DaVita: COVID-19 costs, lower census offset by higher treatment revenue in second quarter
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DaVita Inc. reported positive second-quarter earnings despite the ongoing impact of the COVID-19 pandemic and other financial challenges.
“We had a strong quarter, despite the net headwind from our COVID[-19] response, primarily as a result of improved adjusted margins in our core kidney care business,” Joel Ackerman, DaVita chief financial officer, said during an earnings call with investors.
While core treatment growth dropped from 2.3% in the first quarter of 2020 to 1.6% in the second quarter, “we believe the primary drivers of this decrease were COVID[-19] related, as increased mortality and lower new patient starts were partially offset by a nationwide decrease in kidney transplants and lower missed treatments,” Ackerman said. “We expect this net COVID[-19] headwind to persist at least until this time next year.”
Javier Rodriguez, the CEO of DaVita Inc., said while the company expected the drop in patient census to continue due to deaths from COVID-19, many of the patients are older and tend to be Medicare patients.
“The patients that unfortunately passed away due to COVID[-19] were primarily among our older population, and therefore, were more frequently covered by government insurance,” Rodriguez told investors. “As a result thus far, we have not seen a material negative impact on our commercial mix ... our private pay census fared better than expected in the quarter as our patients worked hard to maintain their employment and their insurance coverage,” Rodriquez said.
DaVita and other dialysis providers have set up separate shifts and dialysis clinics for cohort patients who have tested positive or who are suspected of having COVID-19.
In a press release, the company reported consolidated revenues of $2.880 billion in the second quarter, operating income of $410 million (14.2% operating margin) and adjusted operating income of $461 million (16% adjusted operating margin). Total U.S. dialysis treatments for the second quarter were 7,570,908, or an average of 97,063 treatments per day, representing a per day increase of 0.7% compared with the second quarter of 2019, DaVita said in the release.
Rodriguez said the company was raising its adjusted earnings per share guidance for the year by $0.50 to $6.25 to $6.75.
“Our strong operational performance came despite investments and expenses we incurred in response to COVID[-19] offset by savings associated with COVID[-19] in the form of reduced travel and health benefit expenses among other items,” he said.
“The past several months have been among the finest and most exceptional chapters in our history, reflecting the compassion and the dedication of our teammates,” Rodriguez said during the call. “The company’s strong performance this quarter demonstrates the benefits of our patient-centric, comprehensive kidney care platform, beginning with [chronic kidney disease] CKD all the way through [end-stage renal disease] ESRD and transplant.”
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