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March 18, 2021
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Mortality rate from COVID-19 hurt FMC AG, DaVita Inc. fourth quarter earnings

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Fourth-quarter earnings for Fresenius Medical Care AG and DaVita Inc. were hurt by the high mortality rate and cost of caring for patients who contracted COVID-19, company executives reported during calls with investors.

Although FMC AG met financial targets for 2020, with a 5% increase in revenue and a 12% growth in net income, the dialysis provider said it anticipates “significant negative impact” on net income in 2021 due to thousands of patients on dialysis who died from the virus.

“The COVID-19 pandemic might be the most decisive challenge the world has faced in recent decades,” Rice Powell, chief executive officer of FMC AG, said during an earnings call. “Accelerated infection rates at the end of 2020 resulted in significant excess mortality in the dialysis patient population and this is expected to continue into 2021.

“With an increasing number of vaccines being approved, there is a way out of the pandemic, but it is far from over,” he said.

As a result, FMC AG said it anticipates revenue growth “of up to mid-single digits and assumes net income before potential restructuring measures to decline by up to 25 [%]” in 2021.

Personal protective equipment for employees and patients, as well as higher compensation for employees working in isolation clinics established for patients with the virus, resulted in “significantly increased costs in the dialysis services business,” the company said.

Like Fresenius, DaVita benefited from an increase in Medicare payments for dialysis treatments to boost income for the fourth quarter of 2020, despite a high mortality rate among patients on dialysis with COVID-19.

“We estimate that our patient census at the end of 2020 was approximately 7,000 less than what it would have been otherwise absent COVID,” Javier Rodriguez, CEO of DaVita Inc., said during an earnings call. “As we look to the future, some leading indicators, such as fewer new COVID cases, fewer hospitalizations and the recent vaccination efforts, give us hope.”

DaVita said losses in the fourth quarter included a decline in revenue for calcimimetics, which is now part of the Medicare bundled payment for outpatient dialysis care. Patient care costs were also higher primarily due to increases in COVID-19-related costs, including compensation expense, medical supplies and teammate reimbursement and benefit program expenses, the company said.

“Despite the challenges of COVID, we significantly outperformed our original financial guidance for 2020,” Rodriguez said. “We knew it would be a tough year to deliver profit growth given the headwinds from calcimimetics revenue decline and the cost of fighting the ballot initiative in California.

“Despite this uncertainty, we grew our adjusted operating income by double digits, absent the impact of calcimimetics, ballot cost and net COVID impacts,” he said.