- Earnings call transcript Q3 2022

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Operator

Good morning. My name is Amanda, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the DaVita Third Quarter 2022 Earnings Call. [Operator Instructions] Thank you. Mr. your begin may you conference. Ackerman,

Joel Ackerman

and welcome, Thank we the our conference I CEO. our me may CFO quarter laws. Please of note this forward-looking to We you. am is appreciate call, Rodriguez, Ackerman, company. make And meaning call. our your third in statements federal joining the during everyone, securities continued Javier and Treasurer, that Joel today interest within

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

quarterly these For annual on further recent SEC other and details SEC. refer and that Form concerning and including earnings filings risks report quarter on our make XX-Q press our reports release with filings to the subsequent subsequent third Form most please we XX-K our uncertainties, all and

on be based not update available are may as intend statements law. undertake us, do these no and forward-looking information duty to required and except we currently Our by statements to

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

Javier Rodriguez

us. for thank you, for our call joining Thank QX and today. a Good you morning, quarter Joel. was challenging everyone,

of their for unrelenting teammates been on We declining, to economic community frontline incredibly continue statistics our are cumulative challenges, our have patient the care focus continues patients. who in amazing for on the remain high-quality natural While caring Despite ESKD clinical patients. deliver for work grateful of grow. our COVID the impact COVID to the we

particularly a highlighted our to is is need. constant, patients is community in when commitment it While a

Through led to Ian and XXX you Florida life-sustaining who XXX-plus many people require sustain the for patients kidney had fuel DaVita within operations the and people Florida, as This We of generators, all comprehensive in the I'm restore in issues with dialysis safety received of accounted care hour days significant community. to mile the wind dialysis were per provide dialysis patients teammates. XX, and our XX,XXX deployed on September Southwest treatment. landfall grateful for the As preparedness water in approximately our areas community flooding. know, and of patients in made especially centers Hurricane XXX% subjecting quickly from to dialysis area, that tankers X,XXX health landfall planning, across affected well as operates hurricane. to to tankers,

our turning financial Now to results.

As a challenging it was I quarter. mentioned,

our as $XXX below income income than and operating we expected. QX, assumed quarter adjusted was costs For was million was per did from the expectations in not share volumes improve $XX contract persisted to The quarter. million, and QX productivity for begin operating our headwinds in and $X.XX. down we the had adjusted earnings labor was by sequentially have Adjusted and longer

continue assuming previously anticipated. pressures now longer are We than will these

the from guidance our uncertainty market, the continued COVID our As we the a result, and are year XXXX and for lowering for well. given labor as outlook and

our share. to operating our per $X.XXX $X.XX EPS range to guidance adjusted to We XXXX $X.XX a billion $X.XX are to XXXX reducing billion of guidance and income adjusted

income our million in growth $XXX to updating to million we're outlined press negative quarter. for positive as $XX year-over-year our release this for XXXX, For outlook operating adjusted

uncertainty biggest As drivers continue to in we of be the the and said volume results. our past, in labor have

we're assuming going walk each Let the and through me on on what details these of we you have seen forward. what

Census mortality, mortality. I of excess growth drivers each will the three net treatment main of individually. with cover and Let's volume. rates these excess before start

the each during have to which pressure Omicron QX we mortality, did patient attributed in are we each QX admissions expected excess in anticipated by was see rebound surge. year excluding The rebound on it rebound search a growth, census earlier has of we followed prior on the decline not a in continued saw in COVID and First, surge, seen after second would the admissions assuming through half the in as in and surges. XXXX. We year decline

Next, net treatment rates.

We mid-treatment during increased had after meaningful the the in as increases win impact of earnings treatment on anticipated a they seasonal discussed search call, not. we result As return QX would to we're have our rates having our a and Ominicon volume. change norms in and these search,

this remain these elevated As will of we through now result, XXXX. end through and the are year a assuming

Finally, on excess mortality.

