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DaVita (DVA)

Participants
Kent Thiry Chief Executive Officer
Joel Ackerman Chief Financial Officer
Javier Rodriguez CEO, DaVita Kidney Care
Jim Hilger Chief Accounting Officer
LeAnne Zumwalt Group Vice President
Jim Gustafson Vice President, Investor Relations
Kevin Fischbeck Bank of America
Justin Lake Wolfe Research
Steve Tanal Goldman Sachs
Pito Chickering Deutsche Bank
John Ransom Raymond James
Gary Taylor J. P. Morgan
Whit Mayo UBS
Jeff Gate Gates Capital
Call transcript
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Operator

Thank you for standing by. My name is Colene and I will be your conference facilitator today. At this time I would like to welcome everyone to DaVita's Fourth Quarter 2018 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. Mr. Instructions] [Operator begin may Gustafson, your you conference.

Jim Gustafson

Relations, Colene fourth our statements you company. are Jim of Kent everyone the Accounting note Javier Zumwalt, forward-looking CEO; Group LeAnne today interest to conference call. Rodriguez, Kidney I'm Investor President the Vice welcome that Thiry, quarter Gustafson, Ackerman, may with and this We within room our me in of Thank in and CFO; and Joel we appreciate our Care; continued Jim the laws. President. Please of Officer, DaVita CEO Hilger, during call our federal Chief meaning your Vice make securities

materially these that in the from risks are statements known to forward and looking of statements. could and actual uncertainties the unknown differ those All cause described subject to results

For Report Form Report risks concerning quarter most press uncertainties, release to including refer Form our on these XX-K recent earnings please on our our SEC XX-Q. Quarterly filings, fourth and Annual further details and and

are statements. do these not Our forward-looking undertake we us, update and to based to available statements duty no intend and currently information upon

our Additionally, non-GAAP we'd GAAP reconciliation included measures. turn the SEC our remind our I'll Executive like call these on this most website. Chief of Thiry, financial the measures Officer. earnings now non-GAAP the to A release financial will discuss to measures that submitted to call comparable during we to is press some in you Kent and available over

Kent Thiry

you, Jim. Thank

greater start little caregiving so quarter downstream. communications that about of Joel today, first usual and company are will Antibiotic those clinical highlight As and talking you noted, a Stewardship. solid detail we bit as foremost consistent were course probably already a prior will a with and we had in by results But and we J.R. fourth discuss

dialysis are of highly many know, you infections. to As prone patients

antibiotic use to at Global based we be caregivers excessive resistance. and should of is American antimicrobial all We get the emergence are doing has reducing benefits, including harm to Health antibiotics, have are that preventing getting couple patients across of of prescribing and which proud evidenced continued we This supporting that Care from better a something also better. and

in fact but all Infections, even actually Blood important collect quality. we antibiotics not This to starts we while IV decreased in symptoms improve with XX% to Stream among of by do continue In did clinical of we terms ability our the only patients year, this XXXX, maintaining future. data to is what better in

on DMG update quick a the transaction. Now,

the working negatively The which are process we reasons all obtain many point the other timing the for necessary. and other involved was haven't speak definitively same to so transactions in to diligently We as move timing government companies it reasons all the the to closely of approval, Optum been with that was to course up everybody's FTC and this other ball that of cannot. cannot transactions But is very do for very to impacted we able forward. that by shutdown working

be expenses to bearing expected that of that operating in advantage good and will fourth, than for of is number number rates in are very years; reasons the news are of in is for that tangible Financial for dollar health XXXX One insurer DMG for improve of significantly. will the number prior is improve In two, performance elimination fees, XXXX pick years investments that gone dollar addition, incurred a in the – the Medicare prior better XXXX; fruit. three, in dollar consulting we example significant There dollar up; improvements, elimination considerable made number significantly the some a this.

better would be better significantly than DMG XXXX as that is net XXXX. is to the be So significantly expected

business. Care Javier of summary a Now for Kidney our over to

Javier Rodriguez

topics. two you, Thank I’ll Kent good and Today cover morning everyone.

a provide of the performance, I'll legislation California. second, in financial recap will I recently and our introduced discuss First,

fourth our our million for operating was are Adjusted billion guidance. the $XXX XXXX quarter full income For line quarter for with in the results year. the and $X.XXX

from guidance cash operations flows, operating at than to also in continuing Related cash CapEx in line to our and of lower billion. on with spent are we out CapEx came years. $X.XX spend, Our declining several our new came spend There flow a are guidance next guiding in of are XXXX better centers the this they XXXX. drivers in which decrease spend two as calling CapEx should the to worth couple XXXX

to continue we driving our on focus right the patient. First, modality for

option. at may the home For be many dialyzing them best of

have products, choose to we more patients a PD will Now supply more we home dialysis. able anticipate on secure that be

XXXX fact, new trained home and in over XX,XXX patients. In we educated

an growth capital know, has you home efficient. benefit incremental more of being As

Second, plan term we term as know immediate implication this suggests the fewer earlier centers patient year, we be long in some transplantation is keep that to this don’t of a ESRD term short impact data to growth may we is there slowing, availability pace or industry mentioned whether a recent build with whether but demand. increased

for us couple which set Next, is years. last patients. these enrollment includes enrollment, guidance QX many XXXX with our we individual consistent as expectations. markets decisions that higher to over of Overall later. saw reenrollment from results you we which month, our on many open observe we in last of open cover We In slightly know than will experienced up deliver particular, the shared of Joel stable we the believe results

the of has their XXX, renal assistance of and and transition restrictions in same assembly on at Governor for rate patients. cuts which the A Now, impose providers XXXX, California. impose let seeks the AB a for charitable new potential update to of premium last because to support pre-existing dialysis vetoed year's with premium the charities disease. to SB conditions me member assistance legislation reintroduced harm effectively legislative on bill, was by patients This end-stage

bill. of coalition conceived will in California Our patients, defeat physicians dialysis to fight course this caregivers and of

care a more we by build capabilities, are way. that finish saying for me helping care in continue integrated our Finally, patients to holistic let us which

provide determine at and to of which couple that a dialysis, following first, highest the me are risk examples; a Let we data data, treatment model hospitalization month. claims patients lab predictive of developed incorporates over data the

