DaVita(DVA) - 2021 Q2 - Earnings Call Transcript

Financial Performance - The company reported a 6% year-over-year growth in adjusted operating income and a 35% year-over-year growth in adjusted earnings per share [10] - Operating income for the quarter was $490 million, and earnings per share were $2.64 [20] - Free cash flow was strong, and the company continued to return cash to shareholders through stock buybacks [10] Business Lines and Key Metrics - Treatments per day increased by 0.4% compared to Q1, with excess mortality declining significantly from approximately 3,000 in Q1 to fewer than 500 in Q2 [21] - U.S. dialysis revenue per treatment grew sequentially by almost $6, primarily due to seasonal improvements and favorable changes in government rate and mix [22] - Patient care costs decreased sequentially, primarily due to reductions in labor costs, while G&A expenses increased slightly [22] Market Data and Key Metrics - Approximately 10% of U.S. dialysis patients are in value-based care arrangements, representing almost $2 billion of annual medical costs under management [14] - The company expects its integrated kidney care business to double in size in 2022, both in the number of patients and risk arrangements [14] Company Strategy and Industry Competition - The company is focusing on integrated kidney care (IKC) to improve patient outcomes and reduce total healthcare costs [11] - The trend towards value-based care is gaining momentum, with the company preparing to partner with nephrologists in multiple markets starting in January [12] - The company believes it is well-positioned to win in integrated care due to strong partnerships and a broad kidney care platform [13] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about returning to pre-pandemic treatment growth levels, with an additional tailwind from lower-than-normal mortality rates [21] - The company raised its guidance for 2021, expecting adjusted earnings per share of $8.80 to $9.40 and adjusted operating income of $1.8 billion to $1.875 billion [24] - Potential headwinds include COVID-related costs and losses in the U.S. ancillary segment due to new value-based care arrangements [25][27] Other Important Information - The company is collaborating with the National Kidney Foundation on a pilot aimed at improving health equity in kidney transplantation [7] - The vaccination rates for patients and teammates are approximately 72% and 68%, respectively [55] Q&A Session Question: Can you remind us how the IKC flows through the P&L? - The U.S. component of strategic initiatives serves as a proxy for the IKC P&L, and the company will disclose medical costs under management [30] Question: What is the expected treatment growth rate once normalized? - Management believes treatment growth will revert to pre-COVID levels, with strong new dialysis admissions continuing [48] Question: What is the impact of COVID on the second half of the year? - The company expects a $30 million headwind from COVID in the second half of the year compared to the first half [26] Question: How will the company manage labor costs? - The company is actively investing in a differentiated workplace to attract and retain talent amid a competitive labor market [49] Question: What is the vaccination strategy for patients and teammates? - The company tests patients with symptoms and tracks vaccination rates, with no significant numbers reported for third doses yet [55][56]