Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: ni-co on February 28, 2014, 03:50:39 AM

Title: DVA – DaVita HealthCare Partners
Post by: ni-co on February 28, 2014, 03:50:39 AM
I'm aware of the fact that there is a DaVita thread within the Berkshire category (http://www.cornerofberkshireandfairfax.ca/forum/berkshire-hathaway/davita-thesis/), but I think it deserves its own "investment idea" thread and therefore suggest to move the discussion here.

Since this is a large BRK/Ted Weschler position and this is the "Corner of Berkshire…" board, I assume that you've already had a look at DVA so I spare you the business description.

To me, there are 5 reasons for DVA as an attractive long term ("Coca-Cola-like") investment:


The only real threat to the business I can see is regulatory risk. However, since government is interested in keeping health care cost down and DVA is effectively a low cost provider, I think the risk is somewhat limited and, at least, DVA would be the last of these companies to go under, if government decided to kill the industry. The other threat is a complete buyout by BRK.

I recommend this Seeking Alpha article which got me interested in DVA in the first place:
http://seekingalpha.com/article/1769952-why-davita-is-undervalued-compared-to-fresenius-medical-care

ps: You can make an argument that the whole dialysis business is immoral, like ItsAValueTrap does:
http://glennchan.wordpress.com/2013/06/17/for-profit-dialysis-an-unethical-industry-davita-dva/

However, I think that you can make the same points with nearly every privately owned health care business. It needs to be regulated, for sure. But if you are convinced that, in sum, a privately owned health care industry is a net benefit to society, there is no convincing argument – at least to my mind – not to invest in companies within this sector, as long as they abide by the laws and regulations. The net benefit to society, by the way, is why I invest in DVA but not into tobacco companies – I don't think that ItsAValueTrap's comparison is fair in this regard.
Title: Re: DVA – DaVita HealthCare Partners
Post by: ItsAValueTrap on February 28, 2014, 07:41:23 AM
In the past, DaVita had foreign operations.  Thiry came in and turned the company around.  One of the things that he did was to axe the foreign operations.

DaVita is currently looking at expanding internationally.  However, I think that those foreign markets are very different.  Health care compensation and the preferred treatment of dialysis is very different in other countries.  Davita's biggest expansion push has been to expand in adjacent health care niches within the US (e.g. the large HCP acquisition). 
There is some benefit to expanding internationally as Davita would have more negotiating leverage against its suppliers.

2- The ethics are a problem I think.  Malone never put anybody's life at risk by overdosing them on EPO.  Malone plays within the rules.  Davita has paid numerous settlements for breaking the rules.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Liberty on February 28, 2014, 08:03:59 AM
Quote
The only real threat to the business I can see is regulatory risk.

Just throwing that out there, but at some point in the coming decades, they could hit a wall when we have lab-grown replacement kidneys that have the patient's DNA (no transplant rejection). Probably over the horizon for now, so no big immediate worries. But it still seems like there's a clock on the business model...
Title: Re: DVA – DaVita HealthCare Partners
Post by: ItsAValueTrap on February 28, 2014, 09:03:03 AM
I don't think that lab-grown kidneys will be happening anytime soon.

HART is trying to commercialize its replacement esophagus.  Here's my writeup on HART. (http://glennchan.wordpress.com/2013/12/06/spinoff-situation-harvard-apparatus-regenerative-tech/)  It is having some problems with its replacement esophagus.  Other organs will be even more complex and difficult.

Regenerative medicine has had a very difficult time doing things other than skin.
Title: Re: DVA – DaVita HealthCare Partners
Post by: SwedishValue on February 28, 2014, 01:29:57 PM
My impression after talking with kidney doctors is that there is no indication whatsoever that lab-grown replacement kidneys will be in the making within the nearest decade or two. The kidney a very complex organ, but if it so happens that my investment gets wrecked by artificial kidneys I would be able to stand the permanent loss of capital that would go with it for me as DVA is my second biggest investment.

The willingness to spend on healthcare in general will grow over time (whether privately funded or funded by government programs). Kidney disease is very much related to diabetes, which in turn is very much related to obesity, which in turn is very much related to increasing purchasing power per capita. Mortality for dialysis patients have been going down significantly during the last decade, and there is no sign that this development will stop. All in all, I find it extremely likely that DVA will serve many more additional customers during the next decade. Since DVA has a low-cost profile with significant cost advantage over smaller players (but also over Fresenius), I believe it is very likely that this will also result in significantly higher earnings power a couple of years down the road.

I would be very surprised if the number of living dialysis patients in USA didn't dubble over the next decade. I find no reason to believe that DVA will not retain its market share. I also find it likely that the value of a dialysis patient will grow over the next decade.

My best guess is that DVA due to their favorable market conditions has a high probability of tripling its free cash flow over the next ten years. IF this happens, and DVA finances the capex needed to grow with its cash flow, the stockholders of DVA will have a very nice time. A tripling of the Cash Flow could take net debt levels from today's ~$8 BN to $24 BN, freeing up $16 BN to shareholders in the form of buybacks or growing the HCP business or whatever management finds smart from a capital allocation viewpoint.

I have not found one compelling argument as of why the dialysis market would not continue to grow during the next ten years, just at it has grown for the last thirty years. I would be happy if someone could share one with me.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Liberty on February 28, 2014, 01:38:13 PM
I don't think that lab-grown kidneys will be happening anytime soon.

HART is trying to commercialize its replacement esophagus.  Here's my writeup on HART. (http://glennchan.wordpress.com/2013/12/06/spinoff-situation-harvard-apparatus-regenerative-tech/)  It is having some problems with its replacement esophagus.  Other organs will be even more complex and difficult.

Regenerative medicine has had a very difficult time doing things other than skin.

Yeah, that's why I mentioned decades. But I doubt the rate of progress will be linear and predictable. Breakthroughs can speed things up after long periods of slow progress (ie. when we figured out how to turn regular cells (like skin cells) into stem cells, that helped that whole field quite a bit). We'll start with the easier organs and move up and reach kidneys at some point. No reason why not.
Title: Re: DVA – DaVita HealthCare Partners
Post by: yadayada on February 28, 2014, 11:38:38 PM
You can pick up binge drinking to hedge your investment.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Liberty on March 01, 2014, 12:29:40 AM
My impression after talking with kidney doctors is that there is no indication whatsoever that lab-grown replacement kidneys will be in the making within the nearest decade or two.

I was just mentioning an interesting fact for the long term, not trying to scare people out of this investment in the short term.

I don't think anyone has good visibility into the next decade or two of medical applications, probably not even the people working on the stuff. Could most doctors have told you how cheap it would be to sequence a genome today 10 or 20 years ago? It doesn't even seem that big a deal anymore -- we get used very quickly to big advances (same with things like the iPhone, we're not impressed by the tech anymore). I mean, we have surgical robots and augmented reality apparatuses being used to operate on people... It's likely that in a while, we'll have replacement organs and it won't seem a big deal. I just don't know when.
Title: Re: DVA – DaVita HealthCare Partners
Post by: SwedishValue on March 01, 2014, 03:26:45 AM
I very much appreciate your concerns and thoughts Liberty, and you should know that this coming from you make me second guess myself somewhat.

The kidney in itself is a very complex organ though. From my understanding we do not even know the details as of in which way dialysis works, but we do know that it works. To be able to produce a lab kidney we would probably first need to understand the organ in much more detail.

I just think that raising the issue of lab kidneys is overly cautious as it is a very very low probability event within the next decade (just looking at lead times for new medicines as an indicator, and seeing that we are not even close to producing a lab kidney). I think that foreseeing the development of the lab kidney is overly cautious and not in proportion with the favorable tailwinds the demographic development for increased need of dialysis care gives for the investment case.

On another note, with your argument we could argue for complete disruption of the cable industry (wireless).
Title: Re: DVA – DaVita HealthCare Partners
Post by: kevin4u2 on March 01, 2014, 04:31:13 AM
Even if lab grown kidney replacement was an option, the next problem would be the economics (cost).  This would further drive out the implementation into the future. 

My impression after talking with kidney doctors is that there is no indication whatsoever that lab-grown replacement kidneys will be in the making within the nearest decade or two. The kidney a very complex organ, but if it so happens that my investment gets wrecked by artificial kidneys I would be able to stand the permanent loss of capital that would go with it for me as DVA is my second biggest investment.

The willingness to spend on healthcare in general will grow over time (whether privately funded or funded by government programs). Kidney disease is very much related to diabetes, which in turn is very much related to obesity, which in turn is very much related to increasing purchasing power per capita. Mortality for dialysis patients have been going down significantly during the last decade, and there is no sign that this development will stop. All in all, I find it extremely likely that DVA will serve many more additional customers during the next decade. Since DVA has a low-cost profile with significant cost advantage over smaller players (but also over Fresenius), I believe it is very likely that this will also result in significantly higher earnings power a couple of years down the road.

I would be very surprised if the number of living dialysis patients in USA didn't dubble over the next decade. I find no reason to believe that DVA will not retain its market share. I also find it likely that the value of a dialysis patient will grow over the next decade.

My best guess is that DVA due to their favorable market conditions has a high probability of tripling its free cash flow over the next ten years. IF this happens, and DVA finances the capex needed to grow with its cash flow, the stockholders of DVA will have a very nice time. A tripling of the Cash Flow could take net debt levels from today's ~$8 BN to $24 BN, freeing up $16 BN to shareholders in the form of buybacks or growing the HCP business or whatever management finds smart from a capital allocation viewpoint.

I have not found one compelling argument as of why the dialysis market would not continue to grow during the next ten years, just at it has grown for the last thirty years. I would be happy if someone could share one with me.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Liberty on March 01, 2014, 09:25:35 AM
I just think that raising the issue of lab kidneys is overly cautious as it is a very very low probability event within the next decade (just looking at lead times for new medicines as an indicator, and seeing that we are not even close to producing a lab kidney). I think that foreseeing the development of the lab kidney is overly cautious and not in proportion with the favorable tailwinds the demographic development for increased need of dialysis care gives for the investment case.

I don't think I was expressing myself clearly, because that's what I meant. I just thought it was an interesting thought that came to mind when thinking about dialysis, but that doesn't mean that you should give it meaningful weight for for an investment today, at least until you start seeing more signs that it's approaching.

Quote
On another note, with your argument we could argue for complete disruption of the cable industry (wireless).

For the kind of time frames I was thinking about, absolutely. And I'll certainly reconsider any cable investments if I see signs of that becoming more viable than it is now. The difference here I think is that dialysis will never give someone the quality of life that brand new kidneys will, while inside a home or office (which is where people spend most of their time), cable + wifi can give you the same thing that wireless would but with a more predictable signal source (radio waves will always bounce off thick walls or off hills...).

Quote
Even if lab grown kidney replacement was an option, the next problem would be the economics (cost).  This would further drive out the implementation into the future. 

At first, certainly. But that's the same for every technology, and I think that over the long term biotech will follow similar trends (it might be slower, but we're going in that direction -- again, look a genomics).

Just think of how expensive the CPU in a modern desktop computer would seem to people just a few years ago. Billions of transistors and multiple fully functional cores on the same die for a couple hundred bucks? And they use less power than old CPUs?

If we think from first principles, like Elon Musk, the raw materials of a kidney are not expensive, right? You could grow one with few sacks of potatoes and a jar of multivitamins (I'm exaggerating to make the point). The very hard part is the IP around it; how to get the extracellular matrix to form properly, and then grow the right types of cells in the right places, all that inside an environment that mimics conditions inside a body (a kind of incubator). We already know that our bodies can do it, so we'll probably harness some of those mechanisms at first, rather than reinvent the wheel and try to do it all ourselves from scratch (in biotech, there's a lot of stuff we can know how to do without having to understand how every minute detail works -- ie. the engineering approach). Heck, we might even grow human kidneys inside of pigs and then harvest them or whatever.

All that will be very hard and expensive to develop. But once it is developed, at some point it'll become routine and cheap, just like making multi-billion transistor CPUs the size of postage stamps or boxes with lasers that can read billions of microscopic bumps at high rotational speeds in a dusty living room (DVD players) or whatever.

I know I'm kinda dreaming here. Sorry, didn't mean to take the investment thesis in a direction that is probably not useful. I just wanted to share because I thought it was interesting and thought maybe others would think the same. Back to our regular programming now :)
Title: Re: DVA – DaVita HealthCare Partners
Post by: SwedishValue on March 01, 2014, 09:33:00 AM
Your posts are insightful so I do appreciate if you continue to share your thoughts generously.

I would like to reiterate that I would very much appreciate if there is anyone out there that can give me good reason to believe that the american dialysis population will not double during the next 10 years. Because if it does double or more, I would consider the share very cheap.
Title: Re: DVA – DaVita HealthCare Partners
Post by: lschmidt on March 01, 2014, 11:08:18 AM
Forgive me for chiming in here - my first post.

Let's think about this another way (at least the more likely possibility in my estimation). The average lifetime of a hemodialysis patient is 3 years according to the current medical literature. This number has been static for years. Short-intermediate term advances in dialysis techniques may increase this number, perhaps considerably. Think about the total number of dialysis procedures if the patient population AND the survival rate increase simultaneously. It is, therefore, not clear if technological advance would be a boon or a threat to DaVita's business.
Title: Re: DVA – DaVita HealthCare Partners
Post by: SwedishValue on March 01, 2014, 11:21:50 AM
The one-year mortality rate for patients of DVA is around 13%, I know the numbers in Sweden is around or slightly below 20%. The one-year mortality rate has dropped significantly during the last decade.
Title: Re: DVA – DaVita HealthCare Partners
Post by: maxthetrade on March 01, 2014, 11:31:30 AM
A while back I have read an article about 3D printed kidneys, I can't find the article anymore but a quick Google search tunrned up this one: http://gizmodo.com/scientists-can-now-3d-print-transplantable-living-kidn-1120783047

I don't think this is an immediate threat but certainly something to keep an eye on.

 
Title: Re: DVA – DaVita HealthCare Partners
Post by: rogermunibond on March 01, 2014, 01:36:40 PM
IMO the bigger threat is advances in unmatched kidney transplantation/lowering cost for the procedure plus better donor enrollment and transplant matching algorithms. My MIL went through an unmatched kidney transplant from her daughter and has had much better prognosis than had she been on dialysis.

I'm not sure if Medicare covers unmatched transplant but if the cost can come down further it might.

Further down the line an implantable artificial kidney would be another threat to dialysis.

https://www.ucsf.edu/news/2013/03/13699/artificial-kidney-holds-promise-vast-majority-dialysis
Title: Re: DVA – DaVita HealthCare Partners
Post by: ni-co on March 01, 2014, 01:54:14 PM
I don't think I was expressing myself clearly, because that's what I meant. I just thought it was an interesting thought that came to mind when thinking about dialysis, but that doesn't mean that you should give it meaningful weight for for an investment today, at least until you start seeing more signs that it's approaching.

Thanks, Liberty, I got that point right from your first post and I think you are right to point this out. Indeed, medical progress is a risk I forgot to mention. DVA is, after all, also kind of a technology company. This is one of the few investments where I'd be glad if it would be disrupted by better methods.

To the timing issue: Because of the discounting effect within a theoretical DCF calculation, risks that are 10+ years out wouldn't matter all that much. Mind that the average lifespan of a S&P 500 company is only about 18 years.

The average lifetime of a hemodialysis patient is 3 years according to the current medical literature. This number has been static for years. Short-intermediate term advances in dialysis techniques may increase this number, perhaps considerably. Think about the total number of dialysis procedures if the patient population AND the survival rate increase simultaneously. It is, therefore, not clear if technological advance would be a boon or a threat to DaVita's business.

This is also a very good point. Even if (bio) technology would be ready within the next few years, a significant transition period would also be likely. After all, it's not even clear that patients wouldn't also need a few years of dialysis, even in the event that they could get some kind of kidney substitution anytime soon.
Title: Re: DVA – DaVita HealthCare Partners
Post by: loganc on March 01, 2014, 08:47:46 PM
While the dialysis business has dominated this thread, I believe that one needs to be able to handicap the future performance of the HCP business have a lot of conviction about this company.   I am curious as to how people are thinking about HCP given the relative lack of data around that business.
Title: Re: DVA – DaVita HealthCare Partners
Post by: SwedishValue on March 02, 2014, 01:46:56 PM
I have no superior insight within the HCP business, but i have a few takeaways from the information that DVA has provided. I am not a native English speaker but I will try to express myself clearly.

First, management argues that there is no reason there cannot be a preferred nationwide "health care partner". I believe this as well, just like you can have a preferred nationwide restaurant chain it should be possible through diligent work and very high focus on patient care to create a preferred health care partner. Although a low probability event and/or a long time frame, the potential upside here is huge.

Secondly, management has conveyed that the cash on cash returns they are getting from the HCP acquisition currently is around 7% (if my memory serves me right). Although this is within the lower span of what management expected when they made the acquisition (in which they also issued shares), this is certainly lower than the borrowing costs of DVA. HCP is in no way a business with prospects of long-term deterioration, so this yield should go up over time. This can also be a place for further growth by acquisition, which should be good news considering the long-term results the DVA management team has had allocating capital.

If you want to be conservative for valuation purposes, I believe you can just subtract the cash flow attributed to the HCP business side while also subtracting the purchasing price of HCP.

Hope this is worth something.
Title: Re: DVA – DaVita HealthCare Partners
Post by: buylowersellhigh on March 03, 2014, 12:05:16 PM
Any insights from CNBC interview today on DVA from Ted W.?
Title: Re: DVA – DaVita HealthCare Partners
Post by: CorpRaider on March 03, 2014, 12:08:42 PM
He talked about it, as you might imagine, he likes it.  haha.  Gave an interesting mental model for analyzing healthcare investments generally though (at least I thought it was interesting).  I think that has been posted elsewhere on here already and is on cnbc.com as well. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: loganc on March 05, 2014, 10:34:55 PM
I have no superior insight within the HCP business, but i have a few takeaways from the information that DVA has provided. I am not a native English speaker but I will try to express myself clearly.

First, management argues that there is no reason there cannot be a preferred nationwide "health care partner". I believe this as well, just like you can have a preferred nationwide restaurant chain it should be possible through diligent work and very high focus on patient care to create a preferred health care partner. Although a low probability event and/or a long time frame, the potential upside here is huge.

Secondly, management has conveyed that the cash on cash returns they are getting from the HCP acquisition currently is around 7% (if my memory serves me right). Although this is within the lower span of what management expected when they made the acquisition (in which they also issued shares), this is certainly lower than the borrowing costs of DVA. HCP is in no way a business with prospects of long-term deterioration, so this yield should go up over time. This can also be a place for further growth by acquisition, which should be good news considering the long-term results the DVA management team has had allocating capital.

If you want to be conservative for valuation purposes, I believe you can just subtract the cash flow attributed to the HCP business side while also subtracting the purchasing price of HCP.

I appreciate your comments and I have used the latter thread of logic to justify my current allocation (i.e. assume someone is going to win in the managed care business and that DVA can sell the HCP business at cost).  However, this line of thinking is sort of crude and doesn't inspire the level of conviction that is necessary for me to add to my DVA holding. 

Not to be a jerk, but your discussion of HCP is more or less the line that management is spinning about the HCP business.  To my mind, I can see the potential opportunity in the HCP business and the opportunity with Medicare Advantage is obviously huge.  The fundamental problem is that I can not, at this point, handicap the success or failure of HCP in growing the business.  Clearly, the management team at DVA is very strong and I know they are working very hard at growing the HCP business, but I have yet to really be able to put the pieces together in my mind to get real conviction around this business.   

In conclusion, I have little to add to this thread.  I am working through all of the data I can locate in terms of the HCP business (i.e. the merger prospectus) and hopefully I will be able to provide some helpful insight into this business at some point.
Title: Re: DVA – DaVita HealthCare Partners
Post by: thefatbaboon on May 28, 2014, 02:10:40 PM
 I've been looking at this for a while and have gotten comfortable that i understand the dialysis business but I'm still really struggling with HCP.  I'm pretty ignorant about that whole area.  Has anyone made any progress here?
Title: Re: DVA – DaVita HealthCare Partners
Post by: Fat Pitch on May 28, 2014, 06:41:47 PM
DaVita is trying to pivot into other patient care services via HCP. The core business is dialysis centers, but they want to add more services that a typical hospital provides, but do it at a lower cost. I think it's a great strategy since the person in the dialysis chair is going to be at the clinic for several hours few times a week so why not provide other services so they don't have to go anywhere else?

I think the real vision is to redefine the high cost hospital business model. By showing insurance companies and the government that DaVita can provide superior services at lower prices they hope insurance will bundle the services they provide and encourage more people to select them as their primary care destination. This is a great business with tremendous scale. They benefit society by passing on the savings to the customer. Of course there's the liability aspect of the business so you have to get comfortable with that.

My mental model is the northern pike. These centers are cropping up everywhere and they are low cost... don't need that many good things to go in your favor to do okay here.
Title: Re: DVA – DaVita HealthCare Partners
Post by: thefatbaboon on July 20, 2014, 08:46:01 AM
Well HCP seems to be in a certain amount of disarray.  They only just hired Samitt last year to lead HCP.  Both Margolis and Thiry talked him up pretty big at the December investor day.


HealthCare Partners Announces Leadership Transition
DENVER, July 18, 2014 /PRNewswire-USNewswire/ -- DaVita HealthCare Partners Inc. (NYSE: DVA), a leading provider of kidney care and health care services, today announced that HealthCare Partners (HCP) president and CEO Dr. Craig Samitt is stepping down from HCP effective August 1st. 
Kent Thiry, co-chairman and CEO of DaVita HealthCare Partners, will take over the role of CEO of HCP, working in tandem with the Office of Chief Medical Officer.
"I want to thank Craig for his contributions during his time here. He is a strong CEO and we wish him the best in his future endeavors," said Thiry.
"I will miss working with the talented physicians, staff and management that created and will sustain the HealthCare Partners legacy," said Samitt. "The company is well positioned to continue to transform population health in the United States."
DaVita and DaVita HealthCare Partners are trademarks or registered trademarks of DaVita HealthCare Partners Inc.
Title: Re: DVA – DaVita HealthCare Partners
Post by: loganc on July 22, 2014, 10:50:58 PM
Well HCP seems to be in a certain amount of disarray.  They only just hired Samitt last year to lead HCP.  Both Margolis and Thiry talked him up pretty big at the December investor day.

I don't have much to add here, but I concur that one can only infer disarray at HCP.  It will be interesting to see the HCP results in the next few quarters.  DVA seems pretty cheap to me in the current market environment and the kidney care segment is a juggernaut of a business.   
Title: Re: DVA – DaVita HealthCare Partners
Post by: rogermunibond on August 14, 2014, 07:06:06 AM
Interesting point about trying to extend the 30 month commerical payer coverage period before Medicare takes over.


********************

DaVita CMO Dr. Allen Nissenson on renal care and Medicare ACOs
 
By Modern Healthcare

Posted: August 9, 2014 - 12:01 am ET

Dr. Allen Nissenson has been chief medical officer for Denver-based DaVita Kidney Care, a division of DaVita HealthCare Partners, since 2008. DaVita Kidney Care has more than 2,000 outpatient dialysis centers in 46 states and is one of the largest dialysis providers in the U.S. Nissenson formerly served as associate dean and director of the dialysis program at the David Geffen School of Medicine at UCLA, and as president of the Renal Physicians Association. Before that, he served as a Robert Wood Johnson health policy fellow of the Institute of Medicine, working with the late Sen. Paul Wellstone. Modern Healthcare editor Merrill Goozner recently spoke with Nissenson. This is an edited transcript.

Modern Healthcare: How are dialysis patients faring today?

Dr. Allen Nissenson: If you look at the outcomes for all U.S. patients over the past decade, they've improved significantly. The patients are still really sick but survival is better. They're in the hospital less and they're generally healthier.

MH:How have Medicare payment changes for end-stage renal disease, specifically going to a bundled payment system, affected DaVita?

Nissenson: The problem is, Medicare payment is not equal to the cost of the treatment, so for the 85% of patients we treat who depend on Medicare, we lose money on every treatment. That only works because the 10% of patients who have private insurance subsidize all of the others.

MH: In 2012, DaVita acquired Los Angeles-based HealthCare Partners. Yet the deal hasn't paid off in the short run. What's happening?

Nissenson: The reason we acquired HCP is that their vision of healthcare for the broader American population is exactly our vision for kidney patients. We've got to figure out a way to take the current fragmented system and coordinate it. In the short term, HCP is not thriving to the extent we'd like it to.

HealthCare Partners was a physician-led, physician-focused organization. Naturally there's some tension there. So we're in the process of figuring out how do we take the best of HealthCare Partners and the best of DaVita, with its business discipline and organizational skills, and bring these two together.

MH: How do you see working with chronic kidney disease patients served by HCP?

Nissenson: It's critical to move upstream and start looking at chronic kidney disease (CKD) patients before they reach end-stage disease. HealthCare Partners has thousands of CKD patients. We have a program called Kidney Smart, which is a CKD educational program directed at primary-care doctors and patients, that we are introducing in Southern California in HCP. The upstream work is really going to pay off in the long run.

MH: The Medicare Innovation Center is coming out with pilots to coordinate care for end-stage renal disease patients, called ESRD Seamless Care Organizations. How do you plan to participate in ESCO pilots?

Nissenson: We're hoping to do anywhere from two to five of them. We haven't heard yet if we've been selected to do that many, but we're confident we'll do some. We really believe in the accountable care organization approach. We would have liked to do this much more broadly. But there are some issues around the way the financing is done and other important issues in terms of the regulations. We're enthused but kind of sad that the full potential probably won't be realized.

MH: Before CKD patients wind up in dialysis, they usually are covered by private insurance. But once they are on dialysis, they're covered by Medicare. What can be done to coordinate care across these two payers?

Nissenson: There's no question this is a problem. When you go on dialysis, your private insurance remains the primary payer for 30 months. Because of the inadequacy of the Medicare payment, that gives us 30 months working with the commercial payer so it can help us cover the cost of the Medicare patients. The whole renal care community has been trying to get the CMS to extend that period, so that commercial insurance will be the primary payer for a longer period. In the past, private insurers were against it because they said they'd be stuck with these really sick patients for longer. What they found is, if they collaborate on care coordination, their total costs of care actually go down. So now even the private insurers aren't against it. We're working very hard to get Medicare to extend this, which we think would help everybody.
Title: Re: DVA – DaVita HealthCare Partners
Post by: elevensecsrt4 on September 06, 2014, 03:09:50 PM
I have just recently started studying dva and the business.  I have a close friend who has been going to dva for 4 years now.  I'm puzzled as I have been told by him that everyone who has esrd (on dialysis) is eligible for government payment ( Medicare). So who chooses private insurance ($ out of their own pocket) over Medicare?  So far I'm impressed with this business.
Title: Re: DVA – DaVita HealthCare Partners
Post by: yadayada on September 06, 2014, 04:01:54 PM
I would keep an eye on George Church and Intrexon. You could buy a small position of Intrexon here to hedge your bet. I think he played an important role in getting the costs down for genome sequencing and is high regarded in field of synthetic biology.

In general scientific break throughs are moving much faster now then 20-30 years ago.
Title: Re: DVA – DaVita HealthCare Partners
Post by: loganc on September 06, 2014, 06:11:42 PM
I would keep an eye on George Church and Intrexon. You could buy a small position of Intrexon here to hedge your bet. I think he played an important role in getting the costs down for genome sequencing and is high regarded in field of synthetic biology.

In general scientific break throughs are moving much faster now then 20-30 years ago.

I don't know anything about the Intrexon technology, but have you considered the regulatory hurdles in this potential hedge?  In my experience, the generation of new technology or "scientific breakthroughs" isn't necessarily the rate limiting step - it is getting regulatory clearance to commercialize new technology. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: elevensecsrt4 on September 07, 2014, 10:53:43 AM
For some reason I am having a hard time understanding why davita would continue to accept (allow) medicare paid patients who make up 90% of the dialysis market where they lose money on every treatment.  I find it hard to believe private insurance companies are basically paying for everyone to be on dialysis ( or all of the profits davita generates) That has got to be a rather large difference in payment.


Do you all feel the goal is to expand efficiently to lower overall operating costs to make marginal profit (very tiny) on all govt paid patients? I am in awe the company has a profit at all with just 10% of its patients being profitable patients.

HealthCare partners acquisition was definitely aimed at getting more private insurance payers connected with Davita ( in their system), although patients not on dialysis yet but with kidney issues and for improving overall well being.

Is it just me or did anyone notice Ted W. buys were basically after or around the time the "merger" or Aquisistion of HC partners was announced?

He obviously knows the company well and has been invested for years but his brk $ buys happened shortly after the M&A and could just be a coincidence.

I guess I'm just making a general comment that private insurance payers paying for services from DVA should be welcomed with both arms.

Sorry for the newbie discussion points.  I'm in the early stages of understanding the business.

Love this site by the way! ;D

Title: Re: DVA – DaVita HealthCare Partners
Post by: ItsAValueTrap on September 07, 2014, 11:22:40 AM
Quote
That has got to be a rather large difference in payment.
They more or less are getting gouged due to the limited supply of dialysis centers and doctors.  Sometimes the doctors receive financial compensation from dialysis centers so they may be participating in the gouging.  There are laws against this; DaVita had to pay a settlement because it kind of broke these laws.

From a patient's perspective, you want to go to a dialysis clinic that is close to you.  Otherwise you are spending a huge chunk of your time each week traveling to the dialysis clinic.  Because of this, the clinics kind of have pricing power.  In some areas it is close to a monopoly.  In some areas, DaVita will own most of the dialysis clinics so it becomes more of a monopoly.
Title: Re: DVA – DaVita HealthCare Partners
Post by: compounding on October 12, 2014, 02:43:59 AM
Interesting, via @PlanMaestro On Twitter:

http://news.harvard.edu/gazette/story/2014/10/giant-leap-against-diabetes/
Title: Re: DVA – DaVita HealthCare Partners
Post by: ItsAValueTrap on October 12, 2014, 09:29:03 AM
Interesting, via @PlanMaestro On Twitter:

http://news.harvard.edu/gazette/story/2014/10/giant-leap-against-diabetes/

Stem cell research seems to be very slow.  We haven't done much beyond skin.

HART (which pays for stock promotion) is researching stem cells for the human esophagus.  They're having problems with the technology.  More complex body parts seem to be far, far away.
Title: Re: DVA – DaVita HealthCare Partners
Post by: fareastwarriors on October 23, 2014, 01:19:04 PM
DaVita Pays $389M to Settle Illegal Kickback Claims to Doctors



http://blogs.wsj.com/pharmalot/2014/10/23/davita-pays-389m-to-settle-illegal-kickback-claims-to-doctors/?mod=WSJ_LatestHeadlines (http://blogs.wsj.com/pharmalot/2014/10/23/davita-pays-389m-to-settle-illegal-kickback-claims-to-doctors/?mod=WSJ_LatestHeadlines)
Title: Re: DVA – DaVita HealthCare Partners
Post by: Fat Pitch on October 23, 2014, 04:38:07 PM
DaVita Pays $389M to Settle Illegal Kickback Claims to Doctors



http://blogs.wsj.com/pharmalot/2014/10/23/davita-pays-389m-to-settle-illegal-kickback-claims-to-doctors/?mod=WSJ_LatestHeadlines (http://blogs.wsj.com/pharmalot/2014/10/23/davita-pays-389m-to-settle-illegal-kickback-claims-to-doctors/?mod=WSJ_LatestHeadlines)

That's one way to expand your network... limit competition.
Title: Re: DVA – DaVita HealthCare Partners
Post by: compounding on January 26, 2015, 04:21:33 AM
DaVita Ranks First in Clinical Outcomes According to Government Reports

http://finance.yahoo.com/news/davita-ranks-first-clinical-outcomes-110900312.html
Title: Re: DVA – DaVita HealthCare Partners
Post by: ni-co on February 13, 2015, 08:18:52 AM
If you are in the market for some DVA shares, today'd be the day to buy them.

Quote
HCP, $33 million NOI, right in the middle of the guidance for the quarter. But let's hit the bad news right up front, and that is that CMS may make multiple changes to Medicare Advantage reimbursement. And in aggregate, this could mean that HealthCare Partners 2016 NOI could be below and even well below 2015, so unambiguous, potential bad news on that side.

We incorrectly handicapped the Medicare Advantage reimbursement cuts last year, and I apologize that -- for that. I got it wrong. This actually is becoming a strategic issue for Medicare Advantage in our minds that it is crucial for CMS to protect the incentive to innovate to create health where now there is sickness and reduce risk where it is high for these patients, and we hope they realize that in their near-term decision-making.

http://seekingalpha.com/article/2914006-davita-healthcare-partners-dva-q4-2014-results-earnings-call-transcript
Title: Re: DVA – DaVita HealthCare Partners
Post by: LC on February 13, 2015, 09:35:39 AM
I exited my position yesterday...basically pure luck saved me 5pct. I read Glenn's post on DVA and just said I don't want to deal with companies doing potentially unethical stuff. It's hard enough to get a handle on normal business factors...throw in the unethical/illegal stuff and it's just too much brain damage.
Title: Re: DVA – DaVita HealthCare Partners
Post by: SwedishValue on February 13, 2015, 10:48:08 AM
They are cost leaders at providing a life sustaining service, and they provide it with the best clinical results in adjusted groups. I'm not denying the charges that have been brought to DVA before, but I would strongly disagree with it being an unethical business. (I can appeal to authority and hint at Ted Weschler's opinion as well).

I don't see the big news dropping the share down today. Thiry and his colleagues have said repeatedly that Medicare Advantage and cuts in reimbursement rates will pose significant challenges for the coming years, a statement that now was re-iterated for probably more than the 10th consecutive conference call. DVA has been very good at coping with changes in reimbursement rates historically, and the underlying growth of the most important business segment (dialysis) is organically very high (unfortunately, I really wish this would stop but it's not going to).
Title: Re: DVA – DaVita HealthCare Partners
Post by: Homestead31 on February 18, 2015, 05:01:00 AM
Ted adding

http://investors.davitahealthcarepartners.com/phoenix.zhtml?c=76556&p=irol-secText&TEXT=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTEwMDgxOTY1JkRTRVE9MSZTRVE9JlNRREVTQz1TRUNUSU9OX0JPRFkmZXhwPSZzdWJzaWQ9NTc%3d
Title: Re: DVA – DaVita HealthCare Partners
Post by: buylowersellhigh on March 23, 2015, 12:40:49 PM
Anybody know the reason behind DVA's latest move from $72 to $83?

Title: Re: DVA – DaVita HealthCare Partners
Post by: Homestead31 on July 13, 2015, 08:09:54 PM
the last move higher from $72-83 appears to be tied to the filing that Weschler bought more in Q4'14

anyone else taking a look at this?  EV/ FY '14 FCF (on a maintenance capex basis) is 20x, and PE/ FY '14 FCF (maintenance capex basis) is ~14x...  still a long runway for growth, albeit slower than in the past, and room for operational improvement at HCP as they figure that business out.  you know capital allocation will be top notch, and revenues are defensive (absent gov't interference of course)...  i am gravitating toward ideas like this these days - it may be a form of market timing, but i'd rather be in defensive businesses with excellent capital allocators that can still grow given how i feel about the world and markets in general.  something like this won't double over night, but it can prob do 10-15% a year, which is fine by me, and it should survive any crash better than more cyclical / leveraged companies.

any recent thoughts?
Title: Re: DVA – DaVita HealthCare Partners
Post by: orthopa on January 08, 2016, 05:41:58 PM
Starting to look interesting again down here near a 52 week low.
Title: Re: DVA – DaVita HealthCare Partners
Post by: twacowfca on January 08, 2016, 08:52:20 PM
Starting to look interesting again down here near a 52 week low.

Has Weschler bought any more stock recently?
Title: Re: DVA – DaVita HealthCare Partners
Post by: thefatbaboon on January 09, 2016, 06:58:06 AM
No
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on January 11, 2016, 09:20:17 AM
I bought DVA today. It seems cheap to me.
Trading around 10x pre tax earning.
Very high roe, even higher if u just look at the tangible equity.
The debt is a little high but they have interest rate caps in place.
Company bought back 400m stocks last year.
If Ted can trust so many of his own wealth in this stock, i think i will be fine putting in 10%.

Also, why everybody is so sure this is not a web purchase? I think it may very well be. There is an interview on cnbc where Web talked about health costs, and that he thinks reforms are needed for the health delivery system where low cost providers shall be incentivized. He definitely understand the sector very well. There would be a little conflict of interests for Ted to buy DVA for Berkshire, but not so if Web is buying it. So i think there's a good chance it's a Web holding.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Happy on January 12, 2016, 06:13:07 AM
Also, why everybody is so sure this is not a web purchase? I think it may very well be. There is an interview on cnbc where Web talked about health costs, and that he thinks reforms are needed for the health delivery system where low cost providers shall be incentivized. He definitely understand the sector very well. There would be a little conflict of interests for Ted to buy DVA for Berkshire, but not so if Web is buying it. So i think there's a good chance it's a Web holding.

Weschler has owned DaVita in his hedge fund for over 10 years prior to joining BRK and bought it for BRK shortly after getting hired. And in the last year there was an interview where Weschler was asked why he likes DaVita in particular. They also have confirmed that it is Weschler's holding and not Buffett's.
Title: Re: DVA – DaVita HealthCare Partners
Post by: rogermunibond on March 11, 2016, 10:17:20 AM
Pretty big news this week in the NEJM on unmatched/HLA incompatible kidney transplant.  Likely won't eat into DVA's dialysis business for a while but something to be aware of if you are a long-term investor in DVA.

http://www.nejm.org/doi/full/10.1056/NEJMoa1508380
Title: Re: DVA – DaVita HealthCare Partners
Post by: Larry on September 02, 2016, 08:12:57 AM
DVA has come down about 20% from previous highs, probably due to an investigation launched to see if dialysis firms are steering patients. I think this one has become quite interesting again. Current market cap is 13.42B and their operating cash flow for the last 12 months is 2.061B. FCF is 6.05 per share and the stock sells currently for 64.87.

I like the overall characteristics of the dialysis side, very steady, stable and recession proof and it creates a lot of cash flow. Surely you can debate whether this is ethical or not but Im not going to that discussion here. The HCP acquisition has been a mistake in hindsight and it has not performed well. This was also quite a large deal, I guess this has also put pressure to share price. I think they should stick to dialysis in the first place, as it is what they do best and probably get rid of HCP. There is not as much m&a possibilities in dialysis as before and I believe they have slowed down from previous years in opening new clinics. I think they should just repuchase shares with excess cash flow. But we will see what happens with HCP, dialysis side is still performing very well.

Anyone else following this?
Title: Re: DVA – DaVita HealthCare Partners
Post by: KCLarkin on September 02, 2016, 08:23:54 AM
Seems like a good entry point.

I'm somewhat stuck on the economics of the dialysis business. According to the NYT, most of their patients pay $200 per session via medicare etc. These patients are unprofitable. All of the profits come from a sliver of patients who pay more than $4000 via private insurance.

http://www.nytimes.com/2016/07/02/business/unitedhealthcare-sues-dialysis-chain-over-billing.html?_r=0

Like most of the U.S. healthcare system, this seems very broken. Why aren't private insurers demanding a "fair" price? And is this "two-tiered" system sustainable?
Title: Re: DVA – DaVita HealthCare Partners
Post by: orthopa on September 06, 2016, 10:56:25 AM
Its interesting value wise here but I need to learn more about the business. Dialysis centers are popping up all over the place here and are constantly booked. Its a slow process so hard to "turn over" patients quickly but pts very dependent obviously due to lack of kidneys avail and if not getting tx will die.
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on October 24, 2016, 08:56:34 AM
ANyone know why the big down spike today?Heavy volume.
Title: Re: DVA – DaVita HealthCare Partners
Post by: xtreeq on October 24, 2016, 08:58:34 AM
ANyone know why the big down spike today?Heavy volume.

http://www.stltoday.com/business/local/davita-encouraged-some-low-income-patients-to-enroll-in-commercial/article_ec5dc34e-ca4d-52e0-bc26-a3e56e1e2c85.html
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on October 24, 2016, 09:21:35 AM
Great thanks a bunch!

So basically, davita's employees "encourage" patients to get off medicare/medicaid and steer them towards commercial insurance. Their premiums are paid by a charity in which all the dialysis companies likely contribute too. Because this is an "option" for patients and comes with some perks and doesn't cost them anything, why not.

On the one hand, clearly they make more money and this cost's the commercial insurers more money(rising insurance costs for everyone) . On the other hand, if a charity wants to pay someone's premiums for them and they benefit in more ways than one, is this so bad? If I'm an employee administering dialysis and I know there's a better option for my patient that doesn't cost anything, should I speak up?
Can anyone shed some light on the advantages/disadvantages of commercial vs medicaid/medicare from a dialysis patient's pov?

Before obama care these patients would have been considered catastrophic and as a result would be unlikely to be on commercial insurance. I don't know the dva story back to pre obamacare, maybe someone here does? Did dva receive more money from medicare/medicaid pre obamacare per patient?
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on October 24, 2016, 06:37:08 PM
I found this site and this post helpful.

http://ihatedialysis.com/forum/index.php?topic=32917.0
Title: Re: DVA – DaVita HealthCare Partners
Post by: frankhkii on October 26, 2016, 12:19:45 PM
At current prices Mr Market seems to be pricing in a large hit from the recent article about steering customers to AKF. Can someone who has followed or invested with DVA for a while explain the workings of these higher paying commercial plans and give a valid argument for why they won't go away? If the CMS is able to revise enrollment rules for Medicare and Medicade and/or make "regulatory changes that would allow individual market plans to limit their payment to healthcare providers to Medicare-based amounts" it seems this entire division would be unprofitable. Since this would put them out of business resulting in catastrophic consequences for their patients, it seems a long shot, but its hard to invest with the knowledge and comfort I currently have on why this couldn't or won't happen.

Any links or recommendations to help me understand this outside of DVA filings/calls would be helpful. So much of their profitability comes from these plans and it seems there is a lot of pressure on them while their leverage to fight back is hard to see.

Thanks for any help. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: whiterose on October 28, 2016, 12:43:15 PM
The stock is down nearly 30% from the July highs. It was either way overpriced back then or now seems a good time to enter. Maybe it will drop until the market sees BRK or Weschler stepping in. Does anyone have any particular insights? Thanks!
Title: Re: DVA – DaVita HealthCare Partners
Post by: valueinvesting101 on October 28, 2016, 12:54:21 PM
DaVita Falls on Report It Encouraged Unneeded Insurance (Sunday) By Lee Spears

(Bloomberg) -- DaVita Inc. fell as much as 3.9% to lowest since 2013 after St. Louis Post-Dispatch reported Oct. 23 that DVA encouraged patients who were eligible for Medicaid to buy private insurance.
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on October 28, 2016, 01:34:52 PM
At current prices Mr Market seems to be pricing in a large hit from the recent article about steering customers to AKF. Can someone who has followed or invested with DVA for a while explain the workings of these higher paying commercial plans and give a valid argument for why they won't go away? If the CMS is able to revise enrollment rules for Medicare and Medicade and/or make "regulatory changes that would allow individual market plans to limit their payment to healthcare providers to Medicare-based amounts" it seems this entire division would be unprofitable. Since this would put them out of business resulting in catastrophic consequences for their patients, it seems a long shot, but its hard to invest with the knowledge and comfort I currently have on why this couldn't or won't happen.

Any links or recommendations to help me understand this outside of DVA filings/calls would be helpful. So much of their profitability comes from these plans and it seems there is a lot of pressure on them while their leverage to fight back is hard to see.

Thanks for any help.

I am long.

Here's the short story to get you started.
 Davita is the low cost provider.... 10-15% lower cost per patient vs fresenius by my unit economics estimates. Davita and Fresenius have around 1/3 of us market each. The other 1/3 Is mom in pops not benefiting from the economies of scale. Davita and Fresenius have slowed their acquisitions in the us at this point to keep the current market share balance. As a result, any change in pay would cause mom and pops to shut down. Also, patients may have to drive further to get their treatments.

Title: Re: DVA – DaVita HealthCare Partners
Post by: rb on October 28, 2016, 08:39:58 PM
At current prices Mr Market seems to be pricing in a large hit from the recent article about steering customers to AKF. Can someone who has followed or invested with DVA for a while explain the workings of these higher paying commercial plans and give a valid argument for why they won't go away? If the CMS is able to revise enrollment rules for Medicare and Medicade and/or make "regulatory changes that would allow individual market plans to limit their payment to healthcare providers to Medicare-based amounts" it seems this entire division would be unprofitable. Since this would put them out of business resulting in catastrophic consequences for their patients, it seems a long shot, but its hard to invest with the knowledge and comfort I currently have on why this couldn't or won't happen.

Any links or recommendations to help me understand this outside of DVA filings/calls would be helpful. So much of their profitability comes from these plans and it seems there is a lot of pressure on them while their leverage to fight back is hard to see.

Thanks for any help.

I am long.

Here's the short story to get you started.
 Davita is the low cost provider.... 10-15% lower cost per patient vs fresenius by my unit economics estimates. Davita and Fresenius have around 1/3 of us market each. The other 1/3 Is mom in pops not benefiting from the economies of scale. Davita and Fresenius have slowed their acquisitions in the us at this point to keep the current market share balance. As a result, any change in pay would cause mom and pops to shut down. Also, patients may have to drive further to get their treatments.
Flesh, you seem to have done quite a bit of research on this so you you don't mind, can you provide a bit more detail regarding a couple more issues.

Firstly, DaVita seem to be very aggressive in sales/marketing. This is not their first scandal. In your view is this just stupid over zealousness at the top or is this kind of stuff what drives a good chunk of profits? If they ease up on the pressure will that be a small decrease in profits or will it be significant?

Secondly, what always bothered me about DaVita is that the bulk of the patients are Medicare. In those cases Medicare dictates the terms and they don't seem to make any money off these patients. They mostly service them to pay the rent and the power bill shall we say. The profits seem to be made off of the few patients with private insurance for whom they seem to charge a pretty penny. Give this do you think that their profits are sustainable? What prevents Medicare to cut the rate (i know there were some issues around this a couple of years ago) and push DaVita in a loss per medicare patient? Or otherwise what prevents private insurance to cut payments for dialysis? Or maybe a shift in the mix of private/public insurance? It seems to me like DVA is very exposed to these issues. If any of them would come to be it would evaporate a good chunk of DVA profits.

You seem very confident in the company so I assume you understand these issues better than me. I would appreciate it if you could share your thoughts around these issues.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on October 29, 2016, 12:19:48 AM
DaVita Falls on Report It Encouraged Unneeded Insurance (Sunday) By Lee Spears

(Bloomberg) -- DaVita Inc. fell as much as 3.9% to lowest since 2013 after St. Louis Post-Dispatch reported Oct. 23 that DVA encouraged patients who were eligible for Medicaid to buy private insurance.

Not an exact corrolary to Wells Fargos operation but damn, WEB must be beside himself.

Anyone seen any comments from Munger on this?
Title: Re: DVA – DaVita HealthCare Partners
Post by: Graham Osborn on October 29, 2016, 02:19:00 PM
DaVita Falls on Report It Encouraged Unneeded Insurance (Sunday) By Lee Spears

(Bloomberg) -- DaVita Inc. fell as much as 3.9% to lowest since 2013 after St. Louis Post-Dispatch reported Oct. 23 that DVA encouraged patients who were eligible for Medicaid to buy private insurance.

Not an exact corrolary to Wells Fargos operation but damn, WEB must be beside himself.

Anyone seen any comments from Munger on this?

Given Munger's comments on VRX, it is indeed ironic that BRK owns DVA.  Not saying the situation is as extreme, but these healthcare rollups have certain common traits.
Title: Re: DVA – DaVita HealthCare Partners
Post by: whiterose on October 29, 2016, 04:27:36 PM
Quote
Secondly, what always bothered me about DaVita is that the bulk of the patients are Medicare. In those cases Medicare dictates the terms and they don't seem to make any money off these patients. They mostly service them to pay the rent and the power bill shall we say.