Second, now more in this practitioners needs and to quality real dedicated range our will more a we to primary while future. patients. of capabilities We system, patients, basis life improve the broad care many have of a care time that our look for on addressing the of a forward nurse team course believe of to to coordinated reducing patients we costs the these of providing

our solid to overall continue and So on quality patients. delivering we in focus high summary, care quarter for

for Joel details our results. Now, on financial to on

Joel Ackerman

Javier. Thanks

through Dialysis U.S. Segment. Lab you walk some components me our of Let and

treatment to non First, growth; volume was per a X.X% our was we QX continue X.X% day growth. and growth in decline as see growth normalized in acquired

expect We growth range to continue between to X.X% non-acquired X.X% and XXXX. in

$X.XX treatment QX down Next on per QX. revenue; to from revenue was

was across RPT exclude calcimimetics, network that shifted full revenue much was a than per which of network, the for you portfolio. down impact more If rate offset this the $X for in approximately To year, perspective of sequentially. the up the increases business of achieved out commercial treatment X% little we we've year to commercial some on give as

approximately XXXX that we We demographic in down was in to mix was previously our decline basis consistent with that XXXX. have outlined. XX.X% believe headwind XX XX.X% commercial mix year the points For from in the

$X down DaVita approximately spending an was care revenue increase due to was DaVita by remainder was revenue $X.XX million quarterly to G&A of up treatment, impacted due per our advocacy per Segment negatively our and of by the a announced revenue, Lab and in in quarter-over-quarter QX primarily on approximately cost previously quarter-over-quarter, strategic down decrease Rx. Finally normal quarter-over-quarter On Rx treatment is $XXX spend go-forward patient run initiative fees. and driven rate. Dialysis reflective wind fluctuations. down costs, $X professional the was

the operating achieved For international, venture FX adjusted Asia. positive the a we impact for in our profit joint excluding of slightly quarter,

positive operating expect impacts, income international any FX operations We which in enterprise in XXXX, incorporated excluding guidance. our are from

attributable tax moved low tax year these federal, quarter, operations and XX.X% unusually the It’s The rate fourth in one QX quarter. in the DaVita was of unusual from positive the XX.X%. effective for that direction international rate our the accruals. on result continuing for of a true-ups our income was was it quarterly and all to same as for For state effective

flow. for the Now billion Operating and continuing from our with year, cash XXXX cash flow was on to the previous in $X.XX quarter operations guidance. guidance. line our by $XXX for reiterating million conclude I'll

and We billion. expect be operating between $X.XX income to billion $X.XX

as seasonally tax. As over treatment the the quarter XX.X quarter meaning first absorb a with fewer Also income seasonal QX treatments shorter is has treatment lower costs. the fixed higher and which operating volumes low to days, payroll reminder, had

revenue treatment U.S. treatment growth per X% to to guidance XXXX X% following Our X.X% expectations; to U.S. X% volume cost total growth. includes X% and X.X% U.S. growth. per the treatment

XXXX the billion to initiating operating for offset million $X.XXX real-estate guidance are continuing projects operations $X.XXX transactions. sale proceeds XXXX $XXX continuing In cash from CapEx we expect operations. subsequent that from be in billion. for This We $XXX million year to CapEx includes range for flow self-developed to are the leaseback by from

midpoint. approximately million $XXX million approximately the in projects at XXXX leading expect net spend to We proceeds $XXX of of from self-developed

comparison for in $XXX sale and from million CapEx a $XXX million transactions of purposes, received operations of net was For we our $XX XXXX proceeds continuing leaseback from million.

in our section in earnings the financial see six detail release. supplemental historical can You our data of

income attributable to from expect to we XX.X% effective be Finally, on continuing DaVita XX.X%. tax rate to our operations

although in above the always, could As majority of our probabilistic estimates end are captures which scenarios or there below we guidance a up provided. outcomes,

for it turn to some I'll Kent over closing Now remarks.

Kent Thiry

for: increases like the years. the be increases reminded just zero please be fee comments almost that than better Medicare few year-over-year next make years rate service I for Number few the last to one, over a will few

expensive cash they high Second, four, than the expect like the prior please. positioned year-over-year fact continue to Number of and we or for a are lets which to can rather now a switch be And years. differentiated three, has generate offsets. better Q&A Operator, to well business value and flows these very than we provider added needy foundation strong integrated contributions international incrementally care patients. we some are on

Operator

Thank [Operator Instructions]. you.

comes Kevin The from Fischbeck, first of Bank America. question

line Your open. is now

Kevin Fischbeck

it’s Great, guess going going with confident you close, to if but of that didn’t can’t your DMG that when comment say it’s to we appreciate to still exactly question. are want close. start a I you thanks. as see review I I

from point. to make it's just your track of a everything timing at and still is matter perspective that want sure on Just this

Kent Thiry

Yeah.

Kevin Fischbeck

about in And I little else that slowdown anything about talk more is seeing thinking factors if I talk a like? what from be a wanted missed, may or treatment growth may or are there a Can what not about you little temporary. those thinking then you about bit I think you should are are great. and organic Okay, mentioned factors something the look about growth that that perspective. you to expecting and

Javier Rodriguez

Kevin. Javier. starts thanks Yeah, the non-acquired why on that's a is to bit in slow X.X number year you the back This to growth. to of see the new of and We saw X.X down we end guidance, provided of came when down a started

factors in organs and the with ESRD, that upstream and organs young as and pool, the what's other kidneys. up being impacting, have crisis how patients with that the has number of how still many healthy opioid that people into many picked Some to another of are many due conditions comorbid are are having play gone how transplant happening is is dynamic

they are we short many they a term. be So see longer going inter term is are so to upstream dynamic and there are lot if if played, or trying to

Kevin Fischbeck

doing year, gains, industry market share perspective, to is that? the position from about new growth, that you Okay, loses, thinking are that over the how going inline market you starts for your you share are next

Javier Rodriguez

how are within question? you are that we asking sorry, Is growth? I’m the that positioned

Kevin Fischbeck

Yeah, overall mean market your think X.X%, going or you growing. should to that along you expect guidance gain with to of be does you are share what that X.X% the

Javier Rodriguez

so Yeah, the maybe data that actually dynamics would the would at couple of that and not are last last now of decades couple outperformed believe in that we in market of there's the the looking more non-acquired that do say the just growth. we nothing right we've We years, last not years, couple a overall.