down While are us. mortality COVID remains access years, mortality XXXX for rates prior challenge from in a

in and We these and expect XXXX. the QX our will the to winter the the of remains The Taking on and the XXXX. COVID uncertainty in biggest metrics volume XXXX surges into of for depend three QX impact this through severity rest XXXX. source forecast of persist magnitude this of together, and size

to cover on wage contract will Moving drivers: labor. labor costs. three training and I rate,

costs talked we seen half XXXX As in some pressure pressure the a from significant first forecast. from assuming expected we've with about offsets been headwind are consistent significant with the of lower this of We year. approximately Year-to-date, had XXXX the in contract results $XXX we've million wage benefit in to our $XXX labor past, in also million. costs. Overall,

to although We elevated expect levels QX, at below QX. in remain these

hires, In have of QX anticipated. has hiring of in and that, we're will Training into consistent of forecasting would fact, costs higher increased on increases later a QX decline Because contract staffing $XX during to or the positive level. than with which quarter this magnitude in normally in we expected. which yet labor the peaks. resulted million be in and training, we and expect elevated we originally impact costs now costs accelerated is seen in the turnover, past resulted QX than that cost contract went in the elevated slower On approximately labor with result QX, more relative as not

QX costs In in to elevated training cost-saving work challenges, XXXX. response XXXX. we for on of to and continue number remain result, we a initiatives these early to a As expect

savings anemia meaningful to from new contract our transition will management. deliver to expect we our Mircera to new from contract for WE begin XXXX. in First,

optimizing Second, we labor for capacity result in current and leveraging operational which to clinic costs. fixed [ph] expect higher our of environment, utilization footprint including better the we are clinic costs, our

initiatives we have of investing areas in underway G&A business Finally, our to in while several our reduce future. the

key and effects drivers of cumulative COVID are XXXX the our continued the and discussed, for of and the As outlook XXXX. labor in shift through the of balance

so margins labor XXXX. from both have that had We declines market revenue in impact release would in from we expected volume XXXX, and COVID our dimensions pressures growth anticipated and

We assuming persist what the longer challenges is are guidance. these accounts for our now will which than in change expected,

confident a work strategy and our to financial greater more responding the investment teammates in drive sustaining great now in and have patients focused I remain current As turn to kidney we of home step and access to performance in the detail. transplant. we to it our future industry to challenges. will integrated place We're patients, back, and care over on treated growth high-quality increase our are discuss our in outlook Joel care, for delivering creating dedicated we to our to

Joel Ackerman

Javier. Thanks,

me XXXX. the turn XXXX first of results before give to more rest on I and Let details a QX few

and care costs by expected ballot As spend of the quarter. adjustments, lower approximately were treatment reinstatement partially IKC on as result experience Patient than Approximately the on in decline was cost offset acute We million expense million last ITC offset teammate health QX, up to items. partially in was G&A the as census. These losses $X.XX the the quarter. Revenue Javier sequestration. to as and quarter-over-quarter increased quarter to that compared versus this Spend to labor million of for U.S. treatment on the elevated anticipate continue timing hiring we teammates of offset $XX MA due revenue lower higher mentioned, savings by rates, increased training quarter-over-quarter, losses higher expenses shift shared grew $XX by in ballot was quarter. half miss $XX day in to be expected. per in recognized benefit by to is than and of X.X% the QX. compared second QX expenses. with due primarily primarily the $X QX $XX ITC of wage treatment from three anticipated lower plans, were approximately treatment was benefit per down favorable initiative and than new challenges we the Medicare could the of to per volume half pressure $X.XX, treatment treatments related to $XX due million expected well and continued the result dialysis million higher higher initiative was

million. we of related QX, to gain in properties had First, self-developed $XX some onetime a

OI. from expense of million million $XX was closure there This excluded related QX, adjusted $XX is charges. in Second, recognized to the

there an increase campaign our million is the to California, the against of ballot compensation million change of in in $XX expense higher The related $X was and quarter-over-quarter over balance Third, QX. to fluctuations typical G&A contribution spend. industry initiative the

cost identified initiatives calls, our discussed we've and on a previous of our lower I've number structure As to fixed G&A.

