believe payor consolidations have significantly increased the negotiating leverage of commercial payors, and ongoing consolidations may continue to increase this leverage in the future. In addition, our agreements and rates with commercial payors may be impacted by new business activities of these commercial payors as well as steps that these commercial payors have taken and may continue to take to control the cost of and/or the eligibility for access to the services that we provide, including, without limitation, relative to products on and off the healthcare

exchanges. These efforts could impact the number of our patients who are eligible to enroll in commercial insurance plans, and remain on the plans, including plans offered through healthcare exchanges. We continue to experience downward pressure on some of our rates with commercial payors as a result of these and other general conditions in the market, including, among other things, as employers seek to shift to less expensive options for medical services or as commercial payors dedicate increased focus on dialysis services.

Our negotiations with commercial payors may relate to commercial fee-for-service contracts, value-based care (VBC) contracts in which we share risk with commercial payors, as well as contracts to provide dialysis services to Medicare Part C MA patients. If we fail to maintain contracts with payors and other healthcare providers with competitive or favorable terms, either with respect to commercial plans, commercial VBC contracts, MA plans or otherwise, including, without limitation, with respect to reimbursement rates, scope and duration of coverage and in-network benefits, contract term or termination rights, or if we fail to accurately estimate the price for and manage our medical costs in an effective manner, whether due to inflationary pressures or otherwise, such that the profitability of our commercial or other value-based products is negatively impacted, it could have a material adverse effect on our business, results of operations, financial condition and cash flows. The ultimate result of our negotiations with payors cannot be predicted as they occur in a highly competitive environment and are influenced by marketplace dynamics such as those previously discussed. Among other things, these negotiations may result in termination or non-renewals of existing agreements, decreases in contracted rates, and reduction in the number of our patients that are covered by commercial plans, and we may not be able to enter into new agreements on competitive terms or at all. In the event that our ongoing negotiations with commercial payors result in overall rates reductions in excess of overall rate increases, the cumulative effect could have a material adverse effect on our business, results of operations, financial condition and cash flows. In addition, to the extent that these negotiations result in a reduction in the number of our patients covered by plans with commercial payors, it could have a material adverse effect on our business, results of operations, financial condition and cash flows. A material portion of both our commercial revenue and MA revenue is concentrated with a limited number of commercial payors, and any changes impacting our highest paying commercial payors or our relationships with these payors will have a disproportionate impact on us.

Certain payors have been attempting to design and implement plans that restrict access to ESRD coverage both in the commercial and individual market. Among other things, these restrictive plan designs seek to limit the duration and/or the breadth of ESRD benefits, limit the number of in-network providers, set arbitrary provider reimbursement rates, or otherwise restrict access to care, all of which may result in a decrease in the number of patients covered by commercial insurance or the reimbursement rate for ESRD services, among other things. Payors have also disputed the scope and duration of ESRD benefit coverage under their plans, and, among other things, have required patients to seek Medicare coverage for ESRD treatments. On June 21, 2022, the U.S. Supreme Court issued a decision in the matter of Marietta Memorial Hospital Employee Health Benefit Plan, et al. v. DaVita Inc. et al., a case evaluating the scope of the Medicare Secondary Payor Act (MSPA), deciding that a group health plan that provides limited benefits for outpatient dialysis, but does so uniformly for all plan participants, does not violate the terms of the MSPA because the plan treats all patients uniformly, regardless of whether a participant has ESRD and regardless of whether the participant is eligible for Medicare. For additional information, see Note 7 to the consolidated financial statements included in this report. We cannot reasonably estimate the ultimate impact of the U.S. Supreme Court’s decision at this time, as there is significant uncertainty as to, among other things, whether and to what extent payors may seek to design and implement plans to restrict access to ESRD in light of the decision; whether and how regulators and legislators will respond to the decision, including whether they will issue regulatory guidance or adopt new legislation; how courts will interpret other anti-discriminatory provisions that may apply; whether there could be other potential negative impacts of the decision and any resultant plan behavior on our commercial or government mix or the number of our patients covered by commercial insurance; and the timing of each of these items. Irrespective of any legislative or regulatory action in response to the decision, if more plans seek to implement plan designs that discourage or prevent ESRD patients from retaining their commercial coverage, it may lead to a decrease in the number of patients with commercial plans, the duration of benefits for patients under commercial plans and/or a decrease in the payment rates we receive, any of which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