Kevin Fischbeck

maybe then and Okay, last question for a now.

year-over-year argue mix, On would think guidance demographic But in will relatively kind trends flat. points basis what of the to your you you assumes kind mix know I in mix that line of said all be you was for. I actually expect with commercial think that down XX

to point about So you're I’m year, not you each being sure demographics the how flat if know a XXXX? in decline thinking

Joel Ackerman

patients, offset So the insurance We on are them as Kevin, here. its education well about dialysis. to with demographics certainly points headwind, headwind they’ve Joel XX upstream, The as a of their opportunities through a see basis once come year. helping

headwind, but offset So opportunities persisting. see the headwind to see we do we the

Kevin Fischbeck

Thank great. you. alright Okay,

Kent Thiry

Kevin. you, Thank

Operator

next Thank Justin that question you Research. our and Lake, from comes Wolfe

now line Your open. is

Justin Lake

morning. good Thanks,

the shut understand First, let close the thing me around but question down in you up close. last the I about delayed deal follow talked quarter. to and the first on had deal Kevin's everything, the was government expecting

the So where know expect Is government out of feel that with XX would ex down even quarter, government you days, of first that you us would shutdown, April. to end the shut like you or changed? know about still kind do you take things have the

Joel Ackerman

Kevin so Joel its here. Yeah,

still odds that QX, possibility, real that are for We shutdown certainly trying but lowered the a certainly has government is the of happening.

Justin Lake

would that that trajectory? there new the Is besides change anything shutdown

Kent Thiry

any would suggest were Joel’s asking questions. nobody's there are we always Justin, with going he still applies, a any a goal cited. nobody's and hired that on But new lot nothing answer work, that doing Gap] is [Audio

Justin Lake

if And second legislation, for California just a XXXX that given Curious a coming around the range that can are if and actually sign impact know likely time this is legislation they've you legislation past. know we Governor be then the gets problem. more think put this to if got on potential should help does they you us, about financial it here this the No might pass. you

Kent Thiry

it $XX can can useful range, and different you out, would it'll predict a be Justin, imagine that course a have and I to moves Yeah but as there's be range. of interpret as in constructive and how to million million think somewhere $XX ways you legislation to and the play try give to never you

Justin Lake

I will queue. is helpful. Thanks the That jump in back guys.

Kent Thiry

you. Thank

Operator

you. Thank

comes next from Our question Goldman Steve Tanal, Sachs.

now Your line open. is

Steve Tanal

home I any just treatment X.X, capturing morning. the slower in that good is that normalized, guys, that? dialysis to is the pick-up attributable of or non-acquire guess in quarter you on Thank growth at

Kent Thiry

growth the the there; is That in is in captured home X.X.

Steve Tanal

growing how and the comment that in available. of home should a And guys new technology okay. planning sort business you the thinking in home that? about in it, Got sort more think that’s making that growth we or – you for Are that of are about just It’s hemo. the Is how of market.

Kent Thiry

we in assess talk of and but so of lot really that whatever a a It we for appropriate leading home and lot as when been remember same, products. smoke really for to and do There long right continue is love each there's is for patient, them. and it We’ve we there's you trying a is talk will in as will up the what's patients innovation. of carefully course for can we the something for patient to of if But good the course people are just of pursue technologies. the innovation, best I their that's look lot modality of

Steve Tanal

the Then it. sort longer you term of of point. can number for us at got slower about how the you Novos, what of Okay, this are just sense a De are on for you and ’XX planning thinking give opening

Kent Thiry

Sure.

between are now highlighting of answer Novos. that the slowing a there the leases So that signed are I’ll were De on are the lag made, and is of ago. coming growth were they slowing the two fact a the decisions or Novos year De preface that that by

home. Novos, at traditional also need as you down. dialysis, slowing the and more forward. things. that Novos a So for function the I’ll know home, significant our that One, of we going of the will it's of more and in-center comes De function function continue a XXXX dialyzing patients we slowdown De it's said, in are a are think in at with NAG; a that growing looking two highlight it’s And

Steve Tanal

then RPT on it. you from got the in lastly calcimimetics side about calcimimetics, just a just mentioned had sort in me, Is it was okay, total that sequentially. $XX. think headwind And $X added I of of Understood, sort

I was if think recall in I $XX it correctly? QX

Kent Thiry

Yeah, about that's right.

Steve Tanal

Got you. thank it, okay,

Operator

Chickering Deutsche you, with Thank from Pito comes our Steve. next Bank. question And

open. is line Your

Pito Chickering

and my Two guys morning questions, one Good review the treatment. question. per of for first thanks taking

network Is book sort your You revenues about to for network about the outer of or talk in business. about bringing more can of that? now, network. ballpark revenues of out talked you X.X% from in that estimated We

Kent Thiry

asked as down, January trends I think more we year as today question to can could Kent clarity to much provide been that not and that's some useful as of think the of going for as are long We that. to give and change over about I number that right has stance years be haul we think and sort coming now. our try the many nine in on talked of do trajectory to we a I

Pito Chickering

weaker of you sort the any through is can weather from can we of any fair was of what you sort impact then enough. wildfires talk way quarter what and because of And for and of core then there getting versus saw rest on the in the we of about guys year, in growth sort quarter, so better much monthly so varied growth exited Right, way January. also fourth just the us sort rate or get the any the feel a numbers, it’s

Kent Thiry

Yeah, to like out one nothing stuff to any of that. so time point sort relating or wildfires

that I In terms numbers, think go going granularity. are of to monthly level to of we don't

Pito Chickering

a enough. fair last then perspective. question leverage Okay, And from

ratio hopefully years, sold, next think business think you we what’s I should the by DMG running? the right guys gets As three about leverage the

Kent Thiry

about. thinking No well variety gone that. we Obviously times a is real But change the the X.X is now. that to expect around times range think I think the for although X X generally in, right to have are to range reasons. above that we to of X.X our be to above we still

Pito Chickering

you much. so Thank Great.