This is correct, but on the other hand, rather than seeing it as a weakness it could possibly be a strength at the same time. While negotiating with the government/public payer they can truthfully argue that they are already at cost today, any rebate in reimbursements is not economically viable. Noone wants to be responsible for killing of the whole industry. Dialysis is a much needed medical service, keeping patients/voters/humans alive.
Title: Re: DVA – DaVita HealthCare Partners
Post by: rb on October 29, 2016, 09:06:55 PM
Quote
Secondly, what always bothered me about DaVita is that the bulk of the patients are Medicare. In those cases Medicare dictates the terms and they don't seem to make any money off these patients. They mostly service them to pay the rent and the power bill shall we say.

This is correct, but on the other hand, rather than seeing it as a weakness it could possibly be a strength at the same time. While negotiating with the government/public payer they can truthfully argue that they are already at cost today, any rebate in embursements is not economically viable. Noone wants to be responsible for killing of the whole industry. Dialysis is a much needed medical service, keeping patients/voters/humans alive.
Ok, so what's your point? We're just gonna keep our fingers crossed and hope it doesn't happen? Is this the first time a company would have a loss leader? In the context of Davita Medicare would be almost the portrait of a loss leader.

But while the public sector clients are a concern, my bigger concern in about the private sector insurance business. What prevents them from saying well if Medicare pays you so little why should we pay you so much? Why should we subsidize your profits?
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on October 29, 2016, 10:21:57 PM
Quote
Secondly, what always bothered me about DaVita is that the bulk of the patients are Medicare. In those cases Medicare dictates the terms and they don't seem to make any money off these patients. They mostly service them to pay the rent and the power bill shall we say.

This is correct, but on the other hand, rather than seeing it as a weakness it could possibly be a strength at the same time. While negotiating with the government/public payer they can truthfully argue that they are already at cost today, any rebate in embursements is not economically viable. Noone wants to be responsible for killing of the whole industry. Dialysis is a much needed medical service, keeping patients/voters/humans alive.
Ok, so what's your point? We're just gonna keep our fingers crossed and hope it doesn't happen? Is this the first time a company would have a loss leader? In the context of Davita Medicare would be almost the portrait of a loss leader.

But while the public sector clients are a concern, my bigger concern in about the private sector insurance business. What prevents them from saying well if Medicare pays you so little why should we pay you so much? Why should we subsidize your profits?

Yeah; and then it'd be pointless for Davita employees to get patients to buy private insurance so Davita could switch payers & make better margins.

Then they might be able to eliminate that scandal at the expense of lower margins (a not so virtuous circle...)
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on October 29, 2016, 10:46:17 PM
DaVita Falls on Report It Encouraged Unneeded Insurance (Sunday) By Lee Spears

(Bloomberg) -- DaVita Inc. fell as much as 3.9% to lowest since 2013 after St. Louis Post-Dispatch reported Oct. 23 that DVA encouraged patients who were eligible for Medicaid to buy private insurance.

Not an exact corrolary to Wells Fargos operation but damn, WEB must be beside himself.

Anyone seen any comments from Munger on this?

Given Munger's comments on VRX, it is indeed ironic that BRK owns DVA.  Not saying the situation is as extreme, but these healthcare rollups have certain common traits.

In the October 1967 partnership letter WEB spoke of the trend of capital heading to momentum funds & he said "Essentially I am out of step with present conditions."

This is of course one sound bite from an exceedingly forthright letter (as all have been) but it leads into his shift to relying more on qualitative "high probability insight" (sic) decisions which he says "really make the cash register sing." (sic - again...)

It seems that he has relied a lot on a gut feel for the quality of managements character & may have been conned by Stumpf & now Rodriguez, Thiry & Kogod.

Still doesn't take anything away from the man himself who I believe has impeccable character!
Title: Re: DVA – DaVita HealthCare Partners
Post by: whiterose on October 30, 2016, 01:49:06 AM
Quote
In the context of Davita Medicare would be almost the portrait of a loss leader.
But while the public sector clients are a concern, my bigger concern in about the private sector insurance business. What prevents them from saying well if Medicare pays you so little why should we pay you so much?

I'm not an expert on this, but I guess the industry-dynamic is comparable to the commodities sector, in which DVA is the lowest cost producer (due to sheer size and the accompanying effects of scale, good management, company culture) and medicare the external set market price. The private insurers have not that many options besides DVA, once the mom-and-pop centers close/get bought. If the competition is losing even more on medicare, they have to be even more expensive for the private insurers to get even. As said, I'm not an industry insider nor am I living in the US, maybe I'm missing sth. obvious.
Title: Re: DVA – DaVita HealthCare Partners
Post by: orthopa on October 30, 2016, 06:18:16 PM
So how does divination become more profitable over time if market share is purposefully kept steady? More patients? Raise prices on commercial only patients?
Title: Re: DVA – DaVita HealthCare Partners
Post by: KCLarkin on October 30, 2016, 06:29:20 PM
So how does divination become more profitable over time if market share is purposefully kept steady? More patients? Raise prices on commercial only patients?

Demographics.
Title: Re: DVA – DaVita HealthCare Partners
Post by: rb on October 30, 2016, 06:31:04 PM
So how does divination become more profitable over time if market share is purposefully kept steady? More patients? Raise prices on commercial only patients?
Oh it's pretty clear that patients will go up. It's pretty clear that 5% of people with diabetes need dialysis. So the chain is get fat->get diabetes->become a DVA customer. Americans are really good at getting fat and getting diabetes. Not only that, but they're getting fat and getting diabetes earlier in life. So the mix will probably shift to more private, less medicare which is good for DVA in its current form.

The risks here are that the insurance co's negotiate down DVA's prices, or political/legislation risks such as an expansion of California prop 61. Of course this is not imminent, but my investment horizon is longer than 6-12 months. My problem with US health care stocks is the same as with any bubble. Healthcare costs in the US are out of control. And just like anything else that cannot go on forever, it will eventually stop. What happens then?
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on October 30, 2016, 09:10:11 PM
So how does divination become more profitable over time if market share is purposefully kept steady? More patients? Raise prices on commercial only patients?

For that we'd need to hear from the divine master WEB (and/or his foil "the West Coast Philosopher")
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on October 30, 2016, 09:10:48 PM
So how does divination become more profitable over time if market share is purposefully kept steady? More patients? Raise prices on commercial only patients?
Oh it's pretty clear that patients will go up. It's pretty clear that 5% of people with diabetes need dialysis. So the chain is get fat->get diabetes->become a DVA customer. Americans are really good at getting fat and getting diabetes. Not only that, but they're getting fat and getting diabetes earlier in life. So the mix will probably shift to more private, less medicare which is good for DVA in its current form.

The risks here are that the insurance co's negotiate down DVA's prices, or political/legislation risks such as an expansion of California prop 61. Of course this is not imminent, but my investment horizon is longer than 6-12 months. My problem with US health care stocks is the same as with any bubble. Healthcare costs in the US are out of control. And just like anything else that cannot go on forever, it will eventually stop. What happens then?

My preferred bet being NVO
Title: Re: DVA – DaVita HealthCare Partners
Post by: KCLarkin on October 31, 2016, 06:51:16 AM
Quote
Because Medicaid reimburses for dialysis at a lower rate than ACA Plans, DaVita estimates that a policy change that prevents patients with minimum essential Medicaid coverage from accessing charitable premium assistance to enroll in ACA Plans would result in a reduction in its annualized operating income of up to approximately $140 million before any offsets.  If CMS were to issue a broader ruling that made access to charitable premium assistance unavailable to all ESRD patients on ACA Plans, the estimated financial impact would increase by up to $90 million, based on our estimate that a significant number of ESRD patients would lose their ACA coverage and end up completely uninsured, while others could continue the coverage with federal subsidies.
DaVita looks forward to continuing a collaborative dialogue with regulators and issuers on efforts to strengthen the sustainability of the ACA and continue to provide clarity and access to coverage for patients in the future.  We will provide additional details on our third quarter earnings call on Wednesday, November 2, 2016.

http://phx.corporate-ir.net/phoenix.zhtml?c=76556&p=irol-newsArticle_print&ID=2217263

Stock up about 6% after this press release.
Title: Re: DVA – DaVita HealthCare Partners
Post by: loganc on October 31, 2016, 08:19:27 AM
So how does divination become more profitable over time if market share is purposefully kept steady? More patients? Raise prices on commercial only patients?

For that we'd need to hear from the divine master WEB (and/or his foil "the West Coast Philosopher")

Why do you keep referencing Buffett with respect to the DVA investment?  It is very well known that this is Weschler's investment.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on October 31, 2016, 08:27:23 AM
So how does divination become more profitable over time if market share is purposefully kept steady? More patients? Raise prices on commercial only patients?

For that we'd need to hear from the divine master WEB (and/or his foil "the West Coast Philosopher")

Why do you keep referencing Buffett with respect to the DVA investment?  It is very well known that this is Weschler's investment.

Whatever (you don't think he was in on any discussions?)
Title: Re: DVA – DaVita HealthCare Partners
Post by: rb on October 31, 2016, 08:36:31 AM
So how does divination become more profitable over time if market share is purposefully kept steady? More patients? Raise prices on commercial only patients?

For that we'd need to hear from the divine master WEB (and/or his foil "the West Coast Philosopher")

Why do you keep referencing Buffett with respect to the DVA investment?  It is very well known that this is Weschler's investment.

Whatever (you don't think he was in on any discussions?)
No I don't. DVA was ported over from Peninsula.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on October 31, 2016, 08:41:13 AM
So how does divination become more profitable over time if market share is purposefully kept steady? More patients? Raise prices on commercial only patients?

For that we'd need to hear from the divine master WEB (and/or his foil "the West Coast Philosopher")

Why do you keep referencing Buffett with respect to the DVA investment?  It is very well known that this is Weschler's investment.

Whatever (you don't think he was in on any discussions?)
No I don't. DVA was ported over from Peninsula.

Awesome; so that means a guy I greatly admire had nothing to do with buying into a company I never even put on a watchlist (yay!)
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on October 31, 2016, 09:30:29 AM
So how does divination become more profitable over time if market share is purposefully kept steady? More patients? Raise prices on commercial only patients?

Demographics.

Plus, Dialysis patients are living longer. Also, more older patients (baby boomers) are suffering from ESRD than before. The 70-75 category is growing fastest in % terms. If this trend continues, this could be meaningful combined with growing life expectancy's. 







Title: Re: DVA – DaVita HealthCare Partners
Post by: rb on October 31, 2016, 09:34:39 AM
Awesome; so that means a guy I greatly admire had nothing to do with buying into a company I never even put on a watchlist (yay!)
And that would be your 8th irrelevant post on the DaVita. If you're not interested in DVA and don't have anything to add why are you on this thread?

You may be looking to boost your post count, but the rest of us are actually interested in the subject.
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on October 31, 2016, 09:42:59 AM
Found this interesting at the end of the press release.

[1] Individual market plans include both on-exchange and off-exchange plans (collectively "ACA Plans").  On-exchange plans, often referred to as "Marketplace plans," are purchased through the federal or state program and allow individuals to seek premium tax credits.  Off-exchange plans are purchased directly from the issuers.  Both impact the same risk pool and, as a result, the information provided here refers to both on-exchange and off-exchange plans.
[2] CMS's RFI and accompanying letter to dialysis facilities erroneously implied that it is unlawful to enroll a Medicaid beneficiary in an ACA Plan, citing to Social Security Act Section 1882(d)(3)(i)(II) in its letter to dialysis facilities. In fact, that statute prohibits someone from selling a Medicare beneficiary unnecessary Medicare supplemental insurance that merely duplicates their existing coverage, and is inapplicable to this situation.  Further, Medicaid benefits are often limited; an ACA Plan is not merely duplicative of Medicaid; and CMS itself has repeatedly recognized that Medicaid beneficiaries are eligible to enroll in an ACA Plan, just not eligible for federal premium tax credits or federal subsidies. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Complex-Sits-Webinar-FINAL.pdf 3/20/2016, page 26; https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/PDM-Round-3-FAQ-8-1-16.pdf.
Title: Re: DVA – DaVita HealthCare Partners
Post by: frankhkii on October 31, 2016, 10:54:24 AM
Flesh,

How do you think about and price in future settlement charges and loss accruals? Might it be a cost of business going forward? If we model in the $230mm hit from the release and the 5 year avg settlement charge ~$200mm it starts to look a lot less attractive. Overly conservative?

Thank you.
Title: Re: DVA – DaVita HealthCare Partners
Post by: LC on October 31, 2016, 11:16:22 AM
Awesome; so that means a guy I greatly admire had nothing to do with buying into a company I never even put on a watchlist (yay!)
And that would be your 8th irrelevant post on the DaVita. If you're not interested in DVA and don't have anything to add why are you on this thread?

You may be looking to boost your post count, but the rest of us are actually interested in the subject.

Actually I happen to agree with DooDiligence. I think it's perfectly reasonable to expect Buffett to have a view. I think you're being naive if you think Buffett has no input.
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on October 31, 2016, 11:55:27 AM
Flesh,

How do you think about and price in future settlement charges and loss accruals? Might it be a cost of business going forward? If we model in the $230mm hit from the release and the 5 year avg settlement charge ~$200mm it starts to look a lot less attractive. Overly conservative?

Thank you.

Certainly that's a good way to think about your downside, you'd still be well below a mid cycle market multiple. OTOH, if you believe they can meet their guidance through 2019, you have a nice slow grower selling at a low owner's earnings multiple eating itself. Often times mgmt's will offer neutrality when there's no hard catalyst's and they are looking to eat themselves as a result. At the last quarter mgmt stated no update on guidance for x, y, z until 4th qtr call = accelerated share repurchases for now imo. Also, you must decide whether or not to over weight reimbursement risk versus market/economic risks you'd see elsewhere in your portfolio.

I'm seeing a 4 to 1 upside to downside ratio end of year 17' with little market/economic risk myself.

Then there's perception and earnings. You've got to remember so much of the market follows gaap earnings, we can quickly forget how others think/react when we've learned to think beyond something so simple. Gaap earnings should improve substantially cy 17'. Remembering this has helped my performance. Cash flows will improve yoy as well. I'm not sure when the market will start pricing in rate changes for 2019 but if you're thinking years out I suppose that would happen in 2018. Paying 80 for this today is in Warren's wheelhouse as well. If this is in play we'll probably see Brk hitting the 25% threshold at these prices asap.









Title: Re: DVA – DaVita HealthCare Partners
Post by: rb on October 31, 2016, 12:43:07 PM
Awesome; so that means a guy I greatly admire had nothing to do with buying into a company I never even put on a watchlist (yay!)
And that would be your 8th irrelevant post on the DaVita. If you're not interested in DVA and don't have anything to add why are you on this thread?

You may be looking to boost your post count, but the rest of us are actually interested in the subject.

Actually I happen to agree with DooDiligence. I think it's perfectly reasonable to expect Buffett to have a view. I think you're being naive if you think Buffett has no input.
Well Buffett had no input in buying DVA, Ted had ported it over from Peninsula. Could WB call ted and tell him to get rid of the position? Of course. Will he? I don't think so. He's said multiple times that he does not interfere with T&T and there's no reason to doubt that.

In addition, DVA is a stock holding not a subsidiary. BRK stock holdings have done lots of shady stuff and WB was mum on it. Hell, this isn't even the first time DVA is caught with shady stuff.
Title: Re: DVA – DaVita HealthCare Partners
Post by: rb on October 31, 2016, 12:46:45 PM
If this is in play we'll probably see Brk hitting the 25% threshold at these prices asap.
Actually if BRK is contemplating a takeover you won't see them buying more shares. If they're buying it means there won't be a takeover.
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on December 07, 2016, 09:45:08 PM
At current prices Mr Market seems to be pricing in a large hit from the recent article about steering customers to AKF. Can someone who has followed or invested with DVA for a while explain the workings of these higher paying commercial plans and give a valid argument for why they won't go away? If the CMS is able to revise enrollment rules for Medicare and Medicade and/or make "regulatory changes that would allow individual market plans to limit their payment to healthcare providers to Medicare-based amounts" it seems this entire division would be unprofitable. Since this would put them out of business resulting in catastrophic consequences for their patients, it seems a long shot, but its hard to invest with the knowledge and comfort I currently have on why this couldn't or won't happen.

Any links or recommendations to help me understand this outside of DVA filings/calls would be helpful. So much of their profitability comes from these plans and it seems there is a lot of pressure on them while their leverage to fight back is hard to see.

Thanks for any help.

I am long.

Here's the short story to get you started.
 Davita is the low cost provider.... 10-15% lower cost per patient vs fresenius by my unit economics estimates. Davita and Fresenius have around 1/3 of us market each. The other 1/3 Is mom in pops not benefiting from the economies of scale. Davita and Fresenius have slowed their acquisitions in the us at this point to keep the current market share balance. As a result, any change in pay would cause mom and pops to shut down. Also, patients may have to drive further to get their treatments.
Flesh, you seem to have done quite a bit of research on this so you you don't mind, can you provide a bit more detail regarding a couple more issues.

Firstly, DaVita seem to be very aggressive in sales/marketing. This is not their first scandal. In your view is this just stupid over zealousness at the top or is this kind of stuff what drives a good chunk of profits? If they ease up on the pressure will that be a small decrease in profits or will it be significant?

Secondly, what always bothered me about DaVita is that the bulk of the patients are Medicare. In those cases Medicare dictates the terms and they don't seem to make any money off these patients. They mostly service them to pay the rent and the power bill shall we say. The profits seem to be made off of the few patients with private insurance for whom they seem to charge a pretty penny. Give this do you think that their profits are sustainable? What prevents Medicare to cut the rate (i know there were some issues around this a couple of years ago) and push DaVita in a loss per medicare patient? Or otherwise what prevents private insurance to cut payments for dialysis? Or maybe a shift in the mix of private/public insurance? It seems to me like DVA is very exposed to these issues. If any of them would come to be it would evaporate a good chunk of DVA profits.

You seem very confident in the company so I assume you understand these issues better than me. I would appreciate it if you could share your thoughts around these issues.

I have a 15% position at 58 cost.

I've been thinking about your questions, I don't have any concrete way to answer them. If anyone knows how to quantify your questions, I'm all ears. If there is precedent in the healthcare industry for your concerns, I can't find them, I'm all ears. I don't often share my thoughts simply because I generally don't get any feedback and I usually invest scared, compounding it isn't helpful.

Instead of focusing on what I can't answer, which is how will the payor mix/reimbursement rates fluctuate, I've focused on what I can answer.

The bull thesis is fairly well outlined in this thread, so I'll put that aside. Mgmt has guided to 5.5 m fcf 2016-2019.

The question as I see it is, how would rates be cut and how quickly and when I compare that to 4-5% demographic plus acquisition growth and 4-5% buybacks at current multiple is it probable that dva could at least maintain it's current fcf/share in the face of cuts/payor mix? I'm assuming that if dva's fcf just held steady, the return would be positive.

Considering the mom and pops are crying and I've read repeatedly that they make zero profit on cms reimbursements, wouldn't they at least have to cut slowly? (didn't they already do this by freezing rates?)

If centers start closing down, how far will patients have to drive? How would this backlash from patients contribute cms's attitude about cuts? How many patient death's as a result of proximity issues would it take to turn things around? Who wants to be that guy?

If there is precedent for medicare/caid/private coming down hard on price is it apples to apples? Would people die? This isn't a patented drug with monopoly pricing. People will get hurt, companies will go out of business.

As the low cost producer, everyone else will be crying long before DVA. Excluding a near term, cost effective solution for ESRD aside from dialysis, I don't see a lot of downside. It would take a downside lollapalooza effect IMO to have a meaningful loss. Something like cuts/declining payor mix/HCP declining simultaneously. 



 







Title: Re: DVA – DaVita HealthCare Partners
Post by: bennycx on December 07, 2016, 11:00:30 PM

I am long.

Here's the short story to get you started.
Davita is the low cost provider.... 10-15% lower cost per patient vs fresenius by my unit economics estimates. Davita and Fresenius have around 1/3 of us market each. The other 1/3 Is mom in pops not benefiting from the economies of scale. Davita and Fresenius have slowed their acquisitions in the us at this point to keep the current market share balance. As a result, any change in pay would cause mom and pops to shut down. Also, patients may have to drive further to get their treatments.

Hi flesh, how did you get this piece of information (bolded above)?
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on December 13, 2016, 01:26:52 PM
See attached or click http://seekingalpha.com/article/1769952-why-davita-is-undervalued-compared-to-fresenius-medical-care. Compare his cost analysis to the % of FMS's business being done here in the usa here:

http://seekingalpha.com/article/4016809-fresenius-medical-care-ag-and-co-kgaa-2016-q3-results-earnings-call-slides

It's difficult to be precise but it's pretty clear there's a difference.
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on December 14, 2016, 08:56:09 PM
http://www.valuewalk.com/wp-content/uploads/2016/03/DaVita-HealthCare-Partners-DVA-3.2016.pdf

I just reread this.

Starting at page 48 some additional layers of protection on reimbursement/payor mix risks. Also some good upside points all happening in 2019.

1. CMS reimbursements go back to "normal" as a result of playing catch up from over payment. As this all flows to the bottom, could be in the hundreds of millions.
2. epo contract is up, lots of competition now versus when epo contract was struck... prices will come down. 20-30% of costs per patient currently.
3. International should hit breakeven (from 100m/year loss current)
4. Debt comes due, If rates are up and with more than enough cash flow, might pay off.

Aside from making money, I find what HCP/Davita medical group is doing quite fascinating. Absent bringing a true free market with price discovery to healthcare I think this pay per performance is the best model I"ve seen in terms of bringing us closer to health  care vs our current disease care. Without the proper incentives, nothing will change.

Title: Re: DVA – DaVita HealthCare Partners
Post by: no_free_lunch on December 14, 2016, 09:06:33 PM
So I have been following this one for years due to the Buffet link.  I can see how it will likely do well in a 2-5 year time horizon.  I just wonder if people would be comfortable with it over a longer time horizon, like 20 years.  I read earlier in the thread how there is a chance of a technological disruption.  Lab grown kidney's or something along those lines.  How do you handle that risk?
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on December 15, 2016, 05:57:00 AM
Regarding the kidney transplant issue, this is not a simple procedure. And success is not just due to availability of kidneys.
It's dangerous depending on the patient's health and age. I had discussions earlier this year with Director of U of Chicago Kidney Transplant Center.

The problem for many of these "candidates" is that they are unhealthy and many times overweight. U of Chicago will not do a transplant on individuals above a certain body mass index - those candidates have to lose a significant amount of weight.
The side effects of  infection, drugs, etc can be fatal.  Risk of infections goes up significantly with overweight patients.
 Powerful drugs to fight these infections can damage the heart, etc.

Her opinion: those on dialysis can live very long and healthy lives without a transplant.
Transplants should not be viewed as a silver bullet. I am not a doctor - but this is how I understand the issue.
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on December 15, 2016, 10:15:28 AM
Regarding the kidney transplant issue, this is not a simple procedure. And success is not just due to availability of kidneys.
It's dangerous depending on the patient's health and age. I had discussions earlier this year with Director of U of Chicago Kidney Transplant Center.

The problem for many of these "candidates" is that they are unhealthy and many times overweight. U of Chicago will not do a transplant on individuals above a certain body mass index - those candidates have to lose a significant amount of weight.
The side effects of  infection, drugs, etc can be fatal.  Risk of infections goes up significantly with overweight patients.
 Powerful drugs to fight these infections can damage the heart, etc.

Her opinion: those on dialysis can live very long and healthy lives without a transplant.
Transplants should not be viewed as a silver bullet. I am not a doctor - but this is how I understand the issue.

Now we are getting somewhere. I forwarded this to my bro in law to discuss with his doctor buddies. I'll try to find some statistics on what portion of esrd patients are eligible for any sort of transplant.

Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on December 15, 2016, 12:23:45 PM
If you want to check this presentation from the U of Chicago Transplant Center - it reviews some of the issues
for families of transplant candidates. There are many factors (ex. see slide 11 for body mass index) - they won't
attempt a transplant if your body fat is 40%+. There are rejection issues, long term medication side effects, infections, etc .
You get a team of doctors to evaluate you as a candidate - it's not simply an issue of availability of a kidney.
Families often misunderstand and think if they give a kidney to their sibling - everything is a "go".
It's not at all like that.

With dialysis you do not have these complications or trauma.



Title: Re: DVA – DaVita HealthCare Partners
Post by: rogermunibond on December 15, 2016, 01:27:45 PM
http://www.nejm.org/doi/full/10.1056/NEJMoa1508380

I think I posted on this before non-compatible kidney donation (from live donor) got a major study write up in the NEJM.  Over 1000 transplants and very good results.  Still up in the air if the results are good enough for more widespread adoption.
Title: Re: DVA – DaVita HealthCare Partners
Post by: bennycx on December 15, 2016, 05:26:39 PM
I'm comfortable with this investment other than seeing some reports saying that Davita provides worse quality of care than non-profits? Can anyone quantify this?
Title: Re: DVA – DaVita HealthCare Partners
Post by: rogermunibond on December 15, 2016, 05:45:34 PM
https://data.medicare.gov/data/dialysis-facility-compare

CMS has made dialysis center data available, and they have consumer comparison site.

From my perusing Davita and Fresenius did about avg, mostly 3 stars.  Some nonprofits did much better, but the thing is a lot of nonprofits that had their own dialysis have gotten out of the biz.
Title: Re: DVA – DaVita HealthCare Partners
Post by: fareastwarriors on December 25, 2016, 08:31:10 PM
Kidney Fund Seen Insisting on Donations, Contrary to Government Deal
http://www.nytimes.com/2016/12/25/business/kidney-fund-seen-insisting-on-donations-contrary-to-government-deal.html?ref=business&_r=0 (http://www.nytimes.com/2016/12/25/business/kidney-fund-seen-insisting-on-donations-contrary-to-government-deal.html?ref=business&_r=0)
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on January 26, 2017, 09:13:59 AM
http://pressreleases.davita.com/2017-01-25-DaVita-Responds-to-US-District-Court-Eastern-District-of-Texas-Ruling-Protecting-Dialysis-Patients-from-Discrimination-by-Insurance-Companies
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on February 02, 2017, 10:55:11 AM
http://pressreleases.davita.com/2017-02-01-DaVita-Finalizes-Acquisition-of-Mountain-View-Medical-Group

This acquisition took forever to close. Not sure why.

http://www.denverpost.com/2017/02/01/federal-government-pay-davita-millions-underpayment-claims/

Over 500 million coming in from the govt.

Good things happening along with the new epo contract which is accretive.
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on February 16, 2017, 01:35:11 PM
Things are humming along. I suspect the lowered OI guidance is a result of the whole ACA debacle... not sure. EPS are showing up again, company will be receiving 538m from the govt Q1 17' which isn't included in guidance. No share repurchases in CY17' after reducing share count 8% in CY 16'.... not sure why.... tons of cash... maybe thought lowered guidance may reduce prices?

One thing of note, virtually all of DVA is US based. They pay full taxes going forward and I suspect they will keep most of the tax savings if rates come down to 20%. Other companies that aren't monopolistic should lose some the the tax reduction over time as competition reduces prices, I suspect this will be of a smaller magnitude with DVA.

DaVita Inc. 4th Quarter 2016 Results
DENVER, Feb. 16, 2017 /PRNewswire/ -- DaVita Inc. (NYSE: DVA) today announced results for the quarter and year ended December 31, 2016.

Net income attributable to DaVita Inc. for the quarter and year ended December 31, 2016 was $158 million, or $0.80 per share and $880 million, or $4.29 per share, respectively.
Adjusted net income attributable to DaVita Inc. for the quarter and year ended December 31, 2016, excluding the non-GAAP items described below, was $192 million, or $0.98 per share, and $789 million, or $3.85 per share, respectively.
Additionally, adjusted net income attributable to DaVita Inc. for the quarter and year ended December 31, 2016, exluding the non-GAAP items described below and further excluding the amortization of intangible assets associated with acquisitions, was $222 million, or $1.13 per share, and $897 million, or $4.38 per share, respectively.
Net (loss) income attributable to DaVita Inc. for the quarter and year ended December 31, 2015 was $(6) million, or $(0.03) per share, and $270 million, or $1.25 per share, respectively.
Adjusted net income attributable to DaVita Inc. for the quarter and year ended December 31, 2015, excluding the non-GAAP items described below, was $214 million, or $1.01 per share, and $828 million, or $3.83 per share, respectively.
Additionally, adjusted net income attributable to DaVita Inc. for the quarter and year ended December 31, 2015, exluding the non-GAAP items described below and further excluding the amortization of intangible assets associated with acquisitions, was $239 million, or $1.12 per share, and $930 million, or $4.30 per share, respectively.
The Company's adjusted net income attributable to DaVita Inc., adjusted diluted net income per share, adjusted operating income, adjusted effective income tax rate attributable to DaVita Inc. and free cash flow discussed above and below (collectively its "non-GAAP measures") exclude the effect of certain items that are reconciled to their most comparable GAAP measures at Notes 2, 3, 4 and 5 hereto.

For the quarter ended December 31, 2016, these non-GAAP measures excluded a goodwill impairment charge related to our vascular access reporting unit and an impairment of a minority equity investment (as discussed below), as well as an additional estimated accrual for damages and liabilities associated with our pharmacy business.

For the year ended December 31, 2016, these non-GAAP measures excluded the non-GAAP items mentioned above as well as goodwill impairment charges on certain DaVita Medical Group (DMG) reporting units, a gain on changes in ownership interest upon the formation of our Asia Pacific dialysis joint venture (APAC JV), a gain on the sale of a portion of our Tandigm ownership interest, a loss on the sale of our DMG Arizona business, and estimated accruals for damages and liabilities associated with our pharmacy and DMG Nevada hospice businesses.

For the quarter ended December 31, 2015, these non-GAAP measures excluded estimated goodwill and other intangible asset impairment charges and an estimated accrual for damages and liabilities associated with our pharmacy business. For the year ended December 31, 2015, these non-GAAP measures also excluded the debt redemption charges and a settlement charge related to a private civil suit.

Financial and operating highlights include:

Cash flow:  For the quarter and year ended December 31, 2016, operating cash flow was $482 million and $1.963 billion, respectively, and free cash flow was $329 million and $1.412 billion, respectively. For the definition of free cash flow, see Note 5 to the reconciliation of non-GAAP measures.

Operating income and adjusted operating income:  Operating income for the quarter ended December 31, 2016 was $381 million, and adjusted operating income for the quarter was $445 million.  Operating income for the year ended December 31, 2016 was $1.895 billion, and adjusted operating income for the year was $1.849 billion.

In connection with the acquisition of DMG, we recorded receivables against the acquisition escrow balance to offset specific potential tax liabilities. Certain of these potential tax liabilities expired, resulting in the reduction of this asset during the third and fourth quarters of 2016. This negatively impacted operating income by $4 million and $31 million for the quarter and year-ended December 31, 2016, respectively, and is included in our general and administrative expenses. The reduction in operating income was directly offset by a reduction in income tax expense due to the expiration of the corresponding tax liabilities.

Operating income for the quarter ended December 31, 2015 was $245 million, and adjusted operating income for the quarter was $474 million. Operating income for the year ended December 31, 2015 was $1.171 billion and adjusted operating income for the year was $1.898 billion.

Volume:  Total U.S. dialysis treatments for the fourth quarter of 2016 were 6,889,069, or 87,203 treatments per day, representing a per day increase of 3.7% over the fourth quarter of 2015. Normalized non-acquired treatment growth in the fourth quarter of 2016 as compared to the fourth quarter of 2015 was 4.0%.

The number of member months for which DMG provided care during the fourth quarter of 2016 was approximately 2.3 million, of which approximately 1.0 million, 1.0 million and 0.3 million related to senior, commercial and Medicaid members, respectively.

Goodwill and other asset impairment charges:  During the quarter ended December 31, 2016, we determined that circumstances indicated it had become more likely than not that the goodwill of our vascular access reporting unit had become impaired. These circumstances included changes in governmental reimbursement and our expected ability to mitigate them. We have performed the required valuations to estimate the fair value of the net assets and implied goodwill of this reporting unit with the assistance of a third-party valuation firm. Based on this assessment, we recorded a goodwill impairment charge of $28 million, of which $8 million was attributed to noncontrolling interests. In addition, we recognized an income tax benefit of $7 million related to this charge.

During the fourth quarter of 2016, we also recognized an impairment charge of $15 million on a minority equity investment within our international business, offset by an income tax benefit of $5 million related to this charge.

Effective tax rate:  Our effective tax rate was 32.3% and 30.6% for the quarter and year ended December 31, 2016, respectively. The effective tax rate attributable to DaVita Inc. was 36.3% and 34.1% for the quarter and year ended December 31, 2016, respectively.

Our effective tax rate for the quarter ended December 31, 2016 was impacted by a non-deductible portion of the estimated accrual associated with our pharmacy business and an adjustment to reduce a receivable associated with the DMG acquisition escrow provision relating to an income tax item. Our effective tax rate for the year ended December 31, 2016 was impacted by the foregoing items as well as partially deductible and non-deductible goodwill impairment charges, the loss on the sale of our DMG Arizona business, a non-deductible portion of the estimated accruals associated with our DMG Nevada hospice and pharmacy businesses, a gain on the APAC JV ownership changes, the adjustments related to the reduction in the receivables associated with the DMG acquisition escrow provision relating to income tax items, and the amount of third-party owners' income attributable to non-tax paying entities.

The adjusted effective tax rate attributable to DaVita Inc. for the quarter and year ended December 31, 2016, excluding these items from their respective periods was 36.5% and 38.4%, respectively. The decrease in our adjusted effective tax rate attributable to DaVita Inc. compared to the third quarter of 2016 of 40.0% is due to a decrease in the state tax rate and related true-ups.

Center activity: As of December 31, 2016, we provided dialysis services to a total of approximately 203,000 patients at 2,504 outpatient dialysis centers, of which 2,350 centers were located in the United States and 154 centers were located in 11 countries outside of the United States. During the fourth quarter of 2016, we opened a total of 27 new dialysis centers and acquired four dialysis centers in the United States. We also acquired ten dialysis centers and opened five new dialysis centers outside of the United States.

Share repurchases: During the quarter ended December 31, 2016, we repurchased a total of 6,718,658 shares of our common stock for $416 million, or an average price of $61.96 per share. During the year ended December 31, 2016, we repurchased 16,649,090 shares of our common stock for $1.1 billion, or an average price of $64.41 per share. We have not repurchased any shares of our common stock subsequent to December 31, 2016. As a result of these transactions, as of February 16, 2017 we have a total of approximately $677 million in outstanding Board repurchase authorizations.

Settlement: In the first quarter of 2017, we reached an agreement with the government for $538 million for amounts owed to us for dialysis services provided over several years to patients covered by the Veterans' Administration. This one-time gain, subject to taxes and consideration of noncontrolling interests, is expected to be recognized in the first quarter of 2017 and is excluded from our 2017 adjusted operating income guidance.
Outlook

The following forward-looking measures and the underlying assumptions involve significant risks and uncertainties, including those described below, and actual results may vary significantly from these current forward-looking measures. We do not provide guidance for consolidated operating income, Kidney Care operating income or effective tax rate attributable to DaVita Inc. on a GAAP basis nor a reconciliation of those forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures on a forward-looking basis because we are unable to predict certain items contained in the GAAP measures without unreasonable efforts. These non-GAAP financial measures do not include certain items, including the anticipated gain related to the government settlement.

We expect our adjusted consolidated operating income guidance for 2017 to be in the range of $1.635 billion to $1.775 billion.
We expect our adjusted operating income guidance for Kidney Care for 2017 to be in the range of $1.525 billion to $1.625 billion.
We expect our operating income guidance for DMG for 2017 to be in the range of $110 million to $150 million.
We expect our consolidated operating cash flow for 2017 to be in the range of $1.750 billion to $1.950 billion, which includes the net benefit of the anticipated VA payment.
We expect our 2017 adjusted effective tax rate attributable to DaVita Inc. to be approximately 39.5% to 40.5%.
Title: Re: DVA – DaVita HealthCare Partners
Post by: no_free_lunch on March 09, 2017, 07:00:45 PM
Good summary of the legal situation surrounding DVA.

Quote
Dialysis treatment companies like DaVita (and Fresenius) made contributions to the American Kidney Foundation (AKF)
AKF would then pay for premiums for patients in need of dialysis
Treatment facilities like DaVita would steer patients to coverage, paid for by AKF
..
Why is Davita anticipating lower operating income in 2017? The way in which they had been obtaining some profitable patients has been blocked — at least for a while — by the Department of Health and Human Services, is being investigated by the Department of Justice, and the subject of a potential class-action investor lawsuit.

That’s quite a trifecta, which we’ll continue to track.

http://stateofreform.com/featured/2017/03/davita-regulated-investigated-sued/
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on March 31, 2017, 04:49:16 PM
Regarding the kidney transplant issue, this is not a simple procedure. And success is not just due to availability of kidneys.
It's dangerous depending on the patient's health and age. I had discussions earlier this year with Director of U of Chicago Kidney Transplant Center.

The problem for many of these "candidates" is that they are unhealthy and many times overweight. U of Chicago will not do a transplant on individuals above a certain body mass index - those candidates have to lose a significant amount of weight.
The side effects of  infection, drugs, etc can be fatal.  Risk of infections goes up significantly with overweight patients.
 Powerful drugs to fight these infections can damage the heart, etc.

Her opinion: those on dialysis can live very long and healthy lives without a transplant.
Transplants should not be viewed as a silver bullet. I am not a doctor - but this is how I understand the issue.

I am not qualified to have a medical opinion on this issue, other that I am hearing stories from my wife, who works as a nurse in a dialysis center.

Most of these patient are sick due to loss of kidney function, with very high blood pressure being the most common problem. The dialysis only can do a fraction of the function that a healthy kidney can do. A kidney transplant, while not without risk, seems vastly preferable, but there are not enough transplants available and many patient are not eligible (weight, blood pressure etc). Also, transplants wear out due thenneed to use heavy medication that suppress rejection, so there are issues with that as well. It sucks have a kidney that does not work and not being able to per , since you basically can't dispose of waste. in addition, the kidney fulfills other duties to control blood pressure, produces hormones and dialysis by itself  does not Adresse those at all.

Just an opinion, by there is a real need for a better mousetrap and a huge unmet need to replace failing kidney functions. Hopefully someone will find a way to meet that need better than the current dialysis procedure, but there is nothing out there in the net 10 years, if not more.
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on May 02, 2017, 11:55:58 AM
http://pressreleases.davita.com/2017-05-02-DaVita-Completes-Acquisition-of-Renal-Ventures

"We are excited to have Renal Ventures' employees, physicians and patients join the DaVita Village," said Javier Rodriguez, CEO of DaVita Kidney Care. "Both DaVita and Renal Ventures have talented caregivers with relentless passion towards enhancing the quality of life for patients. We look forward to benefiting from the power of the combined talent dedicated to delivering industry-leading outcomes and comprehensive care."

DaVita acquired 38 dialysis centers and divested seven centers in connection with the approval of the transaction by the Federal Trade Commission."

http://pressreleases.davita.com/2017-05-02-HealthCare-Partners-Nevada-Completes-Acquisition-of-WellHealth-Quality-Care

"WellHealth Quality Care is one of the most respected privately held medical organizations in Nevada, and we look forward to working with this group collaboratively to benefit patients in this community," said Bard Coats, MD, Nevada market president for DaVita's Medical Group division.

WellHealth Quality Care has a network of over 3,000 providers across Southern Nevada as well as a multi-specialty medical group with specialties including obstetrics and gynecology, anesthesiology, cardiology, endocrinology and primary care. WellHealth Quality Care has provided optimal care to the residents of Nevada for over two decades and currently operates in 11 locations.

"We're excited about this union," said Warren Volker, MD, founder, and CEO of WellHealth Quality Care. "The range of services that each of our groups provides complements one another, and through our integration of care we will provide more access and better care to our patients."

Earnings later today.



Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on May 08, 2017, 10:51:59 AM
http://pressreleases.davita.com/2017-05-08-DaVita-Acquires-Purity-Dialysis

It's quite clear these guys have more money than they know what to do with. What do you do with a cash machine when you have no where to put it? It's too bad the international economics apparently are not apples to apples, if it was, there would be more money going there.

I can't think of many companies that are at once economically insensitive and most likely to benefit from a corporate tax reduction and selling at a low multiple while still growing slowly with a long runway and some operating leverage. Insofar that it is true that reduced corporate rates will eventually cause companies to reduce prices as the excess profits are competed away or at least slow the rate of price increases, dva should be insulated from this. It's the low cost producer in a duopoly market where the prices aren't set by the market because there isn't price discovery. Instead we have layers of slow moving bureaucracy plus on the medicare/caid side prices have already been frozen until 2019. 

I reduced from 15%-10% at 68 and will be adding if it gets much cheaper.
Title: Re: DVA – DaVita HealthCare Partners
Post by: no_free_lunch on May 08, 2017, 11:49:47 AM
Thanks for your input and bringing this up again Flesh.

Would anyone have any idea, even an approximation of what normalized free cash flow is?  E.g. approximately what would you expect on average over the next few years?  They are showing $1.8B for trailing 12 months but 40% was just in the most recent quarter and I think there was a one off in there.

I continue to have concerns about some type of technological replacement but admittedly based on little evidence.  In some ways this reminds me of a tobacco company or health insurer where there is always these threats to their existence and yet they continue to just pump out the cash.
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on May 16, 2017, 11:27:22 AM
Just added at 62.45

http://www.businessinsider.com/john-oliver-healthcare-story-davita-dialysis-2017-5

Title: Re: DVA – DaVita HealthCare Partners
Post by: jgyetzer on May 16, 2017, 11:50:20 AM
Seems like a perfect point to do so. Most of that Oliver bit is sensationalized. Little to do with the underlying business...
Title: Re: DVA – DaVita HealthCare Partners
Post by: writser on May 16, 2017, 12:03:13 PM
Seems like a perfect point to do so. Most of that Oliver bit is sensationalized. Little to do with the underlying business...

Probably you are right but the situation looks eerily like something we've seen before. Crazy CEO, healthcare roll-up, horrible balance sheet, famous gurus are long, company is possibly gaming the system, a few smart shorts are honing in on the situation .. Obviously that's a cheesy comparison and DVA looks way more fairly priced than VRX but I'd be at least a little bit careful. There's some reflexivity embedded in situations such as this: if public sentiment turns against DVA things can go downhill fast.

That said I have not nearly done as much homework as flesh so you should probably ignore me. Just a comment from the sidelines.
Title: Re: DVA – DaVita HealthCare Partners
Post by: racemize on May 16, 2017, 12:08:50 PM
I remember this company having some weird situation where most of their profits came from a very small population of who they were serving, which turned me off of it from the outset.  Was it that only the private insurers gave the profit?
Title: Re: DVA – DaVita HealthCare Partners
Post by: maybe4less on May 16, 2017, 12:15:33 PM
I remember this company having some weird situation where most of their profits came from a very small population of who they were serving, which turned me off of it from the outset.  Was it that only the private insurers gave the profit?

Yes, that's correct for the dialysis business at least.
Title: Re: DVA – DaVita HealthCare Partners
Post by: rb on May 16, 2017, 12:24:54 PM
I remember this company having some weird situation where most of their profits came from a very small population of who they were serving, which turned me off of it from the outset.  Was it that only the private insurers gave the profit?
That's correct. It's what put me off from buying it a few years ago.

Basically people requiring dialysis are overwhelmingly of the older variety and they fall under Medicare. Medicare's pricing is pretty tight and they even had a price cut from Medicare a couple of years ago as I remember though not as steep as Medicare was looking for. I should mention that I'm not sure whether to say that all the profit comes from the private insurers is entirely accurate. This is because without the Medicare business paying for the rent, the light, and such DaVita would not be able to service the private business.

However I think that the thesis has changed because of the new administration. Under the current regime I don't see Medicare pushing against them so much on one hand and on the other hand there may be more people pushed into private insurance and thus higher fees for DVA. I'm not entirely sure about this though. There's also quite a few non-profits in the dialysis space that are of some concern.
Title: Re: DVA – DaVita HealthCare Partners
Post by: roark33 on May 16, 2017, 12:37:49 PM
The situation here is really clear if you open the 10-k.

They have basically struck a three-way deal with private insurance companies, medicare/medicaid and dialysis providers.

If you are under a commercial plan, i.e. under 65, the commercial insurance provider will only have to cover your dialysis treatment for 30 months.  After that, you are kicked to medicare, where the providers basically lose money until you get a transplant or pass away.

medicare can't really cut this because providers are already money losing and if commercial tries to cut it, the providers, DVA and Fresenius will protest to the govt to change the 30 month rule to 36 months or something like that. 

It's a 3-way dance and Davita constantly gets caught sticking their hand in the cookie jar trying to juice their profits.  The EPO usage issues, charity premium pushing people to commercial instead of medicaid, etc, etc.  Davita doesn't have clean hands, but they are basically serving 89% of their customers at money-losing prices, so there is that. 

Chanos/Oliver have a lot of things right, but Davita isn't exactly making a profit off the govt here and they should theoretically be making more money if the commercial insurance companies didn't have such a strong lobby to create this 30-month rule.  What other diagnosis have this type of rule in the US....none.

 

Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on May 16, 2017, 01:12:02 PM
I don't expect anything fantastic here, 10-20% a year for a couple year's at todays prices seems reasonable, better than that with tax reform. Less economic sensitivity is a box I don't mind checking. When the price freeze ends in 19' that could be huge as well, maybe that starts getting priced in about a year or so from now.

I think the company should be private.

The CEO IS weird. Thiry and the ceo from trip are both too over the top for me. The trip ceo always reminds me of that guy from office space, the TPS report guy. His voice drives me crazy, I don't need a therapist, I'm always waiting for him to ask me how I feel on the earnings calls.
Title: Re: DVA – DaVita HealthCare Partners
Post by: jgyetzer on May 16, 2017, 01:12:48 PM
Certainly not without flaw ethically, but they are providing lifesaving services that would otherwise be unavailable so I think the likelihood of regulation to the point of failure is low due to political risk to whomever goes after these centers.  (Who wants to take credit/blame for shutting down grandma's dialysis unit?)

As far as private vs. gov't payers it's true that they account for all profits from the 10% of patients on private plans. The transition to Medicare actually occurs after only 90 days on hemodialysis. A mitigating factor is that this is a high fixed cost business and if the government payor patient base can be thought of as marginal revenues after all fixed costs are covered by the private patients, then treating Medicare is still a net positive.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on May 17, 2017, 05:02:37 PM
I remember this company having some weird situation where most of their profits came from a very small population of who they were serving, which turned me off of it from the outset.  Was it that only the private insurers gave the profit?

Yes, that's correct for the dialysis business at least.

They make their profits from private insured patients (%10 of total), the government paid patient actually lose a bit of money, but also ensure coverage of fixed costs.
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on May 25, 2017, 04:43:50 PM
Just listened to capital markets day. Here's the short version as I'm short on time.

International Dialysis becoming break even for the first time in 18 profitable in 19.

DMG ebitda expected to grow massively 17-19'

Medicare/caid rates improving in 18' then moving to market basket rates in 19 (moderate price increases).

New cfo has private equity background.

They are planning on bringing there debt ratio from the historical 3x to higher than that. In the mean time ebitda is expanding and there's plenty of cash currently and accumulating on the balance sheet. Why then should dva take on more debt?

Obviously the only possibility I can think of short of a massive acquisition which is unlikely, is massive buybacks. I think 19' is presumed to be the breakout year having all the moving parts moving into place concretely that year and in the interim we'll see massive share count reduction and debt levels moving up. The ceo was super opaque here about any timing and only being directional.

There's a lot more but that's the short version. Check out the replay.

Title: Re: DVA – DaVita HealthCare Partners
Post by: rb on June 05, 2017, 10:50:56 PM
Did anyone look in detail at American Renal Associates (ARA). If so why are they doing so much worse than DVA? As I understand it these dialysis centers are pretty standard (nothing special about DVA centers) and their product is a commodity. In this case you'd expect clinics and profitability to be similar across clinics. So why is DVA doing better than these other guys?
Title: Re: DVA – DaVita HealthCare Partners
Post by: winjitsu on June 06, 2017, 02:36:24 AM
Did anyone look in detail at American Renal Associates (ARA). If so why are they doing so much worse than DVA? As I understand it these dialysis centers are pretty standard (nothing special about DVA centers) and their product is a commodity. In this case you'd expect clinics and profitability to be similar across clinics. So why is DVA doing better than these other guys?

