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Dialysis Corp. of America (DCAI)

Q2 2009 Earnings Call

August 6, 2009 10:00 am ET

Executives

Stephen W. Everett - President, Chief Executive Officer, Director

Andrew J. Jeanneret - Chief Financial Officer, Vice President - Finance

Analysts

Gary Lieberman - Wells Fargo Securities, Llc

Presentation

Operator

Good morning ladies and gentlemen my name is Howard and I will be your conference operator today. At this time I would like to welcome everyone to the Dialysis Corporation of America Second Quarter 2009 Earnings Conference Call (Operator Instructions). I would now like to introduce your host for today’s presentation Mr. Andrew Jeanneret, Chief Financial Officer.

Andrew Jeanneret

Thank you, Howard and welcome everyone to our second quarter 2009 conference call. My name is Andrew Jeanneret, and with me is Steve Everett, our CEO.

I would like to start the call with our standard forward-looking statement disclosure. During this call, we may make forward-looking statements which can generally be identified by the content of such statements or the use of forward-looking terminology that includes statements that do not contain historical facts. All such forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

For further details concerning these risks and uncertainties, please refer to our SEC filings including in our most recent quarterly report on Form 10-Q and our annual report on Form 10-K. Our forward-looking statements are based on information currently available to us and we undertake no obligation to update these statements whether as a result of changes in underlying facts, information, future events, or other developments.

With that said I will now turn the call over to Steve Everett.

Steve Everett

Thank you Andrew and good morning everyone. As we have done in the past I would like to begin by going over some key data from the quarter as well as an overall business update. We will follow that with Andrew reviewing our financial results and then open up for any questions that you may have.

As you know, we announced our results for the second quarter of 2009 last evening. Let me start with a few operating points worth noting. We began the quarter with 37 dialysis centers in operation serving nearly 2000 patients. During the quarter we consolidated two of our facilities into one. In July, subsequent to the quarters end, we did the same thing with two other centers bringing our total number of centers to 35. In both cases we were able to significantly improve operating efficiencies without losing many patients from our system. Between both of the areas that were consolidated only about five patients transferred out of our system, and we ended the quarter with a total of nearly 2,100 patients.

The two centers that we have in development in partnership with the University of Cincinnati are on schedule with the first one expected to open sometime in early Q4. It is worth noting that for the first time in years we are experiencing a reduction in the overall construction costs for new facilities; that changed about $5.00 a foot.

Our acute program remains unchanged with treatments being delivered in 11 hospitals in the areas that we serve.

Next, our company’s persistent focus on quality care continues to pay off with dialysis adequacy or our KT over Vs greater than or equal to 1.2 have increased to 98% the highest in the industry that we are aware of. Our hemoglobins’ greater than 11 remain constant at 81 and our vascular access management continues to improve with about 60% of our patients now having fistulas in place.

The Company’s growth strategies remain unchanged with a combination of focused same store growth and adding new centers primarily through joint venture start-ups. As you may have seen our same store treatment growth is showing only about 2% year-over-year change for the first six months, but the combining of one of our older centers with the newer centers I mentioned earlier, caused that percentage change to be artificially low. Without that the one less operating day this year we would have been substantially higher. It is also worth noting that DCA when we calculate our same store growth we do not take into consideration De nova’s or our start-up facilities, we actually exclude those and again that is part of the reason that we had the artificially low numbers.

As I mentioned last quarter the current economic conditions have made it a lengthier process to bring new business deals to the finish line, although the number of deals we are working on is very solid. Our development team has expanded the footprint of the Company to include six additional states and we are now active in all of them.

Finally, a quick update on the legislative front, although there is not a ton to report. In regards to the upcoming bundle we expect to see a draft of the rules of the plan sometime this month. Risk adjusters, role market payments, and the like will no doubt be key drivers during the comment period which could last several months.

There is nothing to report on any extension on the MSB. While we remain of the strong opinion that an extension makes sense for patients, for providers, and for the taxpayers, we haven’t seen or heard anything new on the subject.

On that note I will now turn the call back over to Andrew.

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