Operator

you. Thank

Operator

Thank you.

with Our Barclays. Patrick next Healy question comes from

open. Your now line is

Patrick Healy

thanks question. the Hey, good taking for morning,

legislation Can an that you as what do? some color in proactive You on that California. mentioned legislation just to to you’d looking industry past introduce might look provide be some in the

Kent Thiry

Yes, thank you Patrick.

educate are an the on they are course, that sure ecosystem in Of legislators normally all we that that trying going something make not to understand the that we dynamics are to discussing. is

so it's what understands that everybody is getting we that care assistance, trying are to that and on access which guardrails goes so premium to that. to that that charitable now, of continuity our are as is so And opposed make legislation what want right we whatever are needed sure do bill in beyond patient to the clarity the have

Patrick Healy

there recently Kent on is kind color Any speak there? you thing other investment is that could you just about to patients to outside dialysis the to of you address with you something make the and know what and opportunity cost Why CKD it, for enable get involved DaVita clinic. are I've population. and to may integrated transitioning pre-dialysis heard better you care Got on better more once of the think desire you know provide the the patients look

Just around Thanks. color be any helpful? would that

Kent Thiry

and clinical we’ll some start be in to we're will have disease, having be of add help onset We their different cases healthier prevent people by impressive failure. a kidney who upstream the dialysis. significant, take of have delaying to dialysis care in experienced to and patients, it, then value those be if And delay and intervening only economic yet healthier also but able people able to allowed really ways it, kidney with not move but not and and have

to making are done, forecast a as clinical contracting bunch nice yet, as hard. of into but working work and of work economic some any we have progress, implications, regulatory we're well nothing incremental to All there, to be there's these and get improvements but bake big

Patrick Healy

thank it, you. Got

Operator

James. John next comes our And you. from Thank Ransom, Raymond question

is open. lien now Your

John Ransom

like the some of I Hi, went comments was below all what that in it we XXXX least contracting looked was a and back in about good last and place year ended a up at commercial morning, I bit of seems expecting. at qualitative

the thought get always needle was caused that did kind So breaking or move. that here would news to some of you end up we late the

Kent Thiry

with it what’s there's pluses it and seeing what we in came we don't time But in line for with line I any what in given was were the expected. assumptions, and your obviously but of John, on course minuses. know year

John Ransom

six simply guess contracts pleased what the are large I to but was and with be was and for, wouldn't redone shooting five to. talking just zero should what being about I thinking to be was I you referring that's I increases the one

Okay, that's Thank you. for it me.

Kent Thiry

Thank you.

Operator

comes question of from our Morgan. P. Gary And next Taylor J.

open. now is line Your

Gary Taylor

Hey, ones. good a morning, just few quick

spend still in range? For XXXX, the is the million $XX expected advocacy

Kent Thiry

our Gary, the from additional advocacy yes. spend spend, that is regular

Gary Taylor

Okay, that year, extra right? to last compares the XX

Kent Thiry

Correct.

Gary Taylor

California I then sure want XXXX. And Justin's legislation, just the I understood response of in equivalent to to make question the on

every revenue the would saying between in So million to OI? CPA OI California $XX and million it a offset there to you patient $XX hits is be or moved Medicare in are rate, if some revenue

Kent Thiry

is because a Gary, do $XX useful you go so dynamics what because it lot going I’m dynamics. are glad specific provide much to we there are of detail we million range of which basically a are be that many not is you didn't to trying top give we it and there the basically just asking into but line, are and around so is million, assumptions into $XX

Gary Taylor

And going every Medicare, that CPA would right? to be patient

Kent Thiry

patience said, to work the way the yet I will seen. Like system be is and

So good all to of anything, constructive and there. of it’s give probably going the rather range in dynamics you be the assume not

Gary Taylor

on new and looks apologize what is if and for that it you last one think in last CapEx I CapEx XXXX you for is centers but tell can XXXX. Okay, like XXXX and page, for us that in

there. if I to new openings, you trying your talked the Just sense was CapEx on center about impact get annual of a

Kent Thiry

just to a built, where the to can't XXXX significant clear. into from the number QX was decline I over get me about built, before. you we XXXX is be $XX the There's in they Novos number how year confirmed But so of part number. give for in built. jump the number was something range it I Novo the was safe of built of to exactly will get and result of year, correct a what De cost that the said we question a about a of many as assume just getting fewer be Gary, was RPT. let is. think RPT per I what specific $XX $XX There But the De calcimimetics De and watch that course Novos

Gary Taylor

it That's me. Thank for you.

Kent Thiry

Thank you.

Joel Ackerman

Gary. Thanks

Operator

our And Whit question UBS. comes Mayo, from next

Your line open. is now

Whit Mayo

thanks. Hey,

is I'm get On or what just you of to contract your sense book, your in your treatment. expectation commercial how XXXX. for set how for reset the XXXX a trying to much is much revenue in the know of guess of expectation I is renewals and book for Thanks. what

Kent Thiry

disclose We up Whit. contracts the up any commercial down given year we on many be book What are so that. X% X.X%. Thanks and don't that guided how I JPM can't was you give at to would to

Whit Mayo

For XXXX?

Kent Thiry

Correct.

Whit Mayo

size these internally for contributing you of Okay, been looking headwinds contributing able Point help and Point we at to have get know us do A some to treatment whether insurance of I B? from guessing are maybe maybe that the you lot in are, growth, what But it’s transplants all you just better to to think how frame up factors, on whatever. management deceleration a or speculating know the

Joel Ackerman

spend Yeah Whit, we are the time comes so data lag. lot of we because on data really bounces the It's and lot around a using challenging a of a long on that.

So challenging we than current like. how kind more is assess numbers of to

be different from how we deceleration to So – can the about particularly I components. this helpful break don't how trying in think the down comes

Whit Mayo

trying all the to we're I think same exercise. do

I lower this put just up are have still to fluctuations, around this new in color any trend million it the to than guess and have G&A into been perspective. rate? fourth point exclude it know that starting the I $XXX we Looking there year know stands think California, but and at trying a just would I the Is little $XX about the G&A run XXXX. for advocacy million quarter, quarter-to-quarter costs would if expected I'm bit the into of You in

Kent Thiry

that's in there's does roughly treatment it or we you is basis. I pointed would and would per out out. for Yeah, that as think a around the year-over-year don't call reasonable flattish anything so for a XXXX, major – be numbers, expectation bounce on it QX

Whit Mayo

gain a or two but how I and your treatment? I mix way idea advantage maybe this know of On responsive think total you’ve Maybe another per get if ones today answer don't is quick to other before, treatment Medicare know metric disclosed any like is around is different much a of reason more you I XXXX guess XX% other some insight you mix can Any one trying way or CMS the that to that treatments. the and you’d total five, over where I'm maybe industry you of think into be that know time? and go sort