XXXX. in excluded value from anticipate write-off these expense adjusted the QX, footprint. be book These will efforts, are clinic operating operating of of recorded as XXXX adjusted income. to and our in assets excluded to part we depreciation for details we some to also I closed of and net want seek add accelerated related our about income centers We As of certain including our both guidance the optimize expenses expenses additional we million $XX our from XXXX.

income As treatment adjusted primarily positive Javier around small million. We've The on million continued to mentioned, year-over-year operating in our other to estimate negative we've two the updated also made drivers. adjustments to assumptions our growth headwind change $XXX volume. $XX comes

lowered on a outlook for and new operating a is million. in now due outperformance inflation. with of we've IKC First, XXXX pushed to income improvement the outlook result for by costs primarily of range hires We've into This change the in as XXXX. than the rather changed costs, also in $XX associated XXXX year-over-year XXXX labor training performance

to the X.X shares. approximately thus which million brought shares the Finally, X.X quarter, million repurchased during XXXX, we for total far approximately

Q&A. back please we for our you. X.X ratio capital forward, to expect call pace of We of to Thank X leverage Operator, our repurchases target deployment to get Looking currently the lowering share slow focus our to of EBITDA. to more significantly. debt open times our plan levels to the

first Our UBS. Andrew from with Mok comes question

Your line open. is

Andrew Mok

Hi, good about $XXX on you in to respect with and driving COVID Can rank us decline? order help treatment you maybe terms sequential its to implies you laid QX recent and of color to look labor out OI Thanks. for the $XXX appreciate from of material of When I which on the assuming morning. are a what's down a And in at pretty QX? the I’ the quarters. headwinds million what guide impact it step the range headwinds. million all is

Javier Rodriguez

Sure. Thanks, the question. Andrew, for

So bridge the if I we of were the benefit QX, ballot. to the middle of have range QX First, for to

So the benefit. $XX million that's high in

rank them number are and accumulation In wage and benefit some terms X of ordering rate one. training of miss. an Number and headwinds be volume, would the higher And seasonality. which increases census that's would salary is benefit costs, X wage be the two

in of to and and quarter's of the QX, additional season through QX in full had QX of holidays. lower up we due the commercial lowest come in experienced they go of a RPT. sorry, spike as partly decline I'm are flu variability year. some QX, QX, and that the plus headwind then QX bit and a the then rates And mix Historically, and in again will census in due QX, So the mistreatment then mist the in favorable be from also We typically QX treatment worth in as a third and down, in weather see some partly year the middle rate. would kind of - end census well the to we

would be ones. big the those So

think little stuff of there's and I in amortization. a bit depreciation

as IKC I down bit come in G&A. a think and there seasonality again well, will is some

rate mistreatment being here some terms we we're in for the assuming challenges the, persist the And assuming assuming assuming well. we've - above admissions continued as call we're bridge in that QX, excess So assuming that what - we're of QX, we're we're saw that would the persists. mortality, historical those or it, organic norms the of seen the be growth

Andrew Mok

it. Got

Okay.

Joel Ackerman

because a let magnitude. what you Andrew, of just color add as little me a speak of

philosophical to change important it's assumptions through we think I look all a we went the that just Joel how underlying future. the had that note in at

and the out well in the QX. we into that were were QX past, a building rebound, So we in we they uncertainties, assessing around but by would thought taper

the and remained we're on longer. So that assuming now stays uncertainty labor COVID and volume

shifts to bridge. dramatic And that so models trying the you're the that really in way

Andrew Mok

Got it.

historical on in how helpful. XXXX Any the is mistreatment rate That's versus much higher color Okay. levels?

Javier Rodriguez

just about can of headwind on Yeah, volume number, you X% basis give just $XX treatment volume. XXX points of - of million a you so as it's think treatment a that to is about operating higher And our income. worth X%

Andrew Mok

contract Got there mentioned utilization sequential is Was driving it. And which labor were specific you a markets by somewhat trend. higher sequentially, rates? that And driven higher that costs then increased surprising increase? or

Javier Rodriguez

Yes.

decrease contract Let person that because me we're because i.e., country. training as your our training usual that floor model hit And speaking is grab And reality of future, and you one labor a would, you that essence, leading spread teammate of of the is which, leading the is in a training decreasing having look the across and therefore, then is indicator contract whammy market. higher no you're The to variable, months. predictable contract double unfortunately, than persistence whatever, in there to is a we're your is of. is indicator higher in i.e., the little is that lower the labor labor at why behaving course, labor the labor in contract would less one. going training reason normally of X and contract turnover, X, of It translating

Andrew Mok

Got mentioned.. you It's helpful. then it. And

Joel Ackerman

more to labors and about Just number to rate. add on about of less the Javier, contract it's

Andrew Mok

and Last the back I'll helpful. in queue. me, Okay. That's question for hop

that regimen Mircera in to [ph] that from of you understand help you your Epogen switching us XXXX. Can pace ESA mentioned transition? plan the You

Joel Ackerman

it We've gotten and pace. of And the importance that. you Yes. at as on lot a is do right imagine, want safety questions utmost can to we

proper will XXXX, protocols We the but and it's the patient population. by for sure done of that make their review doctors course, to all be have

just please we patients. and the don't have the review so goal. We're And a documents get proper your saying, for particular prescription

Andrew Mok

you. Thank Okay.

