DaVita earnings improve after drop in costs, mortality related to COVID-19
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Leaders of DaVita Inc. told investors that improvement in earnings in the first quarter of 2021 reflect a drop in COVID-19-related expenses and mortality among patients treated in their centers, as well as increases in the vaccination rate.
“Over the last several months, we have made incredible progress in our efforts to combat the COVID-19 pandemic,” DaVita CEO Javier Rodriguez said during an earnings call. “[The] kidney care community administered hundreds of thousands of vaccines to its patients. I’m proud to say that as of [April 28], 72% of our patients nationwide have received at least one vaccine dose.”
Rodriguez said the dialysis provider, which recorded $2.8 billion in revenue in the first quarter with an operating income of $443 million, has also made efforts to provide patient education to equalize vaccinations among all patients who request it.
“We saw the vaccination rates for Black and Hispanic [patients] were approximately 40% below that of white and Asian American [patients]. We ... mobilized our care teams – including social workers, dietitians and medical directors – to have one-on-one conversations with patients to address common causes of hesitancy.
“Our Hispanic patients have now been vaccinated at nearly the same rate as white patients and the gap for our Black patients has been reduced to 10%,” Rodriguez said.
Financial performance
Rodriquez said the company’s treatment margins were 15.7% for the quarter as COVID-19-related costs diminished. Treatment volumes, however, have declined during the pandemic due to the high mortality rate and other factors. “Our treatments per day hit a low point in mid-February, including the impact of approximately 25,000 missed treatments from the winter storm,” Rodriquez said during the call.
During the first quarter of 2021, DaVita provided 7,286,934 total dialysis treatments in the United States, or an average of 94,636 treatments per day. This represented a per day decline of 1.3% and 2.3% compared with the fourth quarter of 2020 and the first quarter of 2020, respectively, according to a company press release.
Since February, however, “our daily treatment trends have steadily improved,” Rodriguez said. “As these trends continue, absent any further infection surges, we believe that our sequential patient census growth through the end of the year could return to pre-COVID levels, which is what we incorporated in our guidance ranges we provided last quarter.”
Volumes will return, Rodriguez predicted, because new cases of COVID-19 and new infections within DaVita’s dialysis population have continued to decline. “[The] number of active cases among our patients across the country decreased approximately 85% from peak prevalence on January 6, 2021, and the last [7]-day incidence rate for new cases decreased approximately 91% from the week ending January 9, 2021.
“Second, we’re grateful that we’re seeing a dramatic decline in the mortality rates associated with COVID.”
The company reported previously that the virus was linked to the deaths of approximately 7,000 patients in 2020. “In the first quarter [of 2021], incremental mortality associated with COVID was approximately 3,300 lives, with more than half of that number occurring in January, decreasing to approximately 600 in March,” Rodriguez said.
Revenue per treatment
The company saw $2.72 in additional revenue per treatment in the first quarter of 2021 compared with the same period last year, primarily due to increases in the Medicare payment for treatment that began in January 2021; favorable changes in government mix due to shifts to Medicare Advantage plans, and favorable changes in commercial mix and increased hospital inpatient dialysis revenue, the company said in the release.
As a result of improvements in patient census and lower COVID-19-related costs, the company is increasing its adjusted earnings per share guidance range to $8.20 to $9 per share and adjusted operating income guidance range to $1.75 billion to $1.875 billion. “At the midpoint of our revised adjusted operating income guidance, this would represent approximately a 4% growth year-over-year. These revised ranges assume no further major disruption from the virus strain,” Rodriguez said.
As of March 31, DaVita provided dialysis services to approximately 238,900 patients at 3,150 outpatient dialysis centers, of which 2,827 centers were located in the United States and 323 centers were located in 10 countries outside of the United States. During the first quarter of 2021, the company opened 18 new dialysis centers and closed seven dialysis centers in the United States. The company acquired three dialysis centers, opened two dialysis centers and closed three dialysis centers outside of the United States during the first quarter of 2021.
References:
www.fool.com/earnings/call-transcripts/2021/04/30/davita-inc-dva-q1-2021-earnings-call-transcript/
www.prnewswire.com/news-releases/davita-inc-1st-quarter-2021-results-301280685.html
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