Joel Ackerman

Yeah, thank you.

out difficult not have we're predict, assumption a of not the going physicians the and their individual’s if see mix can try with going own of are could out care. disclosed in as future, happens coordination and is network, our line and market, co-pays what But look but mix, at decisions. our as it's deductibles into individual that their etcetera. to overall XX%. MA which will disclose MA But They make going We one try you and and to and be to be pocket because it's to you maybe consideration imagine know, are reasonable on around as you in decisions, there's

total is hard, population of guess is assumption we a on now right a market. line it'll be have course in and done some with the and overall try to modeling that so reasonable So

Whit Mayo

Okay, thank Any you and color just one more professional fees. Joel, one. you there? Thanks. to increase last decided

Joel Ackerman

Really there. interesting nothing

really that, of biggest but probably just up kind Some it’s legal of and stuff component down. fluctuations is the normal

Whit Mayo

in – that G&A? that’s professional through is fees, And flowing is your

Kent Thiry

No.

Whit Mayo

care. – the patient your cost number, it’s in in It’s

Kent Thiry

both. in Well, it’s

you an and answer second swing in that for is of the in most my a think I'll up I the is get recollection, patient side. care

Whit Mayo

Okay.

allocated? segment nothing that would So be the in ancillary

Kent Thiry

No.

Whit Mayo

guys. thanks Okay,

Kent Thiry

Thanks.

Operator

Gate comes Jeff question from our And Gates for Capital. next

line Your is open. now

Jeff Gate

because added called if that I'm and was confirm I exclude we’re the then segment I margins year of dialysis XXXX per underlying wanted advocacy was however up calcimimetics K for margin and out quarter incremental benefit, approximately the the, $XX back the If if moving if million just it, XXX I I'm I the Yeah, math and numbers. U.S. that correct. showing actually at to looking pronounce U.S. that I exclude and revenue, you so – of the moved costs dialysis comparable

Kent Thiry

this we Yeah, walk take to I'd kind I'd be with not you. offline. math. suggest happy following I'm your XXX% through of it

Jim you why we’ll to out don't Gustafson follow-up So and reach on this.

Jeff Gate

Okay.

Operator

Thank you, Wolfe question from and next our Research. Lake, Justin comes

now Your is open. line

Justin Lake

kind just few normalization would here. you Kind to question, end so tell we water for how of you Maybe a years. Thanks where of taking I over you have just come price, more outlier could way, more trying XX% of us at? are normalized XXXX. at said this much rates another this another year Commercial assuming nine the got for

Kent Thiry

just I talking part about term not be of and long the outlier work it of think constructive many years down a some we easy-peasy. Justin by can you the is just to book is that in pledged cases the it in year We gave why Alright, which way reality, data. ago reflective year,

middle been got that's some and not net we You rates rates and simple, what bad and everything high and a and really lead material so period years, of the it although so know it's said that’s payer historical got so it's cases years but give unpredictable. many that disruption, some is, other to sort at data bad quite there quarters people any of good quarters years and have over the on low you to really move a basis. a good In neutrality that has not

long data, predictable term. term, it is can once but not so you that the again so over over the you short we the see give empirical relatively And

positive noise over a think So year, single our giving towards shouldn't a really than trend bumps are and outliers there'll but some we be anything this way, the commit that along on fundamental. and data. could years, seven some fewer are guess a just next are the six, bumps that will to however We be do that you belief and lot more guessing negative be continue five, it

Justin Lake

Right. year I guess sure impact know you investors give or for built you know potential in to trying zero growth know can rate the kind you you have you and take. figure there of out – understand, was I'm commercial are this

or normal. we a should outlier five So said, year these consider is given – get you to just this a to you bigger you as like know in the next normally what six year figure normal that a know you talked you over is moving we’re this contractors about rates out is a this to nor increases trying of

Kent Thiry

Yeah, going guidance where this lot that into but we just the into rate the our – applies Hopefully think in I put We word you I’m work to that year, the we're XXXX, in of trying the providing either we really three our getting to in spontaneously can to or year work lot think don't what lot to normal the we're offsets books at offsetting figure a of out markets don't that is particular in capital say. to I giving nice of say for upcoming outlook to particular fact of a put want normal. number ‘XX understand there's exactly yes want some are XXXX. no in we Clearly a say don't I that. helped that increases. year

it want calibrating at our to we've it done and that characterize as job going is or best but wouldn't normal So I abnormal. you, either for on

it's an year. If eight, a years, you tough look nine not last next, just outlier, the it’s over the

Justin Lake

switching that's are know slowdown if of that are pretty see patient know long would just you so in I why and who then you their kidneys actual it’s coming I you growth. and are a they what in assume over in curious that are be they know so taking are patients, terms pre-ESRD and upstream, people something are assumed volume, this seeing would an directors to you have they they saying to they ton Are you of I'm a you've nephrologists you slowing got Okay, from from be telling slowdown able obviously that prevent to know distance. longer would able to pre-ESRD. failing, in or you know the – fully growth seeing medical

Kent Thiry

It's a there's the wide and small way that practices. of know practices you to from large of as distribution the ran a fair question sophistication very are practices

there's not a a the because practice seen not their of are that any is one day at talking XXX of in is never in they segment, picking they that CKD the that but people end are Fortune well busy would. and nothing the put slowdown practitioners sophisticated these that sort many as as But that out. With Justin, they practice the too significant have stake much their I'm to reality that, can way, of don't

Joel Ackerman

why out to appropriate answer one. it’s Justin, the few explain numbers a worth throwing And help is JR’s

say just XX% You say say. mythology let's mortality a and take each, patients group that’s three and doctors a XXX dialysis there's typical they've got rate there's and XXX, then

so you change whether the patients on, across nine about XX organic fluctuations. whatever XX, notice, going spread of add When are new XX months the about with a or or and And going to difference JR’s unless way, you’re talking entire is group to up practice XX they and CKD than It’s not spread this, year to over growth have more not three XX you have doctors. can way, replace year-by-year or anything patients a on new way or X%. X% are the not a why or per that's number pick talking answer it XX So then away. practice aggregate across patients to X% that patients in another you two those incidence up year population, that's and do has settle so something an ones because was have passed that the so wouldn't have and patients to you course advancement the

to practice and EPS the for For incremental exceptions. some attached X%, math level highly, incremental you because a rare highly pay it, with aggregate lot us discernible there's not it's in attention but and to we at of

Justin Lake

Okay.