My guess is the government insurance/private insurance customer mix. It's something you can't control [unless... you decide to donate to a foundation that pays the premiums for government insured patients to switch over to private insurance :)]
Title: Re: DVA – DaVita HealthCare Partners
Post by: DeepSouth on June 06, 2017, 05:36:06 AM
Did anyone look in detail at American Renal Associates (ARA). If so why are they doing so much worse than DVA? As I understand it these dialysis centers are pretty standard (nothing special about DVA centers) and their product is a commodity. In this case you'd expect clinics and profitability to be similar across clinics. So why is DVA doing better than these other guys?

ARA has fewer treatments per patient, fewer patients per clinic, more Medicare quality penalties, and was more aggressive in taking charity assisted ACA exchange patients.
Title: Re: DVA – DaVita HealthCare Partners
Post by: rb on June 06, 2017, 06:51:31 PM
Is there a particular reason why davita would have a better patient mix the someone like ARA? The way i understand it is that patients essentially go to the nearest clinic and DaVita's centers aren't exactly "luxurious". I'm thinking that maybe they're located in more affluent areas but at DVAs size i doubt it's that.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DeepSouth on June 08, 2017, 02:45:20 PM
Is there a particular reason why davita would have a better patient mix the someone like ARA? The way i understand it is that patients essentially go to the nearest clinic and DaVita's centers aren't exactly "luxurious". I'm thinking that maybe they're located in more affluent areas but at DVAs size i doubt it's that.

I think ARA actually has higher % of commercial payors than DVA but still generates weaker $/treatment
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on June 13, 2017, 02:23:16 PM
Does anyone have a feel for why Fresenius trades at such a premium to DVA? 

Putting Thiry's eccentricities and management style aside, as far as I can tell, DVA might be the better of the two major players in the US market?  Is this solely by the hand of John Oliver? 
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on June 14, 2017, 08:09:47 PM
i think it's because DVA's HCP/DMA division has been performing poorly since been acquired by DVA.
Title: Re: DVA – DaVita HealthCare Partners
Post by: K2SO on June 15, 2017, 07:43:01 AM
Interesting comments from Jim Chanos on rent seeking in US healthcare and dialysis in particular (yes, he's short, so take it with a grain of salt). In particular, he points to dialysis costs as a key cause of the failure of ACA exchanges.

https://www.bloomberg.com/news/videos/2017-06-07/invest-spotlight-jim-chanos-makes-his-calls-video

Relevant comments start around 9:00.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Jurgis on June 15, 2017, 10:55:44 AM
OT: Good interview with Chanos.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Foreign Tuffett on June 25, 2017, 06:15:35 PM
One issue that I don't think has been mentioned yet is that Kent Thiry is seriously exploring running for governor of Colorado. Obviously this it would bring invite even more scrutiny of DaVita, as well as mean that the company would have to find a new CEO. Regardless of his eccentricities (which I think are more calculated than they appear at first glance), Thiry's been a very good CEO. I suspect uncertainty over this is one of the factors depressing the stock price.

http://www.denverpost.com/2017/06/25/kent-thiry-davita-ceo-colorado-governor-race/
 (http://www.denverpost.com/2017/06/25/kent-thiry-davita-ceo-colorado-governor-race/)

Also, DaVita recently launched "DaVita Health Solutions", a platform to provide home-based care to chronically ill patients. Given the lack of success they've had thus far, I'm a little puzzled by their continued attempts to expand beyond kidney care. Does anyone have any thoughts on this?

Title: Re: DVA – DaVita HealthCare Partners
Post by: rogermunibond on June 28, 2017, 09:37:59 AM
Interesting history on how the hemodialysis space became an oligopoly

I think it dates from mid 2010s.

Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on June 28, 2017, 06:29:17 PM
Roger - thank you for posting the Boston University study.
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on July 24, 2017, 07:09:05 PM
http://www.denverpost.com/2017/07/24/davita-ceo-kent-thirty-will-not-run-colorado-governor/

DaVita Inc. CEO Kent Thiry announced Monday that he would not join Colorado’s crowded race for governor — ending months of speculation about his political ambitions.

Title: Re: DVA – DaVita HealthCare Partners
Post by: jgyetzer on August 02, 2017, 01:31:28 PM
I'm surprised by the drastic selloff today. Q2 results were pretty much sure and steady and nothing major unexpected. Wondering what disappointed people so badly. The pause in repurchases perhaps?
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on August 02, 2017, 02:15:40 PM
I'm surprised by the drastic selloff today. Q2 results were pretty much sure and steady and nothing major unexpected. Wondering what disappointed people so badly. The pause in repurchases perhaps?

I don't think so. I read the con call transcript. They bought 2% of shares during qtr. And they are continuing with repurchases.  I do think there is nervousness over some proposed California legislation that would raise costs. Apparently has to do with the skilled nurse to patient ratio. But DaVita has stellar ratings on care - so it seems very unnecessary. Also another CA legislation effort to cap fees.  Both are driven by CA unions.  But California is DVA's largest market by far.

My sense is you have this typical reimbursement uncertainty with HC changing landscape.

Would like to hear other opinions - but it just seems like uncertainty, not facts.
Title: Re: DVA – DaVita HealthCare Partners
Post by: jgyetzer on August 02, 2017, 02:42:16 PM
Yeah - I see your point on the legislation question but I can't remember a time in the last several years where there wasnt some regulatory or reimbursement related uncertainty...in all cases Davita would be hurt but other providers would hurt worse so I always chalked these issues up as a wash.
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on August 02, 2017, 04:33:44 PM
Well, I hope you're right cause I own DVA and bought more today.

But the CA legislation also proposes a cap on profits - above 15% gets rebated to payors.
What do you expect from a socialist state like CA?

Here's a few links for you:

http://www.salon.com/2017/06/10/california-bill-addresses-safety-concerns-at-dialysis-clinics_partner/

http://www.mercurynews.com/2017/03/28/dialysis-centers-california-bill-proposes-to-improve-staffing-inspections/

State Bill (SB349)   Proposed legislation to fix personnel to patient ratios:

https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180SB349

AB251   - Proposed legislation to cap profits at 15% - and force rebates back to payers

https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180AB251

I don't know if this is why the stock got hit so hard - so I'm speculating here.

In there Capital Markets Day a couple months ago, they talk about around $3.5B if FCF being generated over the
next few years. With a market cap of $11B - let's hope they step up the repurchases.



Title: Re: DVA – DaVita HealthCare Partners
Post by: forest81 on August 03, 2017, 12:26:43 AM
5b in free cash flow ex development capex 2017-2020. 11b market cap.
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on August 03, 2017, 03:12:21 AM
5b in free cash flow ex development capex 2017-2020. 11b market cap.

i stand corrected!

thanks
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on August 03, 2017, 07:51:01 AM
I bought more...selloff seems overdone. 

A concern of mine is if DVA loses Thiry to politics...thoughts?
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 03, 2017, 07:58:56 AM
I bought more...selloff seems overdone. 

A concern of mine is if DVA loses Thiry to politics...thoughts?

http://www.denverpost.com/2017/07/24/davita-ceo-kent-thirty-will-not-run-colorado-governor/

Title: Re: DVA – DaVita HealthCare Partners
Post by: Foreign Tuffett on August 03, 2017, 08:05:58 AM
5b in free cash flow ex development capex 2017-2020. 11b market cap.

i stand corrected!

thanks

Didn't they include the ~$538 million VA settlement they received in Q1 of this year in the FCF guidance? I would probably exclude that amount from any valuation work since (1) it's a one-off and (2) has mostly been spent already on buybacks.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Foreign Tuffett on August 03, 2017, 08:22:42 AM
Well, I hope you're right cause I own DVA and bought more today.

But the CA legislation also proposes a cap on profits - above 15% gets rebated to payors.
What do you expect from a socialist state like CA?

CA is going to end up with a shortage of dialysis clinics if they continue down this route.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on August 03, 2017, 02:02:19 PM
https://data.medicare.gov/data/dialysis-facility-compare

CMS has made dialysis center data available, and they have consumer comparison site.

From my perusing Davita and Fresenius did about avg, mostly 3 stars.  Some nonprofits did much better, but the thing is a lot of nonprofits that had their own dialysis have gotten out of the biz.
Attached chart from the above data might provide a bit more insight.
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on August 03, 2017, 02:16:35 PM
Well, I hope you're right cause I own DVA and bought more today.

But the CA legislation also proposes a cap on profits - above 15% gets rebated to payors.
What do you expect from a socialist state like CA?

CA is going to end up with a shortage of dialysis clinics if they continue down this route.

From some of the links and the conference calls you can see the dialysis industry is fighting this - saying it will force many, perhaps 20% of these clinics to close, because they are unprofitable and not enough skilled help. This will flood the ER's with patients. You wonder if CA politicians actually have any brains at all. These unions are self serving. Bad for everyone except some employees.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on August 03, 2017, 03:04:54 PM
UnitedHealthcare Trims Dialysis Scheme Suit
https://www.law360.com/articles/836382/unitedhealthcare-trims-dialysis-scheme-suit
Dialysis Parent Co. Dismissed From UHC's Fraud Suit
https://www.law360.com/articles/921342/dialysis-parent-co-dismissed-from-uhc-s-fraud-suit
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on August 05, 2017, 12:36:10 PM
Don't think I've seen this posted here. Long term history of Davita from 1979 and background to the industry; good read.
Favorite quote "We are very much a new company," Thiry explained in an October 23, 2000 interview with the Los Angeles Business Journal. "The previous company was almost exclusively focused on shareholders, and our new mission is to be the provider, partner, and employer of choice. We realize that we have to satisfy our shareholders with a reasonable return, but that is not our primary mission." He did not do that bad considering returns were not his primary focus.

http://www.referenceforbusiness.com/history2/15/DaVita-Inc.html
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on August 06, 2017, 01:54:21 PM
Historical lows
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 06, 2017, 06:24:52 PM
Don't think I've seen this posted here. Long term history of Davita from 1979 and background to the industry; good read.
Favorite quote "We are very much a new company," Thiry explained in an October 23, 2000 interview with the Los Angeles Business Journal. "The previous company was almost exclusively focused on shareholders, and our new mission is to be the provider, partner, and employer of choice. We realize that we have to satisfy our shareholders with a reasonable return, but that is not our primary mission." He did not do that bad considering returns were not his primary focus.

http://www.referenceforbusiness.com/history2/15/DaVita-Inc.html

This one is good study too:
https://www.usrds.org/2015/download/vol2_USRDS_ESRD_15.pdf
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on August 06, 2017, 08:40:34 PM
you guys are posting some great stuff - thank  you!
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 06, 2017, 09:30:19 PM
From Bank of America research, I found following is interesting:

One of the dynamics within the US health care system broadly is the implicit cost
shifting from the government onto the private sector. The government (both Medicare
and Medicaid) set rates and although providers can lobby the government, they cannot
negotiate rates and are a rate taker. Historically, the government has set rates below
inflation as a way to help balance the budget. When 60% of your revenue is paying less
than inflation, providers go back to the 40% where they can negotiate, and try to get
rates that are above inflation. This has been a specific problem for dialysis, because
until 2014, dialysis was not guaranteed an automatic market basket update and each
year had to lobby Congress for an update
. As a result, many years the industry didn’t
receive any update, and we would estimate that over the past 40 years, the update has
averaged about 1%. Below we provide a theoretical example that is illustrative of what
has happened to dialysis rates over time. If we assume that rate in 1972 for both
commercial and Medicare were set at $150, but grew by 1% for Medicare each year and
commercial by 4%, then in 2016, Medicare rates would be $232 and Commercial rates
would be $842

----
so before 2014, medicare rates have failed to grow with inflation. On average it grows only 1% prior to 2014.
Good if it can grow with inflation going forward. Even a small growth compounded will make 70% of DVA business become profit positive.

However, the 2018 rate was only a growth of 0.8%: https://www.healthindustrywashingtonwatch.com/2017/07/articles/regulatory-developments/medicare-medicaid-services-regulations/cms-proposes-update-to-medicare-esrd-pps-payments-for-2018/

Title: Re: DVA – DaVita HealthCare Partners
Post by: Rasputin on August 07, 2017, 06:22:49 AM
On top of pressure on CMS ESRD PPS, mortality rate has come down, causing higher percentage of treatment paid by government.  It's crept up from 87% to almost 90% now  since 2005. 

While DVA Kidney Care rev per treatment has only grown $25 from 2005 to 2017 (from $322 to $347), I estimate commercial rate per treatment has grown from $830 in 2005 to $1150 in 2017.  It's a rough estimate because Davita rounds percentage of treatment paid by government to closest percent. 

In a sense, DVA KC is not rewarded for driving mortality rate lower.  It's a crazy payment system, but I like the moat.  It's an 8% position for me now. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 07, 2017, 08:16:04 AM
NxStage is being bought:
http://www.rttnews.com/2802665/nxstage-medical-inc-nxtm-is-up-sharply-after-bought-by-fresenius-medical.aspx

Mktcap is 2bn. DVA own 7% of it.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Rasputin on August 07, 2017, 08:46:25 AM
DVA sold its NxStage shares within the same purchase year

From 2008 10-K

NxStage agreement
 
In February 2007 we entered into a National Provider Agreement with NxStage, Inc. As a part of the agreement, we purchased outright all of our NxStage System One equipment then in use for $5.1 million, and have been purchasing a majority of our home-based hemodialysis equipment and supplies from NxStage. In connection with the provider agreement, we purchased two million shares of NxStage common stock in a private placement offering for $20 million, representing an ownership position of approximately 7%. We subsequently sold our NxStage Inc. shares in the second and third quarters of 2007 for approximately $25.9 million and recognized a pre-tax gain of $5.9 million or $3.6 million after tax. This pre-tax gain is included in other income.
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 07, 2017, 07:02:53 PM
It's a little amusing to me that Goldman sachs USA team has a Sell rating on DVA (for a year or so now), but their Europe team (different analysts) have a Conviction Buy rating on Fresenius
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 07, 2017, 07:07:21 PM
It's a little amusing to me that Goldman sachs USA team has a Sell rating on DVA (for a year or so now), but their Europe team (different analysts) have a Conviction Buy rating on Fresenius

On Fresenius, GS Europe analyst:
"what we see as highly compelling fundamentals, given 1) improving revenue /
treatment dynamics in the US, 2) ongoing opportunities for efficiencies,
and 3) earnings upside from care coordination. We reiterate Buy (on CL). "

On DVA, GS USA analyst:
"Aside from pricing and regulatory uncertainty, we remain concerned with lack of operating leverage in the business model and runway for growth" ..." We remain Sell on risks to the earnings growth story"

One of them has to be wrong.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Rasputin on August 08, 2017, 11:51:38 AM
I agree with both GS teams with regards to their take on the business and environment. 

Management seems incompetent if we just look at results between 2013 and today.
From beginning 2014 through end of 2016, management has spent $2 B beyond what they categorize as maintenance capex while EBITDA remains stagnant. 

I am a buyer though.  In a scenario where all capex = maintenance capex and they stop acquisition, I get fcf (cash by op activities minus all capex) of around $3.4 per share for 2018.
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on August 08, 2017, 11:56:11 AM
Thought this was worth mentioning.

"Whit Mayo - Robert W. Baird & Co., Inc.

Thanks. Good afternoon. Looking at the cost per treatment in the quarter, if I isolate all of the EPO purchases just within the June quarter, was it all under the new contract or did you have any purchases or any old inventory that you were working through rather I should say? And I'm just trying to think through the run rate going forward.

Kent J. Thiry - DaVita, Inc.

Yeah. All of the purchases were under the new contract for this quarter.

Whit Mayo - Robert W. Baird & Co., Inc.

So, does the second quarter have the full benefit of the new contract or is there a tail on this that we should consider as the year plays out?

Kent J. Thiry - DaVita, Inc.

It's got the benefit that's intended to have for this year."

And then at the end of the call......

"John W. Ransom - Raymond James & Associates, Inc.

Hey, sorry if you have addressed this. I'm just old and forgetful. But the cadence of the EPO purchasing benefit. I mean, we've taken some statements from the manufacturer to interpret that to mean, it's sort of equally weighted between this year and next year. Is that a fair way to think about it?

Kent J. Thiry - DaVita, Inc.

I don't know if we can comment on that. We have big restrictions on what we can say on the contract. So I think, we're going to have to pass on that one.

John W. Ransom - Raymond James & Associates, Inc.

Well. I thought I would try anyway. All right. Thank you.

Javier J. Rodriguez - DaVita, Inc.

Thank you.

Kent J. Thiry - DaVita, Inc.

Thanks, John. Good try.

John W. Ransom - Raymond James & Associates, Inc.

Yeah. Thanks."
Title: Re: DVA – DaVita HealthCare Partners
Post by: crastogi on August 09, 2017, 01:17:09 PM
I agree with both GS teams with regards to their take on the business and environment. 

Management seems incompetent if we just look at results between 2013 and today.
From beginning 2014 through end of 2016, management has spent $2 B beyond what they categorize as maintenance capex while EBITDA remains stagnant. 

I am a buyer though.  In a scenario where all capex = maintenance capex and they stop acquisition, I get fcf (cash by op activities minus all capex) of around $3.4 per share for 2018.

So, I am new, trying to understanding this business.  I got interested as the prices have come down.  Can someone please summarize the bull case? 
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on August 09, 2017, 03:03:54 PM
I'll just give you my view. Valuation-wise, if we are selling below 10X FCF and DVA continues to buy back 10% of their stock each year with their FCF - then 5 yrs from now, we are at 112M shares outstanding, doing maybe $1600M+ in operating income without
trying to grow, which DVA still does. So I get $14/share at that point. Does the stock still remain at $60?

DVA is still growing around 5% organically and rolling up other clinics too.  Growth is not even factored in.

You have to be fearful of re-imbursement rates - since this stuff is expensive. But we don't let people die in this country, and unless
we want many thousands more dying every year or flooding the emergency rooms - someone needs to perform this service.
I see no alternative to DaVita or Fresenius, who now control 70% of the business. The demand is predictable, the uncertainty of the future pricing keeps lots away.  DVA gets high marks for quality of care - and that is crucial to their success.

If someone can come up with reasonable alternatives about how this ESRD is going away - I might see it differently.

I guess my biggest concern is the HCP acquisition - and if this turns sharply positive, which Thiry says it does next year.
Then things look even better.
Title: Re: DVA – DaVita HealthCare Partners
Post by: matts on August 09, 2017, 04:30:58 PM
I'll just give you my view. Valuation-wise, if we are selling below 10X FCF and DVA continues to buy back 10% of their stock each year with their FCF - then 5 yrs from now, we are at 112M shares outstanding, doing maybe $1600M+ in operating income without
trying to grow, which DVA still does. So I get $14/share at that point. Does the stock still remain at $60?

DVA is still growing around 5% organically and rolling up other clinics too.  Growth is not even factored in.

You have to be fearful of re-imbursement rates - since this stuff is expensive. But we don't let people die in this country, and unless
we want many thousands more dying every year or flooding the emergency rooms - someone needs to perform this service.
I see no alternative to DaVita or Fresenius, who now control 70% of the business. The demand is predictable, the uncertainty of the future pricing keeps lots away.  DVA gets high marks for quality of care - and that is crucial to their success.

If someone can come up with reasonable alternatives about how this ESRD is going away - I might see it differently.

I guess my biggest concern is the HCP acquisition - and if this turns sharply positive, which Thiry says it does next year.
Then things look even better.

I don't understand this logic. If government programs and the major insurers decide to reimburse 10% less than the current rate will people just stop coming and die?! Of course not, Davita would adjust to the new market dynamics and eat the lower profit margins because it still makes good profits, just less than before. and THAT'S the bear case.

Title: Re: DVA – DaVita HealthCare Partners
Post by: cmlber on August 09, 2017, 04:39:44 PM
I'll just give you my view. Valuation-wise, if we are selling below 10X FCF and DVA continues to buy back 10% of their stock each year with their FCF - then 5 yrs from now, we are at 112M shares outstanding, doing maybe $1600M+ in operating income without
trying to grow, which DVA still does. So I get $14/share at that point. Does the stock still remain at $60?

DVA is still growing around 5% organically and rolling up other clinics too.  Growth is not even factored in.

You have to be fearful of re-imbursement rates - since this stuff is expensive. But we don't let people die in this country, and unless
we want many thousands more dying every year or flooding the emergency rooms - someone needs to perform this service.
I see no alternative to DaVita or Fresenius, who now control 70% of the business. The demand is predictable, the uncertainty of the future pricing keeps lots away.  DVA gets high marks for quality of care - and that is crucial to their success.

If someone can come up with reasonable alternatives about how this ESRD is going away - I might see it differently.

I guess my biggest concern is the HCP acquisition - and if this turns sharply positive, which Thiry says it does next year.
Then things look even better.

Is there an explanation, besides stupidly conservative guidance, as to why at the investor day DVA projected 4-9% net income growth, but EPS growth (net income growth boosted by share repurchases) is only projected to be 5-12%?  I.e., projecting that they reduce the share count by 1-3% per year. 

But they say they'll have $3.35Bn available for share repurchases over that time frame, which would mean a pace of 10%/year share repurchases.  Is there something I'm missing?
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on August 09, 2017, 05:08:50 PM
I'll just give you my view. Valuation-wise, if we are selling below 10X FCF and DVA continues to buy back 10% of their stock each year with their FCF - then 5 yrs from now, we are at 112M shares outstanding, doing maybe $1600M+ in operating income without
trying to grow, which DVA still does. So I get $14/share at that point. Does the stock still remain at $60?

DVA is still growing around 5% organically and rolling up other clinics too.  Growth is not even factored in.

You have to be fearful of re-imbursement rates - since this stuff is expensive. But we don't let people die in this country, and unless
we want many thousands more dying every year or flooding the emergency rooms - someone needs to perform this service.
I see no alternative to DaVita or Fresenius, who now control 70% of the business. The demand is predictable, the uncertainty of the future pricing keeps lots away.  DVA gets high marks for quality of care - and that is crucial to their success.

If someone can come up with reasonable alternatives about how this ESRD is going away - I might see it differently.

I guess my biggest concern is the HCP acquisition - and if this turns sharply positive, which Thiry says it does next year.
Then things look even better.

I don't understand this logic. If government programs and the major insurers decide to reimburse 10% less than the current rate will people just stop coming and die?! Of course not, Davita would adjust to the new market dynamics and eat the lower profit margins because it still makes good profits, just less than before. and THAT'S the bear case.

I said the risk is in the re-imbursement rates. No kidding that's the bear case.
But of course, you likely see many clinics close and that creates chaos until the market adjustments are made.
Title: Re: DVA – DaVita HealthCare Partners
Post by: crastogi on August 09, 2017, 06:04:51 PM
I'll just give you my view. Valuation-wise, if we are selling below 10X FCF and DVA continues to buy back 10% of their stock each year with their FCF - then 5 yrs from now, we are at 112M shares outstanding, doing maybe $1600M+ in operating income without
trying to grow, which DVA still does. So I get $14/share at that point. Does the stock still remain at $60?

DVA is still growing around 5% organically and rolling up other clinics too.  Growth is not even factored in.

You have to be fearful of re-imbursement rates - since this stuff is expensive. But we don't let people die in this country, and unless
we want many thousands more dying every year or flooding the emergency rooms - someone needs to perform this service.
I see no alternative to DaVita or Fresenius, who now control 70% of the business. The demand is predictable, the uncertainty of the future pricing keeps lots away.  DVA gets high marks for quality of care - and that is crucial to their success.

If someone can come up with reasonable alternatives about how this ESRD is going away - I might see it differently.

I guess my biggest concern is the HCP acquisition - and if this turns sharply positive, which Thiry says it does next year.
Then things look even better.

I don't understand this logic. If government programs and the major insurers decide to reimburse 10% less than the current rate will people just stop coming and die?! Of course not, Davita would adjust to the new market dynamics and eat the lower profit margins because it still makes good profits, just less than before. and THAT'S the bear case.

I said the risk is in the re-imbursement rates. No kidding that's the bear case.
But of course, you likely see many clinics close and that creates chaos until the market adjustments are made.

Thanks everyone for your inputs.  I am concerned about reimbursement rates too.  Looks like they break even/loose little on medicare reimbursements and make money on private insurance. 

However, if things get really bad they have the option to close/ turn away/meter medicaid/medicare patients. 
Does anyone know who has a lower cost structure, Fresenius or DVA? 

Title: Re: DVA – DaVita HealthCare Partners
Post by: Rasputin on August 09, 2017, 06:42:54 PM
I'll just give you my view. Valuation-wise, if we are selling below 10X FCF and DVA continues to buy back 10% of their stock each year with their FCF - then 5 yrs from now, we are at 112M shares outstanding, doing maybe $1600M+ in operating income without
trying to grow, which DVA still does. So I get $14/share at that point. Does the stock still remain at $60?

DVA is still growing around 5% organically and rolling up other clinics too.  Growth is not even factored in.

You have to be fearful of re-imbursement rates - since this stuff is expensive. But we don't let people die in this country, and unless
we want many thousands more dying every year or flooding the emergency rooms - someone needs to perform this service.
I see no alternative to DaVita or Fresenius, who now control 70% of the business. The demand is predictable, the uncertainty of the future pricing keeps lots away.  DVA gets high marks for quality of care - and that is crucial to their success.

If someone can come up with reasonable alternatives about how this ESRD is going away - I might see it differently.

I guess my biggest concern is the HCP acquisition - and if this turns sharply positive, which Thiry says it does next year.
Then things look even better.

I don't understand this logic. If government programs and the major insurers decide to reimburse 10% less than the current rate will people just stop coming and die?! Of course not, Davita would adjust to the new market dynamics and eat the lower profit margins because it still makes good profits, just less than before. and THAT'S the bear case.

For me, 10% drop in rev/treatment (from $347 to $312) is so disruptive that average OI/center will be so low that nobody will open new centers, with possibility of significant # of dialysis center closures.  It will cause MLR to be around 92 for both Davita and Fresenius.

MLR of 85 (similar to California AB 251), though, is a reasonable downside.  That will cause roughly 2.7% drop in DVA Kidney Care OI margin or around $300 million in annual EBIT.  I think DVA will make up this $300 million over the next 3 years from improvement in DMG (roughly $100 million), International (roughly $50 million), and continuing opening de novo (3.5% growth in # of treatments, EBIT improvement of $150 million).  By 2020, DVA EBIT will be equal to 2017.  It wil also have 20% less shares outstanding (assuming it can buy back 7% of its shares outstanding annually for $900 million) with roughly $900 million more net debt.  If everybody is happy with 85% MLR and 10 yr treasury remains around 2.5%, I think 12 times EBIT valuation is pretty reasonable (8.5% pretax return for stable, slightly growing business).  That's EV of $20.4 Billion.  Subtract $9.4 Billion of net debt, equity valuation should be roughly $11 Billion.  Divide that by 155 million shares outstanding = $70 per share in 2020.  Not a great return, but not a permanent loss. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 09, 2017, 07:09:25 PM
- A couple years ago,  the govt wanted to lower the payment rate by something like 10%. They proposed it and asked public for opinions. DVA stock tanked. About 3 months later, government withdrew their proposal. It's very hard to cut the payment. Whenever they do that, DVA's customers call congressman. Their life depend on it. DVA is already losing money on each medicare treatment.
- In fact, the government is on the same team with DVA. In the past, the government pay for all the treatments. Now, the government require private insurers pay for 30 months. I will not be surprised that in a few years private insurers will have to pay for 40, 60 months instead of currently 30 months. The portion that private insurers pay will only get higher in the future. The government encouraged/turned a blind eye on the consolidations in this industry because they want DVA to have negotiation power to extract more money from private insurers.
- Recession will actually hurt DVA, because less people employed means less private insurance payment. But as economy getting better, DVA shall benefit.
- 90% of the profits are from a small number of payers. But, that means this small number could grow to a big number in certain cases (i.e. when everyone has private insurance) , and that means a lot of profits.
- HCP is at least break even for now.
- The only worry is private insurer want to lower the rate. But I don't think they have much say. DVA/FMS will just say no, and Government is behind them.

Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 09, 2017, 08:03:40 PM
I'll just give you my view. Valuation-wise, if we are selling below 10X FCF and DVA continues to buy back 10% of their stock each year with their FCF - then 5 yrs from now, we are at 112M shares outstanding, doing maybe $1600M+ in operating income without
trying to grow, which DVA still does. So I get $14/share at that point. Does the stock still remain at $60?

DVA is still growing around 5% organically and rolling up other clinics too.  Growth is not even factored in.

You have to be fearful of re-imbursement rates - since this stuff is expensive. But we don't let people die in this country, and unless
we want many thousands more dying every year or flooding the emergency rooms - someone needs to perform this service.
I see no alternative to DaVita or Fresenius, who now control 70% of the business. The demand is predictable, the uncertainty of the future pricing keeps lots away.  DVA gets high marks for quality of care - and that is crucial to their success.

If someone can come up with reasonable alternatives about how this ESRD is going away - I might see it differently.

I guess my biggest concern is the HCP acquisition - and if this turns sharply positive, which Thiry says it does next year.
Then things look even better.

I don't understand this logic. If government programs and the major insurers decide to reimburse 10% less than the current rate will people just stop coming and die?! Of course not, Davita would adjust to the new market dynamics and eat the lower profit margins because it still makes good profits, just less than before. and THAT'S the bear case.

I said the risk is in the re-imbursement rates. No kidding that's the bear case.
But of course, you likely see many clinics close and that creates chaos until the market adjustments are made.

Thanks everyone for your inputs.  I am concerned about reimbursement rates too.  Looks like they break even/loose little on medicare reimbursements and make money on private insurance. 

However, if things get really bad they have the option to close/ turn away/meter medicaid/medicare patients. 
Does anyone know who has a lower cost structure, Fresenius or DVA?

This happened before. Govt have tried to lower the rate a couple years ago. Didn't work. Too many phone calls from congressman and patients i guess.
A lot of none-profit and smaller places will have to close if they lower the rate.
if people can't get the service from DVA, even just for a few days, they likely will end up going to ERs.. A hospital stay can run up to $5000-15000/night.  Neither medicare nor private insurer want that.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on August 09, 2017, 08:25:35 PM
I'll just give you my view. Valuation-wise, if we are selling below 10X FCF and DVA continues to buy back 10% of their stock each year with their FCF - then 5 yrs from now, we are at 112M shares outstanding, doing maybe $1600M+ in operating income without
trying to grow, which DVA still does. So I get $14/share at that point. Does the stock still remain at $60?

DVA is still growing around 5% organically and rolling up other clinics too.  Growth is not even factored in.

You have to be fearful of re-imbursement rates - since this stuff is expensive. But we don't let people die in this country, and unless
we want many thousands more dying every year or flooding the emergency rooms - someone needs to perform this service.
I see no alternative to DaVita or Fresenius, who now control 70% of the business. The demand is predictable, the uncertainty of the future pricing keeps lots away.  DVA gets high marks for quality of care - and that is crucial to their success.

If someone can come up with reasonable alternatives about how this ESRD is going away - I might see it differently.

I guess my biggest concern is the HCP acquisition - and if this turns sharply positive, which Thiry says it does next year.
Then things look even better.

I don't understand this logic. If government programs and the major insurers decide to reimburse 10% less than the current rate will people just stop coming and die?! Of course not, Davita would adjust to the new market dynamics and eat the lower profit margins because it still makes good profits, just less than before. and THAT'S the bear case.

I said the risk is in the re-imbursement rates. No kidding that's the bear case.
But of course, you likely see many clinics close and that creates chaos until the market adjustments are made.

Thanks everyone for your inputs.  I am concerned about reimbursement rates too.  Looks like they break even/loose little on medicare reimbursements and make money on private insurance. 

However, if things get really bad they have the option to close/ turn away/meter medicaid/medicare patients. 
Does anyone know who has a lower cost structure, Fresenius or DVA?

This happened before. Govt have tried to lower the rate a couple years ago. Didn't work. Too many phone calls from congressman and patients i guess.
A lot of none-profit and smaller places will have to close if they lower the rate.
if people can't get the service from DVA, even just for a few days, they likely will end up going to ERs.. A hospital stay can run up to $5000-15000/night.  Neither medicare nor private insurer want that.

Yep...

(http://www.uglymule.com/images/DVA-Improvements-in-Care.png)
Title: Re: DVA – DaVita HealthCare Partners
Post by: skanjete on August 10, 2017, 01:27:17 AM
I guess it tells something that everyone is talking about the bear case these days...

Government could indeed lower reimbursements.
But government could likewise also lower corporate taxes, of which DVA pays roughly 35%.

Actually, I thing in the long term DVA performs a service that's essential to the community and will be appropriately rewarded for it, the one way or the other. That is, as long there won't be any competing (better) treatment for dialysis.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on August 10, 2017, 04:19:49 AM
The biggest risk are not the Medicaid or Medicare reimbursement rates, but that the private insurers wake up and start to negotiate rates down closer to Medicare levels, which are roughly 1/3 of what they pay now.
The Government business fills the rooms, but the private insurance business fills the coffers. I also think that LT, the trend will go to home dialysis, since 3 treatments a week does not cut it for the medical outcome. That said, DVA does look very cheap and a lot if not all of the above is already somewhat discounted in the stock price.

Also, DVA will Not be able to buy back 10% of their stock every year, unless they are willing to lever up their balance sheet significantly.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Rasputin on August 10, 2017, 04:44:14 AM
The biggest risk are not the Medicaid or Medicare reimbursement rates, but that the private insurers wake up and start to negotiate rates down closer to Medicare levels, which are roughly 1/3 of what they pay now.
The Government business fills the rooms, but the private insurance business fills the coffers. I also think that LT, the trend will go to home dialysis, since 3 treatments a week does not cut it for the medical outcome. That said, DVA does look very cheap and a lot if not all of the above is already somewhat discounted in the stock price.

Also, DVA will Not be able to buy back 10% of their stock every year, unless they are willing to lever up their balance sheet significantly.

Private insurers were never asleep.  They are not stupid. 

CMS ESRD PPS (government rate) is published annually.  Dialysis is very transparent, CMS gets all the data.  The reason why private rates are around 4 to 5 times CMS rate is because private insurers only pay for 33 months.  Medicare becomes the primary payor for all dialysis patients the day after 33 month ends.  It's called MSP period (Medicare as Secondary Payor) period.  John Oliver show, Chanos don't mention this.  The MSP period is also the reason why dialysis companies are being punished for lowering mortality rate.  The longer a person live on dialysis beyond 33 months, the more losses that patient inflict on the dialysis center. 

The MSP period started at 21 months in 1981, extended to current 33 months in 1997.  It maybe time to extend this MSP period if private payor started to try to avoid this costly group of patients. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 10, 2017, 05:58:46 AM
I think this stock is undervalued and mispriced because most investors think of the govt and private insurers as two separate groups of clients of dva.
They failed to evaluate them as a group, and the dynamic and interplay of the two groups.
It's also wrong to say govt clients are not profitable. DVA's profit model is like a pyramid, similar to amazon's model, where most customers are not profitable (but cash flow helped building up infacstructure) and a small group of customers are very profitable.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on August 10, 2017, 06:15:41 AM
The biggest risk are not the Medicaid or Medicare reimbursement rates, but that the private insurers wake up and start to negotiate rates down closer to Medicare levels, which are roughly 1/3 of what they pay now.
The Government business fills the rooms, but the private insurance business fills the coffers. I also think that LT, the trend will go to home dialysis, since 3 treatments a week does not cut it for the medical outcome. That said, DVA does look very cheap and a lot if not all of the above is already somewhat discounted in the stock price.

Also, DVA will Not be able to buy back 10% of their stock every year, unless they are willing to lever up their balance sheet significantly.

Private insurers were never asleep.  They are not stupid. 

CMS ESRD PPS (government rate) is published annually.  Dialysis is very transparent, CMS gets all the data.  The reason why private rates are around 4 to 5 times CMS rate is because private insurers only pay for 33 months.  Medicare becomes the primary payor for all dialysis patients the day after 33 month ends.  It's called MSP period (Medicare as Secondary Payor) period.  John Oliver show, Chanos don't mention this.  The MSP period is also the reason why dialysis companies are being punished for lowering mortality rate.  The longer a person live on dialysis beyond 33 months, the more losses that patient inflict on the dialysis center. 

The MSP period started at 21 months in 1981, extended to current 33 months in 1997.  It maybe time to extend this MSP period if private payor started to try to avoid this costly group of patients.

Thanks for pointing this out.

I was thinking that the improved mortality meant that DVA was truly aligned with patient values & benefited from this alliance but it turns out they'd be better off if the figures weren't so good.

Tough way to look at churn but...

(http://www.uglymule.com/images/DVA-till-Death-do-Us-Part.png)

John Oliver's bear case seems valid & Thiry might be a bit of a loon but ultimately, Davita seems to do a pretty fair job of keeping people alive.

As an aside, shouldn't CMS rates improve from 2018 forward due to this?

(http://www.uglymule.com/images/DVA-CMS-Overpayment-Bundling.png)
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on August 11, 2017, 03:46:37 AM
Don't think I've seen this posted here. Long term history of Davita from 1979 and background to the industry; good read.
Favorite quote "We are very much a new company," Thiry explained in an October 23, 2000 interview with the Los Angeles Business Journal. "The previous company was almost exclusively focused on shareholders, and our new mission is to be the provider, partner, and employer of choice. We realize that we have to satisfy our shareholders with a reasonable return, but that is not our primary mission." He did not do that bad considering returns were not his primary focus.

http://www.referenceforbusiness.com/history2/15/DaVita-Inc.html

This one is good study too:
https://www.usrds.org/2015/download/vol2_USRDS_ESRD_15.pdf

2016 report
https://www.usrds.org/2016/view/Default.aspx
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on August 11, 2017, 04:38:18 AM
I think this stock is undervalued and mispriced because most investors think of the govt and private insurers as two separate groups of clients of dva.
They failed to evaluate them as a group, and the dynamic and interplay of the two groups.
It's also wrong to say govt clients are not profitable. DVA's profit model is like a pyramid, similar to amazon's model, where most customers are not profitable (but cash flow helped building up infacstructure) and a small group of customers are very profitable.

I fail to see why this prevents the private insurers to demand lower rates  for dialysis. The current structure that private insurance pays 3-5x more for the same service than the government  is certainly not rational. I understand that the government underplays and private insurance overpays to compensate, but this still does not make sense.

And how can DVA say no to a private insurance  that demand the price to go from 5x to 2x, when they take Medicare patients for a much lower treatment term at the same price. It sounds like an Implicit agreement that is just meant to be broken.
Title: Re: DVA – DaVita HealthCare Partners
Post by: matts on August 11, 2017, 07:12:06 AM
I think this stock is undervalued and mispriced because most investors think of the govt and private insurers as two separate groups of clients of dva.
They failed to evaluate them as a group, and the dynamic and interplay of the two groups.
It's also wrong to say govt clients are not profitable. DVA's profit model is like a pyramid, similar to amazon's model, where most customers are not profitable (but cash flow helped building up infacstructure) and a small group of customers are very profitable.

I fail to see why this prevents the private insurers to demand lower rates  for dialysis. The current structure that private insurance pays 3-5x more for the same service than the government  is certainly not rational. I understand that the government underplays and private insurance overpays to compensate, but this still does not make sense.

And how can DVA say no to a private insurance  that demand the price to go from 5x to 2x, when they take Medicare patients for a much lower treatment term at the same price. It sounds like an Implicit agreement that is just meant to be broken.

Agreed. I think some are just refusing the see the larger picture. It reminds me of people trying to rationalize Valeant charging thousands for a tube of foot cream. "That's how the system works, and if insurance companies demand a lower price then Valeant will just say no"

Can someone provide evidence that the MARGINAL client will unprofitable for davita if the private rates go lower by 10%?
 Seems to me like DVA is making too much money for that to be the case. And if the marginal client is profitable, then I believe Thiry will whine and complain but in the end eat it, not close any centers, and everyone who gets care now will continue to get care. He's trying to get paid, and knows that the larger the company is, the more he can shovel his way.

 
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on August 11, 2017, 07:40:53 AM
It seems the market agrees with both of you guys, that DaVita will have to take these lower re-imbursement prices forever.
Could be. There is no certainty.  Maybe the best solution is for the government to take over the clinics and run them like the VA Hospitals. That should be good for the quality of care.
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 11, 2017, 07:46:56 AM
If private insurer want lower payment from dva, and dva say no, where else the patience can get the treatment? They will go to hospitals, and the hospitals will bill much higher amount (plus maybe other tests). So the reality is DVA is already the low cost solution for private insurers.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Rasputin on August 11, 2017, 08:19:31 AM
Private payor rate/treatment down 10% is a reasonable downside.  Assuming government rate/treatment remains the same, it will cause revenue/treatment to be down $11 from $347 to $336, 85 MLR.  EBIT will be down $300 million, which DVA will offset in 3 years. 

I have made mistake with Valeant, so I went through the lists.  One of them is: Can payors threaten to exclude DVA's service?   For VRX derm rx, the answer is yes.  For DVA the answer is no, since it's the lowest cost option. 

I think getting $347 for a service that costs $286 is reasonable.  And DVA's cost is similar to Fresenius's. 

In my view, it's time to extend the MSP period, since mortality rate has come down from 20% in 1997 to under 14% (people living longer on dialysis), then private rates can come down and the difference between private rate vs govt rate won't be so stark. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: Rasputin on August 11, 2017, 08:33:13 AM
https://www.davita.com/UploadedFiles/KidneyCareConnections/MSP_Timeline_10_06.pdf
Title: Re: DVA – DaVita HealthCare Partners
Post by: matts on August 11, 2017, 08:47:05 AM
If private insurer want lower payment from dva, and dva say no, where else the patience can get the treatment? They will go to hospitals, and the hospitals will bill much higher amount (plus maybe other tests). So the reality is DVA is already the low cost solution for private insurers.

and if DVA says, no, what will happen to their business? They would only be left with the money losing government business. Thiry would take a 90% pay cut and fire thousands of employees? Let's not make it sound like Davita has nothing to lose by playing a game of chicken with the insurers. My view is that their negotiating leverage is a lot smaller than what the bulls think. In a negotiation where both sides have massive downsides if a deal doesn't get done, typically both sides make significant concessions, not just one.

Also, I picked 10% arbitrarily, the dynamics might be the same at 15% or 20%. Hence why I asked at what price the marginal patient is no longer profitable, because it's only at that point we can all agree for sure that it makes sense for DVA to say no and walk away. Based on some of the comments it sounds like with a 10% cut the company would still be printing money. what about 15 or 20%?



Title: Re: DVA – DaVita HealthCare Partners
Post by: LC on August 11, 2017, 08:59:29 AM
If private insurer want lower payment from dva, and dva say no, where else the patience can get the treatment? They will go to hospitals, and the hospitals will bill much higher amount (plus maybe other tests). So the reality is DVA is already the low cost solution for private insurers.

and if DVA says, no, what will happen to their business? They would only be left with the money losing government business. Thiry would take a 90% pay cut and fire thousands of employees? Let's not make it sound like Davita has nothing to lose by playing a game of chicken with the insurers. My view is that their negotiating leverage is a lot smaller than what the bulls think. In a negotiation where both sides have massive downsides if a deal doesn't get done, typically both sides make significant concessions, not just one.

Also, I picked 10% arbitrarily, the dynamics might be the same at 15% or 20%. Hence why I asked at what price the marginal patient is no longer profitable, because it's only at that point we can all agree for sure that it makes sense for DVA to say no and walk away. Based on some of the comments it sounds like with a 10% cut the company would still be printing money. what about 15 or 20%?

Between the gov't, davita, and insurers, who has the worst leverage? the insurers. DVA provides a life saving service. The Gov't needs to pay for this service or people will start dying. The insurers want to save money.

I don't see how the gov't sides with the insurers who are doing not much of anything, as opposed to DVA who is providing a subsidized service to the gov't (saving them money) while keeping people alive.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Rasputin on August 11, 2017, 09:12:48 AM
If private insurer want lower payment from dva, and dva say no, where else the patience can get the treatment? They will go to hospitals, and the hospitals will bill much higher amount (plus maybe other tests). So the reality is DVA is already the low cost solution for private insurers.

and if DVA says, no, what will happen to their business? They would only be left with the money losing government business. Thiry would take a 90% pay cut and fire thousands of employees? Let's not make it sound like Davita has nothing to lose by playing a game of chicken with the insurers. My view is that their negotiating leverage is a lot smaller than what the bulls think. In a negotiation where both sides have massive downsides if a deal doesn't get done, typically both sides make significant concessions, not just one.

Also, I picked 10% arbitrarily, the dynamics might be the same at 15% or 20%. Hence why I asked at what price the marginal patient is no longer profitable, because it's only at that point we can all agree for sure that it makes sense for DVA to say no and walk away. Based on some of the comments it sounds like with a 10% cut the company would still be printing money. what about 15 or 20%?

I think you can do the math yourself, the numbers are available, it's a very transparent industry.  I have taken the time to provide numbers for 1 downside scenario that I think is reasonably possible.

I'm saying if the payors have to operate with 80 to 85 MLR, forcing providers to operate with 90 plus MLR will be seen as unreasonable especially when it hurts dialysis patients.  DVA and Fresenius will just stop opening new centers, closing unprofitable centers, while # of ESRD needs grow almost 4% per year.  It costs roughly $3 million per new center.   
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on August 11, 2017, 10:26:26 AM
Medicare can grow it's budget through raising tax dollars or govt debt. Insurers can pass on costs to customers, they have more flexibility than dva.

I think probably the bear case already happened starting in 2013 when dva's medicare reimbursements were all but frozen and have been for the most part since. That's not to say it couldn't get worse. The gov has more power than insurers and medicare already decided to nearly freeze rates whereas most co's have been receiving market basket like inflation increases for their products/services. For the most part dva hasn't. As of now dva should receive only a marginal raise in 18' and closer to a market basket raise in 19'. Attrition through inflation is much more palatable for everyone. 

If any rates are to be cut, the most likely scenario is that rates are frozen, as they have been and dva doesn't receive rate increases going forward. Nobody wants to shock dva's system, however by freezing rates, dva could adjust it's cost structure to compensate slowly over time, to a point. I'm not sure where that point is but there's almost always something to cut, especially if it's 1-2% a year. The recent epo contract is evidence of this. Alternatively, value added services compensate or even add profitability in place of rate increases, such as http://www.davitahealthsolutions.com/.

With so much at risk, the govt allowing this duopoly for a reason, all parties reputation's are maintained by providing the best outcomes for patients. Anything to threaten the marginal facility threatens insurers and medicare/politicians in an instant news world.

Home dialysis is more expensive. Everyone's better off having remote facilities that are unprofitable and as the patient cohort grows these facilities become profitable and you do it all over again. Saving opposing parties money in the mean time.

Ideas like what's being floated in Cali are silly. As previously mentioned, if you hold rates to a 15% margin, facilities are closed down, people are upset and the politicians will hear about it. Plus, if you limit me to a 15% pre tax margin, like a utility at 10%, guess what I'll do? I'll raise my costs in turn increasing my profitability. I can give everyone a raise and keep 15% of it for myself to the point where my reimbursement limits me. If i'm receiving $1 dollar per patient limited by rates, at a 20% margin, and I'm now limited to a 15% margin, leaving .05 on the table, I raise my costs by .05 and capture 15% of it, netting zero savings to opposing parties. My future incentive, in place of cutting costs, is to raise costs as much as possible.

Come to think of it, I suppose if you limit my margin to 15% in cali and force me to hire new people, the above is exactly what will happen. This would mitigate the hit in a small way.

It would be interesting to find out what % of cali facilities are unprofitable at present. It's likely dva would be more profitable today, by closing under performing facilities and raising costs, capturing 15%. However, this may choke growth.

The 30% ish of the market dva and fresenius doesn't hold, can not afford to have any rates cut. This has been mentioned in this thread. See news circa 2013 from small operators. Their margins are significantly smaller than dva's. I don't see evidence of dva or fresenius working hard to gobble up market share at this point.




