DaVita sees revenue stabilize in fourth quarter as patient deaths due to COVID-19 decrease
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A decreasing number of deaths due to COVID-19 among patients on dialysis and stabilizing labor costs have given executives at DaVita Inc. some optimism for the upcoming year, according to a press release.
"We continue to have excitement and conviction in our long-term capabilities and strategy to differentiate DaVita as a health care provider and employer of choice," Javier Rodriguez, CEO of DaVita Inc., said in the release. "I am encouraged by the operating progress we have made in recent months, and we will be closely monitoring volume and the labor environment, which remain challenges in 2023."
The company reported consolidated revenues of $2.917 billion for the fourth quarter of 2022 and $11.610 billion for the year, according to the release.
Last November, a decision by the company to reduce its 2022 adjusted operating income guidance to a range of $1.375 billion to $1.45 billion after a major drop in third-quarter earnings sent its stock price plunging. The company said an ongoing high mortality rate among patients with COVID-19 kept patient census down, and higher labor costs impacted company earnings.
For the fourth quarter of 2022, adjusted operating income was $317 million and $1.450 million for the year, according to the release.
“Our full-year 2022 adjusted operating income came in at the top end of our revised guidance at $1.45 billion,” Rodriguez said during an earnings call about the fourth-quarter financial results. “The primary driver of our fourth-quarter performance coming in at the high end of our range was improvement in labor cost,” he said. “The labor environment continues to be challenging across many dimensions and the fourth quarter was certainly better than the third quarter ... We still expect contract labor will be higher than pre-COVID levels in 2023 by $20 million to $40 million, but that will be a significant improvement to 2022,” Rodriguez said.
COVID-19
Company leaders said they remain hopeful that patient mortality due to COVID-19 continues to decrease. “We're grateful for getting through the winter without a surge of COVID-related mortality and like [the rest of] society, wondering whether the worst of the COVID pandemic is finally behind it,” Rodriguez said. “We announced roughly 6,800 [patient deaths] or so excess mortality [in 2020], and we're guiding roughly to 3,000 [patient deaths due to COVID-19] in 2023. So, it is coming down aggressively,” he said.
Joel Ackerman, chief financial officer of DaVita, told investors during the call that there were 900 patients on dialysis who died due to COVID-19 in the fourth quarter. “You want to compare that to [fourth quarter] Q4 of 2021; that number was somewhere around 1,500 [patient deaths]. So, Q4 over Q4, the numbers come down significantly. And we would expect similarly [first quarter] Q1 '23 over Q1 '22 because of the lack of the surge” during the winter months, Ackerman said.
Clinic closures
As of Dec. 31, 2022, the Denver-based company provided dialysis services to approximately 245,000 patients at 3,074 outpatient dialysis centers, of which 2,724 centers were located in the U.S. and 350 centers were located in 11 countries outside of the U.S., according to the release. During the fourth quarter of 2022, the company closed 58 dialysis centers in the U.S.
Rodriguez said during the earnings call that clinic closures “are the result of a strategic review of our outpatient clinic capacity requirements and utilization, which have been impacted both by declines in our patient census in some markets due to the COVID-19 pandemic, as well as by our initiatives toward, and advances in, increasing the proportion of our home dialysis patients.”
Fourth-quarter charges for U.S. dialysis center closures were approximately $35 million, according to the release, and $86 million for the full year.
California ballot
Revenue improved in the fourth quarter from increased hospital inpatient dialysis revenues and changes in government reimbursement for administration of influenza vaccines, an increase in the commercial payer mix and the continued migration of patients with end-stage renal disease to Medicare Advantage plans, according to the release.
The company also saved money in the fourth quarter by reducing its advocacy costs to fight a proposal in California that would require stricter rules for dialysis operations. The proposal, backed by the Service Employees International Union -United Healthcare Workers West labor union, was defeated by voters last November, but DaVita spent $24 million in the third quarter in efforts to defeat the measure.
References:
DaVita (DVA) Q4 2022 earnings call transcript. www.fool.com/earnings/call-transcripts/2023/02/22/davita-dva-q4-2022-earnings-call-transcript/. Published Feb. 22, 2022. Accessed Feb. 24, 2022.
www.healio.com/news/nephrology/20221114/californians-turn-down-initiative-on-dialysis-clinic-rules
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