Just a few other numbers here. questions

you operate. over be of to this know trajectory we maybe of give target there, You mention business kind us next that profitability. where margin a few any can think, years Can think kind would getting range reasonable think a about international you the you to as

Kent Thiry

we're Justin, call guidance we're Yeah not out to for international. going to longer – going no specific

every whole do. number continue we the don't given something we're going the will on guiding context on it think company, to is as specific in report to quarter, the of magnitude but a it We

Joel Ackerman

But we will by there. add just We've improving of to EBITDA try per consecutive to X% years be year. a little responsive three without the details going margin had into misleading

improvements now. are right just moving sense the that incremental we to things a of you direction, say So and right improvements, the so in give mix can operating

Justin Lake

even margins? target no but Okay,

Kent Thiry

heavily think useful the given higher for right a yet most and that grow don't it's would number country have now – sometimes might return think be it I fact a and influenced you I lower got on so Justin. by idea you in be don't it – It’s the mix. capital margin which good a wouldn't countries different country, but

Justin Lake

that you you CapEx, years can takes or kind because ahead, two know of and of that’s given play CapEx of here. happen time three reporting now, know and what kind The net the know here for number look then far today your how what and are but think you change know if know do two growth CapEx and from Can an year. some go in before you this seeing obviously to CapEx your said them of over from where kind you this business, seven of have Okay, to you you that your moderation more plan if us years out the of moderate. Novo’s you – give you are Joel De materially you decline you can couldn't you period had idea to know you

Joel Ackerman

what just It's kind depending the decline is guide. some impact or We're including but position depend of and multiyear term growth, things, a as right this on on to longer and hard this. a can on temporary real number, not bunch on to be home a penetration not as to other now happens predict in we give There happened of things. will give to in what that guidance Justin. It growth not, are well to position whether

Justin Lake

you was thought material. No, it said I apologize, but I

it could I’m do it were it factors, sounds towards you moving you growth money. continue trying growth home, of you of spend to and to, continues have to order this if decline just call material? But more if would material magnitude. understand know a I just both which to trying are where rate, You what be the so some get you’d you in – those re-accelerate like at you know

Kent Thiry

mean not we're would to position Yeah, right now. a what in exactly quantify that

Justin Lake

you in the recollect advantage. question Medicare on that up? the which industry you an penetration. kind it having was say picking that point I said important you helpful of where were wrong advantage know Am and of to number guys XX% pretty to you – average But you range obviously can today. just you last Medicare to starting over time is one was That Okay, – in to XX%. I I think that get

Kent Thiry

is shared blank no and of didn't happen, looking just the not Justin one say it having the a We're which table. across ever number, there's around bunch remembers table that to but stares

Justin Lake

with well, come Okay I'll then different out way. a

get Is There's that’s understanding or we’ve starting XX% number, from of are us the could going where obviously in positive. a about there understand we XX%, is whether know unless XX%, a point where talked this the you to significant, no you even know now, few be say You going can the round to is. XX% a the meaningful where obviously point. even way benefit but not any getting give not, way XX%, years starting today? you a being potential to To be it be industry

Kent Thiry

to want you prepared I because weren't Justin, today hey point. a are we to fair this, Yeah, but for making predict that do

grow great our and the that to starting is question. this it to So patients issue great cost. also a a point because MA non-trivial we total obviously and and responsive it's bring in is think down multiyear be But expect way to specific we system, do of none going the for will for

here, we'll make number. next and spontaneous you if let provide decision it that about maybe instead quarter not a think us just then So

Justin Lake

the I it. questions. for all appreciate Thanks

Kent Thiry

thanks Justin. Yeah,

Operator

Thank you.

next Our from James. Ransom Raymond comes John question from

is line Your open. now

John Ransom

me Hi, back more time one go just something. let on

commercial talking involve more contracting. that different probably payers being has contracting we nothing receptive it to of crashing to Is from Are payer type do into the and people some you be XX incentivize the advantage most dialysis you or would So long? about that slow. keep would actually Medicare of in to the hook on mentioned Medicare been then kind some and only would involved pre-CSRD months wanting you know it get for

Kent Thiry

thinking are about it you correctly. No,

with so doing and an and we and to were and that over some having they time. would You increase we payers expect both clinically were impact already that work believe quite economically

to However, how at term it get with there's to good associated forecast. better it have exciting for near rolls data into and your bake you future enough and now it, better prove relevant at more it'll be model. it the any math on we right more to not that's and are we Hopefully

John Ransom

types risk tuition the learning from based of DMG part of these contracts. some accelerate or curve this this in of is does And your

Kent Thiry

better care Kidney care Yes, in there do was some able patients, DaVita do to our the dialysis help to able patients. managing both of total was very and and similarly managing both Care DaVita and down was pre-dialysis DaVita kidney better dialysis group economics good DMG help kidney where on learning medical directions at the cost,

So it a mutual and to highway. mutual, good, was be good, it continues learning a

John Ransom

The I different had other payment folks D.C. our is do some that for question might BC think home dialysis. CMMI structures

number then are two. any one; of hearing that, one, you questions; So two number and

you three a return do and high from of a capital say Let's for contribution on economic about today total level XX%. just or waive example set that across. you've at wand Thanks. from now margin it's a XX% of let's How years think a your patients, say got