Title: Re: DVA – DaVita HealthCare Partners
Post by: matts on August 11, 2017, 11:42:13 AM
If private insurer want lower payment from dva, and dva say no, where else the patience can get the treatment? They will go to hospitals, and the hospitals will bill much higher amount (plus maybe other tests). So the reality is DVA is already the low cost solution for private insurers.

and if DVA says, no, what will happen to their business? They would only be left with the money losing government business. Thiry would take a 90% pay cut and fire thousands of employees? Let's not make it sound like Davita has nothing to lose by playing a game of chicken with the insurers. My view is that their negotiating leverage is a lot smaller than what the bulls think. In a negotiation where both sides have massive downsides if a deal doesn't get done, typically both sides make significant concessions, not just one.

Also, I picked 10% arbitrarily, the dynamics might be the same at 15% or 20%. Hence why I asked at what price the marginal patient is no longer profitable, because it's only at that point we can all agree for sure that it makes sense for DVA to say no and walk away. Based on some of the comments it sounds like with a 10% cut the company would still be printing money. what about 15 or 20%?

Between the gov't, davita, and insurers, who has the worst leverage? the insurers. DVA provides a life saving service. The Gov't needs to pay for this service or people will start dying. The insurers want to save money.

I don't see how the gov't sides with the insurers who are doing not much of anything, as opposed to DVA who is providing a subsidized service to the gov't (saving them money) while keeping people alive.

I guess I view leverage from a downside risk scenario. If davita decides to stand firm and the insurer also stand firm on a rate cut, what happens to each player?

Davita: Company is dead. There is no Davita without the private clients, it would just be a money losing pit. Thiry and thousands of others lose their jobs, he also loses his identity. Davita is his life. Never underestimate the power of ego.

Insurers: Costs go up because they have to send their clients to more expensive options (hospitals). Their profitability declines but their entire business is not threatened. OR they could pass on the costs to patients...

Patients: certainly inconvenienced, and also pissed if their premiums go up. But again, deaths would not skyrocket, c'mon guys

Government: Costs go up. If Davita is gone, some government plan patients would have to go to higher cost options.

See my point? Davita is the only actor under EXISTENTIAL threat if they play hardball with insurers. For all other players, it's a question of cost and convenience but their existence is not threatened. That's how I'm looking at it. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on August 11, 2017, 12:37:55 PM
If private insurer want lower payment from dva, and dva say no, where else the patience can get the treatment? They will go to hospitals, and the hospitals will bill much higher amount (plus maybe other tests). So the reality is DVA is already the low cost solution for private insurers.

and if DVA says, no, what will happen to their business? They would only be left with the money losing government business. Thiry would take a 90% pay cut and fire thousands of employees? Let's not make it sound like Davita has nothing to lose by playing a game of chicken with the insurers. My view is that their negotiating leverage is a lot smaller than what the bulls think. In a negotiation where both sides have massive downsides if a deal doesn't get done, typically both sides make significant concessions, not just one.

Also, I picked 10% arbitrarily, the dynamics might be the same at 15% or 20%. Hence why I asked at what price the marginal patient is no longer profitable, because it's only at that point we can all agree for sure that it makes sense for DVA to say no and walk away. Based on some of the comments it sounds like with a 10% cut the company would still be printing money. what about 15 or 20%?

Between the gov't, davita, and insurers, who has the worst leverage? the insurers. DVA provides a life saving service. The Gov't needs to pay for this service or people will start dying. The insurers want to save money.

I don't see how the gov't sides with the insurers who are doing not much of anything, as opposed to DVA who is providing a subsidized service to the gov't (saving them money) while keeping people alive.

I guess I view leverage from a downside risk scenario. If davita decides to stand firm and the insurer also stand firm on a rate cut, what happens to each player?

Davita: Company is dead. There is no Davita without the private clients, it would just be a money losing pit. Thiry and thousands of others lose their jobs, he also loses his identity. Davita is his life. Never underestimate the power of ego.

Insurers: Costs go up because they have to send their clients to more expensive options (hospitals). Their profitability declines but their entire business is not threatened. OR they could pass on the costs to patients...

Patients: certainly inconvenienced, and also pissed if their premiums go up. But again, deaths would not skyrocket, c'mon guys

Government: Costs go up. If Davita is gone, some government plan patients would have to go to higher cost options.

See my point? Davita is the only actor under EXISTENTIAL threat if they play hardball with insurers. For all other players, it's a question of cost and convenience but their existence is not threatened. That's how I'm looking at it.
Does that line of thinking not fly in the face of how an oligopoly works? If you assume the pvt insurer can walk away from DVA then does it not assume a better price from FMS? If FMS does not break with DVA on pricing (probably safe to assume in an oligopoly) then you're left dealing with the 30% of the market that provides both inferior care (higher hospitalization rates, which at 40% of total patient cost and twice per annum on average per patient is a significant swing factor for the insurer) and you're also dealing with a footprint problem (your insured wants easy access to a clinic from home). I think it is a more complicated dance and the fact that an oligopoly was formed in the first place tells you a lot about who has the market power.  The government has the most, evidenced by the fact that they can "demand" the industry provides the service to government at a loss, then the oligopolists and then the insurers.
Title: Re: DVA – DaVita HealthCare Partners
Post by: gfp on August 11, 2017, 03:02:30 PM
So Berkshire just filed a 13D on Davita showing 20.2% ownership, up from 18.69% at DVA's last proxy.  But as far as I can tell it's the same number of shares - 38,565,570.  So this is from share repurchases I gather.  It seems like Berkshire is unlikely to purchase additional shares in size if they are limited to 25% and the repurchases are increasing their ownership this quickly.  One might think Berkshire would consider a bid for the entire company but Buffett may not want the reputational risk of owning a healthcare company - he's pretty much stayed away from them and this one is not without headline risk, rational or otherwise.

Perhaps they will just negotiate an amendment to their standstill agreement forgoing some voting rights in exchange for permission to go above 25%.
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 11, 2017, 03:03:12 PM
don't underestimate how much it will cost the insurers if a dialysis patient get sick.. Very expensive.  For dialysis, it's 800-900/dollar per treatment, or 12k/month. Just 1 day of hospital stay will be the same amount. Delayed dialysis treatments could easily send a patient to hospital and maybe stay there for 3-5 days, and then come back to the hospital a month later. If insurer mess this up, they will quickly lose their entire profits and even start posting losses. As of DVA, they will at least break-even without private insurers.
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 11, 2017, 03:17:06 PM
So Berkshire just filed a 13D on Davita showing 20.2% ownership, up from 18.69% at DVA's last proxy.  But as far as I can tell it's the same number of shares - 38,565,570.  So this is from share repurchases I gather.  It seems like Berkshire is unlikely to purchase additional shares in size if they are limited to 25% and the repurchases are increasing their ownership this quickly.  One might think Berkshire would consider a bid for the entire company but Buffett may not want the reputational risk of owning a healthcare company - he's pretty much stayed away from them and this one is not without headline risk, rational or otherwise.

Perhaps they will just negotiate an amendment to their standstill agreement forgoing some voting rights in exchange for permission to go above 25%.

Yes, when I saw the 13D I was excited for a few minutes, till I pull the last filing.
Strange the Ted's personal holding in the 13D doesn't exactly match with the Form 4 filled in 2014, but total shares are exactly the same.
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 11, 2017, 03:21:09 PM
They were 18% and now 20%, but they didn't make any purchase. So how did they know that there is a change and they need to file? Maybe management was buying stock during the past week and likely sent them a notice of the new shares outstanding?
Title: Re: DVA – DaVita HealthCare Partners
Post by: gfp on August 11, 2017, 03:36:58 PM
It was just the recently filed 10Q for DaVita that gave the new share count at the top:

"All calculations of percentage ownership in this Schedule are based on 191,200,237 shares of Common Stock estimated to be issued and outstanding as of June 30, 2017, as reported in the Quarterly Report on Form 10-Q for the Quarterly Period ended June 30, 2017, which was filed by DVA with the SEC on August 1, 2017."

As for the difference in shares owned by Ted vs his last form 4, I think the difference is just shares owned by his daughter, certain other family members, and his perhaps changing interest in whatever pension fund / retirement vehicle Berkshire offered him.  Most of the discrepancy is the shares owned by Ted's family members.

They were 18% and now 20%, but they didn't make any purchase. So how did they know that there is a change and they need to file? Maybe management was buying stock during the past week and likely sent them a notice of the new shares outstanding?
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 11, 2017, 04:16:10 PM
It was just the recently filed 10Q for DaVita that gave the new share count at the top:

"All calculations of percentage ownership in this Schedule are based on 191,200,237 shares of Common Stock estimated to be issued and outstanding as of June 30, 2017, as reported in the Quarterly Report on Form 10-Q for the Quarterly Period ended June 30, 2017, which was filed by DVA with the SEC on August 1, 2017."

As for the difference in shares owned by Ted vs his last form 4, I think the difference is just shares owned by his daughter, certain other family members, and his perhaps changing interest in whatever pension fund / retirement vehicle Berkshire offered him.  Most of the discrepancy is the shares owned by Ted's family members.

They were 18% and now 20%, but they didn't make any purchase. So how did they know that there is a change and they need to file? Maybe management was buying stock during the past week and likely sent them a notice of the new shares outstanding?

Thanks!!
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on August 11, 2017, 04:54:29 PM
I think this stock is undervalued and mispriced because most investors think of the govt and private insurers as two separate groups of clients of dva.
They failed to evaluate them as a group, and the dynamic and interplay of the two groups.
It's also wrong to say govt clients are not profitable. DVA's profit model is like a pyramid, similar to amazon's model, where most customers are not profitable (but cash flow helped building up infacstructure) and a small group of customers are very profitable.

The Valeant case is very different -  Valeant charged an enourmous markup for drugs with somewhat questionable value and in any case for the most part non -life threading diseases.

DVA comparatively speaking operates in a low margin business for a life saving treatment. The case is entirely different, except the fact that the pricing is not rational, which imo is a risk to profitability.

DVA is in a volume business, where each facility has a significant amount of fixed cost, somin order to make a profits, cost need to be held low and the facility need to run close to its capacity. I think the ability to reduce costs (both capes and variable cost as well as overhead) favors larger players and consolidation into hat now are two major players. Smaller companies and mom and pop business are at an disadvantage here and that is why they tend to sell out to the larger players. I think a business like this will more or less naturally evolve into few players owning large market shares.

Neither DVA nor the insurers  can afford to really take a hard line and deny treatment - people will do in very short order and just imagine the publicity and the lawsuits. It's not going to happen. What is going to happen is a fight behind the scenes and most likely government intervention.

I also think they home dialysis is a long term threat to some extend for the current business model. Yes treatment cost is higher, but clinical outcome is much better for home dialysis (due to more frequent but shorter treatment sessions) and the result is that home dialysis patients tend to remain in the workforce while those going to outpatient places like DVA won't too large extend. If the equipment for home dialysis becomes cheaper, it will become the preferred option, imo. This is not a short term issue, but could become one in ten years.

I fail to see why this prevents the private insurers to demand lower rates  for dialysis. The current structure that private insurance pays 3-5x more for the same service than the government  is certainly not rational. I understand that the government underplays and private insurance overpays to compensate, but this still does not make sense.

And how can DVA say no to a private insurance  that demand the price to go from 5x to 2x, when they take Medicare patients for a much lower treatment term at the same price. It sounds like an Implicit agreement that is just meant to be broken.

Agreed. I think some are just refusing the see the larger picture. It reminds me of people trying to rationalize Valeant charging thousands for a tube of foot cream. "That's how the system works, and if insurance companies demand a lower price then Valeant will just say no"

Can someone provide evidence that the MARGINAL client will unprofitable for davita if the private rates go lower by 10%?
 Seems to me like DVA is making too much money for that to be the case. And if the marginal client is profitable, then I believe Thiry will whine and complain but in the end eat it, not close any centers, and everyone who gets care now will continue to get care. He's trying to get paid, and knows that the larger the company is, the more he can shovel his way.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on August 12, 2017, 10:50:16 AM
Can anyone clarify the following for me please?

It seems accepted by the board and the analyst community and is being communicated by providers that they lose money on CMS business.

Why then do I frequently come across official data that mentions positive margins for dialysis centers and the data they use indicates that all costs are included (incl. costs like depreciation/capex, leases, interest exp and even bad debts)?

For example:
Reference to margins bottom of page 158 http://www.medpac.gov/docs/default-source/reports/mar17_medpac_ch6.pdf?sfvrsn=0
Taking into account the sequester, we estimate that the aggregate Medicare margin
was 0.4 percent in 2015, and the rate of marginal profit—that is, the rate at which
Medicare payments exceed providers’ marginal cost—was 16.6 percent. We project
a 2017 Medicare margin of –1.0 percent, which reflects a CMS accounting change

Slide 9 http://www.medpac.gov/docs/default-source/default-document-library/dialysis-1216-public.pdf?sfvrsn=0

Calculation of margin always seem to be based on Form CMS 265-94 and tab ws-A indicates the line items that go into the calculation.
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwiLyraVn9LVAhUmDcAKHS7wCi8QFggoMAA&url=http%3A%2F%2Fwww.nber.org%2Fhcris%2F265-94%2Fworksheets%2FRENAL%2520WORKSHEET%2520FORMS%2520TRANSMITTAL%25209.xls&usg=AFQjCNEHseKC0W1gRm1M0yjowN2mTgY0eA


Title: Re: DVA – DaVita HealthCare Partners
Post by: Rasputin on August 12, 2017, 11:51:59 AM
I think the cost number that CMS use is 4 wall facility costs (patient care costs + D&A costs).  It doesn't take into account headquarter costs, legal costs, provision for uncollectible costs (ppl not paying their copays). 
Title: Re: DVA – DaVita HealthCare Partners
Post by: Rasputin on August 12, 2017, 12:29:57 PM
From Q2 2013 Earnings Call Transcript:

Gary P. Taylor - Citigroup Inc, Research Division

Just a couple of questions. The first, I was probably hoping to get Kent's perspective but I'm sure someone else can tackle it. I guess I was hoping you can maybe reconcile the thought that negative dialysis margins are an important part of the lobbying position of the industry with respect to the proposed rebasing cuts and I think this is an important part, so I just want to understand the reconciliation. If we go -- if we look at the MedPAC report based on the last analysis they did of 2010, they showed 2.3% positive margins for the whole industry. I'd presume, because of DaVita's scale, your margins might be a little better than that and then certainly, margins improved once the bundle was implemented in 2011. So how do we get back to negative overall Medicare margins? Is the MedPAC analysis just completely flawed in your opinion?

LeAnne M. Zumwalt

Yes, this is LeAnne. Yes, let me take that. Hey, no, the MedPAC analysis is based on the cost reports that we file. As Kent mentioned, one of the most significant drivers of our difference is the, let's call it, uncompensated care bucket, the unreimbursed coinsurance, which is therefore also not reimbursed through the bad debt policies. And so our biggest concern about any analysis that's done by the government, whether that be MedPAC or CMS itself, is that they're presumption is that primarily that the co-pay is 100% collected and it's not.

Gary P. Taylor - Citigroup Inc, Research Division

Okay. So even net of Medicaid contribution on dual eligible, that would net out to, overall negative, including that, that's the case?

LeAnne M. Zumwalt

Correct, that's a fair point. There's some other costs in the cost report, which are not recognized as we take exception for. But as a vehicle of how they do analysis, they strictly maintain the cost report filing data and don't consider these other factors.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on August 12, 2017, 12:54:53 PM
Brilliant thanks Rasputin and then of course not the D&A as a result of acquisitions too.
Very helpful!
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on August 12, 2017, 01:00:05 PM
Good summary of the legal situation surrounding DVA.

Quote
Dialysis treatment companies like DaVita (and Fresenius) made contributions to the American Kidney Foundation (AKF)
AKF would then pay for premiums for patients in need of dialysis
Treatment facilities like DaVita would steer patients to coverage, paid for by AKF
..
Why is Davita anticipating lower operating income in 2017? The way in which they had been obtaining some profitable patients has been blocked — at least for a while — by the Department of Health and Human Services, is being investigated by the Department of Justice, and the subject of a potential class-action investor lawsuit.

That’s quite a trifecta, which we’ll continue to track.

http://stateofreform.com/featured/2017/03/davita-regulated-investigated-sued/
A bit dated and don't think I've seen it posted, but the AKF comment letter to CMS is interesting nonetheless.
http://www.kidneyfund.org/assets/pdf/advocacy/akf-comment-letter-to-cms.pdf
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on August 12, 2017, 01:11:41 PM
Another question please.

What are good sources to look at in order to understand the private payor landscape in ESRD in general and specifically how they ended up paying for 33 months. I understand it was 22 months originally. I'm still trying to frame the 33 months and the dynamics that influence the discussion in general from the private payor's point of view.

Any direction will be much appreciated.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Green King on August 12, 2017, 02:58:55 PM
@MrB With the uncertainty removed what is this thing worth? I looked a few times and I have no clue how to value this thing even without the uncertainty.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on August 14, 2017, 01:26:04 AM
@MrB With the uncertainty removed what is this thing worth? I looked a few times and I have no clue how to value this thing even without the uncertainty.
GK kindly rephrase your question, so I can be sure I understand it correctly. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: Green King on August 14, 2017, 05:07:33 AM
@MrB With the uncertainty removed what is this thing worth? I looked a few times and I have no clue how to value this thing even without the uncertainty.
GK kindly rephrase your question, so I can be sure I understand it correctly.

Thanks for the reply. Simply put what is your price target and how can we get there? Are we looking at a double or a triple here?

I looked it a few times looks like it is trading at 10 Free cash flow and growing at 6% with blow-up risk. Once the blow-up risk is removed will it go to 15 times or 25 times due to its oligopolistic characteristics and supply side tail wind. They need a lot of leverage to get their return on equity so the capital market has to stay in place.

Also Is having free cash flow higher than earnings because they are under spending on CapEx or over depreciating?
Title: Re: DVA – DaVita HealthCare Partners
Post by: LC on August 14, 2017, 08:39:34 AM
Perhaps using client satisfaction is a good proxy for capex spending? I.e. If the company is under-investing, you would think client satisfaction would drop.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on August 14, 2017, 10:15:55 AM
@MrB With the uncertainty removed what is this thing worth? I looked a few times and I have no clue how to value this thing even without the uncertainty.
GK kindly rephrase your question, so I can be sure I understand it correctly.

Thanks for the reply. Simply put what is your price target and how can we get there? Are we looking at a double or a triple here?

I looked it a few times looks like it is trading at 10 Free cash flow and growing at 6% with blow-up risk. Once the blow-up risk is removed will it go to 15 times or 25 times due to its oligopolistic characteristics and supply side tail wind. They need a lot of leverage to get their return on equity so the capital market has to stay in place.

Also Is having free cash flow higher than earnings because they are under spending on CapEx or over depreciating?
Broadly speaking your numbers look fair, but I also assume they allocate significant capital to buybacks (0.5 - 1Bn per annum) over the next 5 years, which should get you a double; triple is unlikely. I'm also assuming the risk of a blow-up is minimal, because the long term history and current structure of the industry makes the political trade off extremely unfavorable. The need is dire and increasing every year. Nobody is perfect, but the hard data tells me the industry (CMS, providers and commercial insurers) is doing a good job in a highly charged and politicized environment. Therefore, a structural change seems easier said than done. 
I don't like the leverage, but the recurring nature of the cash flows put it more in the bucket of a SIRI, DTV, etc
Yes the capital markets/low interest rate environment has to stay in place.

In our analysis the cash flow is not overstated due to the nature of the D&A, which is mostly as a result of inorganic growth; buying dialysis centers and DMG (HCP) in 2012 generates a lot of goodwill and the centers throw off immediate and substantial cash flow. The result is FCF running at 134% of NI over the last 10 years and 149% over the last 7 (probably mainly as a result of the goodwill generated by the botched purchase of HCP). Also the 5 star rating system looks thorough and independent; I think it is unlikely that DVA achieves high numbers and improve on those while under-investing in the business.

 
Title: Re: DVA – DaVita HealthCare Partners
Post by: Green King on August 15, 2017, 04:40:00 AM
@MrB With the uncertainty removed what is this thing worth? I looked a few times and I have no clue how to value this thing even without the uncertainty.
GK kindly rephrase your question, so I can be sure I understand it correctly.

Thanks for the reply. Simply put what is your price target and how can we get there? Are we looking at a double or a triple here?

I looked it a few times looks like it is trading at 10 Free cash flow and growing at 6% with blow-up risk. Once the blow-up risk is removed will it go to 15 times or 25 times due to its oligopolistic characteristics and supply side tail wind. They need a lot of leverage to get their return on equity so the capital market has to stay in place.

Also Is having free cash flow higher than earnings because they are under spending on CapEx or over depreciating?
Broadly speaking your numbers look fair, but I also assume they allocate significant capital to buybacks (0.5 - 1Bn per annum) over the next 5 years, which should get you a double; triple is unlikely. I'm also assuming the risk of a blow-up is minimal, because the long term history and current structure of the industry makes the political trade off extremely unfavorable. The need is dire and increasing every year. Nobody is perfect, but the hard data tells me the industry (CMS, providers and commercial insurers) is doing a good job in a highly charged and politicized environment. Therefore, a structural change seems easier said than done. 
I don't like the leverage, but the recurring nature of the cash flows put it more in the bucket of a SIRI, DTV, etc
Yes the capital markets/low interest rate environment has to stay in place.

In our analysis the cash flow is not overstated due to the nature of the D&A, which is mostly as a result of inorganic growth; buying dialysis centers and DMG (HCP) in 2012 generates a lot of goodwill and the centers throw off immediate and substantial cash flow. The result is FCF running at 134% of NI over the last 10 years and 149% over the last 7 (probably mainly as a result of the goodwill generated by the botched purchase of HCP). Also the 5 star rating system looks thorough and independent; I think it is unlikely that DVA achieves high numbers and improve on those while under-investing in the business.

Thanks for your thoughts. Seems fair. I think the incremental CapEx requirement for $DVA is different from DTV and SIRI but I think the need for their service is much stronger. So it might balance out once the uncertainty is removed. 

Cheers
Title: Re: DVA – DaVita HealthCare Partners
Post by: Foreign Tuffett on August 16, 2017, 12:26:28 AM

Thanks for your thoughts. Seems fair. I think the incremental CapEx requirement for $DVA is different from DTV and SIRI but I think the need for their service is much stronger. So it might balance out once the uncertainty is removed. 

Cheers

I think the part of the equation you are missing is pricing power. DVA has little to no pricing power on the government payer side of their business, but has enjoyed strong pricing power on the private payer side. The fear that the latter is deteriorating is probably the main reason the stock has performed poorly in the recent past.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on August 16, 2017, 04:03:21 AM

Thanks for your thoughts. Seems fair. I think the incremental CapEx requirement for $DVA is different from DTV and SIRI but I think the need for their service is much stronger. So it might balance out once the uncertainty is removed. 

Cheers

I think the part of the equation you are missing is pricing power. DVA has little to no pricing power on the government payer side of their business, but has enjoyed strong pricing power on the private payer side. The fear that the latter is deteriorating is probably the main reason the stock has performed poorly in the recent past.
I don't think I will go as far to say I disagree, but neither do I think it is as plain vanilla; maybe DVA has more pricing power than they are prepared to use, Valeant being a case in point. Then again not having pricing power and having it, but not using it has the same financial result.
Another thought; maybe they have too little power with government and too much with pvt?
Title: Re: DVA – DaVita HealthCare Partners
Post by: Foreign Tuffett on August 16, 2017, 06:18:19 AM

Thanks for your thoughts. Seems fair. I think the incremental CapEx requirement for $DVA is different from DTV and SIRI but I think the need for their service is much stronger. So it might balance out once the uncertainty is removed. 

Cheers

I think the part of the equation you are missing is pricing power. DVA has little to no pricing power on the government payer side of their business, but has enjoyed strong pricing power on the private payer side. The fear that the latter is deteriorating is probably the main reason the stock has performed poorly in the recent past.
I don't think I will go as far to say I disagree, but neither do I think it is as plain vanilla; maybe DVA has more pricing power than they are prepared to use, Valeant being a case in point. Then again not having pricing power and having it, but not using it has the same financial result.
Another thought; maybe they have too little power with government and too much with pvt?

I think if you read between the line the real battle is between the government and the private payers  over who will pay for the treatment of nearly 500,000 dialysis patients. The dialysis providers are  trapped in the middle, forced to resort to odd workarounds like AKF donation schemes to juice what would otherwise be a fairly pedestrian business (albeit one with secular growth tailwinds). DVA and the rest of the industry aren't as unethical as they at first appear to be, but the terrible optics of the situation have given the private payers the upper hand.

Title: Re: DVA – DaVita HealthCare Partners
Post by: Green King on August 16, 2017, 06:34:23 AM

Thanks for your thoughts. Seems fair. I think the incremental CapEx requirement for $DVA is different from DTV and SIRI but I think the need for their service is much stronger. So it might balance out once the uncertainty is removed. 

Cheers

I think the part of the equation you are missing is pricing power. DVA has little to no pricing power on the government payer side of their business, but has enjoyed strong pricing power on the private payer side. The fear that the latter is deteriorating is probably the main reason the stock has performed poorly in the recent past.
I don't think I will go as far to say I disagree, but neither do I think it is as plain vanilla; maybe DVA has more pricing power than they are prepared to use, Valeant being a case in point. Then again not having pricing power and having it, but not using it has the same financial result.
Another thought; maybe they have too little power with government and too much with pvt?

I think if you read between the line the real battle is between the government and the private payers  over who will pay for the treatment of nearly 500,000 dialysis patients. The dialysis providers are  trapped in the middle, forced to resort to odd workarounds like AKF donation schemes to juice what would otherwise be a fairly pedestrian business (albeit one with secular growth tailwinds). DVA and the rest of the industry aren't as unethical as they at first appear to be, but the terrible optics of the situation have given the private payers the upper hand.

This uncertainty creates the price and the market. The alternative is a cut in price than care than the decrease in availability and explosion related private insurance claim due to lack service. More people would have to leave the work force (premature death) because of the lack of treatment.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Foreign Tuffett on August 16, 2017, 07:06:11 AM

Thanks for your thoughts. Seems fair. I think the incremental CapEx requirement for $DVA is different from DTV and SIRI but I think the need for their service is much stronger. So it might balance out once the uncertainty is removed. 

Cheers

I think the part of the equation you are missing is pricing power. DVA has little to no pricing power on the government payer side of their business, but has enjoyed strong pricing power on the private payer side. The fear that the latter is deteriorating is probably the main reason the stock has performed poorly in the recent past.
I don't think I will go as far to say I disagree, but neither do I think it is as plain vanilla; maybe DVA has more pricing power than they are prepared to use, Valeant being a case in point. Then again not having pricing power and having it, but not using it has the same financial result.
Another thought; maybe they have too little power with government and too much with pvt?

I think if you read between the line the real battle is between the government and the private payers  over who will pay for the treatment of nearly 500,000 dialysis patients. The dialysis providers are  trapped in the middle, forced to resort to odd workarounds like AKF donation schemes to juice what would otherwise be a fairly pedestrian business (albeit one with secular growth tailwinds). DVA and the rest of the industry aren't as unethical as they at first appear to be, but the terrible optics of the situation have given the private payers the upper hand.

This uncertainty creates the price and the market. The alternative is a cut in price than care than the decrease in availability and explosion related private insurance claim due to lack service. More people would have to leave the work force (premature death) because of the lack of treatment.

How much pain can/will the dialysis providers take before they stop opening new clinics? One reason to invest in DVA is that it appears to be the low cost provider, and thus would be the least hurt if the industry gets squeezed. However, DVA being the least hurt in a scenario where the dialysis industry's economic returns decline probably wouldn't be a great result for DVA investors.

I think the calculus of what the socially optimal payment level for dialysis services is very complex. Complex enough that's it difficult to make even a directional (higher? lower?) judgment.
Title: Re: DVA – DaVita HealthCare Partners
Post by: LC on August 31, 2017, 09:16:43 AM
https://www.youtube.com/watch?v=yw_nqzVfxFQ&t=604s

John Oliver bit on Davita. Take with a grain of salt of course
Title: Re: DVA – DaVita HealthCare Partners
Post by: frankhkii on August 31, 2017, 12:06:49 PM
https://www.youtube.com/watch?v=yw_nqzVfxFQ&t=604s

John Oliver bit on Davita. Take with a grain of salt of course

For what it's worth, apparently, John Oliver has a writer/journalist who is close with Chanos...
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 31, 2017, 12:15:45 PM
This remind me in 2008/2009 when David Enhorn was pitching his MCO short, and even WEB sold some of his MCO. I bought MCO and sold it. What a regret. Enhorn is still shorting MCO.
Title: Re: DVA – DaVita HealthCare Partners
Post by: rb on August 31, 2017, 12:29:54 PM
https://www.youtube.com/watch?v=yw_nqzVfxFQ&t=604s

John Oliver bit on Davita. Take with a grain of salt of course

For what it's worth, apparently, John Oliver has a writer/journalist who is close with Chanos...
Maybe, but still DVA is nobody's idea of a model corporate citizen.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Jurgis on August 31, 2017, 12:42:34 PM
Maybe, but still DVA is nobody's idea of a model corporate citizen.

Come on. CEO who dresses like a Musketeer, carries a sabre, rides in on a horse and yells "All for one and one for all!". Serious hotness and man crush right there!  :-* Can I get his phone number?  ::)
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 31, 2017, 12:46:05 PM
http://www.npr.org/sections/health-shots/2017/08/30/547004371/this-is-surreal-houston-dialysis-center-struggles-to-treat-patients

"Scott waited almost four hours to start dialysis after arriving on Tuesday. Part of the reason is because the DaVita center is open to all dialysis patients this week, not just regulars such as Scott."
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 31, 2017, 12:48:30 PM
http://www.npr.org/sections/health-shots/2017/08/30/547004371/this-is-surreal-houston-dialysis-center-struggles-to-treat-patients

"Scott waited almost four hours to start dialysis after arriving on Tuesday. Part of the reason is because the DaVita center is open to all dialysis patients this week, not just regulars such as Scott."

Yesuf Said, a nurse who's worked at this center for four years, says it's been difficult dealing with so many patients at once and so many who are new to this center. "We have to do it, because nobody can do it," he says. "It's life and death for patients."
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 31, 2017, 12:55:02 PM
http://denver.cbslocal.com/2017/08/31/davita-dialysis-clinics-harvey/

Last week, DaVita began setting up a command center in Houston so it could properly address any issues as they arose. DaVita has 7,500 patients at 150 facilities in the path of the storm.

“Out of those clinics, only about one-third were able to operate yesterday (Tuesday), and we worked day and night and we were able to open about half of those centers today,” Rodriguez said.


DaVita has been using boats and anything else officials can in order to get patients the care they need. Dialysis patients, on average, get treatment every three days. Missing two sessions can become life threatening for patients.

But it’s not only patients who have been effected by the rain and flooding, employees are impacted as well but still showing up to work.

“We know about 121 of our teammates homes are flooded and of course many more are evacuated,” Rodriguez said about DaVita teammates.

“Remember, these caregivers, these professionals, their homes are flooded too, their families have been displaced too, and they have to go out and take care of our patients because that’s what in their heart. I’m at a loss of words when I hear stories of how amazing they are.”
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 31, 2017, 01:01:32 PM
http://www.pbs.org/newshour/bb/houston-dialysis-patients-getting-treatment-disaster-means-life-death/

"There were a lot of people waiting for this lifesaving treatment. And just the distance people had to come to get there, it's really — it's really, really tough to kind of witness that.

But the patients I was able to speak with were really optimistic and really grateful to have a clinic that was actually open when their local clinic had been closed due to all of the flooding and just difficulty with traveling.

I talked to a patient while she was receiving treatment. Her name was Debrah Payne, and she was just really happy to still be alive.

DEBRAH PAYNE, Dialysis Patient: I was afraid. I just — I didn't know what I was going to do.

And I'm sure all the other people who couldn't make it who know that they have to do this to survive were concerned about whether they were going to make it here or not.
"
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on September 01, 2017, 04:49:14 AM
It is also not only in times of crisis that DVA is prepared to service the industry despite no or little financial gain. In the Q2 2013 call the mentioned that they run about 150-200 clinics (about 10% of the total) at a loss, mainly in inner city and rural locations where there are not sufficient private patients to cross subsidize the Medicare shortfall.
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on September 05, 2017, 08:22:26 PM
https://youtu.be/883iR4POCBk

A different perspective related to the kidney charity fund.
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on September 06, 2017, 10:55:26 AM
https://youtu.be/883iR4POCBk

A different perspective related to the kidney charity fund.

This is a repost, if anyone hasn't read it yet it would likely change your perspective...

http://www.kidneyfund.org/assets/pdf/advocacy/akf-comment-letter-to-cms.pdf
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on September 13, 2017, 09:09:46 AM
Cost, Quality, and Value: The Changing Political Economy of Dialysis Care
http://jasn.asnjournals.org/content/18/7/2021.full.pdf+html

Old but interesting read in general and Figure 1 Chart C is particularly interesting, showing Medicare allowed charges per treatment dropped from $140 to $45 from 1973 to 2006 when adjusted for inflation.
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on September 14, 2017, 07:34:32 PM
Interesting discussion about U.K. Health system:
https://www.reddit.com/r/dialysis/comments/431f5j/anyone_receive_dialysis_in_a_country_with_a/

Bennie Sander is calling for single payer insurance system. If that get done I think it shall be very good for Davitas ( FMS is trading at a premium PE compared to DVA)

Title: Re: DVA – DaVita HealthCare Partners
Post by: Liberty on September 22, 2017, 08:58:37 AM
If you're wondering why the stock is volatile today:

http://sirf-online.org/2017/09/22/davita-inc-warren-and-charlies-excellent-insurance-gambit/

(haven't read it yet, so can't comment)
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on September 22, 2017, 09:26:40 AM
If you're wondering why the stock is volatile today:

http://sirf-online.org/2017/09/22/davita-inc-warren-and-charlies-excellent-insurance-gambit/

(haven't read it yet, so can't comment)
Sniff, sniff - smells like Jim...
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on September 22, 2017, 10:12:31 AM
If you're wondering why the stock is volatile today:

http://sirf-online.org/2017/09/22/davita-inc-warren-and-charlies-excellent-insurance-gambit/

(haven't read it yet, so can't comment)
Sniff, sniff - smells like Jim...

Interesting.

First Chanos, now Roddy Boyd - only 5% of float short, now every hedge fund in the world will hit it.

Title: Re: DVA – DaVita HealthCare Partners
Post by: rb on September 22, 2017, 10:12:54 AM
If you're wondering why the stock is volatile today:

http://sirf-online.org/2017/09/22/davita-inc-warren-and-charlies-excellent-insurance-gambit/

(haven't read it yet, so can't comment)
Sniff, sniff - smells like Jim...
It may be.... but is the report wrong?

Basically it alleges that the AKF is effectively a front for dialysis providers, mainly Davita and Fresenius since they provide the bulk of AKF funding. In turn AKF pays insurance premiums for people that otherwise wouldn't be able to continue paying their premiums. Because of this people are able to keep their private insurance plans and Davita and Fresenius are charging their insurance companies like crazy. If AKF wouldn't be there those people would stop having private insurance and would go on Medicare which would be a very bad outcome for Davita. Also the insurance companies are understandably really pissed off by this.

I think that's about the gist of it.
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on September 22, 2017, 10:33:48 AM
From the point of view of patients, staying in private insurance dramatically increase their chance of receiving a kidney transplant. So AKF provide real value to patients.
Insurance companies are bunch of greedy a**holes who never want to pay anything! Two out of three times, my insurance company reject my doctor's prescription drugs, saying it's too expensive and i can get less effective genetic versions. . Look at their stock prices, they are so profitable nowaday but still reject claims. They are the greedy guys that shall be regulated heavily.
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on September 22, 2017, 10:35:14 AM
Roddy left out that Thiry has already quantified, about a year ago, what impact losing all akf patients would have. Two, read akf's rebuttal, also from about a year ago.

I appreciate Roddy taking the time to allow dva to buyback shares cheaper.

I liked the example of a hospital with a 1% operating margin.
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on September 22, 2017, 10:40:12 AM

I appreciate Roddy taking the time to allow dva to buyback shares cheaper.




Exactly!
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on September 22, 2017, 10:54:25 AM
I can't understand why someone would spend time attacking a service that loses money on nearly 80% of their business (someone correct me if I'm wrong on this figure.)

Seems like they'd be going after egregious margins elsewhere?

Agree with Flesh tho (buy, buy, buy backs!)
Title: Re: DVA – DaVita HealthCare Partners
Post by: dwy000 on September 22, 2017, 11:02:09 AM
I can't understand why someone would spend time attacking a service that loses money on nearly 80% of their business (someone correct me if I'm wrong on this figure.)

Seems like they'd be going after egregious margins elsewhere?

Agree with Flesh tho (buy, buy, buy backs!)
Seems like they are attacking the other 20% of the business which provides all the income (25% operating margins across the entire business) at the expense of insurance provider - which then drives up prices for everyone else.   Not claiming right or wrong but the attention in itself is going to be a weight on the stock for the foreseeable future.  Count the number of comparisons to Valeant that come up.
Title: Re: DVA – DaVita HealthCare Partners
Post by: koshigoe on September 22, 2017, 11:30:27 AM
unfortunately they are entering the share repurchase blackout period (5 weeks before Nov earnings). hopefully today they're buying!
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on September 22, 2017, 11:44:40 AM
I can't understand why someone would spend time attacking a service that loses money on nearly 80% of their business (someone correct me if I'm wrong on this figure.)

Seems like they'd be going after egregious margins elsewhere?

Agree with Flesh tho (buy, buy, buy backs!)

Comparisons with VRX are misguided - DVA does not sell pills that cost $5 to make and are quasi generic for $500. the margins in this busines are much lower than with Pharma. Dialysis is a tough business where it is important to keep cost low and utilization high while at the same time delivering quality work. I think there is an issue with the business model where a relatively small percentage of their patient generate all the prints, but this is by no means that same story than VRX.
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on September 22, 2017, 11:51:27 AM
unfortunately they are entering the share repurchase blackout period (5 weeks before Nov earnings). hopefully today they're buying!

Likely not a coincident this report is published at this time.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on September 22, 2017, 12:15:21 PM
unfortunately they are entering the share repurchase blackout period (5 weeks before Nov earnings). hopefully today they're buying!

Likely not a coincident this report is published at this time.

No blackout for COBF members.

I hope it gets shorted down another 20% (I know, careful what you wish 4)
Title: Re: DVA – DaVita HealthCare Partners
Post by: oddballstocks on September 22, 2017, 12:34:13 PM
I have no dog in this fight.  But the responses here are interesting.  I read the report, have no opinion.

BUT since WEB owns this it's 'good'.  What if WEB sells out, will the psychology change and suddenly the allegations are true, or it becomes 'bad'?

The same thing happened with ZINC.  Everyone was rah-rah ZINC when Pabrai loved it.  Then he dumped the stock, and the stock tanked and suddenly it's terrible.  Yet nothing changed in the meantime, just the perception.

I don't know if half of your profit coming from 4% is good or bad, but I do know it's risky.  Maybe this is a larger comment about following guru's whomever they are.  Their halo can cloud your thinking.
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on September 22, 2017, 01:00:30 PM
I have no dog in this fight.  But the responses here are interesting.  I read the report, have no opinion.

BUT since WEB owns this it's 'good'.  What if WEB sells out, will the psychology change and suddenly the allegations are true, or it becomes 'bad'?

The same thing happened with ZINC.  Everyone was rah-rah ZINC when Pabrai loved it.  Then he dumped the stock, and the stock tanked and suddenly it's terrible.  Yet nothing changed in the meantime, just the perception.

I don't know if half of your profit coming from 4% is good or bad, but I do know it's risky.  Maybe this is a larger comment about following guru's whomever they are.  Their halo can cloud your thinking.

Well, Pabrai is not Web. I would follow Web but not Pabrai. But it's not even a Web position.
If most revenue are from 4% clients, then that's risky. Here the situation is special: the 96% client (gov) getting the service at negative cost and the 4% subsidies the 96% client. The 4% doesnt have to use dva, but other alternatives, including set up their own shops at CVS, would cost more. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: rb on September 22, 2017, 02:37:48 PM
I have no dog in this fight.  But the responses here are interesting.  I read the report, have no opinion.

BUT since WEB owns this it's 'good'.  What if WEB sells out, will the psychology change and suddenly the allegations are true, or it becomes 'bad'?

The same thing happened with ZINC.  Everyone was rah-rah ZINC when Pabrai loved it.  Then he dumped the stock, and the stock tanked and suddenly it's terrible.  Yet nothing changed in the meantime, just the perception.

I don't know if half of your profit coming from 4% is good or bad, but I do know it's risky.  Maybe this is a larger comment about following guru's whomever they are.  Their halo can cloud your thinking.

Well, Pabrai is not Web. I would follow Web but not Pabrai. But it's not even a Web position.
If most revenue are from 4% clients, then that's risky. Here the situation is special: the 96% client (gov) getting the service at negative cost and the 4% subsidies the 96% client. The 4% doesnt have to use dva, but other alternatives, including set up their own shops at CVS, would cost more.
Ok, just did a quick calculation. The cost per treatment for DVA is about $271. 88% of their patients are gov. This implies that they charge the commercial side an average of $1,097 per treatment or about 4x cost. You can see why the insurance cos may be a little pissed off.

I agree with oddball, this reliance on charging a lot per treatment on the commercial side is a great risk. Add in DVAs leverage and it gets even less appealing.

Btw, if they were to get some pushback from insurance to lower their rates to 3x cost that would lower their operating profit by $815 million. This is not an out of this world scenario. 3x cost is not a low price.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Rasputin on September 22, 2017, 03:16:23 PM
Insurance companies shouldn't be pissed about it since they only have to pay the 4x for 33 months. This 33 month period is unique only for ESRD.
Title: Re: DVA – DaVita HealthCare Partners
Post by: rb on September 22, 2017, 03:18:15 PM
Try explaining that to an insurance co.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on September 22, 2017, 03:29:50 PM
I have no dog in this fight.  But the responses here are interesting.  I read the report, have no opinion.

BUT since WEB owns this it's 'good'.  What if WEB sells out, will the psychology change and suddenly the allegations are true, or it becomes 'bad'?

The same thing happened with ZINC.  Everyone was rah-rah ZINC when Pabrai loved it.  Then he dumped the stock, and the stock tanked and suddenly it's terrible.  Yet nothing changed in the meantime, just the perception.

I don't know if half of your profit coming from 4% is good or bad, but I do know it's risky.  Maybe this is a larger comment about following guru's whomever they are.  Their halo can cloud your thinking.

I can’t speak for others, but I don’t own my (small) position because of WEB. I own this knowing because the stock is cheap and I believe they do have a narrow moat, due to being the low cost competitor and have a hug market share, together with Fresenius. I also own this because I have some ground level exposure through family (which I don’t want to evaluate further) and it does not feel like a fraudulent operation, it feels like a very lean operation. so, I think the statement from the article above, that their connection to AKF is their only competitive advantage is incorrect.

Now, I acknowledge the risk from somewhat broken revenue model, where some customers pay 4x what others do, for the same service, but again discrepancies in pricing are allover the healthcare system, albeit at probably a smaller extent.

Also, hurting these cost providers of a very essential service does not really help reduce the overall cost in the healthcare system. If Fresenius and DVA get into trouble and need to close down centers, those patients would need to go a a hospital, where costs are many times higher, due to much higher overhead.

I would not own a large position in DVA,  because I really cannot estimat the risk that something will change in the pricing that could drastically reduce DVA’s profits, but oeverall, it seem that the stocks valuation reflect this risk and makes it a fair bet at current prices.
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on September 22, 2017, 03:44:37 PM
Spekulatius - I'm pretty much with you on this. My brother, who had spina-bifida, just passed away 2 weeks ago from kidney failure. He was on dialysis for 20 months, and I spent time with him in the clinic a couple of times this year (Fresenius, not DVA). These people offer a life saving service.
They kept him out of the hospital, unless there were complications, of which there were many during the 20 months. These clinics are very busy, and most of the patients are unhealthy - keeping them out of the hospital is what they do - and if these clinics close, they will overload the hospitals.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Gregmal on September 22, 2017, 04:15:27 PM
I have a small position in this. My thoughts are as follows.

The company is cheap. There is a moat. They're doing buybacks and are generally shareholder friendly.

I wanted to add today but did not simply because of my larger concern, one that the company has no control over. The government, and more specifically, shithead mouthpieces like Warren and McCaskill have and will continue to use public companies to boost their political status. Its easy for them. Who is going to stand up to Warren for railing the big banks? Or the greedy corporations doing inversions? No one. No politician has the nuts to take the other side so what you have is now widespread abuse of controversial companies whenever someone needs a status boost. Hillary did this non-stop. And it won't end. It's the same reason I haven't pulled the trigger on AGN. And FWIW I think Tepper owning AGN is more a reason to buy it than Buffett owning DVA. Buffett may be the Oracle, but Tepper since '92 has been God.
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on September 23, 2017, 10:00:07 AM
The report is based on old news.

What do you think would happen if the AKF disappeared?  Certainly Medicare/aid would no longer be subsidized.  It may be possible that commercial plans become more expensive on the whole as well since the patients who are subsidized make no money for the company.

I would think the following questions are most important to investors or those considering an investment?  Can anyone add or subtract?

(1) Is kidney care cheaper to the health system because of DaVita?  Cheaper than a hospital but also of lesser cost to the patient depending on coverage/assistance.
(2) Is kidney care better at DaVita?  Yes, according to the ratings, and according to changes in the ratings after DaVita has acquired new kidney care centers.
(3) Is this a growing business?  Yes.
(4) Does management have the shareholder in mind?  Yes, buybacks have been substantial. 
(5) Does DaVita provide an essential service that would be political suicide to attempt to dismantle?  Yes.
(6) Are there high barriers to entry?  Yes and there are only two companies with scale. 
(7) Does DaVita have a strong corporate culture?  Some would call DaVita's corporate culture a cult.

I'm not sure I see a logical reason to sell based on the SIRF report...
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on September 23, 2017, 10:31:07 AM
(8) To what extent are commercial pay reductions mitigated by mom and pops without scale? Will a politician put them out of business and concentrate the duopoly further?

I wouldn't call this a slam dunk to the commercial pay question but it certainly mitigates it. In this slowly dying modern economy, I can't say I'd be totally surprised if this pricing mechanism became less a part of the free market. Especially in certain states. However, absent political interference on commercial... I don't think there's anything commercial insurers can do about it and there's nothing left for CMS to squeeze.

Anyone who was following this in 13' when there was some CMS freezes probably saw a bunch of articles about mom and pops crying about going out of business....

Nothing Roddy wrote was new. It was simply a stacking of all the previous bad news hoping for a lollapalooza effect.

It's probably not a good idea to have huge position here but I'm comfortable with a medium sized position.



Title: Re: DVA – DaVita HealthCare Partners
Post by: Foreign Tuffett on September 24, 2017, 01:03:41 AM
IMO the more that DVA is a good, cash generating business the more it's at risk from the status quo unraveling in an unfavorable way.

Here's a counterfactual to try and explain what I mean. What if, instead of charging private insurers ~$1050 per dialysis treatment, DVA and its ilk charged them $3150 per treatment? In this scenario DVA would look like a great business, but it would be unsustainable. It probably wouldn't happen overnight, but regulations and/or laws would be changed so that, one way or the other, the cost to private insurers for dialysis treatment would come down significantly.

It's this "what is the proper cost to society for the provision of dialysis services?" dynamic that has kept me from investing in DVA. Sure, right now it looks like a pretty good business. However, it's definitely possible that various governmental entities decide that dialysis is bleeding the insurers dry and make it their mission to ensure that the dialysis providers are only profitable enough to incentivized them to open new clinics. 

There's another, much more concise, way of looking at this issue: the dialysis industry doesn't have much pricing power. The circular song-and-dance with the AKF was the dialysis industry's attempt to game a system that it has relatively little control over.


Title: Re: DVA – DaVita HealthCare Partners
Post by: Rasputin on September 24, 2017, 07:21:54 AM
To me, any analysis that only talks about cost/treatment (4x or 3x) is missing the other variable that determine the total cost to private payors.  The missing variable is Number of treatments.

