DaVita(US:DVA)2019-02-14 22:02Financial Data and Key Metrics Changes - The adjusted operating income for Q4 2018 was $370 million, with a full-year total of $1.513 billion, aligning with guidance [13] - Operating cash flow from continuing operations was $307 million for Q4 and $1.48 billion for the year, consistent with previous guidance [27] - The effective tax rate for Q4 was 24.3%, while the annual rate was 29.2%, with Q4's rate being unusually low due to positive quarterly true-ups [25][26] Business Line Data and Key Metrics Changes - In the U.S. Dialysis and Lab Segment, treatment per day growth in Q4 was 3.1%, with normalized non-acquired growth at 2.6% [21] - Revenue per treatment decreased by $0.65 from Q3 to Q4, but excluding calcimimetics, it increased by over $1 sequentially [22] - DaVita Rx revenue declined by approximately $100 million quarter-over-quarter due to the wind down of the business [23] Market Data and Key Metrics Changes - The commercial mix was down approximately 10 basis points from 10.5% in 2017 to 10.4% in 2018, reflecting demographic headwinds [22] - The company expects U.S. total treatment volume growth of 3% to 4% and revenue per treatment growth of 0% to 1% for 2019 [28] Company Strategy and Development Direction - The company is focusing on integrated care capabilities to improve patient outcomes and reduce costs [19] - There is an emphasis on home dialysis, with over 13,000 new home patients trained in 2018, as it is more capital efficient [15] - The company is working on obtaining FTC approval for the DMG transaction, which is expected to improve financial performance significantly in 2019 [10][11] Management's Comments on Operating Environment and Future Outlook - Management noted a slowdown in growth due to various factors, including increased transplantation availability and comorbid conditions affecting ESRD patient numbers [35][36] - The company is optimistic about future Medicare fee-for-service rate increases, which are expected to be better than previous years [32] - Management is cautious about the impact of California legislation on financial performance, estimating a potential revenue impact of $25 million to $40 million if the legislation passes [44][66] Other Important Information - The company plans to reduce capital expenditures in 2019, with expected CapEx between $800 million and $840 million, down from $902 million in 2018 [28][30] - The international business is expected to achieve positive operating income in 2019, excluding foreign exchange impacts [25] Q&A Session Summary Question: Update on DMG transaction - Management remains confident about the DMG transaction closing, but timing is uncertain due to the government shutdown [34][41] Question: Factors affecting treatment growth slowdown - Management identified upstream comorbid conditions and increased organ availability as contributing factors to the slowdown [35][36] Question: Financial impact of California legislation - Management estimates a potential revenue impact of $25 million to $40 million if the legislation passes [44][66] Question: Home dialysis growth - Home dialysis growth is included in the treatment growth figures, and the company is committed to expanding this area [45] Question: CapEx for new centers - Management indicated a significant slowdown in new center openings for 2019 due to changing patient needs and growth in home dialysis [48] Question: Commercial contracting expectations - Management expects the commercial book to be down 1% to up 0.5% in 2019 [72] Question: Medicare Advantage penetration - Management did not disclose current Medicare Advantage mix but indicated it could align with overall market trends [78][110]