In addition, some commercial payors are pursuing or have incorporated policies into their provider manuals limiting or refusing to accept charitable premium assistance from non-profit organizations, such as the American Kidney Fund, which may impact the number of patients who are able to afford commercial plans. Paying for coverage is a significant financial burden for many patients, and ESRD disproportionately affects the low-income population. Charitable premium assistance supports continuity of coverage and access to care for patients, many of whom are unable to continue working full-time as a result of their severe health condition. Many patients with commercial and government insurance also rely on financial assistance from charitable organizations, such as the American Kidney Fund. Certain payors have challenged our patients' and other providers' patients' ability to utilize assistance from charitable organizations for the payment of premiums, including, without limitation, through litigation and other legal proceedings. The use of charitable premium assistance for ESRD patients has also faced challenges and inquiries from legislators, regulators and other governmental authorities, and this may continue. In addition,

CMS or another regulatory agency or legislative authority may issue a new rule or guidance that challenges or restricts charitable premium assistance. If any of these challenges to kidney patients' use of premium assistance is successful or restrictions are imposed on the use of financial assistance from such charitable organizations or if organizations providing such assistance are no longer available such that kidney patients are unable to obtain, or continue to receive or receive for a limited duration, such financial assistance, it may restrict the ability of dialysis patients to obtain and maintain optimal insurance coverage and could have a material adverse effect on our business, results of operations, financial condition and cash flows. In addition, if our assumptions about how kidney patients will respond to any change in financial assistance from charitable organizations are incorrect, it could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Our negotiations and relationships with payors may also be impacted by legislative or regulatory developments and associated legal rulings. For example, the final rules for the 21st Century Cures Act, which are described in detail in Part I, Item 1. Business of the 2021 10-K under the heading "Government Regulation—21st Century Cures Act,"broadened ESRD patient access to certain enhanced benefits offered by MA plans. While these rules increased our MA plan enrollment for ESRD benefits in their first year, the potential ultimate impact of this change in benefit eligibility remains subject to change as market participants continue to adjust to this new regulatory environment. As an example, the removal of objective time and distance standards relating to network adequacy for outpatient dialysis centers for MA plans that was included in the final rules may 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 in the event MA plans attempt to use this revision to the rules to limit or restrict their networks. 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, recent price transparency regulations require most group health plans and health insurance issuers in the group and individual markets to make certain pricing and patient responsibility information publicly available. For further detail on these regulations, see the discussion in Part I, Item 1. Business of the 2021 10-K under the heading "Government Regulation—Price Transparency Rules." On July 1, 2022, enforcement began of the requirement that plans publish machine readable files that include negotiated rates for all covered items and services with all providers and out-of-network allowed amounts. To comply with these requirements, plans have begun to publish these files and make them available to the public. The information that has been made available to date is highly diverse and complex. While the ultimate impact of these requirements remains uncertain, any changes by group health plans, health insurance issuers in the group and individual markets, or consumer choices resulting from these requirements could have a material adverse impact on our business, results of operations, and financial condition, and our reputation could be materially harmed. We could also experience a further decrease in the payments we receive for services if changes to the marketplace or the healthcare regulatory system result in fewer patients covered under commercial plans or an increase of patients covered under more restrictive commercial plans, or plans with lower reimbursement rates, among other things. For additional details regarding potential legislative or regulatory changes, the specific risks we face in connection with any decrease in payments we receive for services due to, for example, fewer patients being covered under commercial plans or an increase of patients covered under more restrictive commercial plans, or plans with lower reimbursement rates, please see Part I, Item 1. Business of the 2021 10-K under the heading "Government Regulation" and the discussion in the risk factor included in Part I, Item 1A. of the 2021 10-K under the heading "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."