Number of treatments have been significantly reduced because private payors only have to cover for 33 months (even as the patient and his/her employer continue to pay monthly premium to their insurance company). 

If ESRD is treated like any other disease, and dialysis is treated like any other expensive-must have-treatment, yes the cost/treatment to private payors will be significantly reduced, but the number of treatments will explode upward and will go higher over time as more patients live longer on dialysis.  Total cost to the insurance industry will be much higher. 

Any article that only mention 4x or 3x commercial rate without mentioning the 30 month MSP period is biased. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on September 25, 2017, 12:49:35 AM
As pointed out the 30 (33) month payment period for commercial is an important variable that is often not mentioned.
Also, the 20%-30% odd percentage of the market provide higher cost treatment and probably needs to go out of business first before DVA's economics falls flat.
Lastly if it is not sustainable/unfair that 10% carries the industry then it is probably also unsustainable/unfair that 90% don't cover costs.

I think it is critical that one views DVA/industry from the point of the patient, bearing in mind how sensitive their situation is. As long as DVA delivers for the patient, all should be well.
Title: Re: DVA – DaVita HealthCare Partners
Post by: mrholty on September 25, 2017, 01:16:10 PM
No position here but considering.

I have looked at the books of a small physical therapy clinic.  Its not uncommon for regular insurance reimbursement rates to be 3x the medicare rate.  This is the fallacy of single payor in the US.  If we go to that and we use those rates as the price it will be interesting to see what happens.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on September 26, 2017, 05:27:41 AM
National Kidney Foundation letter - good read
https://www.kidney.org/sites/default/files/20160922-NKF_response_CMS_RFI_allegations_steering.pdf

Experpt:
Insurer Practices
Insurers have been increasingly denying third party premium assistance payments for dialysis patients
provided by the American Kidney Fund, going even as far to explicitly ask patients to attest that they are
not directly receiving contributions from AKF to help pay their premiums. In addition, some plans also
permit third-party premium assistance from other non-profit organizations, while singling out dialysis
patients and excluding premium assistance provided by the American Kidney Fund. Over the past few
years NKF has worked to end this and other discriminatory practices against ESRD patients by private
insurers, particularly as it relates to Marketplace coverage.

For example:
• In 2013 and 2014 insurance companies in Oregon and Washington required waiting periods for
coverage of organ transplants if patients did not have prior insurance coverage. NKF contacted
the state insurance commissioners and thankfully, Washington and Oregon passed regulations
that prohibited this practice.
• We have seen and continue to see insurers in the Marketplace listing all immunosuppressive
drugs, including generics, on the highest cost sharing tiers.
In 2015 and 2016 we have seen plans across several states that disclose if a person is eligible for
Medicare due to ESRD they must enroll or the plan will only pay for services otherwise not
covered by Medicare and will only pay secondary to Medicare three months after the patient
begins dialysis or at the time they receive a transplant.

o We have seen policies that disclose if a patient does not enroll in Medicare that the plan
will only pay a certain percentage above the Medicare payment rate for dialysis services
and that the patient may be balanced billed by the provider for charges above that rate,
which will not be counted towards their out-of-pocket maximums.

o We have even seen plans in which insurers state they will pay the Medicare premium for
patients if they enroll in Medicare while also maintaining their private coverage with the
carrier.

o We have heard from patients and their social workers about instances where patients
have been called by their insurance company and told they must enroll in Medicare.

A qualitative analysis of the open ended responses we received to our survey identified Medicare
beneficiaries with Part A and B that had no supplemental coverage and indicated difficulty paying the 20%
coinsurance. In some cases these beneficiaries indicated their coinsurance was waived by the dialysis
company, but not by other providers. For some, this led to not seeking medical care beyond their dialysis
facility. In addition, many respondents, including some respondents who have Medicare Part D, stated
that they have high out-of-pocket costs for their prescription medications and were struggling to afford
them. Additionally, some patients claimed they cannot afford to get a transplant. These respondents
tended to be dually enrolled in Medicare and Medicaid or enrolled in Medicare without a supplemental
policy. A few transplant recipients also indicated concerns about paying for private coverage when their
Medicare ends 36 months after transplant or continuing to pay for their private insurance premiums when
AKF HIPP assistances ends.
Title: Re: DVA – DaVita HealthCare Partners
Post by: JRM on September 26, 2017, 07:18:58 AM
This looks worse and worse the more I look at it.  This may not be the next Valeant, but it sure looks like there is some hard core rationalization going on here similar to the VRX thread.  What will happen if the loophole is closed where Fresenius and DaVita tax deductible donations to AKF are not allowed to be spent on claims from the two companies?  What happens if these companies are turned into regulated utilities which result in increased O&M costs and decreased margins?  Why is DaVita constantly settling major lawsuits? And why is the CEO running around dressed like a musketeer?  He looks like a brilliant outsider when things are going well.  When the barbarians are at the gates he just looks like a crazy person.

Their business model is to gouge private insurance.  Period.  They will have a viable business if they aren't allowed to gouge private insurance.  However, the business won't be worth as much.

At the end of the day they provide a value added service, but how is this not a commodity service?  They offer a lower cost than a hospital because of lower overhead and operational efficiencies.  Such as, they are not required to have a doctor on the premises.  They are essentially running these places with technicians and maybe a nurse.
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on September 26, 2017, 07:33:33 AM
I'm not sure anyone wants to try and sell you on DVA. What you call hard core rationalization, I see as conviction.
If DVA makes you uncomfortable, stay away for sure - there is plenty of uncertainty. Almost everything you have
raised has been discussed in detail. The low price compensates for the uncertainty in my opinion.

I don't see how this is a commodity service/business. There is a standard of care that is very important here.
Maybe narrow moat at best, as Fresenius is a high quality provider.

If politicians/gov change the rules on reimbursements to the negative there will be pain for sure. Just don't think
it will happen.
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on September 26, 2017, 07:49:31 AM
I read some online stories by nurses who do dialysis. It's not that easy. New nurses make mistakes and some incidents are fatal. They need to well trained and guided by senior nurse. The work is very intense compared to working in the hospital, resulting shortage of workers. Also, nurses need special educations and pass tests, etc.. Anyway, my point is this is not a commodity business.

Maybe the issue here is DVA 's margin is capped. Its clients will never allow it to make excessive profits, nor will they want DVA lose incentives to open new centers. So DVA is like a regulated utility. But even with limited margin upside, current valuation is heavily discounted.
Title: Re: DVA – DaVita HealthCare Partners
Post by: JRM on September 26, 2017, 08:03:55 AM
I'm not sure anyone wants to try and sell you on DVA. What you call hard core rationalization, I see as conviction.
If DVA makes you uncomfortable, stay away for sure - there is plenty of uncertainty. Almost everything you have
raised has been discussed in detail. The low price compensates for the uncertainty in my opinion.

I don't see how this is a commodity service/business. There is a standard of care that is very important here.
Maybe narrow moat at best, as Fresenius is a high quality provider.

If politicians/gov change the rules on reimbursements to the negative there will be pain for sure. Just don't think
it will happen.

Fair enough.  I've read through the entire thread.  Many of these issues were raised a while back.  As far as DaVita and/or Fresenius being high quality providers, why is it that costs are higher in the U.S. and patient outcomes are worse than other countries?

The service is very important, almost essential since not everyone can get a transplant.  However, that does not mean it is not a commodity service.  Antibiotics are essential as well.

Just seems like a tough way to make money to me. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: JRM on September 26, 2017, 08:07:57 AM
I read some online stories by nurses who do dialysis. It's not that easy. New nurses make mistakes and some incidents are fatal. They need to well trained and guided by senior nurse. The work is very intense compared to working in the hospital, resulting shortage of workers. Also, nurses need special educations and pass tests, etc.. Anyway, my point is this is not a commodity business.

Maybe the issue here is DVA 's margin is capped. Its clients will never allow it to make excessive profits, nor will they want DVA lose incentives to open new centers. So DVA is like a regulated utility. But even with limited margin upside, current valuation is heavily discounted.

I understand what you're saying.  But are these training/testing requirements that allow for a high barrier to entry (and high returns), or is it the duopoly created by Fresenius and DaVita using loopholes and exploiting private insurance?

I'm still trying to fully understand the moat and what would cause it to be lost.
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on September 26, 2017, 08:14:29 AM
So CMS has already ruled that DVA cant proactively sign up patients to enroll in AKF. That resulted in only a small number of reduction in AKF patients
The battle ground now is if CMS will rule if AKF is outright illegal. If AKF is completed baned, yes that will hurt DVA badly. But will CMS ban AKF? Any thoughts?
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on September 26, 2017, 08:19:41 AM
I read some online stories by nurses who do dialysis. It's not that easy. New nurses make mistakes and some incidents are fatal. They need to well trained and guided by senior nurse. The work is very intense compared to working in the hospital, resulting shortage of workers. Also, nurses need special educations and pass tests, etc.. Anyway, my point is this is not a commodity business.

Maybe the issue here is DVA 's margin is capped. Its clients will never allow it to make excessive profits, nor will they want DVA lose incentives to open new centers. So DVA is like a regulated utility. But even with limited margin upside, current valuation is heavily discounted.

I understand what you're saying.  But are these training/testing requirements that allow for a high barrier to entry (and high returns), or is it the duopoly created by Fresenius and DaVita using loopholes and exploiting private insurance?

I'm still trying to fully understand the moat and what would cause it to be lost.

Well, i think if even if u have a lot of money, you wont be able to start many dialysis centers that doesnt result in severe problems. The nurses are in demand, take times to train, and knowhow is important to run the center effienciently and nobody die.  Good luck trying to start one in CVS.
Title: Re: DVA – DaVita HealthCare Partners
Post by: JRM on September 26, 2017, 08:30:39 AM
My wife works at a home infusion pharmacy.  It is a similar but different service provided by dialysis companies.  They have nurses that install PIC lines in patients and deliver IV drugs with pumps.  With the exception of hemophilia patients, the margins aren't amazing.  Even the hemophilia patients are not always worth the trouble anymore because of the competition to get these patients.

They have about a 60/40 mix of mediare/medicaid to private insurance mix; and they typically don't lose money on either.  I guess I see the dialysis business working this way with all things being equal. I am probably biased.
Title: Re: DVA – DaVita HealthCare Partners
Post by: rb on September 26, 2017, 09:04:57 AM
I read some online stories by nurses who do dialysis. It's not that easy. New nurses make mistakes and some incidents are fatal. They need to well trained and guided by senior nurse. The work is very intense compared to working in the hospital, resulting shortage of workers. Also, nurses need special educations and pass tests, etc.. Anyway, my point is this is not a commodity business.

Maybe the issue here is DVA 's margin is capped. Its clients will never allow it to make excessive profits, nor will they want DVA lose incentives to open new centers. So DVA is like a regulated utility. But even with limited margin upside, current valuation is heavily discounted.
DaVita IS a commodity business. The reasons you've listed don't invalidate that. It doesn't matter how hard the work is. Let me give an example. Oil is a commodity business and Coke is not. But making oil is hard. I can't just go out there and produce oil. The work is very intense and you need lots of very expensive equipment and highly trained people. I can however make Coke. The process is easy and doesn't require much in terms of capital. These things don't change the commodity/not commodity aspect.

In the case of dialysis the equipment is commercially available, there are lots of nurses already trained and you can create/train more nurses. Yes it would take some time, but there are no barriers to making nurses. There is nothing proprietary here.

One thing that dialysis centres have is a sort of first mover advantage. It's hard to travel for dialysis so patients choose the centre closest to their home. On top of that there's not enough people with ESRD. So if you open another centre in an area that has an existing one I suspect that capacity utilization would drop so much as to make both centres unprofitable. That's typical of a commodity business and not really a moat.
Title: Re: DVA – DaVita HealthCare Partners
Post by: rogermunibond on September 26, 2017, 09:25:54 AM
For the home infusion example it kind of depends whether the home care company is part of a health system or standalone.  There are ways that nonprofit hospitals can pad the hospital bottom line with buying infusion pharma products at discount and charging the insurer.  Likely wouldn't see the margin at the home care side but on the hospital books.

Don't think anything like that exists for DVA, but Fresenius manufactures GranuFlo and NaturaLyte which are used in dialysis.  They also have acquired generics and biosimilars biz.
Title: Re: DVA – DaVita HealthCare Partners
Post by: JRM on September 26, 2017, 09:32:02 AM
For the home infusion example it kind of depends whether the home care company is part of a health system or standalone.  There are ways that nonprofit hospitals can pad the hospital bottom line with buying infusion pharma products at discount and charging the insurer.  Likely wouldn't see the margin at the home care side but on the hospital books.

Don't think anything like that exists for DVA, but Fresenius manufactures GranuFlo and NaturaLyte which are used in dialysis.  They also have acquired generics and biosimilars biz.

The idea for home infusion is similar to the dialysis business.  It is lower cost to the insurer to receive the infusions at home and it is more comfortable for the patient (usually).  The goal with both is to keep the patient out of the hospital as much as possible.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on September 26, 2017, 09:45:26 AM
I read some online stories by nurses who do dialysis. It's not that easy. New nurses make mistakes and some incidents are fatal. They need to well trained and guided by senior nurse. The work is very intense compared to working in the hospital, resulting shortage of workers. Also, nurses need special educations and pass tests, etc.. Anyway, my point is this is not a commodity business.

Maybe the issue here is DVA 's margin is capped. Its clients will never allow it to make excessive profits, nor will they want DVA lose incentives to open new centers. So DVA is like a regulated utility. But even with limited margin upside, current valuation is heavily discounted.

I understand what you're saying.  But are these training/testing requirements that allow for a high barrier to entry (and high returns), or is it the duopoly created by Fresenius and DaVita using loopholes and exploiting private insurance?

I'm still trying to fully understand the moat and what would cause it to be lost.

Surely if one considers DVA/FSN to be "exploiting private insurance" one cannot simply gloss over the fact that they are not allowed to make money on 90% of their patients? DVA's revenue per treatment from government increased by 0.3% per annum over the last 10 years. Consider inflation and see the attached chart to get an idea of how long this has been going on. Virtually no other healthcare providers have been going without meaningful basket adjustments for so long.
Now for another exception. How come insurers can kick back patients to government after 30 months? It was set 12 months in the 1981, 18 months in 1990 and 30 months in 1997 and it came very close to being set at 42 months in 2007 (Bush vetoed it). Surely it is time for the commercial guys to step up too, because the last time they did was in 2007! However, the question is how valuable is the 30 months? The more I look into it the more I realise it is a significant number. So at the moment after 2.5 years the patient goes to government, right. Mortality rates are often quoted at around 20% which is also the number that sits behind the frequent statement of dialysis patients living 5 years. However when you look at the actual data from USRDS.ORG you note that 16% of your ESRD population is over 75 years old plus another 23% 65-74 old and the survival rate of those are naturally low. Only 8.3% and 1.9% respectively will live 10 years and longer, which tells you the majority of the often sited 20% mortality number is made up of 65 years and older patients. However survival of 10 years and longer jumps to 27% for 45-64 year old, 54% for 22-44 year old and 75% for your 0-21 year old. These last three age groups make up the 61% of your ESRD population and what you realise is that the ability to kick back these patients to government after 2.5 years is extremely valuable to private insurers. Just basic insurance logic tells you the biggest asset is a young healthy patient versus your biggest liability of a young sick patient especially if they have what looks to me to be the most expensive chronic disease in the system. BUT WHY is private afforded this extremely favourable financial treatment? From my understanding this is really the only disease where commercial is allowed to do this.

In terms of the AKF (still digging into this one), but up to 1996 healthcare providers were allowed to pay the roughly 20% shortfall in patients premiums (Medicare Part B and Medigap) directly. This practice was stopped by the 1996 HIPAA "act". At his point AKF stepped into the gap and started working with healthcare providers to pool contributions in order to provide financial aid to patients' uncovered dialysis costs. https://www.bridgespan.org/bridgespan/Images/articles/hngrb-american-kidney-fund/american-kidney-fund.pdf?ext=.pdf
At the time the frequently sited "Advisory Opinion" was received https://oig.hhs.gov/fraud/docs/advisoryopinions/1997/kdp.pdf
Context is important and here there seems to have been an evolution of industry practice over decades under regulatory scrutiny, so maybe its a bit simplistic to view it as some nefarious scheme cooked up over the last 5 years. 

P.S. How long will I live if I choose to stop dialysis?
This varies from person to person. People who stop dialysis may live anywhere from one week to several weeks, depending on the amount of kidney function they have left and their overall medical condition.
https://www.kidney.org/atoz/content/dialysisstop

Its complicated....hence the moat?
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on September 26, 2017, 09:49:56 AM
So CMS has already ruled that DVA cant proactively sign up patients to enroll in AKF. That resulted in only a small number of reduction in AKF patients
The battle ground now is if CMS will rule if AKF is outright illegal. If AKF is completed baned, yes that will hurt DVA badly. But will CMS ban AKF? Any thoughts?
http://www.npr.org/sections/health-shots/2017/02/14/515041363/texas-judge-upends-effort-to-limit-charity-funding-for-kidney-care
http://www.dialysispatients.org/sites/default/files/17-00016%20-%20Docket%20No.%2036%20-%20Order%20Granting%20PI%20%25282017.01.25%2529.pdf
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on September 26, 2017, 09:59:36 AM
My wife works at a home infusion pharmacy.  It is a similar but different service provided by dialysis companies.  They have nurses that install PIC lines in patients and deliver IV drugs with pumps.  With the exception of hemophilia patients, the margins aren't amazing.  Even the hemophilia patients are not always worth the trouble anymore because of the competition to get these patients.

They have about a 60/40 mix of medicare/medicaid to private insurance mix; and they typically don't lose money on either.  I guess I see the dialysis business working this way with all things being equal. I am probably biased.

The long term solution seems to be a re-balancing between government, commercial and providers. Government should pay a bit more, commercial a bit less and longer or a mix of the two and providers should make less. The main challenge to the industry is to transition without interrupting service delivery, because people's lives are at stake. 

Then...you have to address diabetes, hypertension and glomerulonephritis. Nothing is going to change unless the long term drivers are addressed.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on September 27, 2017, 04:08:54 AM
I read some online stories by nurses who do dialysis. It's not that easy. New nurses make mistakes and some incidents are fatal. They need to well trained and guided by senior nurse. The work is very intense compared to working in the hospital, resulting shortage of workers. Also, nurses need special educations and pass tests, etc.. Anyway, my point is this is not a commodity business.

Maybe the issue here is DVA 's margin is capped. Its clients will never allow it to make excessive profits, nor will they want DVA lose incentives to open new centers. So DVA is like a regulated utility. But even with limited margin upside, current valuation is heavily discounted.

I understand what you're saying.  But are these training/testing requirements that allow for a high barrier to entry (and high returns), or is it the duopoly created by Fresenius and DaVita using loopholes and exploiting private insurance?

I'm still trying to fully understand the moat and what would cause it to be lost.

It is a commoditized business in the sense that the treatment and the price they charge is standardized, but that is true for a lot of other medical treatments too.

They definitely need to operate with RN’s on the floor at all times and a doctor needs to be on call. as mentioned above, the quality of care is very important, most patients are very sick and their blood pressure and medication (Heparin, EPO etc) needs to be managed. Nurses need to be trained on the machines and the treatment and patients management and the work is quite intense as stated above, which in conjunction with the moderate pay results in considerable turnover. Mistakes on the floor can easily result in death of a patient.
 This is certainly not a business that every idiot can run. FWIW, I don’t like the CEO and I think he has outlived his usefulnes, but he regards DVA as his baby (somewhat justifiable so).
Title: Re: DVA – DaVita HealthCare Partners
Post by: Foreign Tuffett on September 27, 2017, 04:24:35 AM
I read some online stories by nurses who do dialysis. It's not that easy. New nurses make mistakes and some incidents are fatal. They need to well trained and guided by senior nurse. The work is very intense compared to working in the hospital, resulting shortage of workers. Also, nurses need special educations and pass tests, etc.. Anyway, my point is this is not a commodity business.

Maybe the issue here is DVA 's margin is capped. Its clients will never allow it to make excessive profits, nor will they want DVA lose incentives to open new centers. So DVA is like a regulated utility. But even with limited margin upside, current valuation is heavily discounted.

I understand what you're saying.  But are these training/testing requirements that allow for a high barrier to entry (and high returns), or is it the duopoly created by Fresenius and DaVita using loopholes and exploiting private insurance?

I'm still trying to fully understand the moat and what would cause it to be lost.

It is a commoditized business in the sense that the treatment and the price they charge is standardized, but that is true for a lot of other medical treatments too.

They definitely need to operate with RN’s on the floor at all times and a doctor needs to be on call. as mentioned above, the quality of care is very important, most patients are very sick and their blood pressure and medication (Heparin, EPO etc) needs to be managed. Nurses need to be trained on the machines and the treatment and patients management and the work is quite intense as stated above, which in conjunction with the moderate pay results in considerable turnover. Mistakes on the floor can easily result in death of a patient.
 This is certainly not a business that every idiot can run. FWIW, I don’t like the CEO and I think he has outlived his usefulnes, but he regards DVA as his baby (somewhat justifiable so).

Can you elaborate on your feelings about Thiry?
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on September 27, 2017, 04:50:17 AM
I read some online stories by nurses who do dialysis. It's not that easy. New nurses make mistakes and some incidents are fatal. They need to well trained and guided by senior nurse. The work is very intense compared to working in the hospital, resulting shortage of workers. Also, nurses need special educations and pass tests, etc.. Anyway, my point is this is not a commodity business.

Maybe the issue here is DVA 's margin is capped. Its clients will never allow it to make excessive profits, nor will they want DVA lose incentives to open new centers. So DVA is like a regulated utility. But even with limited margin upside, current valuation is heavily discounted.

I understand what you're saying.  But are these training/testing requirements that allow for a high barrier to entry (and high returns), or is it the duopoly created by Fresenius and DaVita using loopholes and exploiting private insurance?

I'm still trying to fully understand the moat and what would cause it to be lost.

It is a commoditized business in the sense that the treatment and the price they charge is standardized, but that is true for a lot of other medical treatments too.

They definitely need to operate with RN’s on the floor at all times and a doctor needs to be on call. as mentioned above, the quality of care is very important, most patients are very sick and their blood pressure and medication (Heparin, EPO etc) needs to be managed. Nurses need to be trained on the machines and the treatment and patients management and the work is quite intense as stated above, which in conjunction with the moderate pay results in considerable turnover. Mistakes on the floor can easily result in death of a patient.
 This is certainly not a business that every idiot can run. FWIW, I don’t like the CEO and I think he has outlived his usefulnes, but he regards DVA as his baby (somewhat justifiable so).

Can you elaborate on your feelings about Thiry?
Can you two take that part of the discussion offline please?  I hate to listen to a man's "bleeding heart" ;D
Title: Re: DVA – DaVita HealthCare Partners
Post by: Jurgis on September 27, 2017, 06:04:57 AM
Can you two take that part of the discussion offline please?

Can you not take that part of the discussion offline please.  8)
Title: Re: DVA – DaVita HealthCare Partners
Post by: rb on September 27, 2017, 09:31:55 AM
Can you two take that part of the discussion offline please?

Can you not take that part of the discussion offline please.  8)
LOL! You want hear more about Citizen D'Artagnan?  ;D
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on September 27, 2017, 10:47:50 AM
I read some online stories by nurses who do dialysis. It's not that easy. New nurses make mistakes and some incidents are fatal. They need to well trained and guided by senior nurse. The work is very intense compared to working in the hospital, resulting shortage of workers. Also, nurses need special educations and pass tests, etc.. Anyway, my point is this is not a commodity business.

Maybe the issue here is DVA 's margin is capped. Its clients will never allow it to make excessive profits, nor will they want DVA lose incentives to open new centers. So DVA is like a regulated utility. But even with limited margin upside, current valuation is heavily discounted.
DaVita IS a commodity business. The reasons you've listed don't invalidate that. It doesn't matter how hard the work is. Let me give an example. Oil is a commodity business and Coke is not. But making oil is hard. I can't just go out there and produce oil. The work is very intense and you need lots of very expensive equipment and highly trained people. I can however make Coke. The process is easy and doesn't require much in terms of capital. These things don't change the commodity/not commodity aspect.

In the case of dialysis the equipment is commercially available, there are lots of nurses already trained and you can create/train more nurses. Yes it would take some time, but there are no barriers to making nurses. There is nothing proprietary here.

One thing that dialysis centres have is a sort of first mover advantage. It's hard to travel for dialysis so patients choose the centre closest to their home. On top of that there's not enough people with ESRD. So if you open another centre in an area that has an existing one I suspect that capacity utilization would drop so much as to make both centres unprofitable. That's typical of a commodity business and not really a moat.

Very sharp, thanks for unpacking this!
Title: Re: DVA – DaVita HealthCare Partners
Post by: Read the Footnotes on September 27, 2017, 11:53:13 AM
Can you two take that part of the discussion offline please?

Can you not take that part of the discussion offline please.  8)

Years ago Kent Thiry was very well respected. If there is a well reasoned and respectful argument why he did not or does not deserve that respect, I would be very interested in hearing it.

I haven't been following DaVita closely for updates, so I would be very interested in hearing what if anything has changed.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Read the Footnotes on September 27, 2017, 11:58:54 AM
I read some online stories by nurses who do dialysis. It's not that easy. New nurses make mistakes and some incidents are fatal. They need to well trained and guided by senior nurse. The work is very intense compared to working in the hospital, resulting shortage of workers. Also, nurses need special educations and pass tests, etc.. Anyway, my point is this is not a commodity business.

Maybe the issue here is DVA 's margin is capped. Its clients will never allow it to make excessive profits, nor will they want DVA lose incentives to open new centers. So DVA is like a regulated utility. But even with limited margin upside, current valuation is heavily discounted.

I understand what you're saying.  But are these training/testing requirements that allow for a high barrier to entry (and high returns), or is it the duopoly created by Fresenius and DaVita using loopholes and exploiting private insurance?

I'm still trying to fully understand the moat and what would cause it to be lost.

It is a commoditized business in the sense that the treatment and the price they charge is standardized, but that is true for a lot of other medical treatments too.

They definitely need to operate with RN’s on the floor at all times and a doctor needs to be on call. as mentioned above, the quality of care is very important, most patients are very sick and their blood pressure and medication (Heparin, EPO etc) needs to be managed. Nurses need to be trained on the machines and the treatment and patients management and the work is quite intense as stated above, which in conjunction with the moderate pay results in considerable turnover. Mistakes on the floor can easily result in death of a patient.
 This is certainly not a business that every idiot can run. FWIW, I don’t like the CEO and I think he has outlived his usefulnes, but he regards DVA as his baby (somewhat justifiable so).

I'm actually not bullish on DaVita, but . . .

If this is a commodity, how do you explain the oligopoly or duopoly then? Duopoly typically does not develop or endure in commodity businesses with no moats.

Do you believe there is the potential for economies of scale in this business?
What about the fact that high volume centers tend to produces better medical outcomes in most treatment areas?
Title: Re: DVA – DaVita HealthCare Partners
Post by: roark33 on September 27, 2017, 12:17:45 PM
I read some online stories by nurses who do dialysis. It's not that easy. New nurses make mistakes and some incidents are fatal. They need to well trained and guided by senior nurse. The work is very intense compared to working in the hospital, resulting shortage of workers. Also, nurses need special educations and pass tests, etc.. Anyway, my point is this is not a commodity business.

Maybe the issue here is DVA 's margin is capped. Its clients will never allow it to make excessive profits, nor will they want DVA lose incentives to open new centers. So DVA is like a regulated utility. But even with limited margin upside, current valuation is heavily discounted.

I understand what you're saying.  But are these training/testing requirements that allow for a high barrier to entry (and high returns), or is it the duopoly created by Fresenius and DaVita using loopholes and exploiting private insurance?

I'm still trying to fully understand the moat and what would cause it to be lost.

Surely if one considers DVA/FSN to be "exploiting private insurance" one cannot simply gloss over the fact that they are not allowed to make money on 90% of their patients? DVA's revenue per treatment from government increased by 0.3% per annum over the last 10 years. Consider inflation and see the attached chart to get an idea of how long this has been going on. Virtually no other healthcare providers have been going without meaningful basket adjustments for so long.
Now for another exception. How come insurers can kick back patients to government after 30 months? It was set 12 months in the 1981, 18 months in 1990 and 30 months in 1997 and it came very close to being set at 42 months in 2007 (Bush vetoed it). Surely it is time for the commercial guys to step up too, because the last time they did was in 2007! However, the question is how valuable is the 30 months? The more I look into it the more I realise it is a significant number. So at the moment after 2.5 years the patient goes to government, right. Mortality rates are often quoted at around 20% which is also the number that sits behind the frequent statement of dialysis patients living 5 years. However when you look at the actual data from USRDS.ORG you note that 16% of your ESRD population is over 75 years old plus another 23% 65-74 old and the survival rate of those are naturally low. Only 8.3% and 1.9% respectively will live 10 years and longer, which tells you the majority of the often sited 20% mortality number is made up of 65 years and older patients. However survival of 10 years and longer jumps to 27% for 45-64 year old, 54% for 22-44 year old and 75% for your 0-21 year old. These last three age groups make up the 61% of your ESRD population and what you realise is that the ability to kick back these patients to government after 2.5 years is extremely valuable to private insurers. Just basic insurance logic tells you the biggest asset is a young healthy patient versus your biggest liability of a young sick patient especially if they have what looks to me to be the most expensive chronic disease in the system. BUT WHY is private afforded this extremely favourable financial treatment? From my understanding this is really the only disease where commercial is allowed to do this.



---

One part of this analysis that doesn't get as much focus is the lobbying power of the insurance companies.  The main reason I don't own DVA right now, despite being ok with the payor relationship is I think the insurance companies have now decided that they are strong enough to push back against the AFK, and are fine with DVA's threat to go after the 30 month rule.  The insurance companies are large enough now that they will lobby to keep a lid on that limit.  DVA is a small fish and the insurance companies have decided to circle the wagons on this issue.  My two cents.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Jurgis on September 27, 2017, 12:24:28 PM
Can you two take that part of the discussion offline please?

Can you not take that part of the discussion offline please.  8)
LOL! You want hear more about Citizen D'Artagnan?  ;D

Did they release "Twenty Years After"?  8)

Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on September 27, 2017, 02:24:21 PM
---

One part of this analysis that doesn't get as much focus is the lobbying power of the insurance companies.  The main reason I don't own DVA right now, despite being ok with the payor relationship is I think the insurance companies have now decided that they are strong enough to push back against the AFK, and are fine with DVA's threat to go after the 30 month rule.  The insurance companies are large enough now that they will lobby to keep a lid on that limit.  DVA is a small fish and the insurance companies have decided to circle the wagons on this issue.  My two cents.
I think the lobbying is a big part of the story and also an important factor in the research process, because just about every piece of research, study, opinion piece, complaint, legal opinion, you name it seem to have some lobbying behind it. For Davita "Kidney Care Partners" seems to be the main one. http://kidneycarepartners.com/kcp-partners/ Hell, I struggle to keep my own bias in check.

Having said that lobbying has been a big part of the story since the birth of the industry in 1971 (see expert to follow for a rather unorthodox example!). Also I think one has to ask why DVA/FSN have been able to establish an oligopoly in the presence of significant lobbying power of other industry players, including the private insurers. In my mind the latter always had significant power.

Not to discount your point about the private insurers' power, it's a valid point. However, the issue around the AKF is not so simple. It has precedent and operate under "legal cover" from shortly after the the changes brought about in 1996 as mentioned earlier in the thread. This fight is not new and any sudden changes in policies around the AKF will cause significant disruption to a big part of the patient population. Lastly the very fact that the only real beneficiary in disrupting the AKF model is the insurance industry counts against it especially since the argument from the patient side is that these are "efforts by certain health insurers to discriminate against individuals with ESRD" as you can see from this (biased) letter
http://kidneycarepartners.com/wp-content/uploads/2014/10/Patient-Protection-and-Affordable-Care-Act-HHS-NBPP-for-2018-October-6.pdf

Not saying it cannot happen-just that I'm thinking its easier said than done! Again, it's complicated...hence the moat?

Taken from "Origins of the Medicare Kidney Disease Entitlement: The Social Security Amendments of 1972"
https://www.ncbi.nlm.nih.gov/books/NBK234191/
"Glazer, at a New York NAPH press conference on November 3, the day before the
hearing, had announced his intention to undergo dialysis before Chairman Mills
and the Ways and Means Committee. The National Kidney Foundation opposed
the effort—directly in discussions with Glazer and indirectly through Eli
Friedman, advisor to NAPH. Schreiner and Plante had been lobbying Congress
assiduously, seeking support for kidney treatment programs from all sources—
the tax committees, the health legislative committees, and the appropriations
committees. They feared that an accident would cancel all the progress they had
made, and Schreiner stressed this possibility when he tried to dissuade Glazer
from dialyzing before the committee. Given these activities, Schreiner's incredulity
was all the greater when he received a telephone call at home on the evening
before the hearing. Glazer had arrived in Washington, D.C., from New York, and
was calling to ask Schreiner if a Georgetown University dialysis machine could be
brought to the hearing room the next morning for use at that time (Institute of
Medicine, 1989). Schreiner, suppressing his anger, trucked a machine over to the
Longworth House Office Building on Capital Hill. Barred from attending the hearing by the National Kidney Foundation, which did not wish him to lend its prestige to the event, he sent a Georgetown nephrology fellow, James Carey, to act as attending physician....


Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on September 27, 2017, 02:48:45 PM
Can you two take that part of the discussion offline please?

Can you not take that part of the discussion offline please.  8)

Years ago he was very well respected. If there is a well reasoned and respectful argument why he did not or does not deserve that respect, I would be very interested in hearing it.

I haven't been following DaVita closely for updates, so I would be very interested in hearing what if anything has changed.

Who is the "he" you are referring to? Thanks!
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on September 27, 2017, 03:02:41 PM
Maybe this is the moat: I am keeping a lot of patient alive, and they can't go anywhere else. You want to pay less, you need to move these people or you have to step over their dead bodies.

maybe I cut price for you, but I can't take on new patients anymore as I am not making much here. The new patients have no place to go and will cost you 10x more in hospitals.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Read the Footnotes on September 27, 2017, 04:09:26 PM
Can you two take that part of the discussion offline please?

Can you not take that part of the discussion offline please.  8)

Years ago he [Kent Thiry] was very well respected. If there is a well reasoned and respectful argument why he did not or does not deserve that respect, I would be very interested in hearing it.

I haven't been following DaVita closely for updates, so I would be very interested in hearing what if anything has changed.

Who is the "he" you are referring to? Thanks!

My apologies for the confusing use of quotes from the thread. I was reponding to posts about Kent Thiry, CEO of DaVita. Years ago he had the respect of many industry experts I met. I was never really convinced or swayed by all the praise I heard, but I am always interested to hear details of a reversal in common opinion, whether about companies themselves or company leadership.

Of course, this is also fertile ground for mockery without regard for serious analysis, but John Oliver seems to have the funny stuff covered for us on this subject.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Read the Footnotes on September 27, 2017, 04:15:39 PM
Maybe this is the moat: I am keeping a lot of patient alive, and they can't go anywhere else. You want to pay less, you need to move these people or you have to step over their dead bodies.

maybe I cut price for you, but I can't take on new patients anymore as I am not making much here. The new patients have no place to go and will cost you 10x more in hospitals.

These are good points, but they address market demand and price inelasticity, whereas a moat refers to a barrier to new entrants or supply. These desirable demand attributes should attract entrants unless their is a barrier to entry.
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on September 27, 2017, 05:02:35 PM
Maybe this is the moat: I am keeping a lot of patient alive, and they can't go anywhere else. You want to pay less, you need to move these people or you have to step over their dead bodies.

maybe I cut price for you, but I can't take on new patients anymore as I am not making much here. The new patients have no place to go and will cost you 10x more in hospitals.

These are good points, but they address market demand and price inelasticity, whereas a moat refers to a barrier to new entrants or supply. These desirable demand attributes should attract entrants unless their is a barrier to entry.

Scale/Size is maybe a moat. As a patient, he/she will choose one that has high ratings (life at stake!) and hopefully is close to work/home. It will take time and a lot of efforts for any new entrants to establish that track record of good ratings. It's also hard to earn a profit without scale (the new player needs to have enough patients that are from private insurance and can't reject anyone from lower paying medicare).
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on September 27, 2017, 05:14:35 PM
Goldman Sachs' US analyst has a sell ratings on DVA for the last two years. The Analyst left earlier of 2017, but I think now his Associate took over and still have the Sell rating. Anyway, they have nothing good to say about DVA. :) However, here is what' Goldman's europe analyst, who has a conviction buy rating on FMS, says in his research note about FMS:

----
We hosted Mike Brosnan, CFO of Fresenius Medical Care, at our 6th German Corporate Conference ...
3) Constructive conversations with commercial payors: In spite of commentary from peers to the contrary, management stressed that its relationships with
commercial payors have remained constructive ytd, and that the company has not witnessed the tensions that peers have talked about to-date. Importantly, FMC is
increasingly working with payors to deliver total care savings by reducing hospitalizations: all three of the major contracts renegotiated ytd included an element of value-based care. The company has now begun renegotiating contracts with the smaller regional payors, ie the Blues; these discussions will conclude by
year-end.
--



Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on September 27, 2017, 06:12:22 PM
Can you two take that part of the discussion offline please?

Can you not take that part of the discussion offline please.  8)

Feelings don’t matter. My opinion that Thiry has outlived his usefulnes are based on anecotdal observations (or probably heresay) that they core value (Villages = local management, leaders walk-in the talk etc.) don’t permeate to the local level any more (if they ever have done so). His corporate Khumbaja meetings are a joke and quite honestly hard to relate too. I don’t think there is a lot of employee loyalty either.  It is true that he saved what would later become DaVita and grew it into an industry leading company, that is hard driving and cost concisous. I think management would have more credibility if they would put it just like that, without all the bravura that Thiry considers important. I think for some long term employees that have been around for a long time, it may be important still, but for new employees,it just does not ring true. Fresenius seems to do just as well without this stuff and they are better positioned, imo, because they have put their muscle behind the equipment and the consumable sides of the business as well, rather than just the service.

That said, I don’t consider DVA badly managed, but I am not sure that management has the right LT vision to really continue to grow the company and make it future proof.
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on September 28, 2017, 06:06:17 AM
https://www.bloomberg.com/news/articles/2017-09-28/when-warren-buffett-runs-your-pension-plan

"Take Burlington Northern Santa Fe. Before Berkshire took control, in 2010, the railroad’s pension fund held hundreds of securities and was 73 percent funded, meaning it had only 73’ for every dollar owed to plan participants. By the end of last year the situation had changed: The plan was 9 percent overfunded. Four stocks—DaVita, VeriSign, General Motors, and Verizon Communications—accounted for more than half its assets as of Sept. 30, 2016, a Labor Department filing shows.
"
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on September 28, 2017, 09:05:52 AM
Can you two take that part of the discussion offline please?

Can you not take that part of the discussion offline please.  8)

Feelings don’t matter. My opinion that Thiry has outlived his usefulnes are based on anecotdal observations (or probably heresay) that they core value (Villages = local management, leaders walk-in the talk etc.) don’t permeate to the local level any more (if they ever have done so). His corporate Khumbaja meetings are a joke and quite honestly hard to relate too. I don’t think there is a lot of employee loyalty either.  It is true that he saved what would later become DaVita and grew it into an industry leading company, that is hard driving and cost concisous. I think management would have more credibility if they would put it just like that, without all the bravura that Thiry considers important. I think for some long term employees that have been around for a long time, it may be important still, but for new employees,it just does not ring true. Fresenius seems to do just as well without this stuff and they are better positioned, imo, because they have put their muscle behind the equipment and the consumable sides of the business as well, rather than just the service.

That said, I don’t consider DVA badly managed, but I am not sure that management has the right LT vision to really continue to grow the company and make it future proof.
Dialysis providers have to deliver for the patient and CMS is footing the bill for the most part so you better deliver for government. That means better service delivery at lower costs and with mortality rates down and service levels up (see QIP numbers) at cost per treatment down (especially if you look at real versus nominal) it is tough to argue the providers are not earning their keep. Same goes for private where they can complain all they want, but hospitalization (largest cost for patient) is down due to better dialysis management.
DVA outscores both FSN and the rest of the industry on QIP and costs i.e. lowest cost provider, best service delivery.
Kent Thiry is who he is, but you cannot deny his track record both at his previous dialysis company, which he sold for $1.6Bn in the late 1990's and then took over a bancrupt, demoralized company and built it into arguably the best dialysis company globally. You don't like his or Wal-Mart's team and creed approach, but it works for them. Sure I also find it cultish, but maybe that is the point. Thiry's largest cost item is team mates, so in the lowest cost game you have to motivate them in some other way and he's delivered on that. In my view, Thiry for all his faults is part of the moat and when he goes I will seriously reconsider. 
As for new people not liking Davita; read reviews on places like Indeed.com 3.6 stars out of 5 from 2k reviews and then read individual accounts where you will find that Thiry is not above meeting with new recruits during their initial training, he gave the top floor (with the best views) of their HQ to the staff (canteen), etc, etc. These are things that count for a lot of paycheck.
One can take issue with the fact that his approach is not for you, but I don't think that tranlsates in people not wanting to work there. A lot of people love it and are willing to give up some of the paycheck; as mentioned Thiry's largest cost item at 40% of cost per treatment. 

P.S. DVA payments to FSN is something like 3% of DVA's operating costs. It's a business that meaninfully depresses FSN's ROE. Ultimately though, why would one want to give up investing in the lowest cost provider? 
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 03, 2017, 04:31:22 AM
Section 5000 of the IRC of 1986, imposes an excise tax penalty on employers and employee organizations that contribute to nonconforming group health plans. They are taxed 25 percent of the employer's or employee organization's expenses incurred during the calendar year for each group health plan (conforming as well as nonconforming) to which they contribute. This tax penalty does not apply to Federal and other governmental employers.
The term "nonconforming group health plan" means a group health plan or LGHP that at any time during a calendar year, fails to comply with any of the following provisions of the working aged, disability, or ESRD Medicare secondary laws.
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on October 03, 2017, 06:01:04 AM
I don't think the "cult" like culture and all the company shows (I.e. CEO riding a horse) etc shall be holding against them. Look at walmart, Costco, HTC, etc.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on October 03, 2017, 04:04:03 PM
I don't think the "cult" like culture and all the company shows (I.e. CEO riding a horse) etc shall be holding against them. Look at walmart, Costco, HTC, etc.

Corporate culture is only a positive when it permeates trough the entire company, not just a few managers. Most companies will tell you that they have a culture, but it is BS.  I think the culture of Walmart is for example is Long gone, at least the reports about female employees of my local Walmart sorting out their differences in a fistfight after work suggest so.
Costco certainly has one, as has Starbux or Company like Merck. Generally , employees will have a strong loyalty to employers that treat them well in terms of pay, benefit and perks. DVA has some of this on a management level, but I am not sure that is true on thrnvery ground level of a dialysis center - at least my small sample size suggests that it is not true everywhere. Also  anothθ food for though, even if the relation AKF is not illegal and may not be that important than some of the bearish articles suggest, there is the simple fact that this somewhat sophisticated kickback schemes exists suggest to me ethics isn’t DVA’s strong suit.

That said, I do think the company provides a valuable service at a fairly low cost and they try to get it right for patients; it can’t be compared to VRX at all. I own a few shares, but just those basic observations and the scuttlebut that I am getting prevents me from buying more.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 04, 2017, 04:21:09 AM
I don't think the "cult" like culture and all the company shows (I.e. CEO riding a horse) etc shall be holding against them. Look at walmart, Costco, HTC, etc.
Corporate culture is only a positive when it permeates trough the entire company, not just a few managers. Most companies will tell you that they have a culture, but it is BS.  I think the culture of Walmart is for example is Long gone, at least the reports about female employees of my local Walmart sorting out their differences in a fistfight after work suggest so.
Costco certainly has one, as has Starbux or Company like Merck. Generally , employees will have a strong loyalty to employers that treat them well in terms of pay, benefit and perks. DVA has some of this on a management level, but I am not sure that is true on thrnvery ground level of a dialysis center - at least my small sample size suggests that it is not true everywhere. Also  anothθ food for though, even if the relation AKF is not illegal and may not be that important than some of the bearish articles suggest, there is the simple fact that this somewhat sophisticated kickback schemes exists suggest to me ethics isn’t DVA’s strong suit.
Worthwhile reading the David Barbetta settlement to answer two questions.
1. What is the culture and how high does the rot (if any) go, especially considering that the investigative period covered 2005-2014. Hard not to end up with similar sentiments as expressed above.
2. Considering the sanctions, what does it say about the future and the moat about the company e.g. monitors embedded in the company and they have to sign off on a pretty broad range of things like deals etc (so all good now?) and also does the settlement imply some resistance to put it out of business, because it will impact Medicare and the industry's ability to take care of ESRD patients.
For anyone actually bothering to read the settlement, please tell me how Thiry managed to survive that without getting fired?

Quote from: Spekulatius
That said, I do think the company provides a valuable service at a fairly low cost and they try to get it right for patients; it can’t be compared to VRX at all. I own a few shares, but just those basic observations and the scuttlebut that I am getting prevents me from buying more.
I think generally speaking the VRX comparison is weak, but some similarity. The difference between VRX/Philidor and AKF/DVA & FMC seems essentially to be the legal cover provided by the 1997 OIG opinion and the fact that it is not a sub, but for the rest it smells the same.

Having said that the AKF issue is not as one sided as many would like to paint it. The recent (May) letter signed by 184 members of congress in support of premium assistance is a case in point.

https://www.nephrologynews.com/dialysis-providers-akf-program-benefit-hhs-requires-health-plans-accept-charity-based-premiums/

EDIT: Found the actual letter https://www.dropbox.com/s/y9hbf3qzbhe28ri/Rep.%20Cramer%20-%20Third%20Party%20Payer%20Letter.pdf?dl=0
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on October 04, 2017, 05:53:45 AM
Mr B - thank you for contributing mightily to this DVA board. You and others are posting some great docs, like this last one.
Do you by chance have a doc discussing the David Barbetta settlement?
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 04, 2017, 07:32:29 AM
Mr B - thank you for contributing mightily to this DVA board. You and others are posting some great docs, like this last one.
Do you by chance have a doc discussing the David Barbetta settlement?
You're welcome.
Not sure exactly what you're after, but this will keep you busy at least.

Light read
https://www.foley.com/files/Publication/bd469faa-7ccf-46e4-8dfd-dd908fadbf99/Presentation/PublicationAttachment/ff94190f-82ca-4baf-b165-e03e820587f2/HFRA.Lori.DaVita.1210.pdf

Not so light read
https://oig.hhs.gov/fraud/cia/agreements/Davita_Healthcare_Partners_Inc_10222014.pdf

Door stop (includes excellent center specific data from Exhibit 6 onwards)
https://www.phillipsandcohen.com/wp-content/uploads/US-Barbetta-v-DaVita-First-Amended-Complaint-Exhibits.pdf
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on October 04, 2017, 11:34:55 AM
Mr B - thank you for contributing mightily to this DVA board.

Seconded...
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 04, 2017, 02:23:47 PM
DD +1
Ok so here is something interesting to ponder.

If you read the CIA (Corporate Integrity Agreement), which was part of the Barbetta settlement https://oig.hhs.gov/fraud/cia/agreements/Davita_Healthcare_Partners_Inc_10222014.pdf

then there is a few interesting things to note.

Agreement put in place a Compliance Program (CP). Obligation was put on DVA's  Compliance Officer (Jeanine Jiganti) to affect the CP and she chairs the specially created Management Compliance Committee and she reports directly to Thiry and the Board Compliance Committee, which had 90 days to appoint a Compliance Advisor to independently review DVA's CP. Needs to be at least quarterly meetings and reports.

Independent Monitor (IM): Appointed by agreement between DVA and OIG. All monitor's reports submitted to OIG and DVA simultaneously and no draft reports are allowed with DVA. Monitor is not an agent of OIG, but OIG can remove him/her at its sole discretion. IM can retain staff, consultants, etc. 

