DaVita revenue up in second quarter, but high patient mortality lingers post COVID-19
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Key takeaways:
- DaVita reported increases in revenue from patient treatments in the second quarter.
- Company officials said they are unclear as to why mortality rates among patients remain high post-COVID-19.
DaVita Inc. recently reported positive second-quarter results for its dialysis business, but company officials remain perplexed about continued high mortality at its clinics.
“ ... At the end of the day, the question that you and all of us are trying to ask ourselves is, ‘Is there a structural change that is going to change the growth rate?’” Javier J. Rodriguez, the CEO of the company, said during an earnings call with investors. “And, to the best of our ability on the work we have done, the answer we come up with is no,” he said. “It appears that we are in a period of time where mortality is elevated ... the volume should come back over time.”
Although revenue per treatment increased in the second quarter ending June 30, high mortality has reduced treatment growth at the company, along with its decision to close 200 clinics in the last few years.
“We have been talking to our physician community in trying to understand what is driving [high mortality].” Rodriguez said. “The reality is people come up with hypotheses, ... but the real quantifiable answer is not one that we can say with confidence ... We are scratching our head and we will be working on it ... ,” he said.
Joel Ackerman, chief financial officer of DaVita, told investors that the high mortality, along with missed treatments from recent tropical storms, resulted in treatment growth “below our expectations.
“Through the quarter, what we saw was missed treatments were elevated, relative to what we expected, and our census growth was below expectations. The pattern there has continued.
“New to dialysis (admissions) remain strong and are consistent with what we had seen pre-COVID, and mortality remains elevated,” he said.
Ackerman said he expected little change in the number of missed treatments through the end of the year. “We haven’t built in much census growth and we anticipate that the missed rate will continue to be challenging,” he said.
Revenues up
The company reported consolidated revenues of $3.187 billion for the second quarter. Net income for U.S. operations was $222.7 million, and profit margin was 7%, according to a company press release.
DaVita purchased 2.7 million shares of its common stock in the second quarter at an average price paid of $140.14 per share.
Revenue per dialysis treatment at the end of the second quarter was $390.22, up $5.68 per treatment compared to the first quarter, and up $15.92 per treatment compared to the second quarter of 2023. The increase in patient costs per treatment went up slightly — $0.25 — since the start of 2024.
The company said in the release that increases in revenue in the second quarter were “primarily due to a seasonal improvement from patients meeting their coinsurance and deductibles and normal annual rate increases, partially offset by unfavorable changes in payer mix.
“The year-to-date change was primarily driven by the increase in average reimbursement rates from normal annual rate increases, including from Medicare, as well as revenue cycle improvements, favorable changes in mix and an increase in hospital inpatient dialysis rates,” according to the release.
The company reported revenue from international dialysis operations was flat compared to the last quarter but recent acquisitions of dialysis centers in Ecuador and Chile and closing acquisitions in Columbia and Brazil by the end of the year should have an impact, he said.
Based on the financial results, the company said it is updating its operating income guidance range for 2024 to $1.91 billion to $2.01 billion, Ackerman said, “all together these changes reflect an approximate $35 million in our adjusted operating income guidance at the midpoint range.”
Facility closures
DaVita said it closed three dialysis centers in the second quarter. Since the beginning of the year, the company has incurred charges of approximately $29.9 million to close centers. “We expect to close 40 clinics this year,” Ackerman said. “These costs represent $15 million per quarter, and will likely be at about $60 million for 2024,” he said. “For 2025, we expect $20 million to $30 million in closure costs” and the closure of around 20 clinics, he said. The company has closed about 200 clinics in the last several years, he said, and canceled new openings.
As of June 30, DaVita provided dialysis services to approximately 265,100 patients treated at 3,124 outpatient dialysis centers; 2,672 of those centers were located in the United States and 452 centers were located in 13 countries outside of the United States.
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