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Dialysis Corporation of America (DCAI)

Q3 2009 Earnings Call Transcript

November 5, 2009 10:00 am ET


Steve Everett – President and CEO

Andrew Jeanneret – CFO


Pito Chickering – Deutsche Bank

Ryan Austin [ph] - Wells Fargo



Good day ladies and gentlemen, and thank you for standing by. Welcome to the Dialysis Corporation of America third quarter 2009 earnings call. (Operator instructions) I would now like to introduce your host for today’s conference, Mr. Andrew Jeanneret, CFO. Sir, please go ahead.

Andrew Jeanneret

Thank you, Karen, and welcome everyone to our third 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 included 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. Good morning all. We will stick to our usual format today by first going through a few significant items for a quarter, including a business update. Andrew will take us through the financial results and then we will open up to your questions.

Our third-quarter results were announced yesterday, pretty much in line with our internal expectations. We did not experience any significant events or shifting trends in our daily operations during the quarter in our 35 dialysis centers currently in operation. They are all doing as expected both operationally and financially.

As you may recall, we consolidated units in a couple of our markets at the end of last quarter. The results of those moves have been very good in spite of the few patients we lost due to transportation and geography issues. Construction of our Kenwood, Ohio center is almost complete and subject to state surveying schedule, we should be open before the year-end.

Also our other current center being developed in partnership with the University of Cincinnati is on plan with construction underway. Obviously, it is treating the patients that entrust their dialysis needs to us that must be and is our primary focus and responsibility. One of the key measurements of quality care is dialysis adequacy. 97% of our patients have Kt/V greater than or equal to 1.2, which is the best in the industry.

Approximately 61% of our patients have fistulas in place and a continued focus by DCA’s clinical services folks, is steady demonstrable improvements is in their hands [ph]. Lastly, our hemoglobin is greater than 11 came in at 79%, a slight drop compared to the last quarter.

Our same-store treatment growth was right at 6% for the quarter compared to the same period last year, which is a nice rebound from the less than ideal 2% that we experienced last quarter. While we had no additional facilities to announce today, be assured that our business development activities are plentiful. That being said, our business model and courageous select acquisitions and de novo development.

In other words, we're only going to invest in markets and specific opportunities, where we are confident of solid returns on investments, where there are physician partners that aspire to the same high standards of care that all of our existing centers have.

Finally a couple of points on our 2011 bundle. First as you are no doubt aware, the comment period has been extended by 30 days, which we will take it out to December 16. We along with the most of the industry are continuing to try to get our arms around several key points of the bundle, and continue to provide CMS with comments on the draft of the rules. Three key items for DCA anyway come to the forefront.

The case mix adjusters are certainly one of them. We are continuing to be challenged with identifying exactly where our patients will fall and as the information that we have available is less than what CMS had in determining exactly how the breakdown would work.

Secondly, the part D side is very difficult to decipher, and we believe that it is under funded in the current draft. We will have to wait to see how that piece shapes out. And thirdly, the lab component could be a good thing for us as I have spoken to in the past or bad. We're not sure at this point just how much of the bundle is being directed to labs nor is the 20% co-pay the patients would now be responsible for was taken into consideration.

Assuming that these issues are addressed properly, we remain optimistic that the bundle will be good for DCA. With that I will turn the call back over to Andrew to discuss our financials.

Andrew Jeanneret

Thanks Steve. I would like to discuss our 2009 third quarter and nine-month results. Our operating revenue for the third quarter of 2009 was $25.1 million, a 14.9% increase over the $21.9 million in the third quarter of 2008. For the nine-month period operating revenue was $73.3 million, a 16% increase over the $63.2 million for 2008. Our total treatments were 75,985 for the 2009 quarter and 68,925 for the 2008 quarter, a 10.2% increase quarter-over-quarter.

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