Joel Ackerman

Thank you.

Operator

you. Thank

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

line open. Your is

Kevin Fischbeck

thanks, something little dynamic, past happen a cause bit consistent it that What wanted that any this to ask people the basis, treatments to treatment I something seems in miss Great, I of can't the it you for before? a time. seen like have miss is about guess, extended would period on happen really

back? in And how now view of and to this what has does and happened why So ever are long the causes it happening longer? take normally your come it's persisting

Javier Rodriguez

because treatments for one thanks just common happened Kevin, cetera, question. Yes, are certain vacations, life et volumes the you transportation Miss at where missed treatment.

there's you the patients long I I'd that think you miss are call miss right the it in assessing meaning when chronic go XX% too roughly that of of what found consolidated, are we But without is not studied data, the treatment. XX% can that dialysis. a we causing

issues, things other of we And found either patient in of something and the from scheduling scheduling ill are so our to into home, either the popery transportation then when him or started that, half due due treatments stay or or other we else, roughly And patient, things that being the to hospitalizations. center. the to with so look is herself covet miss staffing or a half

into lot that patients, is And things so and do sure all to is a on processes there's where that trying mistreatment the we now of what this the double connected. reschedule we're to our it's down -- but make right go

elevated. introduction, if we seeing number is to and harder And revert it that working staffing get we're COVID pretty really it to started we tight you year-over-year. stay with rescheduled and because labor to back flat basically, - talked the so then that would treatment a it you we're this thought and tight, sort now it. never normal, was market And of If have sometimes about had will, it's on move,

Kevin Fischbeck

That I sense. Okay. drove quarter. in then, makes And what the commercial mix guess, the

a was think I but tailing that a quarter, headwind year-to-date. this

anything update So on is Any on impacting at or the pricing there? Marriott all? going what thoughts

Javier Rodriguez

is I'd was mix Medicare because to Yeah. got that which as mix down. a our numerator to down there's that. remember It is And excess in call particularly well. Commercial But way what population, was material No. side. little report on older number in of denominator is you on normal the a moving flattish, it and nothing and and commercial that mortality unusually was

Kevin Fischbeck

there? About impact Marriott any pricing having is

Javier Rodriguez

that -- if remember, extended are pricing No. negative contracts so they I for of On the you pricing, were our period an we're to set long-term and say incorporate the of our time going that, inflation is didn't of experiencing. course,

and life, bumps the with therefore, And susceptible a the we've and this, look with everyday going is of If horizon. to payers. not our that X-year X-, time plan about at you stable to positive you're we talked very with have relationships you're can predictable

Kevin Fischbeck

All right. Great. Thank

Operator

you. Thank

next from Chickering Pito question Bank. comes Our with Deutsche

open. Your is line

Pito Chickering

Yeah. Thanks taking Good for questions. morning, guys, my

Going reported back of versus of in July curious our saw to in in August, I'm that the miss kind beginning what you results sort just September to of changed of so you when sort of dramatic relate sort XQ through guidance? and what August

Javier Rodriguez

Yeah.

high -- the change a is Let think repetitive philosophical main I'll guidance. the I in and me Peter, level, little grab be thing, the

data any and really if normal. and miss - normal. we assuming, going on up were that this on opposite the big that would these treatments a quarter a that, actually goes way. open that we change. and from of would is us an a you to gap predicting maybe high, spoken all-time that any will you goes we now, rebound training going where had to just it couple, then in all And to smarter then happen lot think when of don't already to and -- well, of of to starts you start meaning to instead particular, the thought this numbers it so grab have make And rebound say so a said, to instead We've revert high they're those we numbers revert

had and options, first The And guidance too at We had is so for X XXXX. to predict internally we one you options. right? we all. conversations couple just it had is don't much give because of a just

and second assume is unpredictable. -- environment until The And labor educated last current predict try try and COVID data. is really then markets there's regulate. doesn't clear when make you change you the the one to to about an the prediction

