DaVita(US:DVA)2020-07-31 03:24Financial Data and Key Metrics Changes - The company raised its adjusted earnings per share guidance for the year by $0.50 to a range of $6.25 to $6.75, reflecting strong operational performance despite COVID-related expenses [10][35] - Adjusted operating income margin was strong at 16%, with year-over-year margin expansion due to effective cost management and improved revenue per treatment [31][26] - Total revenue was in line with expectations, impacted by lower treatment volumes but offset by higher revenue per treatment [28] Business Line Data and Key Metrics Changes - Non-acquired treatment growth slowed from 2.3% in Q1 to 1.6% in Q2, primarily due to COVID-related factors such as increased mortality and lower new patient starts [27] - The home business saw significant growth, with over 28,000 home patients and a continued increase in interest for home dialysis options during the pandemic [14][13] Market Data and Key Metrics Changes - The patient census was negatively impacted by COVID-related deaths and delayed starts on dialysis, with expectations for treatment volumes to fall below the previously provided range of 1.5% to 2.5% [11] - The commercial mix remained stable, with no material negative impact quarter-over-quarter, as many patients maintained employment and insurance coverage [12][29] Company Strategy and Development Direction - The company is focused on enhancing its home dialysis offerings and has invested in technology and education to support patients choosing home modalities [14][19] - The introduction of calcimimetics into the Medicare bundle payment is expected to stabilize reimbursement and offset underfunding issues [20][22] - The company aims to expand Medicare Advantage enrollment opportunities for ESRD patients, despite concerns over network adequacy requirements [23][24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertainty surrounding the long-term impacts of COVID-19 but expressed confidence in the resiliency of the business model [12][34] - The company is preparing for potential challenges in the second half of 2020, incorporating a wide range of scenarios into its updated guidance [34] Other Important Information - The company incurred approximately $85 million in expenses related to COVID-19, with a net impact on operating income estimated between $20 million and $30 million after offsets [32][33] - Share repurchases were temporarily suspended, with no shares repurchased during Q2 or July [39] Q&A Session Summary Question: Operating income guidance and margin contraction - The decline in operating income is attributed to reduced calcimimetics profits, costs associated with a California ballot initiative, and the cumulative impact of COVID-19 costs in the second half of the year [40][42] Question: Medicare Advantage rule implications - The implications of the new Medicare Advantage rule are uncertain, particularly regarding network adequacy and its potential impact on ESRD patient enrollment [43][45] Question: Calcimimetics revenue expectations - Calcimimetics are expected to contribute similarly to earnings next year, with the reimbursement becoming a permanent component of the bundle [50][51] Question: Commercial mix and job loss impact - The company noted that job loss among its patient population has been lower than national averages, with many patients maintaining insurance coverage through alternative means [56][57] Question: Patient education on Medicare Advantage - The company is working to provide unbiased training to patients regarding their insurance options, recognizing varying levels of awareness among the population [60][62] Question: Cost management and productivity sources - Effective cost management was achieved through reduced health care utilization among employees, lower turnover, and efficient staffing during the pandemic [88][89]