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Dialysis Corporation of America (DCAI)

Q4 2009 Earnings Call

March 11, 2010 10:00 AM EST

Executives

Andrew Jeanneret – CFO

Steve Everett – President and CEO

Analysts

Ryan Halsted – Wells Fargo

Darren Lehrich – Deutsche Bank

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Dialysis Corporation of America fiscal year-end 2009 earnings conference call. At this time, all participants are in a listen-only mode. Later will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions). As a reminder, this conference call is being recorded.

I would now like to introduce your host for today’s conference, Mr. Andrew Jeanneret, CFO. Sir, you may begin.

Andrew Jeanneret

Thank you, operator, and welcome everyone to our 2009 fourth quarter conference call. My name is Andrew Jeanneret. With me is Steve Everett.

I will start the call with our forward-looking statement disclosure. During our 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 fact.

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 reports 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 developments.

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

Steve Everett

Thanks Andrew. Good morning everyone. As you know, we announced our results for the fourth quarter and the full year of 2009 yesterday. As with prior calls, I would like to spend a few minutes providing you with the business update before Andrew covers the financial results. And then, we will be happy to take any questions that you may have.

First, a few operating notes. As you know, we consolidated four of our centers last year to two centers, resulting in improved aggregate margins at those facilities as well as operating efficiencies. During the year, we also built two new centers in Ohio, which are currently in the process of being certified by Medicare.

We provided a little bit more than 296,000 dialysis treatments for the year, which is a slightly lower number than we expected for our same-store growth which was about 2%. We also began our first university affiliation in 2009, which was with the School of Medicine at the University of Cincinnati. The affiliation included a grant agreement that will span over three years with the DCA contribution of $265,000 in each of those years, the first which was provided last March.

Beyond the financial support we are providing, it’s our hope for DCA facility participation in various research studies being conducted by the university in the hopes of improving the lives of the patients afflicted with kidney disease.

On the clinical front, we made several progressive steps in improving what has already been excellent quality care. Our Kt/V greater than 1.2, which is the measurement of adequacy of dialysis remained at slightly above 97%, a statistic that we are very proud of.

Our anemia management for the year resulted in hemoglobins greater than 11 to be roughly 80%, a slight downward tick primarily due to an increase in the nursing home patients in our system. These patients typically have more comorbidities and can be more challenging to obtain the ideal hemoglobin levels. Our final clinical measurement is access management, which continues to improve with 60% of our patients having fistulas [ph] in place at the end of the year.

Our new business development was rather stagnant over the year with two new centers being developed as I already mentioned and the integration of our Hyattsville center into our system.

We sat on the sidelines regarding acquisitions and found many physicians wanting to sit on the sidelines this past year in regards to de novo joint ventures, driven primarily by a desire to see how the impact of the bundle of 2011 is going to affect them, which we should be able to address better later in 2010, as well as their continued concerns over the economy as a whole.

While I am reluctant to predict the timing of these opportunities that are out there coming to fruition, we do feel confident that the effects of the 2011 bundle becomes clearer and personal financial fears begin to subside, we should be able to get these opportunities to the finish line.

Finally, it would be a mistake not to make note of our take on the upcoming bundle. The key issues that in our opinion that will ultimately determine the impact on DCA or any other provider for that matter are where our oral medications will end up, what comorbidities will be used in determining reimbursement, and lab testing. We will have a better feel for everything as the year progresses. At this point, there is really nothing new to report.

The fact that we have completed our phase-in of our new clinical information system, which is a huge deal for us was critical for DCA as we prepare for the bundle to say nothing of making life easier on our physicians and our caregivers.

Read the rest of this transcript for free on seekingalpha.com