And we And volume, X, so thought better to get end Option of of COVID would we back is take something 'XX we closer and they had used assumptions to which at the in which is closer are improving and we taking dynamics COVID have adoption XXXX. these the volumes and assume in until we're data. markets X, now, we further that strange into continue labor

Joel Ackerman

So Peter, on quantification let me just fill little view with the a of Javier's details. in bit high-level

So about ago, census lower That not from guidance so we XX% at coming it's further. $XXX and the the we down I'd which - the XX% had center It's it's miss XX. down rate, volume, that months And say, that's if the at our you versus range. of is is, 'XX biggest a where of is way it's from the look just today treatment three were not it's on million that split mistreatment anticipated, roughly that higher up rate. going component

training seeing Looking when in putting from forward about philosophy. second we year place coming also more ultimately, treatment reduction start the it's not much really this change labor. the And benefits pushing hires census volume. about first lower and And other of the Tow biggest then the the of Again, on new the our out of being one and be costs with we're and some of that next would contract that XXXX, training new to then the half component down in thirds really half year contract. driver miss big on to the volume. rates that's

those the So numbers. are

Pito Chickering

Okay.

quarter, patients, on or I assumptions patient for On should XQ, break can incidence rate, second. excess the promotional X in half of ignoring and back treatment mistreatments these quarter a down slower drivers the what be the you leading sort it's during saw year? actually guess, COVID. mortality ESRD instance there If here, key this in a new mix I breakout the of rate to for mortality which I the from treatment, three of patient just buckets? guess is And could you lower

Javier Rodriguez

Yes.

me got you've Let those because components grab the right.

So start let's the top. from just

the flattish new discussed, the You points which which subtract of couple start are then admits a been you and we've starting roughly has which XXX subtract roughly And down new has mortality, higher. The as treatments, patients transplants, have been with basis subtract admit. then then already been we've point. on miss you higher, thousand you discussed depending

question, upstream, is about the the into that's very admits that's which population, so leads with of population entire of that to been all is what next natural we've happening a because is new what of the we've actually which is the The half the down there sort And talked why studying really are equation. question. along Unfortunately, is dialysis. visibility dissatisfying CKD patients answer, to and and low roughly crash which

a into data different conclusive. getting start lot sources you and what of So and isn't at -- looked we've sets data

right COVID bigger more could will progresses. time to hypothesis, from now, be someone bit others be that the into that, as a might and CKD that time think There hypothesis at pace be one post so offset which the have that are patient population. will volume progress over And there that in because says good ESKD depth the a happen

already the the And upstream least visibility is that the other so variables again, in unfortunately, one we've right have now, we the discussed.

Pito Chickering

to know you you I revenue changes after us it. for Can all making? don't that decrease XXXX you large Got growth guidance. this so what give XXXX, assume XXXX help but guide revenue with in we're pretty Okay. over OI guidance of these

Javier Rodriguez

Yes.

So I they components RPT would other volume. next I and best think be think think offset high about very And the at will each a year. level, to

you up much too said decline, volume at of a revenue those volume everything a then RPT about if so better and the range of decline and wind range would the but at -- the be we've kind take into middle would maybe flattish bit offset X% get to I other think each little want about in specificity, thinking don't I again, So a

Pito Chickering

much. so thanks Great,

Operator

Lake Instructions] comes Thank Justin Research. you. Our with Wolfe question from next [Operator

line is Your open.

Justin Lake

morning. good Thanks,

volume question. follow-up the Just a first quick on

X% So volumes down next just clear? is be to assuming, year what for you're guys,

Javier Rodriguez

Yes.

Justin Lake

treatments? mix That

Javier Rodriguez

basis Year-over-year, than because it's that point saying normal to continue points impact mistreatment assuming it XXX basis that XXXX, than in XXX is at higher normal no there's run running and what we're basically level. we're will higher

So it's change. no it's XXX year-over-year, points basis relative pre-COVID, but to

Justin Lake

Got it.

coming below XXX% mortality? new is from admits this So

Javier Rodriguez

Yes. a think is of I as running XXXX, new excess continued it's then thing recognize the that combination of on the have important mean historical throughout -- annualizes. the admits below plus mortality negative as year I impact impact year-over-year the as that we -- mortality other and excess to that has of mortality a full

Justin Lake

then And into full you us the many talked in in how closed how the year this And the how closed to about many insight quarter? in third And clinics you for third expect many you closures do Okay. are close year? Can clinic then the you quarter. any tell XXXX?

