The paragraph introduces the DaVita Third Quarter 2024 Earnings Call, facilitated by Michelle. Nic Eliason, Group Vice President of Investor Relations, opens the call and welcomes participants. He is joined by Javier Rodriguez, CEO, and Joel Ackerman, CFO. The paragraph cautions that forward-looking statements may be discussed, which are subject to risks and uncertainties detailed in the company's financial filings. It also mentions the use of non-GAAP financial measures and their reconciliation to GAAP measures is provided in the earnings press release. The call is then turned over to CEO Javier Rodriguez.

The paragraph highlights the efforts of frontline caregivers and the dialysis community in maintaining patient care amid challenges, including recent hurricanes and supply disruptions. It discusses the response to Hurricanes Helene and Milton, which impacted millions, emphasizing the resilience of patients and staff. Most affected centers resumed operations quickly, and DaVita mobilized resources like generators and fuel to support care continuation. Inspirational stories emerged as teams conducted wellness checks and ensured urgent care access. The Asheville Kidney Center opened promptly after the hurricanes to assist patients from multiple facilities and supported anyone needing treatment, even those with other providers.

The article discusses the dialysis community's collective response to patient care during and after Hurricane Helene, emphasizing the importance of scaled resources and discipline. Efforts to address humanitarian needs and community rebuilding are ongoing. The hurricane disrupted key supply lines, notably affecting Baxter’s facility, which supplies peritoneal dialysis (PD) solutions and saline. Although new PD patient starts were temporarily halted, existing patients' treatments remain mostly unaffected, with new starts expected to resume soon. Baxter is working to restore supply levels, and alternative supplies have been secured. The disruptions had minimal financial impact on the third quarter but are projected to affect the fourth-quarter results by $10 to $20 million due to increased supply costs, reduced PD starts, and decreased productivity.

The paragraph discusses the company's inclusion of adjusted operating income guidance within their 2024 projections, acknowledging that supply challenges may affect results into 2025. They anticipate the CMS ESRD final rule soon, focusing on the market basket update and the transition of oral-only drugs into Medicare Part B. The company supports this transition, emphasizing patient access, despite some manufacturers’ opposition. Additionally, they reported a third-quarter adjusted operating income of $535 million and an earnings per share of $2.59, highlighting margin expansion and resilience despite volume challenges.

The company remains strong in cash flow and is effectively implementing its capital allocation strategy, including share repurchases. They are on track to meet their 2024 financial guidance, with adjusted operating income expected between $1.91 billion and $2.01 billion, despite a Baxter supply shortage. While they have not provided specific guidance for 2025, they plan to do so in the fourth quarter. They are recovering from the pandemic years with consecutive double-digit adjusted operating income growth and expect to return to pre-pandemic growth levels. For the recent quarter, adjusted operating income was $535 million, adjusted EPS was $2.59, and free cash flow was $555 million. Treatment volume per day was stable despite high admissions, elevated mortality, and mistreatment due to hurricanes, with full-year volume growth expected between 0.5% and 1%.

In the third quarter, the company reported an increase in revenue per treatment by over $4, aligning with expectations and supporting an anticipated full-year growth of 3.5% to 4%. Patient care costs rose due to labor and medical expenses, while G&A costs grew by $19 million due to typical quarterly fluctuations, and depreciation increased by $11 million due to center closures. Despite foreign exchange impacts, international operations performed well, and the Integrated Kidney Care (IKC) segment saw a $32 million increase in adjusted operating results, although it is expected to incur a $50 million loss annually. Debt expenses rose by $37 million due to the expiry of 2% interest rate caps and additional debt raised through two transactions totaling $2.1 billion in August.

The paragraph outlines the company's financial strategies and outlook. It explains that the proceeds from recent deals were used to repay a loan, pushing the nearest debt maturity to 2028. Leverage at the end of Q3 increased slightly but remains within the target range. The company repurchased shares in Q3 and October. They reaffirm their adjusted operating income and EPS guidance for 2024, despite expected hurricane impacts, and maintain their free cash flow target. For 2025, no formal guidance is given yet, but the company anticipates several headwinds, including elevated mortality, the impact of a facility closure, and the expiration of interest rate caps, alongside tailwinds from reduced closure costs and international business growth. The company will provide more detailed guidance in the Q4 earnings call.