The scope of the CP: "Arrangements" shall mean every arrangement or transaction that involves, directly or indirectly, the offer, payment, solicitation, or receipt of anything of value, and is between DaVita Dialysis and any actual or potential source of health care business or referrals to Da Vita Dialysis or any actual or potential recipient of health care business or referrals from Da Vita Dialysis....service for which payment may be made in whole or in part by a Federal health care program

So everything that relates to deals or transactions, in particular the Federal health care program, the False Claims Act and the Anti-Kickback Statute needs to be run by the committees and the IM. The IM's also has authority over "Focus Arrangements" means every Arrangement that is between DaVita and any Health Care Provider and involves, directly or indirectly, the offer, payment, or provision of anything of value. Basically any deal to buy or sell centers.

So after that mouthful there are two things I'm thinking about.
1. If DVA essentially had the OIG camping out in HQ or had extremely granular oversight, since Oct 2014 (5 year agreement) and they have to sign off on just about everything then it should be darn difficult to have any hanky panky going on including
2. any of the suggested misconduct regarding AKF and ACA, but it might also explain why DVA immediately ended premium assistance for Medicaid eligible patients late last year after it surfaced in the press (my assessment). It could be because of the CIA, which puts them on an extremely short leash if anything remotely sinister pops up.

Any lawyers want to chime in?
 
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on October 04, 2017, 02:25:00 PM
Mr B - thank you for contributing mightily to this DVA board. You and others are posting some great docs, like this last one.
Do you by chance have a doc discussing the David Barbetta settlement?
You're welcome.
Not sure exactly what you're after, but this will keep you busy at least.

Light read
https://www.foley.com/files/Publication/bd469faa-7ccf-46e4-8dfd-dd908fadbf99/Presentation/PublicationAttachment/ff94190f-82ca-4baf-b165-e03e820587f2/HFRA.Lori.DaVita.1210.pdf

Not so light read
https://oig.hhs.gov/fraud/cia/agreements/Davita_Healthcare_Partners_Inc_10222014.pdf

Door stop (includes excellent center specific data from Exhibit 6 onwards)
https://www.phillipsandcohen.com/wp-content/uploads/US-Barbetta-v-DaVita-First-Amended-Complaint-Exhibits.pdf

Mr. B

You gave me exactly what I was looking for - which was a high level explanation of the Barbetta Settlement, that imposes sanctions and OIG reporting requirements in place of a "death penalty" or something less extreme by the Feds.
I was trying to understand your comments about the Feds reluctance to not interrupt the business operations for the good of the patients.  The Foley & Laudner document does that. I'll work my way through the "door stop" materials! Ha! Thanks.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on October 04, 2017, 05:02:19 PM
Jeez, imagine if pharma were treated the same way...
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on October 05, 2017, 08:12:45 AM
Tom Price is out, most likely candidate is Seema Verma.
She visited a dialysis center in Texas post Harvey.

https://www.houstonpublicmedia.org/articles/news/2017/09/18/237773/visiting-houston-medicare-chief-says-key-post-harvey-priority-is-safety-of-health-care-facilities/amp/

Title: Re: DVA – DaVita HealthCare Partners
Post by: JRM on October 06, 2017, 04:28:15 AM
Jeez, imagine if pharma were treated the same way...

The pharmaceutical industry is a mess in a lot of ways.

So, just to be clear; the bull thesis relies on the following to hold:

1.  The Affordable Care Act is not revised in such a way that takes away the large payouts to dialysis patients.
2.  Regulators do not remove the "self-licking-lollipop" loophole where dialysis companies contribute to AKF, then AKF helps pay the higher premiums under the ACA.

Good to know one of the reasons why my insurance premiums keep going up.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 06, 2017, 07:52:36 AM
Jeez, imagine if pharma were treated the same way...

The pharmaceutical industry is a mess in a lot of ways.

So, just to be clear; the bull thesis relies on the following to hold:

1.  The Affordable Care Act is not revised in such a way that takes away the large payouts to dialysis patients.
2.  Regulators do not remove the "self-licking-lollipop" loophole where dialysis companies contribute to AKF, then AKF helps pay the higher premiums under the ACA.

Good to know one of the reasons why my insurance premiums keep going up.

I think the lens through which you view those things is critical, though.

Speaking for myself the bull thesis relies on the following,
1. Government made a moral commitment in 1973 to provide access and cover to all ESRD patients. The probability seems low that it will change.
2. Government has understood, since 1973 that it needs to retain control over serving the ESRD population if it wants to ensure access, control costs and improve quality. The probability seems low that it will change.
3. Government co-opted private healthcare companies since the early 1980s to improve access, lower costs and increase quality.  a) Access has improved in various ways, but mainly because ESRD itself is the entitlement, immediately classifies the patient as disabled and government has worked hard since the early 1980s to ensure private companies do not discriminate against ESRD patients. b) Government uses three broad strategies to drive down costs cost shifting (private), bundling (simplifying the cost structure) and capitation (capping costs) c) quality through various ways, but most recently through the star system. The probability seems low that the industry structure will change, especially considering the success since 1973; 50k v 628k patients, costs per patient per annum more than halved in real terms and quality up e.g. mortality rates more than halved.

So I look at things like ACA, AKF, etc, etc within the historical context and within the industry framework. Otherwise I find myself seeing the wood for the trees. Not saying those are not valid short to medium term issues, just that I think history and industry structure is poorly understood, which results in a low quality investment decision. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on October 06, 2017, 08:16:21 AM
Jeez, imagine if pharma were treated the same way...

The pharmaceutical industry is a mess in a lot of ways.

So, just to be clear; the bull thesis relies on the following to hold:

1.  The Affordable Care Act is not revised in such a way that takes away the large payouts to dialysis patients.
2.  Regulators do not remove the "self-licking-lollipop" loophole where dialysis companies contribute to AKF, then AKF helps pay the higher premiums under the ACA.

Good to know one of the reasons why my insurance premiums keep going up.

I think the lens through which you view those things is critical, though.

Speaking for myself the bull thesis relies on the following,
1. Government made a moral commitment in 1973 to provide access and cover to all ESRD patients. The probability seems low that it will change.
2. Government has understood, since 1973 that it needs to retain control over serving the ESRD population if it wants to ensure access, control costs and improve quality. The probability seems low that it will change.
3. Government co-opted private healthcare companies since the early 1980s to improve access, lower costs and increase quality.  a) Access has improved in various ways, but mainly because ESRD itself is the entitlement, immediately classifies the patient as disabled and government has worked hard since the early 1980s to ensure private companies do not discriminate against ESRD patients. b) Government uses three broad strategies to drive down costs cost shifting (private), bundling (simplifying the cost structure) and capitation (capping costs) c) quality through various ways, but most recently through the star system. The probability seems low that the industry structure will change, especially considering the success since 1973; 50k v 628k patients, costs per patient per annum more than halved in real terms and quality up e.g. mortality rates more than halved.

So I look at things like ACA, AKF, etc, etc within the historical context and within the industry framework. Otherwise I find myself seeing the wood for the trees. Not saying those are not valid short to medium term issues, just that I think history and industry structure is poorly understood, which results in a low quality investment decision.

This is definitely more complicated than I thought at 1st.

Thanks to you & others for explaining the situation to a 5 year old (me.)

It's a 4% position for me & if it dropped another 10% I may or may not push it up to 6% (would probably do it with long dated calls & maybe shorting some puts.)

Cognitive biases everywhere...
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 09, 2017, 02:59:35 AM
Yep not the simplest story DD. Maybe JPM gets you to your -10%

09-Oct-2017 09:57:54 AM - DAVITA INC DVA.N: JP MORGAN CUTS TARGET PRICE TO $51 FROM $66 -Reuters News
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on October 09, 2017, 08:05:43 AM
Yep not the simplest story DD. Maybe JPM gets you to your -10%

09-Oct-2017 09:57:54 AM - DAVITA INC DVA.N: JP MORGAN CUTS TARGET PRICE TO $51 FROM $66 -Reuters News

Anatomy of a knife catcher:

1. Thinks he's right but EEEK! OK, breathe & go watch Wayne Brady do Let's Make a Deal.

2. OK, calmed down enuf to tear away from LMAD & re-read COBF DVA thread.

3. Realizes that downward price wishes seem nicer when you're just wishing for them.

4. Still want to go long, long Calls (if it goes down some more.)

Which will probably segue to a scene in the ER's hand bandaging room.

---

If Fidelity doesn't list JPM's rating, do they matter?  :o

Neutral 2 Underweight, pfffft, let's some Sell's from all these neutrals.

(http://uglymule.com/images/DVA-Fidelity-JPM.png)
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on October 09, 2017, 08:28:36 AM
JPM  is certainly after the fact...

I bought more today
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on October 09, 2017, 09:21:17 AM
JPM  is certainly after the fact...

I bought more today

Thinking in dollar amounts to buy instead of round lots is making this easier for me.

That plus not chasing 1/8s & 1/4s.

Might get harder if bad news hits?

Seems like JPM just attracted those who didn't know the company already.
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on October 09, 2017, 12:12:41 PM
Yep not the simplest story DD. Maybe JPM gets you to your -10%

09-Oct-2017 09:57:54 AM - DAVITA INC DVA.N: JP MORGAN CUTS TARGET PRICE TO $51 FROM $66 -Reuters News

Curious if anyone had access to the JP Morgan report?  Saw the highlights on Schwab - looks like the same old rehashed stuff from last year.

Added more today - light volume day, buyback blackout, and Oct 31st coming up - maybe DVA gets flushed out here?

We will see!
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on October 09, 2017, 06:23:46 PM
Yep not the simplest story DD. Maybe JPM gets you to your -10%

09-Oct-2017 09:57:54 AM - DAVITA INC DVA.N: JP MORGAN CUTS TARGET PRICE TO $51 FROM $66 -Reuters News

Curious if anyone had access to the JP Morgan report?  Saw the highlights on Schwab - looks like the same old rehashed stuff from last year.

Added more today - light volume day, buyback blackout, and Oct 31st coming up - maybe DVA gets flushed out here?

We will see!

JPM:
     ** JPM analyst Gary Taylor raises concerns about DVA's level of earnings power derived from American Kidney Fund's (AKF) operations, amid ongoing legal battle between payors, dialysis providers and AKF

     ** Taylor estimates DVA contributes ~$100 mln to AKF annually and receives as much as $500 mln-$700 mln of annual pretax income benefit

Title: Re: DVA – DaVita HealthCare Partners
Post by: Happy on October 10, 2017, 02:12:23 AM
http://pressreleases.davita.com/2017-10-10-DaVita-Provides-Disclosures-Regarding-Charitable-Premium-Assistance (http://pressreleases.davita.com/2017-10-10-DaVita-Provides-Disclosures-Regarding-Charitable-Premium-Assistance)
Title: Re: DVA – DaVita HealthCare Partners
Post by: Bluffy on October 10, 2017, 02:33:49 AM
Yep not the simplest story DD. Maybe JPM gets you to your -10%

09-Oct-2017 09:57:54 AM - DAVITA INC DVA.N: JP MORGAN CUTS TARGET PRICE TO $51 FROM $66 -Reuters News

Curious if anyone had access to the JP Morgan report?  Saw the highlights on Schwab - looks like the same old rehashed stuff from last year.

Added more today - light volume day, buyback blackout, and Oct 31st coming up - maybe DVA gets flushed out here?

We will see!

JPM:
     ** JPM analyst Gary Taylor raises concerns about DVA's level of earnings power derived from American Kidney Fund's (AKF) operations, amid ongoing legal battle between payors, dialysis providers and AKF

     ** Taylor estimates DVA contributes ~$100 mln to AKF annually and receives as much as $500 mln-$700 mln of annual pretax income benefit

If I take Taylors estimates and say the worst case would be a 600 mln annual pretax loss (700 - 100 in contributions) I get 1490 mln - 600 mln = 890 mln in pre-tax income. If I apply a 12 times pre-tax earnings multiple on the equity I get to a 10680 mln market cap vs. current market cap at approximately 10300 mln. I don't see a lot of downside for a highly regulated business with attractive long-term economics.
What risks am I not seeing?
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on October 10, 2017, 07:54:00 AM
i think most brokerage analyst got the following wrong prior to today's DVA disclosure:
1. Very high none ACA commercial exposure, Up to 1bn. But today's disclosure say it's only 500m and DVA doesnt expect it will be 100% of 500mn. In fact, they are saing it will be more close to 0 than 100%.
2. CMA only have authority on the individual insurance rate (which DVA has 50mn exposure).  They dont have a say on commericial side. That's regulated by dept of labor.

Certainly, both bull and bear see there are some rate pressures but the price already reflected this aspect. The stock is cheap because there is a mis understanding on AKF, thanks to short funds who need to make a bonus before year end :)
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on October 10, 2017, 04:52:04 PM
Yep not the simplest story DD. Maybe JPM gets you to your -10%

09-Oct-2017 09:57:54 AM - DAVITA INC DVA.N: JP MORGAN CUTS TARGET PRICE TO $51 FROM $66 -Reuters News

Curious if anyone had access to the JP Morgan report?  Saw the highlights on Schwab - looks like the same old rehashed stuff from last year.

Added more today - light volume day, buyback blackout, and Oct 31st coming up - maybe DVA gets flushed out here?

We will see!

JPM:
     ** JPM analyst Gary Taylor raises concerns about DVA's level of earnings power derived from American Kidney Fund's (AKF) operations, amid ongoing legal battle between payors, dialysis providers and AKF

     ** Taylor estimates DVA contributes ~$100 mln to AKF annually and receives as much as $500 mln-$700 mln of annual pretax income benefit

If I take Taylors estimates and say the worst case would be a 600 mln annual pretax loss (700 - 100 in contributions) I get 1490 mln - 600 mln = 890 mln in pre-tax income. If I apply a 12 times pre-tax earnings multiple on the equity I get to a 10680 mln market cap vs. current market cap at approximately 10300 mln. I don't see a lot of downside for a highly regulated business with attractive long-term economics.
What risks am I not seeing?

I think a business under siege can trade way lower than that. Why pretax earnings? I have seen plenty of business trade below 12 x postal earnings, when they were under the gun.
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on October 10, 2017, 05:53:12 PM
increased share buyback to 1.5 billion (was 1.2 billion):
http://pdf.reuters.com/htmlnews/8knews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20171010:EDG_0000927066-17-000077
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 11, 2017, 12:48:48 AM
increased share buyback to 1.5 billion (was 1.2 billion):
http://pdf.reuters.com/htmlnews/8knews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20171010:EDG_0000927066-17-000077
And I was worrying about management backing off from the repurchase, looks more like they're backing up the truck!
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 11, 2017, 07:03:47 AM
If you're wondering why the stock is volatile today:

http://sirf-online.org/2017/09/22/davita-inc-warren-and-charlies-excellent-insurance-gambit/

(haven't read it yet, so can't comment)
Sniff, sniff - smells like Jim...
It may be.... but is the report wrong?

Basically it alleges that the AKF is effectively a front for dialysis providers, mainly Davita and Fresenius since they provide the bulk of AKF funding. In turn AKF pays insurance premiums for people that otherwise wouldn't be able to continue paying their premiums. Because of this people are able to keep their private insurance plans and Davita and Fresenius are charging their insurance companies like crazy. If AKF wouldn't be there those people would stop having private insurance and would go on Medicare which would be a very bad outcome for Davita. Also the insurance companies are understandably really pissed off by this.

I think that's about the gist of it.

YES it seems.
The report has the main input, DaVita US patients, as 214k, which is actually global NOT US. US patients are 194k. Puts market share number out at 41% and has a significant trickle down affect in his table. He should have picked up on this fairly easily, because you will be hard pressed to come across a market share number of higher than 35% for DaVita. Certainly throws up a question about his motivation/sleigh of hand. Honest mistake?
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 11, 2017, 10:17:06 AM
Just out of interest. Can someone look on Interactive Brokers what the cost to borrow on DVA is please?
Title: Re: DVA – DaVita HealthCare Partners
Post by: frankhkii on October 11, 2017, 10:59:19 AM
Just out of interest. Can someone look on Interactive Brokers what the cost to borrow on DVA is please?

I see a current "fee rate" of 0.25% and a "Rebate rate" of 0.91%. It was interesting that Chanos decided to not mention DVA at Grants yesterday and only briefly mentioned dialysis in passing (he pitched short UHS, ESRX, LPNT, and THC). It seems he's short a large basket of healthcare companies...

Is there any timeline you can point to for the injunction? I see FMC was quoted as saying it is "indefinite in duration" as long as the court does not change it. Additionally, when and how does the rule actually get overturned? Thanks.

 
Title: Re: DVA – DaVita HealthCare Partners
Post by: rb on October 11, 2017, 11:50:00 AM

I see a current "fee rate" of 0.25% and a "Rebate rate" of 0.91%. It was interesting that Chanos decided to not mention DVA at Grants yesterday and only briefly mentioned dialysis in passing (he pitched short UHS, ESRX, LPNT, and THC). It seems he's short a large basket of healthcare companies...
Do you have a link for yesterday's Grants or Chanos's thing?
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on October 11, 2017, 03:29:26 PM
GS UK team:

Fresenius Medical Care/dialysis: Yesterday’s conversations were dominated by the ongoing “charitable premium assistance” issue at FMC and other dialysis
providers. For a fuller description of steering and CPA – see here). I don’t think we learned anything new yesterday – but the debate around charitable assistance continues. Broadly there are three groups of patients who have received charitable premium assistance (CPA)
1. those who are eligible for Medicaid (or Medicare) but purchase commercial healthcare insurance which is funded by charitable assistance (ie steered
patients) – we have previously quantified this impact as a $132mn headwind for FME. This group is highly likely to decline over time
2. Patients who are insured on an employer sponsored plan, or COBRA (unemployment insurance) but cannot afford co-pays and seek financial help (eg
from the American Kidney Fund – AKF).
3. People insured by Medicare but cannot afford co-pays

Yesterday’s conversations related mostly to the second group, and despite yesterday’s concerns, we see limited risk to the charitable assistance for this group.
For FME, Charitable Assitance is likely to remain an overhang, with limited visibility on full resolution. CMS are expected to issue a rule relating to the first group (Medicaid eligible, steering patients) by year end, and an ongoing DoJ investigation into the wider charitable premium issue may provide clarity on groups 2 and 3 – but this CPA issue may dominate the narrative on dialysis/FMC for some time – we are Buy on FME. Our 12-month price target of €97 assumes FMC trades at 11.5x 2018E EV/EBITDA. Key risks to our view and price target include reimbursement headwinds, wage inflation, commercial mix changes, corporate activity, and US$ moves. Last close: €81.01.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 11, 2017, 10:43:24 PM
GS UK team:

Fresenius Medical Care/dialysis: Yesterday’s conversations were dominated by the ongoing “charitable premium assistance” issue at FMC and other dialysis
providers. For a fuller description of steering and CPA – see here). I don’t think we learned anything new yesterday – but the debate around charitable assistance continues. Broadly there are three groups of patients who have received charitable premium assistance (CPA)
1. those who are eligible for Medicaid (or Medicare) but purchase commercial healthcare insurance which is funded by charitable assistance (ie steered
patients) – we have previously quantified this impact as a $132mn headwind for FME. This group is highly likely to decline over time
2. Patients who are insured on an employer sponsored plan, or COBRA (unemployment insurance) but cannot afford co-pays and seek financial help (eg
from the American Kidney Fund – AKF).
3. People insured by Medicare but cannot afford co-pays

Yesterday’s conversations related mostly to the second group, and despite yesterday’s concerns, we see limited risk to the charitable assistance for this group.
For FME, Charitable Assitance is likely to remain an overhang, with limited visibility on full resolution. CMS are expected to issue a rule relating to the first group (Medicaid eligible, steering patients) by year end, and an ongoing DoJ investigation into the wider charitable premium issue may provide clarity on groups 2 and 3 – but this CPA issue may dominate the narrative on dialysis/FMC for some time – we are Buy on FME. Our 12-month price target of €97 assumes FMC trades at 11.5x 2018E EV/EBITDA. Key risks to our view and price target include reimbursement headwinds, wage inflation, commercial mix changes, corporate activity, and US$ moves. Last close: €81.01.
I don't think this is a bad summary. However I think one should always view this in the broader industry and historical context. This has been going on for a long time and is industry wide, not limited to ESRD. So if you want to hit ESRD you have to hit the entire premium assistance market, which will be more challenging. Go after ESRD alone and you need to show you're not discriminating, which will be more challenging. ESRD also has the advantage that it is operating under legal cover from the 1997 OIG opinion.
I suspect the end of year/early 2018 ruling will be challenged (lawyers weigh in please).

DOJ going after specific companies is possibly biggest threat here or another whistleblower/DOJ. Considering the last guy walked away with an estimated $30m; it must present a big carrot.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 11, 2017, 10:45:32 PM
Just out of interest. Can someone look on Interactive Brokers what the cost to borrow on DVA is please?

I see a current "fee rate" of 0.25% and a "Rebate rate" of 0.91%. It was interesting that Chanos decided to not mention DVA at Grants yesterday and only briefly mentioned dialysis in passing (he pitched short UHS, ESRX, LPNT, and THC). It seems he's short a large basket of healthcare companies...

Is there any timeline you can point to for the injunction? I see FMC was quoted as saying it is "indefinite in duration" as long as the court does not change it. Additionally, when and how does the rule actually get overturned? Thanks.

 

Are you referring to the CMS rule that was struck down in TX? If so then the next development seem to be the CMS ruling that most are expecting towards yearend, which will clarify the above. Don't recall being a limit on it. Think it has to be a new rule.

Also do you have the main points about Chanos' ESRX short thesis please?
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 12, 2017, 10:14:10 AM
https://www.nephrologynews.com/house-bill-would-require-health-plans-to-accept-3rd-party-payment-assistance/

On Oct. 5, Representative Kevin Cramer, R-N.D., introduced legislation that would amend the Affordable Care Act to allow third-party payments and charitable assistance. H.R. 3976, called the Access to Marketplace Insurance Act, would open the door to charitable contributions like the American Kidney Fund’s Health Insurance Premium Program (HIPP), which is funded largely by dialysis companies to help patients pay their health coverage premiums........
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on October 13, 2017, 10:27:52 AM
Sadly, if this report is to be believed - obesity trends worldwide are alarming:

http://www.who.int/mediacentre/news/releases/2017/increase-childhood-obesity/en/

Title: Re: DVA – DaVita HealthCare Partners
Post by: rogermunibond on October 13, 2017, 10:34:41 AM
Huge problem in Mexico (sugar/soda tax), huge problem in the Middle East.

ESRD is kind of the pessimists bet that human genetics are wired to seek out sugar, alcohol, fat, dopamine.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 13, 2017, 02:23:51 PM
Macabre, but in business terms, despite the small international presence DVA has it is already number 2 globally.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Read the Footnotes on October 13, 2017, 03:32:51 PM
Macabre, but in business terms, despite the small international presence DVA has it is already number 2 globally.
In terms of human suffering, Sadly disease growth rates internationally will likely grow at significantly more than twice the domestic growth rates.

Unfortunately that does not necessarily present the business opportunities you might expect. You cannot extrapolate the revenues or profitability numbers from the US to international healthcare markets. The US healthcare market is a market unlike any other.

This is basically the worst off all possible worlds, suffering will increase. Those suffering will not have access to  treatment on the same terms as the US and it will not present an equivalent business opportunity to that which emerged decades ago in the US. It is possible that markets will start to resemble US healthcare, but to me that is a low probability speculative bet. Last time I tried to analyze that question, I saw little to support that thesis.

With that said, there is some chance that the budget constraints abroad might allow them to leapfrog to better treatment at lower prices. Just because US healthcare is in general excellent doesn't mean it is not simultaneously disfunctional and suboptimal.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 14, 2017, 07:46:56 AM
Macabre, but in business terms, despite the small international presence DVA has it is already number 2 globally.
In terms of human suffering, Sadly disease growth rates internationally will likely grow at significantly more than twice the domestic growth rates.

Unfortunately that does not necessarily present the business opportunities you might expect. You cannot extrapolate the revenues or profitability numbers from the US to international healthcare markets. The US healthcare market is a market unlike any other.

This is basically the worst off all possible worlds, suffering will increase. Those suffering will not have access to  treatment on the same terms as the US and it will not present an equivalent business opportunity to that which emerged decades ago in the US. It is possible that markets will start to resemble US healthcare, but to me that is a low probability speculative bet. Last time I tried to analyze that question, I saw little to support that thesis.

With that said, there is some chance that the budget constraints abroad might allow them to leapfrog to better treatment at lower prices. Just because US healthcare is in general excellent doesn't mean it is not simultaneously disfunctional and suboptimal.
You are correct about the US spending way more than anybody else on healthcare, but the attached from a recent dbAccess presentation from Fresenius shows them achieving significantly higher margins than the US in EMEA and very importantly Asia Pacific, which is the highest growth area globally and it has the most patients.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 16, 2017, 06:00:22 AM
The following was released today, which is in addition to the CPA data of OCT 10

DaVita Provides Additional Information Regarding Patients Receiving Charitable Premium Assistance

http://pressreleases.davita.com/2017-10-16-DaVita-Provides-Additional-Information-Regarding-Patients-Receiving-Charitable-Premium-Assistance
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on October 16, 2017, 05:44:05 PM
The following was released today, which is in addition to the CPA data of OCT 10

DaVita Provides Additional Information Regarding Patients Receiving Charitable Premium Assistance

http://pressreleases.davita.com/2017-10-16-DaVita-Provides-Additional-Information-Regarding-Patients-Receiving-Charitable-Premium-Assistance

They left out how Davita subsidizes government patients by losing money on treatments (humble, I like that.)

It all sounds plausible to me & I'm way more comfortable with this than I was with Express Scripts.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DocSnowball on October 18, 2017, 07:47:59 PM
I've been considering this investment thesis as well, and yes the document helps. However, it still bothers me that Davita has openly tried to pull a fast one on its customers, these private insurance companies. How they will react to this in the long run involves more than just these numbers put out. This still gives me pause and puts it in the "too hard" investment pile for me.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on October 19, 2017, 12:44:24 AM
I've been considering this investment thesis as well, and yes the document helps. However, it still bothers me that Davita has openly tried to pull a fast one on its customers, these private insurance companies. How they will react to this in the long run involves more than just these numbers put out. This still gives me pause and puts it in the "too hard" investment pile for me.

I guess what we're asking here is "Can Davita bump prices to commercial payers & if so, how much?"

And will govt EVER allow the company to earn a meagre ROI 4 this lifesaving service?
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 19, 2017, 12:45:21 AM
I've been considering this investment thesis as well, and yes the document helps. However, it still bothers me that Davita has openly tried to pull a fast one on its customers, these private insurance companies. How they will react to this in the long run involves more than just these numbers put out. This still gives me pause and puts it in the "too hard" investment pile for me.
Observation: I don't think it is what you meant, but the private insurance companies are not the customer.

Questions: Why do you say a) that DVA pulled a fast one on the insurance companies and b) how long has DVA been pulling "the fast one" and c) what options do the insurance companies have in terms of "reacting to this in the long run"?

I'm really interested to see where you came out on those after your research.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DocSnowball on October 19, 2017, 02:49:33 AM
Thanks - patients and payers are both customers for a health services provider like Davita, since the patient and their provider chooses the Dialysis center but insurance sets limits of what they can choose and what services are covered or not covered there.

As I understand it, Davita, indirectly through this "initiative" of the AKF shifted patients on insurances like Medicare to private insurances, to garner higher profits in the short term, which has not been received well by these private insurances. Insurers have many ways of pushing back, like questioning every nickel and dime of expenses and withholding payments until those questions are cleared up, or even denying payments. They do this routinely to hospitals for a small proportion of bills sent to them. Also, how well these private insurances will work to collaborate with Davita in the long run is what I am questioning. It is this situation of an unhappy customer that worries me a little bit, in this case the unhappy customers are the ones that make up a healthy contribution to Davita's bottom line. I would have liked to have seen a win-win being created to invest, here the situation is of win-lose and I wonder how these companies will try to hit back. I don't have the answer to your last question as to how.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DocSnowball on October 19, 2017, 02:57:00 AM
I've been considering this investment thesis as well, and yes the document helps. However, it still bothers me that Davita has openly tried to pull a fast one on its customers, these private insurance companies. How they will react to this in the long run involves more than just these numbers put out. This still gives me pause and puts it in the "too hard" investment pile for me.

I guess what we're asking here is "Can Davita bump prices to commercial payers & if so, how much?"

And will govt EVER allow the company to earn a meagre ROI 4 this lifesaving service?

Yes you're right, thanks for helping me clarify my not so specific comment - this incident is a negative to the brand or the moat, and may come in the way of bumping prices to commercial payers down the line. The Government has limited money to spend in healthcare, so its generosity is very limited. We feel the pinch every day in operations in healthcare when dealing with Medicare or Medicaid.
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on October 19, 2017, 05:34:09 AM
I've been considering this investment thesis as well, and yes the document helps. However, it still bothers me that Davita has openly tried to pull a fast one on its customers, these private insurance companies. How they will react to this in the long run involves more than just these numbers put out. This still gives me pause and puts it in the "too hard" investment pile for me.

I guess what we're asking here is "Can Davita bump prices to commercial payers & if so, how much?"

And will govt EVER allow the company to earn a meagre ROI 4 this lifesaving service?

Yes you're right, thanks for helping me clarify my not so specific comment - this incident is a negative to the brand or the moat, and may come in the way of bumping prices to commercial payers down the line. The Government has limited money to spend in healthcare, so its generosity is very limited. We feel the pinch every day in operations in healthcare when dealing with Medicare or Medicaid.

But what the government actually pays is money losing to DaVita and the rest of the industry - so the government is getting a bargain while the quality of care improves and lives are extended.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 19, 2017, 06:34:11 AM
Thanks - patients and payers are both customers for a health services provider like Davita, since the patient and their provider chooses the Dialysis center but insurance sets limits of what they can choose and what services are covered or not covered there.

As I understand it, Davita, indirectly through this "initiative" of the AKF shifted patients on insurances like Medicare to private insurances, to garner higher profits in the short term, which has not been received well by these private insurances. Insurers have many ways of pushing back, like questioning every nickel and dime of expenses and withholding payments until those questions are cleared up, or even denying payments. They do this routinely to hospitals for a small proportion of bills sent to them. Also, how well these private insurances will work to collaborate with Davita in the long run is what I am questioning. It is this situation of an unhappy customer that worries me a little bit, in this case the unhappy customers are the ones that make up a healthy contribution to Davita's bottom line. I would have liked to have seen a win-win being created to invest, here the situation is of win-lose and I wonder how these companies will try to hit back. I don't have the answer to your last question as to how.
Ok, but how long has this "initiative" of DaVita been going?
Also, if we assume insurers are "unhappy customers", because they pay too much then how long has this been the case?
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on October 19, 2017, 07:25:07 AM
Thanks - patients and payers are both customers for a health services provider like Davita, since the patient and their provider chooses the Dialysis center but insurance sets limits of what they can choose and what services are covered or not covered there.

As I understand it, Davita, indirectly through this "initiative" of the AKF shifted patients on insurances like Medicare to private insurances, to garner higher profits in the short term, which has not been received well by these private insurances. Insurers have many ways of pushing back, like questioning every nickel and dime of expenses and withholding payments until those questions are cleared up, or even denying payments. They do this routinely to hospitals for a small proportion of bills sent to them. Also, how well these private insurances will work to collaborate with Davita in the long run is what I am questioning. It is this situation of an unhappy customer that worries me a little bit, in this case the unhappy customers are the ones that make up a healthy contribution to Davita's bottom line. I would have liked to have seen a win-win being created to invest, here the situation is of win-lose and I wonder how these companies will try to hit back. I don't have the answer to your last question as to how.
Ok, but how long has this "initiative" of DaVita been going?
Also, if we assume insurers are "unhappy customers", because they pay too much then how long has this been the case?

My assumption is that payers should be secretly happy to NOT be shelling out for extended hospital stays (win/win)
and Davita CANNOT slack off on this metric just to prove a point (which they obviously wouldn't do to begin with.)

Anyone can pick nits about the charitable assistance but
once again, courtesy of Matt Brice there's this thought:

"There is no other medical condition where commercial insurance can kick its enrollees off after a specified period (dialysis=36 months)"

https://twitter.com/TheSovaGroup/status/911269877163241472

---

Also, big ups to MrB, DocSnowball, cubsfan, RB & others who've made this as clear as I think it can be made (warts & all.)
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on October 20, 2017, 12:23:37 PM
Dialysis is covered under medicare part b for in-center dialysis, if dialysis is done in a hospital, it's under part a.  Of course, centers are cheaper and more prevalent. 

Nearly half of all dialysis patients are under the age of 65, which means previous to being diagnosed with end-stage renal disease (ESRD) and starting the first dialysis session, these patients were not eligible for Medicare. 

If Medicare rolled the age of eligibility back by 5 years, we would be in a different scenario. 

Why?

There is a 3-month lapse from the first dialysis session until coverage is in effect.  And that patient is on the hook for those three months. 

"When you enroll in Medicare based on ESRD and you’re on dialysis, Medicare coverage usually starts on the first day of the fourth month of your dialysis treatments. This waiting period will start even if you haven’t signed up for Medicare. For example, if you don’t sign up until after you’ve met all the requirements, your coverage could begin up to 12 months before the month you apply. (link: https://www.medicare.gov/sign-up-change-plans/get-parts-a-and-b/when-how-to-sign-up-for-part-a-and-part-b.html#collapse-5778 (https://www.medicare.gov/sign-up-change-plans/get-parts-a-and-b/when-how-to-sign-up-for-part-a-and-part-b.html#collapse-5778))"

These are people, on average, around 60 years old who have ESRD. 

What are the choices? In-Center hemodialysis, at-home hemo-dialysis, or peritoneal dialysis. 

At-home and peritoneal is not available from many dialysis providers because these are not cost-effective or financially feasible to provide the service.  As a result, from what I understand, many are left with only one option: in-center hemodialysis. 

Now, the patient has to make a hard decision: find another center or hospital, who knows how far away, that will provide at-home or peritoneal dialysis services (these medicare covers immediately), or request subsidies from the AKF and get in-center care immediately. 

 
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 21, 2017, 11:20:48 AM
Thanks - patients and payers are both customers for a health services provider like Davita, since the patient and their provider chooses the Dialysis center but insurance sets limits of what they can choose and what services are covered or not covered there.

As I understand it, Davita, indirectly through this "initiative" of the AKF shifted patients on insurances like Medicare to private insurances, to garner higher profits in the short term, which has not been received well by these private insurances. Insurers have many ways of pushing back, like questioning every nickel and dime of expenses and withholding payments until those questions are cleared up, or even denying payments. They do this routinely to hospitals for a small proportion of bills sent to them. Also, how well these private insurances will work to collaborate with Davita in the long run is what I am questioning. It is this situation of an unhappy customer that worries me a little bit, in this case the unhappy customers are the ones that make up a healthy contribution to Davita's bottom line. I would have liked to have seen a win-win being created to invest, here the situation is of win-lose and I wonder how these companies will try to hit back. I don't have the answer to your last question as to how.
Ok, but how long has this "initiative" of DaVita been going?
Also, if we assume insurers are "unhappy customers", because they pay too much then how long has this been the case?
Thanks for the PM Doc and just for the benefit of the board the following.

The risk regarding the AKF is not immaterial, but I take issue with the fact that the discussion is generally defined too narrow and viewed over too short a period. Simply put, the AKF is just one part of broad based premium assistance which has been an integral part of healthcare in the US since at least 1990. It was formalised, in the case of Medicaid by way of section 1906 (1906-Omnibus Budget Reconciliation Act of 1990 and amended in the Balanced Budge Act of 1997) and waivers allowed under section 1115. For the non-profit side by various OIG opinions as in the 1997 one (previously mentioned in this thread) for the AKF as a direct result of the mentioned Balanced Budget Act of 1997. So the assumption of the AKF suddenly not being allowed premium assistance seems overly simplistic and pushes back against a lot of history. The AKF and DaVita did not cook up some scheme overnight. If anything was a catalyst over recent years then it was ACA/non discrimination against pre-existing conditions.

Anyway the above is just my opinion, for some of the facts see below. 

To get the basic idea read this http://www.maximus.com/sites/default/files/DecisionPoint_Premium_Assistance_WEB.pdf
More detailed https://www.macpac.gov/wp-content/uploads/2015/03/Premium-Assistance-Medicaid%E2%80%99s-Expanding-Role-in-the-Private-Insurance-Market.pdf

For self flagilation
https://www.medicaid.gov/Federal-Policy-Guidance/Downloads/FAQ-03-29-13-Premium-Assistance.pdf
http://web1.ctaa.org/webmodules/webarticles/articlefiles/NEMTreportfinal.pdf
https://kaiserfamilyfoundation.files.wordpress.com/2013/02/8417-premiums-and-cost-sharing-in-medicaid.pdf
https://www.gpo.gov/fdsys/pkg/FR-2013-07-15/pdf/2013-16271.pdf

Lastly, this is a recent and interesting example of how some States behave when threatened with cuts to what they think is morally important issues.
https://www.arktimes.com/ArkansasBlog/archives/2017/10/17/governor-promises-arkansas-works-will-remain-stable-despite-trump-executive-order

At the end of the day for me (please do your own work!) the issue of AKF being stopped comes down to, "easier said than done"!
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 21, 2017, 11:21:46 AM
Dialysis is covered under medicare part b for in-center dialysis, if dialysis is done in a hospital, it's under part a.  Of course, centers are cheaper and more prevalent. 

Nearly half of all dialysis patients are under the age of 65, which means previous to being diagnosed with end-stage renal disease (ESRD) and starting the first dialysis session, these patients were not eligible for Medicare. 

If Medicare rolled the age of eligibility back by 5 years, we would be in a different scenario. 

Why?

There is a 3-month lapse from the first dialysis session until coverage is in effect.  And that patient is on the hook for those three months. 

"When you enroll in Medicare based on ESRD and you’re on dialysis, Medicare coverage usually starts on the first day of the fourth month of your dialysis treatments. This waiting period will start even if you haven’t signed up for Medicare. For example, if you don’t sign up until after you’ve met all the requirements, your coverage could begin up to 12 months before the month you apply. (link: https://www.medicare.gov/sign-up-change-plans/get-parts-a-and-b/when-how-to-sign-up-for-part-a-and-part-b.html#collapse-5778 (https://www.medicare.gov/sign-up-change-plans/get-parts-a-and-b/when-how-to-sign-up-for-part-a-and-part-b.html#collapse-5778))"

These are people, on average, around 60 years old who have ESRD. 

What are the choices? In-Center hemodialysis, at-home hemo-dialysis, or peritoneal dialysis. 

At-home and peritoneal is not available from many dialysis providers because these are not cost-effective or financially feasible to provide the service.  As a result, from what I understand, many are left with only one option: in-center hemodialysis. 

Now, the patient has to make a hard decision: find another center or hospital, who knows how far away, that will provide at-home or peritoneal dialysis services (these medicare covers immediately), or request subsidies from the AKF and get in-center care immediately.

Walkie what you said goes over my head. Can you rephrase your point please?
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on October 23, 2017, 08:52:03 AM
apologies if the idea was not unpacked enough

one becomes eligible for Medicare when turning 65

Roughly half of those who need dialysis are under 65...most of those who need dialysis are around 60

The Social Security Amendment during the Nixon years allows for ESRD patients to be eligible for Medicare regardless of age

From day 1 and session 1, ESRD patients are covered for at-home or peritoneal dialysis.

However, due to various factors, the most ubiquitous and available service is in-center hemodialysis. 

In-center hemodialysis, however, is not covered under Medicare until three months after the first dialysis session (as per the previous quotation taken from Medicare's website).  While helpful later, not so for new dialysis patients.

A new patient walks into a DaVita center needing dialysis and doesn't have appropriate coverage.  Though being the largest at-home dialysis provider in the US, not every center provides in-center let alone peritoneal dialysis.

As a result, DaVita tells the patient that s/he has to pay for dialysis out-of-pocket until Medicare kicks in or DaVita tells the patient, if eligible, to make a request for premium assistance via the AKF. 

If/when the AKF approves, the patient gets in-center hemodialysis coverage and faces no possible out-of-pocket costs. 

Also, I would note, that the John Oliver piece argues that DaVita should tell its patients to get transplants.  This is not feasible given the number of ESRD patients versus the number of available organs for transplant thereby rendering his argument solely sensationalist. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on October 23, 2017, 10:35:09 AM

Also, I would note, that the John Oliver piece argues that DaVita should tell its patients to get transplants.  This is not feasible given the number of ESRD patients versus the number of available organs for transplant thereby rendering his argument solely sensationalist.

Even if there were enough kidneys for transplants, that would never solve the problem. Many of these individuals are
way too unhealthy and may not survive the transplant or complications that occur after surgery due their other issues
such as obesity and heart issues.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Rasputin on October 23, 2017, 10:47:48 AM
According to the SIRF article getting dialysis patients transplant is bad ok?  lol

Asked what the biggest concern she has with the state of dialysis today, Browne argued that dialysis patients switching to private plans from Medicare/Medicaid are often put at major financial risk should they get a transplant. (The AKF’s premium assistance doesn’t cover transplants.)

“Higher premiums and co-pays are the patient’s obligation if they get a transplant,” said Dr. Browne, who added “patients can harm their listing eligibility for transplants by switching.”
Title: Re: DVA – DaVita HealthCare Partners
Post by: Rasputin on October 23, 2017, 10:51:54 AM
To add to the documents that MrB graciously uploaded, here are some docs on cost analysis of a hemodialysis center from 2005, and a recent article of a county estimating the cost per treatment for hemodialysis (2015 cost estimate).  Also what happened in 2007 when Congress tried to lengthen the MSP period.
Title: Re: DVA – DaVita HealthCare Partners
Post by: rogermunibond on October 23, 2017, 11:53:09 AM
In terms of health care practice, there's no easy solution to ESRD.

The solution is prevention.  So sugar sweetened beverage (SSB) tax would be the way to start.

Mexico's data is showing sizeable reductions in purchases over the first two years of the tax.  Waiting for more recent data to see if that trends is continuing.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Happy on October 24, 2017, 02:02:05 AM
If they strongly cut reimbursements, smaller dialysis providers would go broke. DaVita/FMC either would buy them (making the government even more dependent on them to provide the service) or the replacing treatments would be significantly more expensive. In the end DaVita should be allowed to earn a good profit as long as they provide the service better and more efficiently than the alternatives.

People like to ridicule managers that do things differently when things aren't going so well. When all is great, he has "real character".

Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on October 24, 2017, 04:20:37 AM

Also, I would note, that the John Oliver piece argues that DaVita should tell its patients to get transplants.  This is not feasible given the number of ESRD patients versus the number of available organs for transplant thereby rendering his argument solely sensationalist.

That part is a joke, DVA is clearly a service organization, since when should they do consult on treatment options? That is what the doctors are for. Also, obtaining an organ transplant isn’t easy and the waiting list is long. Patients are generally aware of the transplant option, but it they just aren’t enough transplants available and many patients are ill suited for the procedure.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 24, 2017, 04:58:12 AM
apologies if the idea was not unpacked enough

one becomes eligible for Medicare when turning 65

Roughly half of those who need dialysis are under 65...most of those who need dialysis are around 60

The Social Security Amendment during the Nixon years allows for ESRD patients to be eligible for Medicare regardless of age

From day 1 and session 1, ESRD patients are covered for at-home or peritoneal dialysis.

However, due to various factors, the most ubiquitous and available service is in-center hemodialysis. 

In-center hemodialysis, however, is not covered under Medicare until three months after the first dialysis session (as per the previous quotation taken from Medicare's website).  While helpful later, not so for new dialysis patients.

A new patient walks into a DaVita center needing dialysis and doesn't have appropriate coverage.  Though being the largest at-home dialysis provider in the US, not every center provides in-center let alone peritoneal dialysis.

As a result, DaVita tells the patient that s/he has to pay for dialysis out-of-pocket until Medicare kicks in or DaVita tells the patient, if eligible, to make a request for premium assistance via the AKF. 

If/when the AKF approves, the patient gets in-center hemodialysis coverage and faces no possible out-of-pocket costs. 


Also, I would note, that the John Oliver piece argues that DaVita should tell its patients to get transplants.  This is not feasible given the number of ESRD patients versus the number of available organs for transplant thereby rendering his argument solely sensationalist.
https://www.kidney.org/atoz/content/insurance
So between the AKF and other HIPP operators such as some state Medicaid programs a good number of these patients must end up on private insurance via ACA due to not being allowed to decline a patient as a result of his/her pre-existing condition. This really makes it a case of I pay everything or a take on private insurance coverage. This might sound insensitive, but it is a bit like shopping for insurance after you crashed your car and the private insurers are forced to take you?
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 24, 2017, 05:13:03 AM

Also, I would note, that the John Oliver piece argues that DaVita should tell its patients to get transplants.  This is not feasible given the number of ESRD patients versus the number of available organs for transplant thereby rendering his argument solely sensationalist.

That part is a joke, DVA is clearly a service organization, since when should they do consult on treatment options? That is what the doctors are for. Also, obtaining an organ transplant isn’t easy and the waiting list is long. Patients are generally aware of the transplant option, but it they just aren’t enough transplants available and many patients are ill suited for the procedure.
Just to add and please check the data for yourself, because I'm not convinced it is the right way to look at it. If you look at the D.14 sheet of the modality data workbook put out by the USRDS (https://www.usrds.org/reference.aspx D.Treatment Modalities) then you will note that of all the ESRD patients 7% have a functioning graft (transplanted) kidney after 1 year, ramping up to 52% after 5 years and 80% after 10 years. Obviously anything less than 100% is not desirable, but probably not bad considering the limited supply of kidneys and latest cost estimates pegged at $414,880/transplant.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 30, 2017, 10:33:30 AM
From 2015 "Renal ventures transaction" comments by FTC https://www.ftc.gov/system/files/documents/cases/1510204_davita_analysis.pdf

..Entry into the outpatient dialysis services markets identified in the Commission’s
Complaint is not likely to occur in a timely manner at a level sufficient to deter or
counteract the likely anticompetitive effects of the proposed transaction. By law, each
dialysis clinic must have a nephrologist medical director
, and most dialysis clinics have
long-term (seven to ten year) contracts with nephrologist medical directors that also
include non-competes. As a practical matter, medical directors also serve as the primary
source of referrals and are essential to a clinic’s success. The relative shortage and lack
of available nephrologists, particularly those with an established referral stream, is a
significant barrier to entry into each of the relevant markets
. These obstacles make entry...
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on October 30, 2017, 10:59:31 AM
From 2015 "Renal ventures transaction" comments by FTC https://www.ftc.gov/system/files/documents/cases/1510204_davita_analysis.pdf

..Entry into the outpatient dialysis services markets identified in the Commission’s
Complaint is not likely to occur in a timely manner at a level sufficient to deter or
counteract the likely anticompetitive effects of the proposed transaction. By law, each
dialysis clinic must have a nephrologist medical director
, and most dialysis clinics have
long-term (seven to ten year) contracts with nephrologist medical directors that also
include non-competes. As a practical matter, medical directors also serve as the primary
source of referrals and are essential to a clinic’s success. The relative shortage and lack
of available nephrologists, particularly those with an established referral stream, is a
significant barrier to entry into each of the relevant markets
. These obstacles make entry...

There's the moat that many do not see.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on November 01, 2017, 03:05:48 PM
https://www.bizjournals.com/denver/news/2017/10/26/davita-ceo-thiry-to-chair-colorado-effort-to.html

At the end of the article:

“Thiry spent more than $1 million of his own money in support of last year's pair of ballot measures to open up the state's primaries to non-partisan voters, propositions 107 and 108, both of which passed.”

I wish he lived in Florida (said another disenfranchised voter.)
Title: Re: DVA – DaVita HealthCare Partners
Post by: Gregmal on November 07, 2017, 01:44:35 PM
Shit guidance it looks like
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on November 07, 2017, 03:29:53 PM
Damn, they bought back a lot of shares. 6M just since Sept 30th.
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on November 07, 2017, 05:16:43 PM
net loss predominantly due to asset impairment (non-cash gaap loss) resulting from ruling on charity assistance, but both revenues +5% and cash flow from operations +6% are up

I would think they appeal? 

after hours action looks pretty bad (down 7%)...may or may not stick by the morning, but perhaps there is fear the downside is greater than where mgmt is guiding? 