Javier Rodriguez

Sure, Justin.

there's For there. little the year, a timing in

between around for And a XXX between year, bounce year on we're again, XXX So the forecasting could or XX. and so. for let's and next depending give XX those range And timing.

And so remind you through spoke time, because last this put several lenses. we just I we think of to

is patient we to first the sure make The right access. have

of things. process really it's look we local at being to home that sure and we Secondly, the - But have lens availability the type responsible. complicated of a those leases the look of we're thoughtful the dynamics, be for lastly, to that then we of market sort and make

Joel Ackerman

XX. was number the Justin

Justin Lake

close do pretty of then you patient XXX% retain well? like the any feel does have to close you growth center? this impact these on patients as And Good. when Okay. Or you

Javier Rodriguez

the retain don't we majority. We vast but XXX%, retain

on So it much shouldn't of an volume. impact have

Justin Lake

Okay. And question jump back leverage. last then I before the

range EBITDA billion in you $X So somewhere year the would - next the ? agree

Javier Rodriguez

going rethink if the leverage, and we into above next year-over-year of what over But like down. get are year. it you're debt effort, cash to free leverage are we round I range Obviously, up important to X.Xx. driver to of happens we this we further how more want that the to much share heavily where to X to certainly specifics. deploying buybacks of would to target quarter. And course get about don't think pay flow is -- an be I the that. to asking But X.X% we're our will EBITDA of to lean our down

So quarter. come year $X.XX over last and pace will down -- the sorry, our share I drag leverage our as leverage down that well next quarter it's And our I'm XXX a as should from down to this come say down to fair revolver should well. level was the total of think buyback come

Justin Lake

right, Yes, Joe, do is guess bit was little you trying what like in is have to EBITDA I'm you closer. the you in assuming OI -- if the -- looking. release I backward that number total, coming I to to press the the $XX.Xmillion a coming year EBITDA next the X.X, like with in is D&A down get so would leave

repo cash bit more are have XXX% if free color XX-XX at now towards just X.X tell you versus appreciate over little a share kind the and put the But $X forward get to understanding repo. X.X% number? Thanks. debt of would on you of right next times, Is at look two, I one, is close so look help the you of And that us any net maybe give have could were in previously, then terms us backward release, share flow X.X% that you share said the X.X%? closer release could debt-down you doing you the think you in you that if it's to you repo. or I been year, in a maybe it

Javier Rodriguez

Yes.

little start range, of somewhere number a you a north you $X.XX year. higher if So I EBITDA get billion. take, I'd for think, of our with next in middle the

and to on think a way would pay depreciation want cut an going in back it I much XX%. flow add we're $XXX specific I terms we but free share debt higher XX% buyback. deploy, number, would of kind million of how I then get And back of the think XX% on range. EBITDA the it's more to number cash of down percentage X.XX% XX%, to OI, the don't than to a give that's be think in amortization, you'd I to

Justin Lake

helpful, That's appreciate I it. Got it. guys.

Operator

Thank you.

from next Deutsche comes with Bank. Pito Our question Chickering

line Your open. is

Pito Chickering

Hey, guys.

a of follow-up here. sort a Just

implied new -- Looking than at it's OI, of sort quarter, ‘XX. that, fourth pretty just the the a I lot annualize lower if

of a sort of won't nature curious XQ what in in Just costs take that run XXXX? of into or sort a more as we rate onetime

Javier Rodriguez

Sure.

and XXXX that So the guide. let up try of build to bridge annualized QX me

a I gap do to here's need wind think that would we And how $XXX bridge. you it. about with up I million

million full tailwind be be million. QX the of $XXX will volume $XXX north a a will First, to year, a call that will headwind from be tail

again, of think, think where the to will imminently. run expecting I year, is be it not we will that of important year-over-year next we're fee-for-service, rule RPT, final One Medicare than historically.\ realize drivers big the out stronger there,

the anticipating will are final We better be rule rule. the preliminary than that

So million. worth negative the and in bit of and would just a all is will out then help of million that $XX cost that's that million. seasonality then is the -- there north that $XXX table add of on increases, RPT million so the to call normal RPT called QX release press in $XXX savings, which probably I in we $XX