Kent Thiry

hope to We've it some talked are conversations of supporters at Yeah, with on I'll the in. ahead a people Number CMMI of regular way and at, with kidney meetings. constructive is so care them one, do a looking eliminating of they they home take growth stuff obstacles stab about and and of of that series including go that we're we the a it. looking and PD at that to best stuff, put bunch applaud it. had are other and and a We've we the also bunch

just now. then patients Number on the capital are on it intensity I second, a America happier the And the a it on of because a different that waive we've reduces fact not preferences, Javier leader, be might home and but is growing group be some time they long think to of homes are in mean nephrology business. a that there's that couple should wand, remain been or single referred will. in if or ways. doesn't you that home, home is that patterns, to happier would on been world and for One, significantly every it etcetera, we've chance practice that local patient be today, there in this healthier our steadily. that good that at who two, leader good intend of the

number that, intensity for patients. implication that step is Having of cases capital one would And that people better of factually walk outside in healthier incorrect a so said now and excuse form patients to around and saying better a patients, all life. some happier uniformly me is when be so care right of that dialysis it’s leads almost home of it for a a lot

dialyze patient who the to For than a and the is subset you leads stay home who those what center. desire in people on different average of initiative the at type of for patients of it tend a the better to but have are have everyone type not and fundamentally to that clinical outcomes, take

at is it's to dialyzing So do because burden home. that apples-to-apples and have the responsibility clinical risk of you difficult an and very type comparison, population the very, of take willing of on to

John Ransom

one that for and me. for thanks So last

and very patterns level mix a of at is home, versus factors? clinical opinion relatively the how around quantitative Just high much for minor qualitative factors physician in practice your

Kent Thiry

say Could you the question again please?

John Ransom

not, try. Probably I'll but

some has shortfall the home the answer about been clinic. told trained is have What we being just been thinking a told the physicians, just of some and what of that is year. been physicians, XX of that So is XX, default the and of bips in is kind rhythm growth we've tiny, not that not being the

know patients you You mentioned. home you others, as whereas know belong some don't at

clinical structures first if just around this offsets. with normalize how like patient, factors some famous and patterns had much thinking So can, if making the to you option, about of practice other the was know you where the everybody know qualitative country we – and can the physician go the to the versus decision mix to you guess the it we physician across is look

Javier Rodriguez

this John, is Javier.

call or low but have a if champion a get trying I Maybe know right end really home most, right let's a see XX are and into so XX think mix. really, also dedicated education to when high the most champions, the the to probably good, as patient, you for on up really it that’s that and the we are physicians you look good use. around you you get around world, they the that's look to number program and the we it modality good

John Ransom

great. that’s That’s all me. Thanks, from

Kent Thiry

you. Thank

Operator

Thank you.

of comes Our next from Bank Kevin America. Fischbeck question of

open. now line Your is

Kevin Fischbeck

guess is say XXXX rate Hey, included have it, might me. advocacy guidance in costs but the I that the missed I includes just a few you additional or that normal more spend? did for run from

Kent Thiry

than It million $XX we’ve with California in of is know think and had this the significantly you The we’ve $XX was includes advocacy stop. is think as had costs before of we built to in million it something consistent XXXX. always $XX-ish said point structure. I less into cost Javier what that that a went trying No, make up million our which as XXXX result the it

roll the $XX through. this that million of there been There that that’s changed. is kind and hasn’t in is other So stuff will of remnant always California that piece that

Kevin Fischbeck

is guys. have from the that don’t and there health density for But about on little and – cap great, talked know, Is guys patients. this to you health more this just obviously anything, bit time time I lower I’m from some on a you some subset it. supportive to a then is that it’s been discussion of obviously Okay, feels used so have good; commentary, home good hearing of home off

is but some better to that across things Fresenius good, have. have you and and is you the for that because hemo that off extent downside country so There that already concern patients, (b) bricks so that speaking. or varied model (a) that probably you home now push commercial competition that is and there mortar towards think and create the one structurally know guys of – and you as Does anything move So the intensive towards is have that that the think would there that’s you as a that can disruption home to good, probably for hemo, we potential of were create about entry any less I getting I on am capital that’s bigger. worry base you more the you

Kent Thiry

are that remember healthcare important big your are most and definition you consumers to fail, fragile quite entire so by you’re things sick. the of our Yeah, one is of when system and patients the kidneys

it approximately at a and number are at in home look point of of in they DaVita is patients and and to of that acute home in-center patients the will (a) their have ours, hospitalized; hospitalized treat are use XX% an course of is patient the serve not you home actually when high or cavity were so right infection things there is peritoneal the last (a) if world. years it’s two times discussed and And an Most so that’s so and gives not one probably discussing and sometimes setting that that doesn’t the sometimes within at then Fresenius two some (X) to care. it that

the from the the and entire home. hospital, having want is service the their very the a the meaning they the of doctor for proposition of then And clinic the center because go so want patient, suite to clinic, to important of part value care, home a to course they and hospital the continuity

So is that your responsive to answer.

Kevin Fischbeck

becomes owning wouldn’t leasing rights Yeah, method to a this backs facilities more sale more disruption a bit your a the no, is an these signaling always financing understand sale lease is bricks leaseback going going a percentage Are on and than other bit that it be bigger you wanted about and And to role the now. you – home that the of as that’s you what motors question of plan even dynamic. forward. important going or percentage you if hemo expect I have to that’s then, forward higher a that through just good,

Kent Thiry

of the the no there amount rather owning, on we is capital lease having Kevin, it expense someone is it, we already constructed in build center. is are So extremely both effective have planning us for and the the and cost terms then here us which sell us than What and for in ultimate build the the real-estate dynamic else of us leasing the is found to center more real low. change that for center

through benefit line, which are the we cash as an effectively, sell flow is the CapEx to is on CapEx through have our that the offset line. when an the CapEx we a flow we CapEx So increase There impact this, sell which normal flows result center. economically is we this net a – in doesn’t when of but our

noise ultimate So bring how little in of out of the ownership it it really view of important everyone flow in but cash the little we’ve no flow it net wanted create against real kind the but the bit the clarify confusing, it’s sure of the has and was to on cash thought CapEx a back businesses we We quarters CapEx real to center, change is. what six, why what lay the clearest is. understand make last and added the we plays does that few to our out that’s over this a table how

Kevin Fischbeck

Alright, Thanks. great.

Operator

Whit comes question UBS. Mayo, Our from next

Your line is now open.