Maybe this is another buying opportunity?
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on November 08, 2017, 05:05:44 PM
I started a position in DVA this afternoon...

Sincerely,
VM
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on November 08, 2017, 06:43:03 PM
I started a position in DVA this afternoon...

Sincerely,
VM

what JPM says about DVA?  :P
Title: Re: DVA – DaVita HealthCare Partners
Post by: whiterose on November 22, 2017, 10:27:37 PM
DaVita explores sale of physician network business:

Quote
DaVita Inc (DVA.N), the largest U.S. provider of kidney care services, is exploring a sale of its physician network business, DaVita Medical Group, that could value the unit at up to $4 billion, according to people familiar with the matter.

https://www.reuters.com/article/us-davita-m-a-davita-medical-group-exclu/exclusive-davita-explores-sale-of-physician-network-business-sources-idUSKBN1DM2PB
Title: Re: DVA – DaVita HealthCare Partners
Post by: rb on November 22, 2017, 10:41:26 PM
DaVita explores sale of physician network business:

Quote
DaVita Inc (DVA.N), the largest U.S. provider of kidney care services, is exploring a sale of its physician network business, DaVita Medical Group, that could value the unit at up to $4 billion, according to people familiar with the matter.

https://www.reuters.com/article/us-davita-m-a-davita-medical-group-exclu/exclusive-davita-explores-sale-of-physician-network-business-sources-idUSKBN1DM2PB

Ooohh! That's not good.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Txvestor on November 23, 2017, 02:46:21 AM
Actually if they get a decent price, which they could from a strategic buyer like a large medicare advantage insurer, this could turn out to be a good decision for them albeit an admission of a prior failed strategy.
They have had a miserable time of running it, and obviously they're not produsing anything close to the returns they initially projected. In addition I am sure it has taken up a disproportionate share of management's time and attention, and appears nowhere close to a turnaround. If DVA were to sell this off and use the proceeds to do a share buyback it could be incredibly accretive.
Having a near duopoly scale advantage position in the hemodialysis market with yet more roll up and organic growth opportunity remaining is not exactly a bad/business place to be in. They can then return their focus to their core competency and the stock price will respond.
Title: Re: DVA – DaVita HealthCare Partners
Post by: bennycx on November 23, 2017, 03:21:13 AM
Question: why is everyone talking about Davita and not Fresenius? Is it just because Ted W has bought it?
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on November 23, 2017, 06:01:14 AM
Actually if they get a decent price, which they could from a strategic buyer like a large medicare advantage insurer, this could turn out to be a good decision for them albeit an admission of a prior failed strategy.
They have had a miserable time of running it, and obviously they're not produsing anything close to the returns they initially projected. In addition I am sure it has taken up a disproportionate share of management's time and attention, and appears nowhere close to a turnaround. If DVA were to sell this off and use the proceeds to do a share buyback it could be incredibly accretive.
Having a near duopoly scale advantage position in the hemodialysis market with yet more roll up and organic growth opportunity remaining is not exactly a bad/business place to be in. They can then return their focus to their core competency and the stock price will respond.

Question is how much does one fault them for buying it in the first place? Probably was not the worst idea at the time, because managing patients more effectively does seem to be a good solution due to the complexity and how it relates to outcomes. Also reasonable time frame to realise you made a mistake, sell it and move on. Therefore good theory, but if you cannot make it work then move on.

Selling it and buying back more of your stock sits better with me than throwing more money at it.


Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on November 23, 2017, 06:14:04 AM
Question: why is everyone talking about Davita and not Fresenius? Is it just because Ted W has bought it?
Ted actually owned both and in a meaningful way over the years.
Speaking for myself, Davita is more of a pure play on "dialysis services" and has a higher probability of meaningful share buybacks over the next 4 years (around $5Bn), which is meaningful considering $10.6Bn market cap. Lastly meaningful difference in valuation, which again need to be considered in light of the difference in ROE & ROC. 

Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on November 23, 2017, 06:42:08 AM
DaVita explores sale of physician network business:

Quote
DaVita Inc (DVA.N), the largest U.S. provider of kidney care services, is exploring a sale of its physician network business, DaVita Medical Group, that could value the unit at up to $4 billion, according to people familiar with the matter.

https://www.reuters.com/article/us-davita-m-a-davita-medical-group-exclu/exclusive-davita-explores-sale-of-physician-network-business-sources-idUSKBN1DM2PB

Happy Thanksgiving Jim...
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on November 23, 2017, 08:07:13 AM
If they really got $4bn for it - it would be a huge homerun.  Either way the stock is dirt cheap
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on November 23, 2017, 09:13:35 AM
If they really got $4bn for it - it would be a huge homerun.  Either way the stock is dirt cheap

Or maybe the buyer just buy the whole company? Healthcare vertical integrations are in play.  Cvs?
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on November 23, 2017, 09:17:24 AM
Question: why is everyone talking about Davita and not Fresenius? Is it just because Ted W has bought it?

FSM is trading at a much higher pe premium because in Europe dialysis is fully paid by govt at a good profit margin.
DVA is more a bet that the profit margin will improve over time (maybe like Europe one day) and pe multiple will improve.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Txvestor on November 23, 2017, 04:57:28 PM
Actually if they get a decent price, which they could from a strategic buyer like a large medicare advantage insurer, this could turn out to be a good decision for them albeit an admission of a prior failed strategy.
They have had a miserable time of running it, and obviously they're not produsing anything close to the returns they initially projected. In addition I am sure it has taken up a disproportionate share of management's time and attention, and appears nowhere close to a turnaround. If DVA were to sell this off and use the proceeds to do a share buyback it could be incredibly accretive.
Having a near duopoly scale advantage position in the hemodialysis market with yet more roll up and organic growth opportunity remaining is not exactly a bad/business place to be in. They can then return their focus to their core competency and the stock price will respond.

Question is how much does one fault them for buying it in the first place? Probably was not the worst idea at the time, because managing patients more effectively does seem to be a good solution due to the complexity and how it relates to outcomes. Also reasonable time frame to realise you made a mistake, sell it and move on. Therefore good theory, but if you cannot make it work then move on.

Selling it and buying back more of your stock sits better with me than throwing more money at it.



It was absolutely a disaster of a purchase. 100% a mistake, if that is not obvious from what I said already. This is about as much acknowledgement as you're ever going to get from a typically ego laced American boardroom.
Partners healthcare, since renamed was not a renal specialty medical practice, it was a much broader network of providers. It was not their core competency and they did not manage it properly, it did not deliver any synergies, and certainly never delivered anything close to the ROI they projected. They are ever so gently admitting it now. Additionally it was a sizeable purchase considering their own size.
If you want a comparison on how it is when done well, then look to the growth of the optum division burried within Unitedhealth, they have been putting up crazy impressive numbers with their acquisitions based strategy.
I do agree that a share buyback is in order with the proceeds at these levels.
As to reimbursements, yes they are stingy in the US, but its ironic how many people esp. the public(and perhaps even more broadly on this forum) think otherwise. Medical reimbursement is a fairly opaque mess, and what I have noticed is that you make money in the US either from a monopolistic pricing power eg. Patented drugs, or generic drugs masqueraded as such eg epipen until recently, or scale based negotiation of service pricing with private insurers eg. large single specialty medical groups, or Heavy DC lobbying organizational power eg. AHA and other medical products supplier groups, that protect the tariffs. Other than than medicare is actually a pretty stingy payer when considering the cost of doing business in the US. Witness the rapid disappearance of smaller medical practices and smaller dialysis centers.
Title: Re: DVA – DaVita HealthCare Partners
Post by: mwtorock on November 23, 2017, 06:47:08 PM
Mixed feelings to the news but overall leaning towards positive. Everyone makes mistakes, but management probably realized this a little too late. It is good if they are really selling it.
Title: Re: DVA – DaVita HealthCare Partners
Post by: gfp on November 29, 2017, 06:48:50 AM
Medical Group bought another physician network.  Interesting that they are expanding at the same time the rumor is they are being marketed for sale? 
http://pressreleases.davita.com/2017-11-28-DaVita-Medical-Group-Acquires-Large-IPA-Network-in-the-Pacific-Northwest
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on November 29, 2017, 09:39:36 AM
Medical Group bought another physician network.  Interesting that they are expanding at the same time the rumor is they are being marketed for sale? 
http://pressreleases.davita.com/2017-11-28-DaVita-Medical-Group-Acquires-Large-IPA-Network-in-the-Pacific-Northwest

Not sure how much it means. I thought the same, but then business is not going to stop even if they are selling it. Probably just makes it more attractive to the buyer anyway.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on November 29, 2017, 09:41:38 AM
Both the Dialysis PATIENTS Demonstration Act of 2017 and the Access to Marketplace Insurance Act signing up new sponsors regularly. Getting up to good numbers now.

https://www.congress.gov/bill/115th-congress/house-bill/3976/cosponsors?pageSort=lastToFirst&loclr=cga-bill
https://www.congress.gov/bill/115th-congress/house-bill/4143/cosponsors?pageSort=lastToFirst&loclr=cga-bill
Title: Re: DVA – DaVita HealthCare Partners
Post by: Foreign Tuffett on November 29, 2017, 12:04:21 PM
Could this have implications for the AKF?

https://www.bloomberg.com/news/articles/2017-11-29/pharma-charity-may-shut-after-u-s-faults-drugmakers-influence (https://www.bloomberg.com/news/articles/2017-11-29/pharma-charity-may-shut-after-u-s-faults-drugmakers-influence)

First sentence: "A medical charity that received hundreds of millions of dollars from pharmaceutical companies lost a crucial stamp of approval from the U.S. government, after allowing its donors improper influence over how the nonprofit was run."
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on November 29, 2017, 06:12:16 PM
Could this have implications for the AKF?

https://www.bloomberg.com/news/articles/2017-11-29/pharma-charity-may-shut-after-u-s-faults-drugmakers-influence (https://www.bloomberg.com/news/articles/2017-11-29/pharma-charity-may-shut-after-u-s-faults-drugmakers-influence)

First sentence: "A medical charity that received hundreds of millions of dollars from pharmaceutical companies lost a crucial stamp of approval from the U.S. government, after allowing its donors improper influence over how the nonprofit was run."

There are a lot of alternatives to Xyrem so steering to the most expensive choice does seem whiffy.

Not so many choices with ESRD (someone feel free to slap this weakly informed opinion down.)

The treatment that Davita gets from payers just seems like bullying to me & once a bully gets a taste...
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on November 30, 2017, 07:13:09 AM
Both the Dialysis PATIENTS Demonstration Act of 2017 and the Access to Marketplace Insurance Act signing up new sponsors regularly. Getting up to good numbers now.

https://www.congress.gov/bill/115th-congress/house-bill/3976/cosponsors?pageSort=lastToFirst&loclr=cga-bill
https://www.congress.gov/bill/115th-congress/house-bill/4143/cosponsors?pageSort=lastToFirst&loclr=cga-bill

MR. B - I have read this - but do not quite "get it". Since I'm a little dense, can you give a few comments as to the impact?
Specifically, I'm not quite sure how this compares to prior legislation, and what areas it strengthens or impacts.
Thanks for any comments.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on November 30, 2017, 09:08:18 AM
Both the Dialysis PATIENTS Demonstration Act of 2017 and the Access to Marketplace Insurance Act signing up new sponsors regularly. Getting up to good numbers now.

https://www.congress.gov/bill/115th-congress/house-bill/3976/cosponsors?pageSort=lastToFirst&loclr=cga-bill
https://www.congress.gov/bill/115th-congress/house-bill/4143/cosponsors?pageSort=lastToFirst&loclr=cga-bill

MR. B - I have read this - but do not quite "get it". Since I'm a little dense, can you give a few comments as to the impact?
Specifically, I'm not quite sure how this compares to prior legislation, and what areas it strengthens or impacts.
Thanks for any comments.
Sure. I think we might have covered it earlier in the thread, but here's a few quick links.

Dialysis PATIENTS Demonstration Act - two sides
http://www.dialysispatients.org/articles/dialysis-patient-citizens-applauds-introduction-dialysis-patient-demonstration-bills
http://www.dciinc.org/wp-content/uploads/2017/11/DPDA-Harming_the_future_of_kidney_care_-2017_11_09.pdf

Access to Marketplace Insurance Act
https://cramer.house.gov/media-center/press-releases/cramer-sponsors-legislation-to-close-obamacare-loophole-preventing
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on November 30, 2017, 06:44:15 PM
I take it then that this is a positive for DaVita??

Sincerely,
VM
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on December 06, 2017, 04:21:56 AM
Merry Christmas Jim!

UnitedHealth to buy DaVita's medical unit for $4.9 billion (cash)
https://www.reuters.com/article/us-davita-m-a-unitedhealth/unitedhealth-to-buy-davitas-medical-unit-for-4-9-billion-idUSKBN1E01HJ

"DAVITA PLANS TO USE PROCEEDS FROM DEAL FOR SIGNIFICANT STOCK REPURCHASES OVER 1 TO 2 YRS AFTER CLOSE OF DEAL, AS WELL AS TO REPAY DEBT​, OTHERS"


Up 11.2% pre market
Title: Re: DVA – DaVita HealthCare Partners
Post by: maxthetrade on December 06, 2017, 05:06:36 AM
Great news. Let's hope they buy back a shitload of stock!
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on December 06, 2017, 05:13:03 AM
Merry Christmas Jim!

UnitedHealth to buy DaVita's medical unit for $4.9 billion (cash)
https://www.reuters.com/article/us-davita-m-a-unitedhealth/unitedhealth-to-buy-davitas-medical-unit-for-4-9-billion-idUSKBN1E01HJ

"DAVITA PLANS TO USE PROCEEDS FROM DEAL FOR SIGNIFICANT STOCK REPURCHASES OVER 1 TO 2 YRS AFTER CLOSE OF DEAL, AS WELL AS TO REPAY DEBT​, OTHERS"


Up 11.2% pre market

That was fast.
Title: Re: DVA – DaVita HealthCare Partners
Post by: mwtorock on December 06, 2017, 06:02:23 AM
good news - good execution once they acknowledge the problem - another indication of quality management. any thoughts about the next chapter of DVA outside of buyback and debt reduction?
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on December 06, 2017, 06:20:45 AM
good news - good execution once they acknowledge the problem - another indication of quality management. any thoughts about the next chapter of DVA outside of buyback and debt reduction?

Not sure what you would need other than this deal.  Just some back of the envelope thinking a good friend of mine just sent:

Operating income for the dialysis business: $1.77 B, less interest expense of about $425 (assume no debt reduction)
less taxes (if we assume a 20% rate) you still get NI of about $1 billion.

If the market cap is $13 billion after the rise in price today, and take out $4.9 billion in cash plus about a billion on
hand, you are paying $6 billion for a PE of about 7.

How good does the next chapter need to be?
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on December 06, 2017, 07:19:15 AM
I started a position in DVA this afternoon...

Sincerely,
VM

24% in a month. Not a bad start VM.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Rasputin on December 06, 2017, 07:58:54 AM
Hi cubsfan,

Their guidance for kidney care 2017 is $1.57 B to $1.6 B.  There will be $100 million headwind in 2018 due to 401k accounting change (they had $100 million benefit in 2017 that will not be repeated in 2018) plus some losses for international kidney care, I'm using $1.45 B OI for 2018. 

It's roughly 10 times net income if the 20% tax rate comes  to fruition or 13 times if tax cut act fails.  Still reasonably cheap in my view. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on December 06, 2017, 08:01:31 AM
 ;D

largest position in all accounts.... long ways to go from here.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Rasputin on December 06, 2017, 08:07:20 AM
Oops i think we both missed the $155 million net income attributable to minority shareholders (for their JVs)

So $1.45 B in EBIT minus $425 million Interest times 0.8 minus $155 million minority interest = $670 million in net income.

Use all $4.9 B for share buyback at $68/share = 117 million sh o/s remaining

EPS is around $5.7.

If they use $2.5 B for debt paydown, $2.4 B for sharebuyback, I get

$1.45 B in EBIT minus $300 million interest times 0.8 minus $155 million minority interest = $765 million in net income

$2.4 B share buyback at $68/share = 154 million sh o/s remaining.

EPS is around $5.

So it's about 11 to 13 times earning.  Still reasonably cheap. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on December 06, 2017, 08:16:14 AM
Oops i think we both missed the $155 million net income attributable to minority shareholders (for their JVs)

So $1.45 B in EBIT minus $425 million Interest times 0.8 minus $155 million minority interest = $670 million in net income.

Use all $4.9 B for share buyback at $68/share = 117 million sh o/s remaining

EPS is around $5.7.

If they use $2.5 B for debt paydown, $2.4 B for sharebuyback, I get

$1.45 B in EBIT minus $300 million interest times 0.8 minus $155 million minority interest = $765 million in net income

$2.4 B share buyback at $68/share = 154 million sh o/s remaining.

EPS is around $5.

So it's about 11 to 13 times earning.  Still reasonably cheap.

sprained wrist here...

what do you get for 2019? Is it fair to get a market multiple in 19 with less debt from a resilient cannibal?
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on December 06, 2017, 08:50:22 AM
Hi cubsfan,

Their guidance for kidney care 2017 is $1.57 B to $1.6 B.  There will be $100 million headwind in 2018 due to 401k accounting change (they had $100 million benefit in 2017 that will not be repeated in 2018) plus some losses for international kidney care, I'm using $1.45 B OI for 2018. 

It's roughly 10 times net income if the 20% tax rate comes  to fruition or 13 times if tax cut act fails.  Still reasonably cheap in my view.

Thanks for the correction Rasputin - I am easily excited!
Title: Re: DVA – DaVita HealthCare Partners
Post by: Gregmal on December 06, 2017, 09:48:04 AM
To satisfy the contrarian in me, are there any reasons anybody sees to take profits here? Not that it's wrong, but I've always been skeptical of unanimous bullishness. I am long fwiw.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Rasputin on December 06, 2017, 10:10:04 AM
For me the #1 risk is revenue per treatment.  Can they continue to get $340 ish per treatment?  We know # of treatment will continue to grow.

#2 is tax rate.  That $5 eps is predicated on a 20% tax rate.  A 40% tax rate = $3.50 eps

I cut roughly 3% of my DVA holding.  I had some higher cost shares that I purchased around $69. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on December 06, 2017, 10:15:14 AM
If they really got $4bn for it - it would be a huge homerun.  Either way the stock is dirt cheap

Or maybe the buyer just buy the whole company? Healthcare vertical integrations are in play.  Cvs?

lol. got lucky on this one! I have 20% of my portfolio on this name.. :)
now they have 4.9b cash, which is almost half of their current mktcap. They can pay off 1b in debt, and still have 3.9b left for buy back over 2 years. That's 20% of shares outstanding per year.
Title: Re: DVA – DaVita HealthCare Partners
Post by: KCLarkin on December 06, 2017, 10:17:43 AM
To satisfy the contrarian in me, are there any reasons anybody sees to take profits here? Not that it's wrong, but I've always been skeptical of unanimous bullishness. I am long fwiw.

Go on twitter and I think you'll find plenty of bearishness.
https://twitter.com/WallStCynic/with_replies
Title: Re: DVA – DaVita HealthCare Partners
Post by: Gregmal on December 06, 2017, 10:18:44 AM
For me the #1 risk is revenue per treatment.  Can they continue to get $340 ish per treatment?  We know # of treatment will continue to grow.

#2 is tax rate.  That $5 eps is predicated on a 20% tax rate.  A 40% tax rate = $3.50 eps

I cut roughly 3% of my DVA holding.  I had some higher cost shares that I purchased around $69.

Thanks, and agree. Have seen too many times people overlook big risks simply because a stock is very cheap. DVA to me carries some big ?s but after today appears to be a much cleaner investment. Definitely de-risked quite a bit, but at the same time a little more expensive and predicated on, as you mention, some positive assumptions. IMO it's closer to fairly valued based on what it is "today", but potentially quite cheap if we are correct in some of our year or two out assumptions.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Gregmal on December 06, 2017, 10:23:46 AM
If they really got $4bn for it - it would be a huge homerun.  Either way the stock is dirt cheap

Or maybe the buyer just buy the whole company? Healthcare vertical integrations are in play.  Cvs?

lol. got lucky on this one! I have 20% of my portfolio on this name.. :)
now they have 4.9b cash, which is almost half of their current mktcap. They can pay off 1b in debt, and still have 3.9b left for buy back over 2 years. That's 20% of shares outstanding per year.

Wouldn't it be more prudent to look into de-levering a bit more while the share price is elevated? From their latest repurchase announcement the stock is up nearly 30% in a mere couple of months. The current share price is also not very far off prices from a few years ago, before some of these new question marks and regulatory risks entered the picture. Personally, I'd rather see them be more aggressive with the debt pay down and then just use FCF for repurchases while at these levels.
Title: Re: DVA – DaVita HealthCare Partners
Post by: no_free_lunch on December 06, 2017, 10:27:29 AM
For what it's worth, reuters is reporting they will use the cash for a combination of share repurchases and debt reduction.  Personally would prefer to see it all go against the debt.

Quote
DaVita plans to use the proceeds of the sale for stock buybacks and to repay debt.

https://www.reuters.com/article/us-davita-m-a-unitedhealth/unitedhealth-to-buy-davita-primary-care-unit-for-4-9-billion-idUSKBN1E01HJ
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on December 06, 2017, 10:38:31 AM
If they really got $4bn for it - it would be a huge homerun.  Either way the stock is dirt cheap

Or maybe the buyer just buy the whole company? Healthcare vertical integrations are in play.  Cvs?

lol. got lucky on this one! I have 20% of my portfolio on this name.. :)
now they have 4.9b cash, which is almost half of their current mktcap. They can pay off 1b in debt, and still have 3.9b left for buy back over 2 years. That's 20% of shares outstanding per year.

Wouldn't it be more prudent to look into de-levering a bit more while the share price is elevated? From their latest repurchase announcement the stock is up nearly 30% in a mere couple of months. The current share price is also not very far off prices from a few years ago, before some of these new question marks and regulatory risks entered the picture. Personally, I'd rather see them be more aggressive with the debt pay down and then just use FCF for repurchases while at these levels.

Impo, I think it will be mistake to pivot the fair value to historical prices. BAC is up 120% from low and they are still buying back. If the management think the stock is worth a lot more, they shall just buy back regardless what happened in the previous 3 months. Deleveraging is also important, but without HCP the remaining business is very cash flow stable.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Rasputin on December 06, 2017, 10:43:07 AM
Attached: ML take on this transaction
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on December 06, 2017, 10:46:34 AM
plenty of fcf and cash to massively pay off debt and do buy backs... plus tail winds beginning 19'.

It's likely they seriously accelerated buy backs before these recent announcements.

22% position for me before today.... will not be selling anytime soon.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Gregmal on December 06, 2017, 10:47:16 AM
If they really got $4bn for it - it would be a huge homerun.  Either way the stock is dirt cheap

Or maybe the buyer just buy the whole company? Healthcare vertical integrations are in play.  Cvs?

lol. got lucky on this one! I have 20% of my portfolio on this name.. :)
now they have 4.9b cash, which is almost half of their current mktcap. They can pay off 1b in debt, and still have 3.9b left for buy back over 2 years. That's 20% of shares outstanding per year.

Wouldn't it be more prudent to look into de-levering a bit more while the share price is elevated? From their latest repurchase announcement the stock is up nearly 30% in a mere couple of months. The current share price is also not very far off prices from a few years ago, before some of these new question marks and regulatory risks entered the picture. Personally, I'd rather see them be more aggressive with the debt pay down and then just use FCF for repurchases while at these levels.

Impo, I think it will be mistake to pivot the fair value to historical prices. BAC is up 120% from low and they are still buying back. If the management think the stock is worth a lot more, they shall just buy back regardless what happened in the previous 3 months. Deleveraging is also important, but without HCP the remaining business is very cash flow stable.

I agree regarding historical prices. More so just pointing out that going balls to the wall on a buyback at $55 is a little different than doing it around $70. Rather er on the side on caution and maybe limit buybacks to 10% of shares per year until debt is reduced a bit. At $55? Sure take out every share. $70's? Better safe than sorry.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on December 06, 2017, 11:17:23 AM
I am lucky (to have soaked up every word on this thread.)
I believe in the value of Davita's service & understand the risks, thanks to you guys.

I'm going to hold what I've got (a 5.6% position before the news & 6.8% after.)

Hopefully they'll stick to their knitting from now on.

---

Do I read this correctly to mean CMS is paying less now to recoup what they deemed as overpayment & that after 2018 Davita may be allowed a small profit on CMS bundled payments? (the last part is implied & not stated.)

(http://uglymule.com/images/DVA-CMS-Overpayment-Bundling.png)
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on December 06, 2017, 11:33:01 AM
I am lucky (to have soaked up every word on this thread.)
I believe in the value of Davita's service & understand the risks, thanks to you guys.

I'm going to hold what I've got (a 5.6% position before the news & 6.8% after.)

Hopefully they'll stick to their knitting from now on.

---

Do I read this correctly to mean CMS is paying less now to recoup what they deemed as overpayment & that after 2018 Davita may be allowed a small profit on CMS bundled payments? (the last part is implied & not stated.)

(http://uglymule.com/images/DVA-CMS-Overpayment-Bundling.png)

Yes, now look at 19'
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on December 07, 2017, 04:23:03 PM
the transaction makes one think differently about the underlying value of goodwill on the balance sheet

DaVita's total equity as of last quarter was $4.8B and the all cash deal is for $4.9B ...say DMG got to where they thought it would, DMG is only 1/3 of sales

When I did my initial analysis, what seemed most important was cash-flow stability through cycles rather than the balance sheet because dialysis in the US is a duopoly and DaVita is certainly a franchise business.

Now, a lot of goodwill might convert into cash and GAAP earnings will likely take a sharp turn up... there is a lot to learn about what the numbers will look like going forward, and while I don't invest with multiple expansion as a thesis, it seems ever more likely as the ratio of revenue to cash flow spikes before the value added from the announced buyback

thoughts?
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on December 08, 2017, 02:37:21 AM
Very, very interesting point!!!

Sincerely,
VM
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on December 08, 2017, 05:06:32 AM
https://seekingalpha.com/article/4130152-implications-unitedhealths-deal-buy-davita-unit

Comment section:

"Ranjit Thomas, CFA, Marketplace Contributor
Comments (159) |+ Follow |Send Message
Author’s reply » I spoke to John Penshorn, SVP at UNH who was kind enough to provide me with some additional color on the deal and their thinking. The unit comes with a tax asset that they are valuing at $750 million (at current rates), effectively reducing the purchase price by this amount. This probably represents the amortization of the intangible asset created when DVA bought the unit. UNH believes that they can considerably increase the unit's margins over time(Optum's stated objective is 8-10%), along with increasing its revenues. So now you can get a sense of their thinking around the purchase price. $4Bn of revs to $5Bn...2% margin to 8%...and now you're talking $400 million of operating income, and a purchase price (after deducting the tax asset) that's 16x future taxed earnings, which looks reasonable. I think this is a bit of a stretch, and one can justify almost any acquisition at any price if you assume you can quadruple margins. Also, it's a debatable point whether the value from this potential improvement should flow to the seller rather than be retained by the buyer. John pointed out the strong operational record of the company (which one cannot argue with), and mentioned that acquisitions have played a big part in this."
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on December 10, 2017, 01:45:15 PM
part of the thesis has always been about Thiry as an operator...now he and the board are purely focused on improving margins, capital allocation, and buying back stock.  It's a pure play once again.  It is very tough to have a negative investment case at this point. 

Sincerely,
ValueMaven
Title: Re: DVA – DaVita HealthCare Partners
Post by: Txvestor on December 10, 2017, 07:51:59 PM
UNH/Optum is clearly a better operator than Davita. I think Davita took a hands off approach to the partners healthcare division and paid dearly for it. Its a very complex and involved area and not their core competency. This in the end was most certainly a poor purchase, consider thar 6 yrs on you're barely getting the same price you paid for it. I would argue that they got quite lucky with a motivated buyer looking to scale up on the back of past successes. UNH has the talent pool within Optum to wring out some improvements in margins that Davita never could and also to gain some scale advantage, but its unclear to me if they can get to the margins they've penciled into their acquisition basis. I personally think they overpaid and should have negotiated harder or walked, but like I said, they are in acquisition mode and coming off of recent successes in the area.
Remember, there are also synergies with their other businesses, like OptumRx, Data analytics, benefits management etc. Its amazing how much of a one stop shop UNH has become. Each division feeds the other. Its remarkable.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on December 12, 2017, 04:42:26 AM
Upgrades to $82 now from Citi and Baird..interesting
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on December 12, 2017, 05:57:56 AM
I believe this could be my next Edwards Lifesciences (EW)

(trying not to let the giddyness induce cog biases.)
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on December 12, 2017, 08:38:05 AM
H.R.3976 - Access to Marketplace Insurance Act is up to 70 cosponsors now.

https://www.congress.gov/bill/115th-congress/house-bill/3976/cosponsors?pageSort=lastToFirst&loclr=cga-bill
Title: Re: DVA – DaVita HealthCare Partners
Post by: mwtorock on December 12, 2017, 08:45:25 AM
intrinsic value is close to 90 per share to me. citi's target is still conservative.
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on December 13, 2017, 03:44:48 AM
How are you getting to $90?

Funny that JPM keeps its u/w, yet increases its price-target by $17 (from $51 to $68)

How that is allowed i'll never know....

Sincerely,
ValueMaven
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on December 13, 2017, 07:17:29 AM
There's a reason they're called ANALysts.

I'm watching this thread instead of price moves / targets.
(constantly gazing at Thiry & Co too.)
Title: Re: DVA – DaVita HealthCare Partners
Post by: Gregmal on December 13, 2017, 07:21:26 AM
There's a reason they're called ANALysts.

I'm watching this thread instead of price moves / targets.
(constantly gazing at Thiry & Co too.)

Or another way I've always looked at it; if the analysts were any good at what they do, they'd be running money, rather than writing book reports.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on December 13, 2017, 07:38:56 AM
There's a reason they're called ANALysts.

I'm watching this thread instead of price moves / targets.
(constantly gazing at Thiry & Co too.)

Or another way I've always looked at it; if the analysts were any good at what they do, they'd be running money, rather than writing book reports.

Yep

(http://uglymule.com/images/peterpoops.gif)
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on December 15, 2017, 06:27:52 AM
Someone at justice has a painful boner for Thiry.

https://www.reuters.com/article/us-davita-settlement/davita-pharmacy-unit-settles-u-s-billing-probe-for-63-7-million-idUSKBN1E82UV

Is all this legit or are Thiry's political activities being indirectly attacked?
(Why hasn't this been picked up by InfoWars?)

 ;D

---

https://www.prnewswire.com/news-releases/davita-kidney-care-issues-statement-about-davita-rx-settlement-300571751.html
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on December 15, 2017, 12:07:59 PM
Whatever the case maybe, DVA is an investment now focused on both capital allocation AND capital distribution.  They need to given investors a reasonable timeline for the buyback.  That said, you are looking at a serious reduction in float over the next 18 - 24 months.

Sincerely,
ValueMaven
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on December 15, 2017, 12:29:26 PM
Well with 11.5M shares repurchased YTD as of Nov 7th, looks like they will buy back every share they can if they
stay undervalued. That took $700M, and now they have $1.2B left for buybacks, with some portion of $4.9M
cash from the UHC/HCP deal coming. I think the biggest worry is the stock running away in 2018.

From Earnings report:

Share repurchases:  As of November 7, 2017 we have repurchased a total of 11,446,307 shares of our common stock during the year for a total of $702 million at an average price of $61.30 per share. During the quarter ended September 30, 2017, we repurchased a total of 1,982,250 shares of our common stock for approximately $117 million at an average price of $59.09 per share. During the nine months ended September 30, 2017, we repurchased a total of 5,556,823 shares of our common stock for $349 million at an average price of $62.77 per share. We have also repurchased 5,889,484 shares of our common stock for $353 million at an average price of $59.92 per share subsequent to September 30, 2017.

On October 10, 2017, our Board of Directors approved an additional share repurchase authorization in the amount of approximately $1.253 billion. This recently approved authorization was in addition to the amounts remaining at that time under our Board of Directors' prior share repurchase authorization announced in July 2016. As of November 7, 2017, we have a total of approximately $1.228 billion in outstanding Board repurchase authorizations remaining under our stock repurchase program. These share repurchase authorizations have no expiration dates.

Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on December 15, 2017, 12:46:48 PM
Very well said!!  BUT you mean $4.9B !!

Sincerely,
ValueMaven
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on December 15, 2017, 01:39:45 PM
oops...thanks VM !
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on December 18, 2017, 09:44:00 AM
Looks like previous posters back of the envelope calcs didn't include the 900m cash on hand plus the 1.2 b ish fcf they will generate q4 17'-q4 18' (5 qtrs). Presumably we should now be looking forward to at least a end of year 18' valuation.

At 21% tax and by taking the 4.9b plus 1.2b plus 900m and applying it to debt at 5.5% you get a pretty good number. Applying it all to debt is conservative because it's at a lower rate than the fcf yield whichever time frame your looking at.
Personally, I"d like to see about 4-5b of the 7b go to debt NTM. If debt was reduced by this amount I think the EV would become an afterthought as the debt/equity became perceptibly clean... large debt reduction... rising equity = mkt cap valuation.  No doubt there were considerable buy backs this qtr.

Tail winds in 19' on rates, international is supposed to turn positive, and other upside options in the works. It's likely there will be some focused organizational changes leading to some operating leverage, next 1-2 years. Margins were larger pre DMG, not sure how to reconcile that, may be due to over payments. 19' will be the beginning of a clean company with slow/steady net income growth eating itself, no 401k hit. The narrative will change, a year from now we may be considering the implications of faster growth internationally as mgmt gets focused on this area which was already being projected to inflect and the higher rates kick in.

17% NTM gain seems fair from here.

Or WEB could buy it, or DVA could buy WEB's stake, either would be fun. If WEB was going to buy it, post sale, pre tail winds, would be the time to do so somewhere around mid-high 80's next year. International acceleration could en sue w BRKs vs pubco mandates.
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on December 18, 2017, 05:10:16 PM
Looks like previous posters back of the envelope calcs didn't include the 900m cash on hand plus the 1.2 b ish fcf they will generate q4 17'-q4 18' (5 qtrs). Presumably we should now be looking forward to at least a end of year 18' valuation.

At 21% tax and by taking the 4.9b plus 1.2b plus 900m and applying it to debt at 5.5% you get a pretty good number. Applying it all to debt is conservative because it's at a lower rate than the fcf yield whichever time frame your looking at.
Personally, I"d like to see about 4-5b of the 7b go to debt NTM. If debt was reduced by this amount I think the EV would become an afterthought as the debt/equity became perceptibly clean... large debt reduction... rising equity = mkt cap valuation.  No doubt there were considerable buy backs this qtr.

Tail winds in 19' on rates, international is supposed to turn positive, and other upside options in the works. It's likely there will be some focused organizational changes leading to some operating leverage, next 1-2 years. Margins were larger pre DMG, not sure how to reconcile that, may be due to over payments. 19' will be the beginning of a clean company with slow/steady net income growth eating itself, no 401k hit. The narrative will change, a year from now we may be considering the implications of faster growth internationally as mgmt gets focused on this area which was already being projected to inflect and the higher rates kick in.

17% NTM gain seems fair from here.

Or WEB could buy it, or DVA could buy WEB's stake, either would be fun. If WEB was going to buy it, post sale, pre tail winds, would be the time to do so somewhere around mid-high 80's next year. International acceleration could en sue w BRKs vs pubco mandates.


WOW!! Very well written flesh!!

Sincerely,
ValueMaven
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on December 18, 2017, 05:16:30 PM
DVA bonds trading as if the bonds are investment grade, but bonds are rated just under IG (Ba3, B+)

Initial coupons around 5.75% w/closest bonds trading at ~$103.  While the 2025 bonds are trading at par (Ba3. B+).

Has anyone weighed the cost different between refinancing at IG rates or direct buyback? 

Could it be cheaper at this point to use FCF for buybacks since the cost of calling debt then refinancing might be higher and more cash restrictive than simply buying back shares and waiting for the cash pile to accumulate so that the company gets an IG rating?  Outlook should be quite different now?
Title: Re: DVA – DaVita HealthCare Partners
Post by: UK on December 18, 2017, 08:50:44 PM
It seems Chanos is still short:

https://www.cnbc.com/amp/2017/12/14/cnbc-exclusive-cnbc-transcript-kynikos-associates-founder-and-president-jim-chanos-speaks-with-cnbcs-kelly-evans.html

CHANOS: AND SO THIS BILL HAS BEEN RUSHED AND THE QUESTION IS, WHAT ARE THE UNINTENDED CONSEQUENCES? ONE OF THE AREAS THAT WE THINK, IF IT GOES THROUGH, IT'S GOING TO IMPACT THE HEALTH CARE ECONOMY A LOT MORE THAN PEOPLE THINK.
EVANS: HEALTH CARE?
CHANOS: HEALTH CARE.
EVANS: IS THAT BECAUSE THEY'RE REPEALING THE INDIVIDUAL MANDATE?
CHANOS: THE MANDATE, THE BASIC NONDEDUCTIBILITY OF MEDICAL EXPENSES.
EVANS: RIGHT.
CHANOS: AND REALLY, I THINK IT WILL BE, AS PAUL RYAN, I THINK, HAS HINTED AT, IT WILL BE THE OPENING SALVOS THEN IN 18 AND 19 FOR CUTTING ENTITLEMENTS, WHICH IS MEDICARE AND MEDICAID, AGAIN. AND SO THEY'RE GOING AFTER OBAMACARE IN THIS SORT OF BACKDOOR SNEAKY WAY AND WE ACTUALLY HAVE THIS SAYING WITH THE HEALTH CARE STATS, WE THINK WINTER IS COMING. WE THINK WE'RE ABOUT TO SEE DEFLATION.
EVANS: YOU JUST QUOTED NETFLIX, BY THE WAY. OH - NO, THAT WAS HBO "GAME OF THRONES."
CHANOS: NO HBO!
EVANS: I STAND CORRECTED.
CHANOS: COME ON, GET YOUR STREAMING SERVICES RIGHT.
EVANS: YOU KNOW I'M NOT A TRUE VIEWER.
CHANOS: BUT WE THINK THAT WINTER IS COMING IS THE REALITY FOR THE U.S. HEALTH CARE SECTOR. THAT DEFLATION, NOT INFLATION, IS COMING.
EVANS: AND YOU'VE BET AGAINST NAMES LIKE McKESSON, THEN DRUG DISTRIBUTORS.
CHANOS: MALLINCKRODT.
EVANS: I'M SORRY, MALLINCKRODT. NAMES IN THE KIDNEY IT DIALYSIS SPACE, FOR EXAMPLE. ARE THERE ANY OTHERS YOU WOULD EXPAND –
CHANOS: WE'VE BEEN LOOKING AT THE RENT-SEEKING COMPANIES, COMPANIES THAT WE THINK HAVE EXISTED ON THE PERIPHERY OF THE HEALTH CARE ECONOMY THAT BASICALLY HAVE WENT AFTER THESE PRICING SORT OF GAMESMANSHIP MODELS. AND WE THINK THAT THAT'S OVER. WE THINK AS THE PIE SHRINKS, IT'S GOING TO BE TOUGHER AND TOUGHER TO JUSTIFY THE ABILITY OF COMPANIES TO HIKE DRUG PRICES 1,000% OR CHARGE COMMERCIAL INSURERS FIVE TIMES WHAT YOU CHARGE MEDICARE AND MEDICAID IN THE CASE OF DIALYSIS. AND WE THINK THAT THERE'S A NUMBER OF THOSE COMPANIES, SOME HAVE ALREADY DROPPED, SOME HAVEN'T. WE'RE STILL VERY NEGATIVE ON THE PBM SPACE, EXPRESS SCRIPTS CAME OUT AND REAFFIRMED GUIDANCE, RAISED IT THIS MORNING. THERE'S NO REASON FOR INDEPENDENT PBMs TO EXIST, FOR EXAMPLE.
EVANS: DOES THE CVS/AETNA DEAL MAKE SENSE TO YOU?
CHANOS: I THINK THAT'S – EVERYONE'S LOOKING AT IT THE REVERSE WAY THROUGH THE TELESCOPE. WE THINK IT'S THE PBM, CVS CAREMARK THAT IS BUYING THE INSURER BECAUSE THEY'RE WORRIED ABOUT THE PBM MODEL, AND NOT THE OTHER WAY AROUND. NOT AN INSURER GETTING MORE VERTICALLY INTEGRATED. AND SO, I THINK, ONE OF THE THINGS WE'VE TOLD CLIENTS IS THAT AS HEALTH CARE COMPANIES FOUND MORE AND MORE INNOVATIVE WAYS IN WHICH TO GET PAID OVER THE PAST TEN YEARS, WE THINK GOING FORWARD, THE PAYER IS GOING TO FIND MORE AND MORE INNOVATIVE WAYS NOT TO PAY.

Title: Re: DVA – DaVita HealthCare Partners
Post by: dontdodebt on December 18, 2017, 11:10:49 PM
But the dialysis industry isnt overly profitable right? Dosent this mean they (which includes Davita) cant lower prices much? Sure they can lower to some segment of the consumer type (like insurers) but then they just raise prices for medicaid.

A business have to have some profitability to exist and this business have to exist. Consumers (medicaid/medicare and insurers) have not much choice then to pay up.

If goverment force the prices down so the most cost effective company (davita) loose its profitability people will die, its not rocket science.
Title: Re: DVA – DaVita HealthCare Partners
Post by: LC on December 18, 2017, 11:17:37 PM
Thats my thought as well:

WE THINK AS THE PIE SHRINKS, IT'S GOING TO BE TOUGHER AND TOUGHER TO JUSTIFY THE ABILITY OF COMPANIES TO HIKE DRUG PRICES 1,000% OR CHARGE COMMERCIAL INSURERS FIVE TIMES WHAT YOU CHARGE MEDICARE AND MEDICAID IN THE CASE OF DIALYSIS

Well fine, but then they're going out of business because they lose money on medicare customers. Now who performs dialysis?
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on December 19, 2017, 06:41:42 AM
I like Chanos, but this seems like a terrible stock to short.
A smart management team can absolutely kill you with their options when you generate so much cash:
buybacks, debt reduction, divestures, cost cutting, etc.
And you're shorting the survivor in an oligopoly business.

Reminds of when Dave Einhorn presented and shorted Moody's in 2010.
Chanos and Einhorn are really bright and convincing, but they can be too smart for their own good.

The only thing DVA can't control is the reimbursement rate.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Gregmal on December 19, 2017, 07:10:38 AM
I like Chanos, but this seems like a terrible stock to short.
A smart management team can absolutely kill you with their options when you generate so much cash:
buybacks, debt reduction, divestures, cost cutting, etc.
And you're shorting the survivor in an oligopoly business.

Reminds of when Dave Einhorn presented and shorted Moody's in 2010.
Chanos and Einhorn are really bright and convincing, but they can be too smart for their own good.

The only thing DVA can't control is the reimbursement rate.

Two of the cardinal rules of shorting, at least the way I learned, was never short on valuation alone, or when you need something to change in order for the short to work out. When you look at a lot of the mistakes of guys like Chanos(VRX was hailed as a success but he shorted in like 2011 in the 50's and had to hold for 5 years), Einhorn (AMZN and many more) and Ackman(HLF) a lot of pain could have been avoided simply adhering to this. DVA would fall into the same category. Barring a major regulatory change, this will likely be a bad short.
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on December 19, 2017, 07:35:33 AM
It's year end. Chanos probably need to do some fund raising so he can have a good Christmas. And it won't hurt for him covering some shorts to harvest some tax credit ::)
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on December 19, 2017, 01:34:43 PM
I just talked to a friend who used to cover healthcare and used to follow DVA for many years.
It seems to me the thesis can be summarized as following:
1. Insurance companies don't really care much about the payments to dialysis companies. It's not much compared to other stuffs they have to pay. And they know their payment is capped, which is more important to them.
2. Govt has be very careful and will fight an uphill war to lower payment. Because they are not dealing with a single drug company. They are dealing with all these mom and pop shops and low income people who depend on it. A lot of administrative burden for them to do that :)Plus, the profit is not excessive.
3. They are a duopoly. They have a lot of power in controlling their input costs such as paying for the drugs needed.
4. The current payment scheme is written into law for a long time. It's unlikely going to change.

 
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on December 19, 2017, 02:04:36 PM
I just talked to a friend who used to cover healthcare and used to follow DVA for many years.
It seems to me the thesis can be summarized as following:
1. Insurance companies don't really care much about the payments to dialysis companies. It's not much compared to other stuffs they have to pay. And they know their payment is capped, which is more important to them.
2. Govt has be very careful and will fight an uphill war to lower payment. Because they are not dealing with a single drug company. They are dealing with all these mom and pop shops and low income people who depend on it. A lot of administrative burden for them to do that :)Plus, the profit is not excessive.
3. They are a duopoly. They have a lot of power in controlling their input costs such as paying for the drugs needed.
4. The current payment scheme is written into law for a long time. It's unlikely going to change.

This.

---

I do somewhat agree with Chanos' idea concerning Caremark/Aetna.

His remark about payers finding more innovative ways NOT to pay seems relevant re: Amazon becoming a drug dealer (never disappoint the customer.)
(maybe he'll find a way to express pessimism on Amazon's aspirations?)  :D
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on December 19, 2017, 02:17:35 PM
I just talked to a friend who used to cover healthcare and used to follow DVA for many years.
It seems to me the thesis can be summarized as following:
1. Insurance companies don't really care much about the payments to dialysis companies. It's not much compared to other stuffs they have to pay. And they know their payment is capped, which is more important to them.
2. Govt has be very careful and will fight an uphill war to lower payment. Because they are not dealing with a single drug company. They are dealing with all these mom and pop shops and low income people who depend on it. A lot of administrative burden for them to do that :)Plus, the profit is not excessive.
3. They are a duopoly. They have a lot of power in controlling their input costs such as paying for the drugs needed.
4. The current payment scheme is written into law for a long time. It's unlikely going to change.

That's good input. The rate has to be attractive enough for the DVA and others to keep expanding. You sure don't
want the gov running this type of business. Just look at the VA Hospitals.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on December 19, 2017, 07:20:25 PM
I just talked to a friend who used to cover healthcare and used to follow DVA for many years.
It seems to me the thesis can be summarized as following:
1. Insurance companies don't really care much about the payments to dialysis companies. It's not much compared to other stuffs they have to pay. And they know their payment is capped, which is more important to them.
2. Govt has be very careful and will fight an uphill war to lower payment. Because they are not dealing with a single drug company. They are dealing with all these mom and pop shops and low income people who depend on it. A lot of administrative burden for them to do that :)Plus, the profit is not excessive.
3. They are a duopoly. They have a lot of power in controlling their input costs such as paying for the drugs needed.
4. The current payment scheme is written into law for a long time. It's unlikely going to change.

That's good input. The rate has to be attractive enough for the DVA and others to keep expanding. You sure don't
want the gov running this type of business. Just look at the VA Hospitals.

I am fairly certain that the costs would increase and potentially double, if the government would run this business.
Title: Re: DVA – DaVita HealthCare Partners
Post by: RichardGibbons on December 20, 2017, 10:30:43 AM
I am fairly certain that the costs would increase and potentially double, if the government would run this business.

Just out of curiosity, what about DaVita makes you think its costs would double?  Healthcare expenses across the world vs. the USA shows conclusively that one thing the government does much more inexpensively than private business is medicine, so I'm curious why you think DaVita's doesn't fit that model.
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on December 20, 2017, 10:41:18 AM
DaVita is all about efficiency and high quality of care and lower cost. Seems the complete opposite of the
federal government. It would be hard for me to imagine a government run dialysis business caring one lick about
throughput. Plus this dialysis business is very people intensive with highly skilled personnel.
Title: Re: DVA – DaVita HealthCare Partners
Post by: RichardGibbons on December 21, 2017, 10:21:45 AM
Makes sense.  Thanks, Cubs.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on December 22, 2017, 05:10:08 PM
I am fairly certain that the costs would increase and potentially double, if the government would run this business.