XXXX the lower flat highlight down being as list, we XXX. wasn't that were coming I we one in by what there half coming see The somewhere you labor year the being QX higher wage if labor just rates offset that thing over to you back was down see on relative which well contract XXXX add And Labor relatively costs, you around all relative want to as could to get my in up, time. of to training the see So is flat. QX. as

Pito Chickering

ITC versus Is it it reimbursement know XXXX. Okay. increased Got assumptions? changing for utilization one, it. assuming? your on ITC And that Is what's you're investments? XXXX? it what's guidance the for other of guess the I I assuming? that but driving the higher moving for what small parts change Kind you're of then lower Is

Javier Rodriguez

I apologize. you the Pito, sorry, I'm Could missed question? I repeat that.

Pito Chickering

Apologies.

ITC, Looking guiding guiding a to your previously, XXXX guidance, you're on is million $XX flat to at to specifically headwind. you're now or the headwind tailwind

ITC for year. So swing in guidance it's here next a

delta/ the key it -- the it exactly curious utilization of that? Just driving what's is Is -- more was it driver

Javier Rodriguez

Yes.

that. about Sorry

if on XX than is for I expected. look XX from XX. factors better the is bridging we I really at play a there think in IKC, to XX% at X here coming it One So lot are

a So you're smaller loss. to to a comping much

IC called thing we've And second in in is year again. X we in The growth the headwind is to OI. XXXX growth as now past, a out expect

overall So of your the that the - and 'XX. going much. the offset result It's by to some hasn't changed of seeing some to benefit 'XX is has extent, in impact growth we're gotten XX get in better

Pito Chickering

coming growth contracts more converting from MA that into... Is

Javier Rodriguez

is a opening it of the a There's program. of more are we the of lot bulk mix little CKCC that, but

doing we large had XX% XX government. this a year, more be we're So next be but will volume MA, more the predictable and will year. There little

Pito Chickering

getting the I with do ICE then, point breakeven better And worse or from for view all guess, the previous enough. Fair Okay. moving parts, you guidance?

Javier Rodriguez

I growth would business than we term, impact negative short on But better the is the say a has performing NOI. expected. in

Pito Chickering

great. Okay, Thanks much. so

Javier Rodriguez

Thank you.

Operator

you . Thank

UBS. comes Our Mok from last Andrew question with

open. is line Your

Andrew Mok

Hi.

in the year. patient any give treatment next at us? number population have is When such excess are seeing for you you And for the of finish do negative reduced the a excess of to start current to noted mortality you should the you this quarter you excess annualizing that impact evidence annualization the First, mortality then that mortality look accelerate? you population, that when rates can

Javier Rodriguez

Yes.

a $X,XXX. it, call in quarter little was X,XXX, So north the bit of excess mortality

lower are what between to and pull In out forward. we terms seeing call hard mortality tease mortality for is higher the of pull-forward it the us effect difference we from very COVID

the two mortality by the impacted we're the being mortality, of mortality positively a or those is earlier the census our is believe a excess to still blend net in that lower excess effectively that give just pull is from forward numbers. it. concept but in of some patients So number a position quantify We we not

prior I that a who it mortality our think patients of a the isn't occurring the in by fair the quarter hope of as as number So net mortality of from number to that's of think result this is a I offset clear. lower excess COVID, quarter. mortality died

Andrew Mok

Okay.

you get And this had to the quarter? into you the down hurricane fourth quantify that impact. there able of I to noted the that any dialysis impact hurricane in on what then on Florida your the all Can impact throughout understand. is think I quarter? hurricane, And lingering P&L patients you're the access

Javier Rodriguez

for again, was Yes, Andrew, that. P&L nothing QX there the no in significant on impact and

Andrew Mok

you're better? the that Medicare points Is give think assuming what you on Okay. us I said rate, rates. Can And you're then basis Medicare you already better on XXX color some there? assuming

Javier Rodriguez

I final Yes. think, the so sectors other delta between That's and is number. a X.X%, -- seen a reasonable in reasonable about at estimate. what their we're thinking We've looked their have prior

Operator

Lake Research. you. through Thank come Justin have we another Wolfe did And question with

Your line is open.