In the paragraph, Andrew Mok from Barclays asks about the impact of hurricanes on 3Q treatment volumes and the expectations for Q4. Joel Ackerman responds that the hurricanes had a minimal effect of about 10 basis points on Q3 treatments and are expected to have a significantly lesser impact on Q4. Andrew further inquires about 2025 headwinds and tailwinds, particularly regarding the financial impact of phosphate binder inclusion. Javier Rodriguez admits they cannot provide a useful range due to insufficient information.

The paragraph discusses the uncertainty surrounding the reimbursement and pricing of phosphate binders, a class of drugs that will be included in the Medicare bundle. There are four products with varying prices, and the removal of restrictions on branded products could affect the market mix. Additionally, 10-15% of patients without Medicare Part D might increase demand. Due to these variables—volume, reimbursement, and pricing—the financial impact is unclear, and more information will be available next quarter. Joel Ackerman comments on the challenges of predicting operating income, suggesting headwinds and tailwinds will likely balance out.

In the conversation, Andrew Mok and Joel Ackerman discuss the target growth rates pre-COVID and how they consider current challenges and opportunities in planning. AJ Rice from UBS seeks clarification on a $10 million to $20 million financial impact due to a hurricane, confirming it refers to EBITDA rather than revenue. He inquires about treatment patterns, noting that new therapy adoption is back to pre-pandemic levels, and whether the elevated mistreatment rate is solely due to the hurricane or other factors. Regarding mortality, Rice asks if extending projections into 2025 is based on new information or simply the first mention of that year. Joel Ackerman responds that the hurricane's financial impact will largely affect EBITDA, with a small potential revenue impact if patients switch providers. He confirms that admission rates remain consistent and the mistreatment rate is influenced by various factors, not just storms.

The paragraph discusses insights into treatment growth and mortality rates. Historically, treatment growth averages around 6% annually, with variability between quarters. Recent storms added a slight increase, but didn't affect the overall mistreatment rate. Elevated mortality rates have not returned to pre-COVID levels, but there's no significant change in the outlook for 2025. Pito Chickering from Deutsche Bank inquires about patient numbers and factors affecting treatment growth, aside from mortality. Javier Rodriguez explains that the primary factor influencing volume is elevated mortality. He notes that admit growth is healthy, the treatment mix is stable, and the transplant rate remains constant.

The paragraph involves a conversation between Joel Ackerman and Pito Chickering discussing financial metrics and the impact of external factors on their business. Ackerman explains that quarterly NAG (a financial metric) has volatility and looking at it quarter over quarter may not provide a clear picture of volume trends. He emphasizes that treatment rates and timing during the quarter affect NAG. Despite some volatility in the payer market, the annual financial goal of negative $50 million remains on track and unaffected. True-ups with payers happen in the third and fourth quarters and are proceeding as expected. The conversation ends with a question about commercial and MA price increases for 2025, which are in line with historical levels.

The paragraph involves a discussion about volume growth expectations for a company. Javier Rodriguez indicates that there are no major changes to report, and Joel Ackerman states that they anticipate a 0.5% to 1% growth in volume for 2024, similar to previous estimates. Lisa Clive from Bernstein inquires about volume growth and reimbursement splits in IKC, and Joel Ackerman commits to providing more information later. Joanna Gajuk from Bank of America further questions volume growth targets, specifically for the next year and the goal of 2% same-store volume growth. Ackerman responds that the primary factor for next year’s growth will be mortality rates, with a noted headwind on treatment days of about 25 basis points.

The paragraph discusses current and projected challenges and opportunities for the company, including clinic closures and issues with PD (peritoneal dialysis) related to Baxter, which could impact patient volume. While clinic closures previously created a headwind, they may soon become a tailwind as they fade into the past. However, ongoing issues with PD may direct potential patients to other providers, creating another headwind expected to offset the former. Despite these challenges, the company starts next year from a base performance level with variability depending on mortality rates and treatment mix. It also notes no changes in PD mix, which is in the mid-15% range, while HHD (home hemodialysis) is around 2%. The paragraph concludes by expressing gratitude to Baxter and the government for their efforts in ensuring supply for all patients.

