DaVita healthCare Partners Inc. (DVA)

DVA 
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DaVita, Inc. (DVA)

Q1 2010 Earnings Call

January 27, 2010 05:00 pm ET

Executives

Jim Gustafson - VP, IR

Rick Whitney - CFO

Kent Thiry - Chairman and CEO

LeAnne Zumwalt - VP

Luis Borgen - CFO

Analysts

Kevin Fischbeck - Banc of America

Kevin Ellich - RBC Capital Markets

Gary Lieberman - Wells Fargo

Justin Lake - UBS

Brian Zimmerman - Deutsche Bank

Mark Afrasiabi - PIMCO

Mark Arnold - Piper Jaffray

Gary Taylor - Citigroup

John Ransom - Raymond James

Andreas Dirnagl - Stephens

Chuck Ruff - Insight Investments

Presentation

Operator

Good afternoon. I’ll be your conference operator today. At this time, I would like to welcome everyone to the DaVita first quarter 2010 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator Instructions).

Thank you. Mr. Jim Gustafson, you may begin your conference.

Jim Gustafson

Thank you and welcome everyone to our first quarter conference call. We appreciate your continued interest in company. I’m Jim Gustafson, Vice President of Investor Relations and with me today is Kent Thiry, our CEO, Rich Whitney our CFO and LeAnne Zumwal, Vice President and Luis Borgen who will be our CFO starting next month.

I’d like start with our forward looking disclosure statements. During this call, we may make forward looking statements within the meaning of the Federal Securities Laws. All of these statements are subject to known and unknown risk 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 our most recent annual report on form 10-K.

Our forward looking statements are based on information currently available to us and we do not intend and undertake no duty to update these statements for any reason. Additionally, we’d like to remind you that during this call, we will discuss on a non GAAP financial measures, a reconciliation of these non-GAAP measures to the comparable GAAP financial measures is included in our form 8-K, submitted to the SEC and are available on our website.

I will now turn the call over to Kent Thiry, our Chief Executive Officer.

Kent Thiry

Thank you and thank all of you for your interest in DaVita. We had another solid quarter. I'll cover five quick topics. Number one, clinical outcomes, number two bundling, number three government investigations, number four industry dynamics, excuse me number four outlook and number five, industry dynamics.

First clinical outcome is which we always cover first because we are first and foremost, a care giving company serving above 119,000 patients now. Referred to this spec of adequacy which is essentially how well you’re doing at, removing toxins from our patients blood, this quarter, 96% of our hemodialysis patients had a Kt/V greater than 1.2. Second with respect to divesture access, 66% our patients have fistulas which is a preferred form of vascular abscess. Third, in management, positions that managed 65% of our patients to hemoglobin levels it tends between 10 and 12 over the last three months.

For these inversely all other clinical measures are patient outcomes compared very favorably to the national averages. Our high quality, our high quality clinical care and that is only results in healthier patience. But it also drives reductions and hospitalization and surgical procedures and therefore significant savings to the American Tax payer.

Topic number 2 the bundle is simply nominal information to report. We are waiting for the final rule just as you are CMS is still likely to release it in late May or June while we hope the rule will be much better than the interim rule and in fact we expected it. I want to remind everyone that a bad bundling rule would mean that centers will close which would hurt both access to care and the quality of care.

Topic number 3 government investigations, we were recently notified by the department of justice that it is conducting a similar investigation into the company financial relationships with positions. We have not received any more detail in that but are expecting subpoena sometime in the near future. As most of you know investigations in this nature generally take years to conclude also as most of you know our comments at this stage must necessarily be quite generic.

Namely with 34,000 team-mates in more 1800 locations across the country it would be naïve to assert that we are sure that we are perfect everywhere and everyday. And we whole heartedly respect the government’s responsibility to ensure the appropriateness of our and other provider practices. However for any perspective share holders out there listening or doing due diligence on DaVita. You will find that our 10 year track record with respect to these types of investigations is almost uniquely positive in the world of American Health Care.

Topic number 4, outlook. Very simply we are maintaining our 2010 operating income guidance of $950 million to $1.02 billion looking into 2011 everyone know we faced challenges and opportunities of adapting to the new bundle and that could mean and probably will mean two to four quarters of transitional activities.

The fifth and final topic, just stepping back for a moment and looking at fundamental industry dynamics and the fundamental risk to avoid characteristics of your investments or potential investment in us. On the risk side there is no understating the fact that there is an unusual government rate pressure these days in all of American healthcare and there is normal private rate pressure, that there is simply no getting away from those risks on the upside side however point, A, the bundle does create $1.1 billion of innovation potential and in that sphere scale helps. Point B, if government funding becomes more inadequate centers will close and given CMS shares accountability for 88% of American dialyses patients center closings are appropriately highly visible and highly sensitive.

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