Whit Mayo

around Thanks. kind those ones a I moving of had on just numbers my versus couple quick notes.

headwinds and I’ve sure tailwinds correct make to want the down. got written just So

the got reversing this tailwind a million side I’ve to On losses year, tailwind. for be $XX DaVita Rx

cited big advocacy you Are are Are those anything? $XX we now the a million Joel missing in rates. right California maybe those buckets? net think the pickup $XX million on Medicare on and then I numbers, a tailwind

Joel Ackerman

I think what a the getting Medicare are sizes puzzled actually about headwind. the I’m you’re… was here is right,

Whit Mayo

was on I rate guess thinking I just update. more the

Kent Thiry

rate the debt to is you talking issue were Oh bad revenue. going Medicare yes. on the which about update, bring positive thought I

Whit Mayo

incremental million you Yeah rate the the $XX know from ballpark, okay, is just update. that in tailwind

Kent Thiry

right. about That’s

Whit Mayo

be on the a Okay you’ve million Medicare $XX are headwind debt then major right you $XX got and headwinds those DaVita mentioned from and as Any Healthy the headwinds million that from the numbers? bad reversal may Solutions. recoveries and other a

Joel Ackerman

a -.it’s the in about accounting It an reversal call was right. I lack of, standpoint. wouldn’t a yes. are Those DHS it

Whit Mayo

Okay.

implies… And so that

Kent Thiry

The one in point retirement roughly was the to million The other had I was $XX that cost QX. we precisely. would number million, thing $XX

Whit Mayo

it. Got

Okay.

Kent Thiry

Add category. that to the tailwind

Whit Mayo

fairly Got okay. some the then the fluid Yes. right on/off drugs like calcimimetics And now, just market. it, at landscape coming last one, one is

what’s Just off, expectation and for get I’ll thanks? XXXX the

Kent Thiry

Yes.

the largest guidance ways So think components situation. of in it of could think It is very one the you’re of a But if kind out. play of a our of middle but the terms swing a it’s in the exactly lot $XXX again plays different I roughly change how speaking million right. fluid of year-over-year, It given is OI out. it you big not variability range about the of

Whit Mayo

would So, to end? be high low the way what the Is to within scenarios would any toward that calcimimetics you be range? happen play versus would the end would share that out to what have that get with there

Javier Rodriguez

prefer patterns. there The prescription oral you have down go or IV or mix in the come do of that couple dynamics there to up oral, so is In are consider have you a physicians there. one, or

to then market. addition In have come you consider whether tX more generics in

you got lag, of a five versus to player ASP a that. has and what then so have a that one calculation players has in and lag it’s got and on if pricing happens course six-month So

play. are those in So the dynamics

Whit Mayo

I comment six just and six promise how months, trended Okay. Can and for last what you I’m implies one XX next last that the lied, ASP ASP. on months, off to one I has the now.

Joel Ackerman

has trended prediction, all as I because of things to you have ASP it went down. the then And relates can’t just one through.

Operator

the Morgan. Thank J. Gary Taylor, comes you. next P. question And from

line now Your open. is

Gary Taylor

it’s to while about slower you to, in quick want morning. off at go the this your a prevalent just how was get growth it dipping. fives, I was I fours, if in why industry, the had growth not look a one. the U.S. population it data back before looking in the maybe reason good to or phone. threes. there’s when just kind Everybody the from happens XXXX the of question is since you RDF in good and XXXX call been double XXXX I comprehensive. knows what See to at move But you, Nobody it’s the had

lag, into is the but it’s know couple poised looks of years to like it it a drop You two’s.

look picture, you’re step function-ish maturing, looks saying long of bigger more years? than that the that at last seeing something seen So that the of you’re decline when industry over you kind sort that XX we’ve

Kent Thiry

the direction number. dramatic But and quite in predicting is any either would that significant of I is opposite clear say the recognize trend. the we’re is that change data lot the quickly, happens dynamism No. trend underneath nothing probably there is the not and of yet that trend an awful that

On better. one failure and diabetes kidney hand the getting hypertension, causes of are treatment primary of the some for

So you in could a that patients. dialysis argue would lead that reduction to

failure. in and have populations disease On the far more hand kidney America, growing the other African-American kidney significantly and to Hispanic they and are likely are

the direction I two exactly pushes could other or opposite that variables. three and So four cite or

create and of that too It the that in XX or So so basic without hasn’t may lot sort underlying which very some because of very any significant in and of a American past trend. underneath trends to up trend, but fact down, just demographics the would years. continue surface under difficult well the it’s fundamental we get long-term in forces for American confident, are change, those discontinuity think if that discontinuity any healthcare of

Gary Taylor

seeing thought steeper. Got something transplant you you. onerous you was I were opioids commentary just thought or perhaps more the suggesting

Thanks. So clarification. I the appreciate

Kent Thiry

Let’s but fail fundamentally treatment the availability quite of the also leading cases. to throughout five going reduced indicators oversight, that incidence clinic and well-funded changing one is prescription people a help dramatically, that these people, because the opioid new that of America of and like abuse prescription point is discontinuity, things lack would of that to we their we stay prescription years temporary from is that second, because where is would all limitations, patterns, and because example of relatively in already be one for for many say kidneys perfect on predict to now a that the probably getting

become eight and fundamental years. system the five, difficult seven, because will ways term, healthcare example again relative but do classic incrementally a over and a one in of impact has on positive a with next six, issues us probably issues. negative basis that it’s had in But it some demographic an quantify that’s once So fundamental to short new thing on a the has calibrate, very

Gary Taylor

Thank you. Understood!

Kent Thiry

Thanks.

Operator

Our next Deutsche question from Bank. Chickering, comes Pito

line is open. Your

Pito Chickering

implying where and guys quarter. they these, organic taking you are to what the I to the thanks, growth know you versus Hey, to to for guys for you in bottom supporting the XXXX? for any of as the extra it you guidance fourth give the new % of in take the want X.X Are so Can crack thanks of and X.X% all additional guidance are what color quarter upside another midpoint why have ‘XX? fourth be. did fact versus you here. at So point ranges fourth calling what treatment guided of that can of they mean has the guidance you’re in an this the terms X.X% is is quarter questions improved I your – in

Joel Ackerman

crack things, a a little I don’t on at to take look and although tend got bit I’ll quarterly think that, over thing’s add. of at does bounce time. purely to know around with number you a a some I bit, much other we The blending basis;

blending the X.X% with QX we’re some so range. prior the model, data say point that’s our to with X.X% I’d come So go-forward up in something data we and

Pito Chickering

so Thanks worth Alright, it try. much. a is

Operator

at speakers, we time. this And no show further questions

Kent Thiry

much all Alright, you to for next to again your thank DaVita. look you in talking interest quarter. forward very We

Operator

Thank Thank conference. today’s you, that for And concludes speakers. all you joining.

this at time. disconnect may You