In the paragraph, Joel Ackerman discusses expectations for patient retention and transitions in DaVita's dialysis services. Despite a potential decline in the home dialysis mix in the next quarter, Ackerman anticipates retaining most PD (peritoneal dialysis) patients. New patients, many of whom are already receiving dialysis in their clinics, may delay transitioning to PD without significant inconvenience. Some patients might choose alternative options, including delaying their start with PD or selecting another provider. Joanna Gajuk inquires about RPT (Revenue Per Treatment) growth projections for next year. Ackerman indicates that growth is expected to be lower than the current year's guidance of 3.5% to 4% but higher than historical ranges. Javier Rodriguez provides a clarification that DaVita's home patient mix consists of 15.5% in total, with 2% on home hemodialysis (HHD) and approximately 13% on peritoneal dialysis (PD).

In the paragraph, Ryan Langston from TD Cowen asks about the increase in advocacy costs for the third quarter, noting that these costs were down in the second quarter. Javier Rodriguez explains that the rise is mainly due to activities in California related to elections, efforts to restore patients in Washington, D.C., and the campaign regarding the inclusion of oral medications in a healthcare bundle. Langston also inquires about the elevated mistreatment rates caused by weather events, to which Joel Ackerman responds that they are still above pre-COVID levels but should decrease over time without further storms, although they typically rise in the fourth quarter due to seasonal factors.

In the conversation between Justin Lake and Joel Ackerman, they discuss the financial projections for 2024 and 2025, focusing on growth rates and interest expenses. Justin notes an anticipated increase in growth rates from 2.5% to 3.5% and suggests this should positively impact 2025. Joel agrees with his calculation but notes they chose not to categorize certain factors as headwinds or tailwinds. Regarding interest expenses, Joel says $135 million per quarter is a good estimate for the next year, potentially decreasing due to lower caps. He explains that the increase is due to more debt but doesn't expect further debt in upcoming quarters. Justin inquires whether these caps could be renewed at reasonable rates.

In the paragraph, discussions take place about interest rate caps and mix percentages within a financial or business context. Joel Ackerman explains a shift from a fixed three or four-year interest rate cap to a rolling approach, which will cause changes to happen gradually in response to interest rate fluctuations, rather than abruptly. Justin Lake inquires about commercial mix percentages for the quarter compared to the previous quarter, and Ackerman confirms no significant changes. Andrew Mok from Barclays asks about the 7% sequential and 10% year-over-year increases in General and Administrative (G&A) expenses. Javier Rodriguez attributes these increases mainly to IT investments, wages, and reimbursement operations investments. Mok also inquires about the ACA exchange mix within the commercial mix, to which Rodriguez states that the Qualified Health Plans (QHPs) have a 7-8% mix nationally, while their specific population shows a 3% mix.

In this paragraph, a discussion takes place during a conference call involving several individuals, primarily focusing on financial expectations and market dynamics. Andrew Mok asks about growth in a specific payer class, and Javier Rodriguez notes that their growth mirrors the market's growth. Pito Chickering from Deutsche Bank inquires about depreciation being a tailwind for earnings per share in 2025, and Joel Ackerman responds that while depreciation will contribute positively due to fewer center closures, overall, it will be flat to down. Pito further examines headwinds and tailwinds, including factors like mortality, facility ramp-ups, interest rate caps, and bundle implications. Ackerman seeks clarification on whether the bundle is considered a headwind or tailwind.

In the article paragraph, Pito Chickering discusses the uncertainties related to bundles and how their outcomes could either be beneficial or detrimental, depending on upcoming governmental decisions. Joel Ackerman acknowledges the variability involved and suggests that outcomes could lead to either headwinds or tailwinds for the business. After concluding this discussion, Javier Rodriguez expresses gratitude for the efforts of DaVita's care teams and notes the company's resilience in managing costs from recent storms. Despite challenges like elevated mortality, DaVita's investments have helped return operating income to pre-pandemic levels.

This summary was generated with AI and may contain some inaccuracies.