As noted, the foregoing dynamics of our arrangements and negotiations with commercial payors each may have an impact on, among other things, our ability to enter into and maintain contracts with payors with competitive terms, including, without limitation, reimbursement rates, scope and duration of coverage and in-network benefits as well as the number or percentage of our patients with higher-paying commercial insurance. If, as a result of these or other dynamics, we experience a decline in the average rates that commercial payors pay us or a reduction in the number of patients with ESRD coverage under higher-paying commercial plans either in total or relative to the number of patients under government-based programs that pay at lower rates or an increase in the number of patients that are uninsured or underinsured, it 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 second quarter of ~~2021:~~2022:

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)
April 1-30, 2021 991 $ 109.91 991 $ 1,498,730
May 1-31, 2021 413 122.30 413 $ 1,448,155
June 1-30, 2021 666 122.33 666 $ 1,366,725
2,070 $ 116.38 2,070


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)
April 1-30, 2022	627	$	111.05	627	$	2,080,991
May 1-31, 2022	405	106.04		405	$	2,038,014
June 1-30, 2022	2,837	90.64		2,837	$	1,780,881
	3,869	$	95.56	3,869

~~Effective on 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~~The Company is 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 ~~August 2, 2021,~~July 29, 2022, we had a total of ~~$1.260~~$1.706 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

4342

Item 6. Exhibits


Exhibit
Number

31.1						Certification of the Chief Executive Officer, dated August ~~3, 2021,~~1, 2022, 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 August ~~3, 2021,~~1, 2022, 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 August ~~3, 2021,~~1, 2022, 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 August ~~3, 2021,~~1, 2022, 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.

4443

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: August ~~3, 2021~~1, 2022


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

4544


						Six months ended June 30, 2021				Fair value
	Notional amount		LIBOR maximum rate	Effective date	Expiration date	Debt expense		Recorded OCI gain		June 30, 2021		December 31, 2020
2019 cap agreements	$	3,500,000	2.00%	6/30/2020	6/30/2024	$	2,754	$	3,761	$	6,432	$	2,671


	Three months ended June 30, 2021		Six months ended June 30, 2021
Beginning balance	$	28,225	$	30,248
Acquisitions	2,156		2,694
Foreign currency translation	3,055		975
Fair value remeasurements	60		(154)
Payments	(5,154)		(5,421)
Ending balance	$	28,342	$	28,342


	Three months ended June 30, 2021
	U.S. dialysis		Ancillary services						Corporate administration
			U.S.		International		Total				Consolidated
	(dollars in millions)
Operating income (loss)	$	534	$	(28)	$	10	$	(18)	$	(25)	$	490



Adjusted operating income (loss)	$	534	$	(28)	$	10	$	(18)	$	(25)	$	490


	Three months ended March 31 2021
	U.S. dialysis		Ancillary services						Corporate administration
			U.S.		International		Total				Consolidated
	(dollars in millions)
Operating income (loss)	$	480	$	(25)	$	13	$	(12)	$	(25)	$	443



Adjusted operating income (loss)	$	480	$	(25)	$	13	$	(12)	$	(25)	$	443


	Remainder of 2021		2022-2024		2025-2026		After 5 years		Total
	(dollars in millions)
Potential cash requirements under other commitments:
Letters of credit	$	69	$	—	$	—	$	—	$	69
Noncontrolling interests subject to put provisions	1,062		171		114		79		1,426
Non-owned and minority owned put provisions	114		6		—		—		120
Operating capital advances	1		4		2		4		11
Purchase commitments	256		1,504		346		—		2,106
	$	1,502	$	1,685	$	462	$	83	$	3,732