Justin Lake

you me hear okay? Can

Javier Rodriguez

fine, can We hear Justin. you

Justin Lake

throw maybe through be And are going to instance, earlier year. going on question brought kind just in thought So one of cost through you that the up implementing XXXX. guys I Micra more we Andrew for

at just for there it, benefit through won't the at that, potential looking be the you'll like, right a 'XX as any year. contract about see you potential tunnel The you the Freyser than the of hopefully we thinking and to about costs XXXX. end expected So through to higher of run moderate but going go labor you talked savings see at being is of was year. the rate end on you that's also through higher were the than

is there -- so the exit within you the about run contract be So that, could get think that and much the us through maybe us XX%? savings XX, expect rate and in your an give for third much How costs total could how run rate tell are -- do how you then cross-cutting in just in could we you Macera those cost if numbers you fourth and will number around labor cutting, quarter. running some much wondering in that that could out? you you what three/ to how could is And think instance,

Javier Rodriguez

Yes.

things it So the think half QX directionally nonpayment tougher account the we correctly, -- X that's for And back into the about for half just thinking first, always how co-pays. you're front than revenue deductibles is associated tough And of with year. will of is I the treatment. year seasonally I that of per put because the One and buckets. or the debt bad be

saw initiatives the seen a we of the quarters training anticipating building because some other of course revenue not the expected QX year. pressures generally the finally, could We've with Mircera recognition better is ITC, in revenue of contract year, over of We and again, have less although in But earlier savings XXXX. that QX IKC a over we other associated annualize. the to of the that the we're QX the I better recognize is of combination than business in of -- seeing And works. declining year. more a that's a that with labor some from and you the pattern we're have how of think for combined course then Second assumed something will

the So terms of down it that to labor. to for was we're stuff about come some looking in this starting remain for Contract That's QX will start although -- rate, QX contract and declining year. relative bit $XX QX really to how assuming almost labor in those a of our QX which little north elevated things We're next then insignificant. bit and historical are a XX is running quarter. million quantify of the at at of

cost In terms of the magnitude of savings. quantifying the

the the range. component that. million So number three. of is we've at footprint of the the for X is middle number The is realignment out biggest G&A next year of called the the $XXX Mircera and

that those on going get those things, not can give So three help in to numbers. the on numbers right I we're specific you but ballpark think

Joel Ackerman

the is tell, my this to covers for fourth effort. higher? second on them is rate a [ph] the going that and will do so they're long integrate to when. remember, year Justin. year, prescribing of many be something operationally how is It's Maybe be it the it. it fourth about quarter takes make hard information, a would to than -- along physicians would thinking going be it it benefit that's will an lot kind of kind Setra double This how and be not but run the be us, intensive what annualized, how to - Got change the the of the full the Ultimately, question ratable quarter exit it,

a make to ready we're think don't prediction that. on I So

Justin Lake

question last for then on And is revenue per Okay. me treatment.

commercial kind moving to for So can a of in revenue there think of much the terms treatment, going much give about dollars around us number you First, you parts how could understand, that about maybe decline. into lastly, Yes. you saw reasonable trying that in you per treatment quarter there that mix benefit put quarter? two, And number how revenue on talked a benefited benefit? were some is that treatment Just the and a one, fourth to that was a commercial rate run then

if the I is think $X fluctuation. can which having as you quarter QX your of rate good to build XXXX and benefited a year of think you run exit for We by want off 'XX I reasonable a full the see for $X run So of RPT of to number. rate, that normal think the $XXX all time. exit

points basis of terms a mix, the it down was commercial few In for quarter.

So really not significant.

to I was pretty rounds it small. think this it XX.X% but quarter quarter, it and last XX.X% was

Operator

we further the Mr. time, hand have to Rodriguez. call back this no At questions. apologize. I you. I'll

Javier Rodriguez

Aman. Thank you,

the uncertainty we you conversation assuming time. guidance see we and estimate stay can period As on are have volume now and that are give dynamics to is labor from very harder all best elevated of. that of have working of course, COVID a hard We, they spoken the you the with for our will

time Have One I I with all Let myself kidney challenging and challenging the care me of very times separate look comments. and for they broader just and as But close times are from for a community health moment providers. is DaVita couple are say, this in our I care Take these positioned appreciate sheet. team, to the but a help day. of given are good today. strength strategy can't clarity well I to the out, balance the experience incredibly of of time we outperform care. and our and differentiate your further our

Operator

Thank That for you today's conference. concludes you. participating. Thank

may at this time. You disconnect

DaVita (DVA) 28 Oct 222022 Q3 Earnings call transcript