Just out of curiosity, what about DaVita makes you think its costs would double?  Healthcare expenses across the world vs. the USA shows conclusively that one thing the government does much more inexpensively than private business is medicine, so I'm curious why you think DaVita's doesn't fit that model.

The dialysis business is unlike the drug business and has much lower margins, high capex relative to the revenue. The employees are not particularly well paid (maybe $30-35 for nurse, and $10-20 for techs). Its based on achieving high throughput and productivity. The government would not be able to hire the necessary employees at such relatively low wages and overhead cost and productivity would be way lower.

Also, the government sponsored single payer healthcare does not mean that the providers are government agencies. In Europe, most providers are not government agencies, but the rules and the framework are determined by the government . That’s a big difference. I would bet that the cost for dialysis Europe is not much different than the cost in the US (for Medicare).
Title: Re: DVA – DaVita HealthCare Partners
Post by: karthikpm on December 22, 2017, 05:18:48 PM
Here is a nice comparison of costs. Little dated. I think the big difference in the US is the number of patients on dialysis and candidacy for dialysis. Patient selection in the US is lax compared to the Eurozone.

https://www.asn-online.org/policy/webdocs/asndagreimbursementdialysis.pdf
Title: Re: DVA – DaVita HealthCare Partners
Post by: Txvestor on December 22, 2017, 06:51:54 PM
This precisely exemplifies when people repeatedly talk about
“health care costs” in the US and “poorer outcomes”. There’s
little to no focus on such factors in the analysis. Many of these
factors would be pertinent to you if you are the patient and
the American public is sure not willing to compromise very
much on this, and the politicians have sold them on their
“Healthcare as a right”. There are many such examples in the
system.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Cigarbutt on December 22, 2017, 08:04:33 PM
Disclosure: Have been looking at DVA for some time. Still a lot of work to do.

In terms of this specific sub-question:
@RichardGibbons,
Concerning the notion of getting your bang for the buck, most would agree that this has to be addressed on a case by case basis.
And the discussion may rapidly degenerate.
I would submit that higher costs do not automatically result in better care (and sometimes even may be correlated with poorer health outcomes).

Focus on DVA.
The article submitted by karthikpm is one of the best out there.
But comparison is frought with difficulties as 1-there are blended, direct and indirect costs, 2-the patient populations are different and 3-there are purchase power parity adjustments. Also most studies discussing the topic (cost) often have a focus on the relative (cost) advantage of PD vs HD and not on international pairing (apples to oranges).

Here are two more for those interested:
https://f1000research.com/articles/2-273/v1
see table 1
https://academic.oup.com/ndt/article/28/10/2553/1807345

The best answer about cross-country cost comparisons is I don't know. For the private/public question which is related, my impression however would go along what Spekulatius describes.
Dialysis treatment can be relatively standardized (evaluation/selection, treatment itself and routine follow-up) and is relatively less affected by factors that drive costs much higher in the healthcare system elsewhere.
The over-riding principle for DVA is that its operations can be schematically compared to a utility 1-that requires a high investment in real assets, 2-whose "reasonable" return is directly or indirectly negotiated with a third party (government) and 3-which can benefit from efficiency gains and scale (incentive to do the right thing AND make money).

I submit that this is an area where a private player can make a difference (higher quality of care and lower costs), with shareholders pocketing at least part of the difference.
With expected pressure to contain or reduce costs, the moat that DVA seems to have may become more and more valuable.
Plan to contribute more if I come up with something useful.
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on December 25, 2017, 07:06:31 AM
Awesome insight...Thanks!  One really does wonder why Berkshire hasn't acquired DaVita at this point...Thiry would fit very well into Berkshires culture

Sincerely,
ValueMaven
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on December 25, 2017, 09:33:01 AM
Awesome insight...Thanks!  One really does wonder why Berkshire hasn't acquired DaVita at this point...Thiry would fit very well into Berkshires culture

Sincerely,
ValueMaven

Berkshire would only consider acquiring DVA if that is what Davita wanted - and it appears DVA does not want to be acquired at this point. Berkshire does not do hostile takeovers.

https://www.bizjournals.com/denver/news/2013/05/07/warren-buffetts-berkshire-hathaway.html

Under the pact, Berkshire agreed not to pursue "any business combination, merger, tender offer, exchange offer or similar transaction” involving DaVita. It also agreed not to try to place a director on DaVita’s board or to sell off large blocks of stock at one time to one buyer without DaVita’s approval.


The agreement was signed by Ted Weschler, who as a Berkshire investment manager has been buying DaVita shares, and DaVita President Javier Rodriguez.
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on December 29, 2017, 04:46:25 AM
I agree - but that was almost 5 years ago... a lot has changed since then!!  DVA would fit very nicely inside BRKs ownership portfolio
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on January 03, 2018, 05:51:47 PM
you have to wonder how aggressive mgmt is at these levels with the monster buyback...just given the stock is up 35% in a matter of 2 months
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on January 04, 2018, 06:54:52 AM
Today: DaVita (NYSE:DVA) upgraded to Buy by BofA/Merrill Lynch.

 ???
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on January 04, 2018, 06:58:26 AM
Wolfe research also listed DVA as on their researchers' "Top 2018 idea"
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on January 04, 2018, 03:20:10 PM
does anyone have these reports, or a recap they can post? 

sincerely,
valuemaven
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on January 04, 2018, 09:15:48 PM
(Baxter + DVA) - (Anesthetics & Bio-surgical Supplies) = Fresenius?

Rumormongering is just another town in Holland
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on January 05, 2018, 01:51:55 AM
(Baxter + DVA) - (Anesthetics & Bio-surgical Supplies) = Fresenius?

Rumormongering is just another town in Holland
Rumorongering
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on January 05, 2018, 02:20:07 AM
DAVITA INC DVA.N: BERNSTEIN RAISES TARGET PRICE TO $84 FROM $59.50 - Reuters News
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on January 05, 2018, 09:28:57 AM
(Baxter + DVA) - (Anesthetics & Bio-surgical Supplies) = Fresenius?

Rumormongering is just another town in Holland
Rumorongering

True but is it any more moronic than sell siders snapping their fingers & upping a value by 30% or more?

Apologies if you're Dutch (I love everything about you guys but you have REALLY long street names.)
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on January 09, 2018, 05:26:18 PM
One of the great capital return stories in the market today...the name continues to work...huge buyback, reduction of leverage, improving business trends, and lower tax rate. 

Sincerely,
VM
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on January 11, 2018, 02:59:16 AM
company presented at JPM healthcare conference yesterday afternoon and I think the Q&A went better then expected...stock turned in the afternoon.  Check out the Q&A were they talk about aggressively giving capital back to the shareholders, and the recent DMG deal...so of those comments were really interesting. 

sincerely,
valuemaven
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on January 11, 2018, 05:34:09 AM
company presented at JPM healthcare conference yesterday afternoon and I think the Q&A went better then expected...stock turned in the afternoon.  Check out the Q&A were they talk about aggressively giving capital back to the shareholders, and the recent DMG deal...so of those comments were really interesting. 

sincerely,
valuemaven
Thanks for the heads up!
https://jpmorgan.metameetings.net/events/healthcare18/sessions/13925-davita-inc/webcast
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on January 11, 2018, 06:12:48 AM
Getting regular updates now - moving along nicely on both Acts.

Dialysis PATIENTS Demonstration Act
https://www.congress.gov/bill/115th-congress/house-bill/4143/cosponsors?pageSort=lastToFirst&loclr=cga-bill

Access to Marketplace Insurance Act
https://www.congress.gov/bill/115th-congress/house-bill/3976/cosponsors?pageSort=lastToFirst&loclr=cga-bill
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on January 11, 2018, 06:49:02 AM
company presented at JPM healthcare conference yesterday afternoon and I think the Q&A went better then expected...stock turned in the afternoon.  Check out the Q&A were they talk about aggressively giving capital back to the shareholders, and the recent DMG deal...so of those comments were really interesting. 

sincerely,
valuemaven

ML just upgraded target price to 92
Title: Re: DVA – DaVita HealthCare Partners
Post by: no_free_lunch on January 11, 2018, 10:30:04 AM
The price targets are encouraging but it would be nice to know what is behind that.  Does anyone have any 2019 or 2020 free cash flow forecasts?
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on January 11, 2018, 11:50:40 AM
Just listened to the 16 minute jpm presentation however the q and a wasn't part of the recording. Anyone know where to find the q and a portion written or otherwise?
Title: Re: DVA – DaVita HealthCare Partners
Post by: Bluffy on January 11, 2018, 01:06:26 PM
Just listened to the 16 minute jpm presentation however the q and a wasn't part of the recording. Anyone know where to find the q and a portion written or otherwise?

Had the same problem. Go in their again and look right over the presentation. There should be a tab next to "presentation" labeled with "Q&A".

Otherwise: https://jpmorgan.metameetings.net/events/healthcare18/sessions/13926-davita-inc-q-a/webcast (https://jpmorgan.metameetings.net/events/healthcare18/sessions/13926-davita-inc-q-a/webcast)
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on January 12, 2018, 03:03:58 AM
Just listened to the 16 minute jpm presentation however the q and a wasn't part of the recording. Anyone know where to find the q and a portion written or otherwise?

Had the same problem. Go in their again and look right over the presentation. There should be a tab next to "presentation" labeled with "Q&A".

Otherwise: https://jpmorgan.metameetings.net/events/healthcare18/sessions/13926-davita-inc-q-a/webcast (https://jpmorgan.metameetings.net/events/healthcare18/sessions/13926-davita-inc-q-a/webcast)

Presentation (only)
http://investors.davita.com/static-files/915e0798-b9c0-44c9-b3a4-02bfead9a001
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on January 13, 2018, 03:23:32 PM
This is a very interesting deck...prob explains why DVA has been on fire recently.  If Thiry is able to pull this off, we are looking at a stock thats going to go much higher...I still think Berkshire might acquire this (regardless of the standstill letter that was signed 5yrs ago)

Sincerely,
VM
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on January 20, 2018, 07:57:43 AM
http://pressreleases.davita.com/2018-01-11-DaVita-Physician-Solutions-Makes-Its-First-Big-Investment-in-New-Technology-from-Epic

Is this a part of DMG?

I hope not (or at the least, that some kind of partnership would continue.)

Just seems like a treasure trove of data for Davita.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on January 24, 2018, 11:02:52 PM
Jim has a new stooge 8)
https://seekingalpha.com/article/4139719-davita-healthcare-partners-overvalued-facing-significant-headwinds
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on January 25, 2018, 04:21:37 AM
Jim has a new stooge 8)
https://seekingalpha.com/article/4139719-davita-healthcare-partners-overvalued-facing-significant-headwinds

Ha, I saw that in my Twitter feed & thought he was a shill but I want to avoid confirmation bias so...

---

On another note; I spotted a shiny, brand new, Fresenius in town the other day (almost ready to open up.)

Is Fresenius' 5% +/- higher GM's (from a quick look at MStar numbers) a result of their being more vertically integrated?

Seems like this would be a priority for DVA given the pricing environment.

Baxter has spun out some winners in the past (I own one) & owning their dialysis biz should make DVA even more attractive?
(I know this is just noodling & most of you are presenting JUST facts but...)
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on January 25, 2018, 07:20:15 AM
Jim has a new stooge 8)
https://seekingalpha.com/article/4139719-davita-healthcare-partners-overvalued-facing-significant-headwinds

Jim give classes at some MBA schools and ask students to do write ups on short ideas. I will not be surprised if this is from one of his “graduates”
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on January 29, 2018, 12:13:24 PM
The short argument can only have short-term implications. 

If dialysis is no longer profitable, dialysis centers will close and people will move closer to where there is a profitable center or make long commutes 2-3x a week. 

A politician who doesn't fight to increase medicare reimbursement for dialysis will be killing sick people.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on February 05, 2018, 10:22:10 AM
Can anyone get hold of this report please?

Government Report Reveals Dialysis Industry Improves Patient Care
https://www.prnewswire.com/news-releases/government-report-reveals-dialysis-industry-improves-patient-care-300593123.html
Title: Re: DVA – DaVita HealthCare Partners
Post by: LightWhale on February 06, 2018, 02:24:40 AM
Can anyone get hold of this report please?

Government Report Reveals Dialysis Industry Improves Patient Care
https://www.prnewswire.com/news-releases/government-report-reveals-dialysis-industry-improves-patient-care-300593123.html


https://data.medicare.gov/data/dialysis-facility-compare
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on February 06, 2018, 05:01:59 AM
Great!
Title: Re: DVA – DaVita HealthCare Partners
Post by: Cigarbutt on February 11, 2018, 05:54:20 AM
"Can anyone get hold of this report please?

Government Report Reveals Dialysis Industry Improves Patient Care
https://www.prnewswire.com/news-releases/government-report-reveals-dialysis-industry-improves-patient-care-300593123.html"

I think that certain reports have circulation limited to providers and internal use and not to the general public (or the retail investor:)).

A nice complementary article:
http://cjasn.asnjournals.org/content/early/2017/12/19/CJN.11231017.full#F1

Slowly but surely moving in the direction of evidence-based conditional funding/payments.

Reference 10 of the article is also interesting.
https://www.healthaffairs.org/do/10.1377/hblog20161228.058133/full/
A lot of work to be done, but potential ways to include true measures of patient satisfaction and coming to grips with the transparency paradox.
Maybe patients will read rating surveys and reliable review sites (just like what you do before you go to a restaurant, hotel etc) before making a healthcare choice.

Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on February 11, 2018, 09:25:40 AM
I own a ton of DVA...It's a pure-play at this point...I really like what is going on here too...plus we have a huge FCF Yield and aggressive buyback, with great broader trends. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on February 12, 2018, 01:32:31 PM
Submission of Amendment to the Fair Pricing Dialysis Act (attached)

Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on February 13, 2018, 01:29:30 AM
Submission of Amendment to the Fair Pricing Dialysis Act (attached)
Interesting that they make no mention of the fact that private dialysis companies make no money on their Medicare/Aid patients.
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on February 13, 2018, 09:11:03 AM
If I read it correctly, it looks like they would be allowed to make a 15% margin before interest, taxes, and headquarters.

If that's right, presumably, some facilities would be making substantially less and some substantially more. On the whole, it would be a bad thing. Unless they built a bunch of facilities that weren't being used to grow .

However, if a facility is underperorming/losing money and assuming cms is close to break even... is commercial really going to allow them to be charged more than the going rate in these cases? Hard to imagine.

If they don't allow that, than many current and future facilities would be closed/not built.... causing a serious proximity problem for patients. There's really no point in building some out that may take years to eek out a profit... or keep one open.

Anyways, I should read it again... just breezed through it.
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on February 13, 2018, 04:56:51 PM
Submission of Amendment to the Fair Pricing Dialysis Act (attached)
Interesting that they make no mention of the fact that private dialysis companies make no money on their Medicare/Aid patients.

"The Act is intended to be budget neutral for the State to implement and administer." 

Perhaps this statement is true to the extent that if this legislative non-sense were enacted there would be no consequences. 

It's obvious that the sole beneficiary would be the carrier.  What's missing is that a carrier's job is to insure risk.  This isn't Federally-subsidized flood insurance.  Carriers should increase premiums to cover the difference and deal with the consequences. 

Wait... they already have increased premiums after ACA. 

Now carriers want to reduce reimbursement AND increase premiums again? 

Sure, DaVita is for profit, but DaVita has a positive impact on the health care system as a whole. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on February 16, 2018, 08:43:56 AM
Thiry & Ackerman discuss possible uses for cash from the sale of DMG (kind of...)

https://www.bizjournals.com/denver/news/2018/02/13/davita-officials-expound-on-potential-acquistions.html
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on February 16, 2018, 10:44:59 AM
If I read it correctly, it looks like they would be allowed to make a 15% margin before interest, taxes, and headquarters.

If that's right, presumably, some facilities would be making substantially less and some substantially more. On the whole, it would be a bad thing. Unless they built a bunch of facilities that weren't being used to grow .

However, if a facility is underperorming/losing money and assuming cms is close to break even... is commercial really going to allow them to be charged more than the going rate in these cases? Hard to imagine.

If they don't allow that, than many current and future facilities would be closed/not built.... causing a serious proximity problem for patients. There's really no point in building some out that may take years to eek out a profit... or keep one open.

Anyways, I should read it again... just breezed through it.

I've said before, at some point, what's to stop any dialysis co from simply raising their costs considering the cost plus nature of this proposed legislation? They couldn't do it quickly, but they could come in high and raise costs slowly, deliberately.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on February 16, 2018, 03:18:50 PM
If I read it correctly, it looks like they would be allowed to make a 15% margin before interest, taxes, and headquarters.

If that's right, presumably, some facilities would be making substantially less and some substantially more. On the whole, it would be a bad thing. Unless they built a bunch of facilities that weren't being used to grow .

However, if a facility is underperorming/losing money and assuming cms is close to break even... is commercial really going to allow them to be charged more than the going rate in these cases? Hard to imagine.

If they don't allow that, than many current and future facilities would be closed/not built.... causing a serious proximity problem for patients. There's really no point in building some out that may take years to eek out a profit... or keep one open.

Anyways, I should read it again... just breezed through it.

I've said before, at some point, what's to stop any dialysis co from simply raising their costs considering the cost plus nature of this proposed legislation? They couldn't do it quickly, but they could come in high and raise costs slowly, deliberately.

They would need to collude with each other and the many smaller competitors to make this work. This  work ifnthetr is essentially only Fresenius and DaVita left. There is a point however to this argument, if you are the lowest cost provider, there is no point in lowering the cost even more, if the government truly runs this as a cost plus business.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Cigarbutt on February 22, 2018, 06:13:07 AM
Trying to run various long term scenarios in terms of potential cost containment pressures.
Demand for dialysis will rise ++ (demographics, higher incidence of risk factors, probable absence of a suitable substitute) but the exposure to Medicare or equivalent is likely to remain high.
https://spectator.org/healthcare-spending-to-reach-5-7-trillion-by-2026/
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ForecastSummary.pdf

Something has to give.
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on February 22, 2018, 01:59:15 PM
DaVita saves money for the system and closing locations could have a disastrous impact if too many patients are not on commercial plans. 

What happens if patients start going to hospitals for care?  Certainly, neither the carriers, government, or even hospitals would want this to happen, especially if the patient is in the initial window of ineligibility and otherwise does not have coverage. 

Commercial plans can and might get even more expensive to compensate, but current Medicare/aid reimbursement for ESRD patients is poor. 

It doesn't sound like the Trump administration wants to put more into healthcare?

At some point, something will give, but it's likely it hits the fan if Fresenius and DaVita start to close locations. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on February 26, 2018, 12:09:17 PM
http://www.healthcarefinancenews.com/news/cms-gives-bigger-increase-medicare-advantage-payment-rates-2018
Title: Re: DVA – DaVita HealthCare Partners
Post by: rolling on April 19, 2018, 05:59:27 AM
First bought davita yesterday at 64...
It is the first buyback window after the announcement of the sale of HCP and it has pulled back a lot.  Low earnings multiple, lower tax rate, low net debt after the deal, cannibal, a big runaway for expansion (international), a growing client base and expectations of profit  after achieving scale in international markets.
It seems to me that the pricing headwinds might not be enought to counter all these pluses.
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on April 19, 2018, 10:40:34 AM
All DVA needs to do is keep reloading on the stock buybacks with funds from
UHC deal. We should do just fine.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on April 19, 2018, 11:42:12 AM
First bought davita yesterday at 64...
It is the first buyback window after the announcement of the sale of HCP and it has pulled back a lot.  Low earnings multiple, lower tax rate, low net debt after the deal, cannibal, a big runaway for expansion (international), a growing client base and expectations of profit  after achieving scale in international markets.
It seems to me that the pricing headwinds might not be enought to counter all these pluses.
When does the window start?
Title: Re: DVA – DaVita HealthCare Partners
Post by: rolling on April 19, 2018, 01:48:11 PM
First bought davita yesterday at 64...
It is the first buyback window after the announcement of the sale of HCP and it has pulled back a lot.  Low earnings multiple, lower tax rate, low net debt after the deal, cannibal, a big runaway for expansion (international), a growing client base and expectations of profit  after achieving scale in international markets.
It seems to me that the pricing headwinds might not be enought to counter all these pluses.
When does the window start?
Sorry, I meant buyback blackout window. Apparently, "regulations under which companies refrain from discretionary stock buybacks for about five weeks before reporting earnings through the 48 hours that follow".
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on April 19, 2018, 07:13:04 PM
First bought davita yesterday at 64...
It is the first buyback window after the announcement of the sale of HCP and it has pulled back a lot.  Low earnings multiple, lower tax rate, low net debt after the deal, cannibal, a big runaway for expansion (international), a growing client base and expectations of profit  after achieving scale in international markets.
It seems to me that the pricing headwinds might not be enought to counter all these pluses.
When does the window start?
Sorry, I meant buyback blackout window. Apparently, "regulations under which companies refrain from discretionary stock buybacks for about five weeks before reporting earnings through the 48 hours that follow".

So won't it better to buy while the company is not buying, which will be during the blackout window, or even after the window ends?
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on May 03, 2018, 05:08:42 PM
https://finance.yahoo.com/news/davita-inc-1st-quarter-2018-200100882.html

"New debt capacity: On March 29, 2018, we entered into an agreement to increase our borrowing capacity under our existing Senior Secured Credit Agreement. Pursuant to this agreement, the Company entered into an additional $995 million Term Loan A-2 which bears interest at LIBOR plus 1.00%. As of March 31, 2018 the Company had drawn an initial $452 million on Term Loan A-2. The Company has drawn and intends to continue to draw on this new debt capacity as needed for any share repurchases made prior to the closing of the sale of DMG.

Share repurchases: During the quarter ended March 31, 2018, we repurchased a total of 4,197,304 shares of our common stock for approximately $298 million at an average price of $71.09 per share. We have also repurchased 4,350,135 shares of our common stock for $276 million at an average price of $63.44 per share from April 1, 2018 through May 2, 2018. As of May 2, 2018, we have a total of approximately $545 million in outstanding Board repurchase authorizations remaining under our stock repurchase program. These share repurchase authorizations have no expiration dates."


Seems to me they are borrowing $900 millions to buy stocks. In one month 4/1 to 5/1, they bought back $276 million.  They must be confident the DMG deal with close.
I like that!
Title: Re: DVA – DaVita HealthCare Partners
Post by: tripleoptician on May 03, 2018, 05:11:41 PM
"Share repurchases: During the quarter ended March 31, 2018, we repurchased a total of 4,197,304 shares of our common stock for approximately $298 million at an average price of $71.09 per share. We have also repurchased 4,350,135 shares of our common stock for $276 million at an average price of $63.44 per share from April 1, 2018 through May 2, 2018. As of May 2, 2018, we have a total of approximately $545 million in outstanding Board repurchase authorizations remaining under our stock repurchase program. These share repurchase authorizations have no expiration dates."

Thats a pretty solid buyback in 4 months. Did I read correctly that this buyback is before cash from the DMG sale?

Looks like they may run out of room on available $545 million room left for the year.

I think we do fine here with this level of cannibalization

Edit: sleepydragon u beat me to it!
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on May 04, 2018, 07:40:27 AM
Share buy backs:
According to the Q they repurchased 4.2m shares for $71.09 on average in ALL of Q1 and 4.3m in the 1 month this Q at avg $63.44
Now if you look at a chart for Q1 it seems that there were only about 14 days in total right at the end of the Q where it got to $71 and lower, so this might indicate that they have a firm price up to which they're willing to buy back, which is likely around $70
Title: Re: DVA – DaVita HealthCare Partners
Post by: mwtorock on May 04, 2018, 08:39:34 AM
these are good moves to me. they are opportunistic about buying back, eg. they did not wait for the cash from the deal, they did not buy back at higher prices in Q1, they bought when the prices are far below intrinsic value like 70 or 64...
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on May 04, 2018, 09:06:08 AM
SEIU letter and AKF rebuttal letter mentioned in the call

https://www.ahip.org/wp-content/uploads/2018/04/ESRD-Steering-Letter_4.16_FINAL_Embargoed.pdf
http://www.kidneyfund.org/assets/pdf/advocacy/akf-letter-to-secretary-azar.pdf
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on May 04, 2018, 11:10:46 AM
SEIU letter and AKF rebuttal letter mentioned in the call

https://www.ahip.org/wp-content/uploads/2018/04/ESRD-Steering-Letter_4.16_FINAL_Embargoed.pdf
http://www.kidneyfund.org/assets/pdf/advocacy/akf-letter-to-secretary-azar.pdf

I may be biased but I like the rebuttal, and so does Mister Market.
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on May 07, 2018, 11:19:01 AM
On the call, Thirty also commented that the sale is still on track...
Title: Re: DVA – DaVita HealthCare Partners
Post by: rolling on May 07, 2018, 02:35:47 PM
Well, it seems I made a mistake here. An happy mistake  ;D  from April 1 to May 2 the company spent 284M in share repurchases (I thought they couldn't), which adds to the 290M spent in the full 1st quarter, to a total of 574M for almost 5% of shares outstanding.
Adjusted Net debt 31/03: 9.389M
Net debt 31/12: 8.828M
change: 277M+284M
DMG sale: 4.900M
interest expense: 114M

This means that most cash generated by operations is currently being used in capex (growth and maintenance) and that share repurchases come from DMG sale. In other words, if capex is funded by operations, all DMG cash can be used to lower debt and share repurchases.

Market cap: 174.1*66=11492M
So, at current prices almost 17.5% of the company can still be bought back even while the company reduces 2.9B to current debt and keeps capex at current pace. Such a debt reduction would also bring some interest savings.
Then we would have:
EBIT: 1.55 (1.5-1.6)
Interest expense: 360M
taxes: 308M
Net income: 882M
Market cap: 9481M (82,5% of current market cap)
Net debt: 6489M
P/E 10.75

This is basically what is implied at current prices. A decent multiple for a steadily growing company (4.8% volume growth versus 1st quarter 2017).

Any mistake?

ps: I originally intended to do a quick 1 month trade with Davita. However I was bought out in another position I had opened a little later (2 weeks ago) and so I am now evaluating Davita as more of a long term position. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on May 07, 2018, 04:31:27 PM
Well, it seems I made a mistake here. An happy mistake  ;D  from April 1 to May 2 the company spent 284M in share repurchases (I thought they couldn't), which adds to the 290M spent in the full 1st quarter, to a total of 574M for almost 5% of shares outstanding.
Adjusted Net debt 31/03: 9.389M
Net debt 31/12: 8.828M
change: 277M+284M
DMG sale: 4.900M
interest expense: 114M

This means that most cash generated by operations is currently being used in capex (growth and maintenance) and that share repurchases come from DMG sale. In other words, if capex is funded by operations, all DMG cash can be used to lower debt and share repurchases.

Market cap: 174.1*66=11492M
So, at current prices almost 17.5% of the company can still be bought back even while the company reduces 2.9B to current debt and keeps capex at current pace. Such a debt reduction would also bring some interest savings.
Then we would have:
EBIT: 1.55 (1.5-1.6)
Interest expense: 360M
taxes: 308M
Net income: 882M
Market cap: 9481M (82,5% of current market cap)
Net debt: 6489M
P/E 10.75

This is basically what is implied at current prices. A decent multiple for a steadily growing company (4.8% volume growth versus 1st quarter 2017).

Any mistake?

ps: I originally intended to do a quick 1 month trade with Davita. However I was bought out in another position I had opened a little later (2 weeks ago) and so I am now evaluating Davita as more of a long term position.

Despite the noise, DaVita brings a lot of value to the US healthcare system and to patients. 

The services provided are absolutely necessary and life-extending despite the difficulties living with ESRD presents. 

Unless we can start printing and implanting kidneys inexpensively, there does not seem to be a better or even cheaper alternative anywhere on the horizon.
Title: Re: DVA – DaVita HealthCare Partners
Post by: gfp on May 12, 2018, 05:38:07 AM
Seems from this filing that Berkshire is up to 22.1% of Davita.  I haven't checked if the share count is the same and this is solely the result of DVA share repurchase activity.  Reuters reports that BRK last reported a 20.2% stake in DVA on  8/11/2017.

https://www.sec.gov/Archives/edgar/data/927066/000119312518161063/d585955dsc13da.htm

***  well now I did check and the 2% increase in ownership percentage is solely resulting from DVA's share repurchases ***
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on May 12, 2018, 06:10:58 AM
Seems from this filing that Berkshire is up to 22.1% of Davita.  I haven't checked if the share count is the same and this is solely the result of DVA share repurchase activity.  Reuters reports that BRK last reported a 20.2% stake in DVA on  8/11/2017.

https://www.sec.gov/Archives/edgar/data/927066/000119312518161063/d585955dsc13da.htm

***  well now I did check and the 2% increase in ownership percentage is solely resulting from DVA's share repurchases ***

I think Berkshire signed an agreement with DVA of not buying more stocks
Title: Re: DVA – DaVita HealthCare Partners
Post by: gfp on May 12, 2018, 06:32:02 AM
They have an agreement in place to not go over 25%.  This looks like it will be ultimately breached through share repurchase activity, but I'm sure they will work something out.  They don't seem too concerned with Berkshire as a large shareholder.  Most of the side letter agreements are really to protect Ted and Berkshire from a Sokol-like trading situation.  Basically, Ted can't buy or sell personal shares (he owns 1.4% of the company personally), without Warren's prior consent.
Title: Re: DVA – DaVita HealthCare Partners
Post by: NBL0303 on May 12, 2018, 07:21:10 AM
They have an agreement in place to not go over 25%.  This looks like it will be ultimately breached through share repurchase activity, but I'm sure they will work something out.  They don't seem too concerned with Berkshire as a large shareholder.  Most of the side letter agreements are really to protect Ted and Berkshire from a Sokol-like trading situation.  Basically, Ted can't buy or sell personal shares (he owns 1.4% of the company personally), without Warren's prior consent.

The Standstill Agreement, I believe, prevents them from purchasing shares to cross that threshold, I do not believe it prevents them from holding shares over that threshold, when the threshold was crossed via repurchases. 

I agree with you that is the purpose for many side letter type arrangements but I don't think that is the case with this one - there were some pretty unique things going on with Davita at that time and Berkshire was trying to accommodate them with this.
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on May 12, 2018, 11:21:52 AM
still - I think this would be a great company inside the Berkshire family...
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on May 12, 2018, 11:53:23 AM
still - I think this would be a great company inside the Berkshire family...

I don’t think Thierry is ready to tap dance to Warren’s tune.
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on June 15, 2018, 07:16:07 AM
I am a huge fan of Thierry right now...he gets that the street wants him to focus on its core business...buyback stock, and stay out of the headlines.  Earnings yield on this is still so cheap.  We just need the Optum deal to finally close, and the stock would ripe $15 - $20 points in no time. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on July 07, 2018, 08:35:25 AM
"Two California families awarded $253 million in lawsuit against dialysis corporation",

https://www.fresnobee.com/news/local/article214205774.html

---

This seems excessive.
Do punitive damages often get reduced or eliminated?

---
edit
---

More background,

https://www.denverpost.com/2018/06/30/verdict-davita-testimony-wrongful-deaths/
Title: Re: DVA – DaVita HealthCare Partners
Post by: Cigarbutt on July 07, 2018, 03:19:38 PM
"Two California families awarded $253 million in lawsuit against dialysis corporation",

https://www.fresnobee.com/news/local/article214205774.html

This seems excessive.
Do punitive damages often get reduced or eliminated?

More background,

https://www.denverpost.com/2018/06/30/verdict-davita-testimony-wrongful-deaths/

The idea here is to try to discount the cost of doing business.
Punitive damage awards are hard to predict and can be substantial.

There are valid arguments in favor of punitive damages but a point can be made that amounts awarded sometimes seem excessive and have not been clearly shown to meet the underlying objectives. Especially true with the blockbuster punitive damages. Reform may be on the way. Something to consider is that, as I think that more dialysis and other comparable care will get covered by Medicare and "public" funds, capping damages "rules" may become more stringent. The large amounts are typically awarded by juries and one has to wonder if emotion plays over reason. What about the mindset of the typical jury starting his/her day reading the following article:
https://nypost.com/2018/06/29/hospital-charges-18000-to-treat-baby-with-a-bottle-and-a-nap/
I wonder if one's judgement is not clouded then when comparing the large corporatiion to the beloved guy who worked hard all his life and used to impersonate Santa Claus.

Concerning the merits of the cases, which may be irrelevant to this Board, the use of GranuFlo gives rises to potential questions. The defense side and expert witnesses used a shrewd strategy (and this is not pseudo-science or esoterics) and DaVita's "exposure" is significant as the ESRD population is at high risk of complications and mortality and dialysis is a high-risk procedure. The defense has to put together a reasonable thesis suggesting a link and reinforcing the potential bias described above. Don't get me wrong as I think that the business model has significant advantages and the results they report based on the CMS guidelines in terms of outcomes are relatively good but to reach financial target returns, DVA has to focus on costs and when drawing the line in some areas, this may be clearly be perceived as putting the safety of patients at risk. Historically, if you look at the regulatory legal profile (where most of the litigation risk lies IMO), DVA has been stretching the limits and the perception may be that the profit motive, at a certain point, may be detrimental to clinical results.

Having discussed the above, blockbuster awards at first instance courts are typically appealed. Then you get re-trials, punitive damages are reduced or eliminated on appeal or, very often, "settlements" are reached. Typically settlement amounts are not disclosed but, from inference, amounts are often immaterial or a small fraction of the initial amounts mentioned in initial press releases. Hope this helps if you try to discount these "operating" costs in your valuation.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on July 07, 2018, 04:24:54 PM
"Two California families awarded $253 million in lawsuit against dialysis corporation",

https://www.fresnobee.com/news/local/article214205774.html

This seems excessive.
Do punitive damages often get reduced or eliminated?

More background,

https://www.denverpost.com/2018/06/30/verdict-davita-testimony-wrongful-deaths/

The idea here is to try to discount the cost of doing business.
Punitive damage awards are hard to predict and can be substantial.

There are valid arguments in favor of punitive damages but a point can be made that amounts awarded sometimes seem excessive and have not been clearly shown to meet the underlying objectives. Especially true with the blockbuster punitive damages. Reform may be on the way. Something to consider is that, as I think that more dialysis and other comparable care will get covered by Medicare and "public" funds, capping damages "rules" may become more stringent. The large amounts are typically awarded by juries and one has to wonder if emotion plays over reason. What about the mindset of the typical jury starting his/her day reading the following article:
https://nypost.com/2018/06/29/hospital-charges-18000-to-treat-baby-with-a-bottle-and-a-nap/
I wonder if one's judgement is not clouded then when comparing the large corporatiion to the beloved guy who worked hard all his life and used to impersonate Santa Claus.

Concerning the merits of the cases, which may be irrelevant to this Board, the use of GranuFlo gives rises to potential questions. The defense side and expert witnesses used a shrewd strategy (and this is not pseudo-science or esoterics) and DaVita's "exposure" is significant as the ESRD population is at high risk of complications and mortality and dialysis is a high-risk procedure. The defense has to put together a reasonable thesis suggesting a link and reinforcing the potential bias described above. Don't get me wrong as I think that the business model has significant advantages and the results they report based on the CMS guidelines in terms of outcomes are relatively good but to reach financial target returns, DVA has to focus on costs and when drawing the line in some areas, this may be clearly be perceived as putting the safety of patients at risk. Historically, if you look at the regulatory legal profile (where most of the litigation risk lies IMO), DVA has been stretching the limits and the perception may be that the profit motive, at a certain point, may be detrimental to clinical results.

Having discussed the above, blockbuster awards at first instance courts are typically appealed. Then you get re-trials, punitive damages are reduced or eliminated on appeal or, very often, "settlements" are reached. Typically settlement amounts are not disclosed but, from inference, amounts are often immaterial or a small fraction of the initial amounts mentioned in initial press releases. Hope this helps if you try to discount these "operating" costs in your valuation.

Thanks
Title: Re: DVA – DaVita HealthCare Partners
Post by: frankhkii on July 09, 2018, 06:50:28 PM
Chief Medical Officer from Davita firing back.

https://www.denverpost.com/2018/07/09/385-5-million-verdict-shocking-davita-would-do-the-same-thing-again/
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on July 10, 2018, 02:01:01 AM
"Two California families awarded $253 million in lawsuit against dialysis corporation",

https://www.fresnobee.com/news/local/article214205774.html

This seems excessive.
Do punitive damages often get reduced or eliminated?

More background,

https://www.denverpost.com/2018/06/30/verdict-davita-testimony-wrongful-deaths/

The idea here is to try to discount the cost of doing business.
Punitive damage awards are hard to predict and can be substantial.

There are valid arguments in favor of punitive damages but a point can be made that amounts awarded sometimes seem excessive and have not been clearly shown to meet the underlying objectives. Especially true with the blockbuster punitive damages. Reform may be on the way. Something to consider is that, as I think that more dialysis and other comparable care will get covered by Medicare and "public" funds, capping damages "rules" may become more stringent. The large amounts are typically awarded by juries and one has to wonder if emotion plays over reason. What about the mindset of the typical jury starting his/her day reading the following article:
https://nypost.com/2018/06/29/hospital-charges-18000-to-treat-baby-with-a-bottle-and-a-nap/
I wonder if one's judgement is not clouded then when comparing the large corporatiion to the beloved guy who worked hard all his life and used to impersonate Santa Claus.

Concerning the merits of the cases, which may be irrelevant to this Board, the use of GranuFlo gives rises to potential questions. The defense side and expert witnesses used a shrewd strategy (and this is not pseudo-science or esoterics) and DaVita's "exposure" is significant as the ESRD population is at high risk of complications and mortality and dialysis is a high-risk procedure. The defense has to put together a reasonable thesis suggesting a link and reinforcing the potential bias described above. Don't get me wrong as I think that the business model has significant advantages and the results they report based on the CMS guidelines in terms of outcomes are relatively good but to reach financial target returns, DVA has to focus on costs and when drawing the line in some areas, this may be clearly be perceived as putting the safety of patients at risk. Historically, if you look at the regulatory legal profile (where most of the litigation risk lies IMO), DVA has been stretching the limits and the perception may be that the profit motive, at a certain point, may be detrimental to clinical results.

Having discussed the above, blockbuster awards at first instance courts are typically appealed. Then you get re-trials, punitive damages are reduced or eliminated on appeal or, very often, "settlements" are reached. Typically settlement amounts are not disclosed but, from inference, amounts are often immaterial or a small fraction of the initial amounts mentioned in initial press releases. Hope this helps if you try to discount these "operating" costs in your valuation.
Add to that the risk that Thiery is an aggressive operator that don't mind steering close to the line as shown by the Whistleblower Case and the substantial use of options.
Not the whole story, but worth bearing in mind.
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on August 01, 2018, 07:06:34 PM
Davita buys back another 8M shares in Q2 - what a cannibal.

And reloads with $1.5B for more buybacks.

Share repurchases: During the quarter ended June 30, 2018, we repurchased a total of 7,797,712 shares of our common stock for approximately $512 million at an average price of $65.60 per share. We have also repurchased 3,871,905 shares of our common stock for $273 million at an average price of $70.48 per share from July 1, 2018 through July 31, 2018. As of July 31, 2018, we have repurchased a total of 15,866,921 shares of our common stock for approximately $1,083 million at an average price of $68.24 during 2018.

On July 11, 2018, our Board of Directors approved an additional share repurchase authorization in the amount of approximately $1,390 million. This recently approved authorization was in addition to the approximately $110 million remaining at that time under our Board of Directors' prior share repurchase authorization approved in October 2017. As of July 31, 2018, we have a total of approximately $1,426 million in outstanding Board repurchase authorizations remaining under our stock repurchase program. These share repurchase authorizations have no expiration dates.

Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on August 03, 2018, 06:39:48 AM
What did they get from Walgreen for this?
More cash for buybacks?

http://www.orlandosentinel.com/business/consumer/os-bz-davita-layoffs-20180730-story.html
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on August 17, 2018, 09:52:07 AM
https://www.gurufocus.com/news/724620/francis-chou-buys-buffetts-davita-spirit-and-allegiant-in-2nd-quarter
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on August 19, 2018, 04:38:49 AM
Has there been any update on the deal with Optum yet??
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on August 21, 2018, 09:04:45 PM
Has there been any update on the deal with Optum yet??
still on track to close this year...
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on August 24, 2018, 04:19:34 AM
https://www.sec.gov/Archives/edgar/data/927066/000092706618000167/dva8-k8222018.htm


Amendment to Employment Agreement

DaVita Inc. (the “Company”) entered into an amendment (the “Amendment”) to the employment agreement with Kent J. Thiry, the Company’s Chairman and Chief Executive Officer and the Chief Executive Officer of DaVita Medical Group, effective as of August 20, 2018. The Amendment removes the additional payment that Mr. Thiry would be eligible to receive for excise taxes incurred under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), and replaces such provision with a provision that automatically reduces any payments or benefits related to a change in control of the Company to the extent necessary to avoid the imposition of excise taxes under Section 4999 of the Code, provided that such reduction would result in a better after-tax result for Mr. Thiry. The foregoing summary description of the Amendment does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Amendment, which is filed as Exhibit 10.1 hereto and incorporated by reference herein.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Happy on August 30, 2018, 04:38:44 AM
https://www.axios.com/california-passes-controversial-dialysis-bill-premium-assistance-6e3bd888-4696-4c5a-853b-efcb6f6692f9.html (https://www.axios.com/california-passes-controversial-dialysis-bill-premium-assistance-6e3bd888-4696-4c5a-853b-efcb6f6692f9.html)

The California Assembly late Wednesday passed dialysis legislation SB 1156 by a 44-19 tally after it originally didn't have the votes. California's Senate still has to vote it through again, but it's "pretty much pro forma at this point" and will head to Gov. Jerry Brown's desk, according to a lobbyist familiar with the bill.

The bottom line: This is a giant win for the SEIU, health insurers and employers and a huge blow to dialysis companies and the American Kidney Fund, but it's a coin flip on what Brown will do. The bill would cap payments at lower Medicare rates for providers that have financial ties to charities that subsidize patients' commercial insurance.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on August 30, 2018, 05:47:39 AM
https://www.axios.com/california-passes-controversial-dialysis-bill-premium-assistance-6e3bd888-4696-4c5a-853b-efcb6f6692f9.html (https://www.axios.com/california-passes-controversial-dialysis-bill-premium-assistance-6e3bd888-4696-4c5a-853b-efcb6f6692f9.html)

The California Assembly late Wednesday passed dialysis legislation SB 1156 by a 44-19 tally after it originally didn't have the votes. California's Senate still has to vote it through again, but it's "pretty much pro forma at this point" and will head to Gov. Jerry Brown's desk, according to a lobbyist familiar with the bill.

The bottom line: This is a giant win for the SEIU, health insurers and employers and a huge blow to dialysis companies and the American Kidney Fund, but it's a coin flip on what Brown will do. The bill would cap payments at lower Medicare rates for providers that have financial ties to charities that subsidize patients' commercial insurance.

Maybe the Fed should just nationalize dialysis treatment centers?
After all, they own these guys already...

(Tongue ==> Cheek)

 :o
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on August 30, 2018, 06:28:18 AM
No need to nationalize if you control the pricing. The current system where private insurance pays 3x what Medicare/ Medicaid pays makes no sense, but sane is true for many parts of the US health care system.
Title: Re: DVA – DaVita HealthCare Partners
Post by: dwy000 on August 30, 2018, 06:57:00 AM
This is not good for the California treasury.  If the rates are capped theres no reason for the assistance programs to exist and those patients will move into the government payroll (medicaid).  If the rates paid by Medicaid dont improve it could jeopardize clinics and send patients to emergency rooms - which will cost even more.

From a financial perspective you would think the government would be more inclined to set up their own insurance  assistance program to keep as many patients off Medicaid as possible.  Much cheaper for taxpayers (that was tongue in cheek as well) 
Title: Re: DVA – DaVita HealthCare Partners
Post by: mwtorock on August 30, 2018, 07:42:13 AM
This is not good for the California treasury.  If the rates are capped theres no reason for the assistance programs to exist and those patients will move into the government payroll (medicaid).  If the rates paid by Medicaid dont improve it could jeopardize clinics and send patients to emergency rooms - which will cost even more.

From a financial perspective you would think the government would be more inclined to set up their own insurance  assistance program to keep as many patients off Medicaid as possible.  Much cheaper for taxpayers (that was tongue in cheek as well)

however we probably should not trust government/politicians to make right choices, should we?   :P

All that said,  should it put that much a dent into the valuation of DVA long term?
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on August 30, 2018, 07:46:12 AM
This is not good for the California treasury.  If the rates are capped theres no reason for the assistance programs to exist and those patients will move into the government payroll (medicaid).  If the rates paid by Medicaid dont improve it could jeopardize clinics and send patients to emergency rooms - which will cost even more.

From a financial perspective you would think the government would be more inclined to set up their own insurance  assistance program to keep as many patients off Medicaid as possible.  Much cheaper for taxpayers (that was tongue in cheek as well)
I believe there must be senate approval followed by gubernatorial support for CA to enforce, but the stock appears to be moving as if this is a done deal

that said, that is one very possible outcome

another very possible outcome is that state assembly is the only approval the bill gets

for the time being, I think nothing is more likely than something...in the short-term, do politicians chose to alienate voters or donors?  considering the demographics of those impacted most, it might be a smarter move to kick the can down the road until the votes are collected?

closing clinics will be bad for patients, bad for the government, but good for the insurance companies

that said, if it doesn't go through, insurers will argue they should charge more
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on August 30, 2018, 03:10:23 PM
Is it true the standstill period with brk doesn't end unless DVA is m & a or ownership falls below 15%?
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on August 30, 2018, 08:54:43 PM
I guess we'll see if high dollar hospital stays start jumping up.

Meanwhile, I hope Davita buys an assload of shares back.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on August 31, 2018, 04:03:40 AM
I guess we'll see if high dollar hospital stays start jumping up.

This would take years to work out. DVA can’t really dump existing patients. They can close down centers that are now unprofitable, but that would also hurt their LT earnings power.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on August 31, 2018, 05:23:21 AM
I guess we'll see if high dollar hospital stays start jumping up.

This would take years to work out. DVA can’t really dump existing patients. They can close down centers that are now unprofitable, but that would also hurt their LT earnings power.

Wasn't suggesting that (Thiry doesn't strike me as the kind of guy who would hurt people just to prove a point.)

But legally & contractually, are they obligated to continue serving patients who are not covered?
Insurance companies don't have to pay after (is it 32 months?)
Why would Davita HAVE to provide service (except out of a sense of moral obligation?)

What would be the difference between Davita providing free service or Davita contributing to premium assistance programs?
(Besides the obvious shifting of a liability from payers to Davita.)

What I am suggesting is that we should see an increase (over time) of newly diagnosed CA ESRD patients, who can't afford insurance, ending up in the hospital.
Then the liability get's shifted from payers to HOSPITALS & THEY start complaining to legislators (ad nauseam.)

Something has to give.

If not, then either the service degrades and/or, as you said, dialysis clinics start shutting down (which would exacerbate the problem.)

= edit =

and yes, it will take years to work out (which I'm OK with.)

"You pay a very high price in the market for a cheery consensus" (https://www.forbes.com/2008/11/08/buffett-forbes-article-markets-cx_pm-1107stocks.html#40312251765d)
Title: Re: DVA – DaVita HealthCare Partners
Post by: Cigarbutt on August 31, 2018, 06:14:06 AM
For dialysis care, I would say that, over time, the right balance between costs, outcomes and profits should eventually trickle down to a reasonable compromise. Bumps expected along the way.

When analyzing the California legislation recent announcement, it's hard to embrace market efficiency. The motivations pushing for change is more ideological than practical and DaVita and oligopolistic brothers have shown to be very adept at this political game.


Spent some time lately on DVA and wonder about the long-term challenges that may decrease its potential for profits:
1-the definition of "reasonable" profit which will be more and more influenced by government and quasi-government agencies
2-the accountability game
3-the captured nephrologist
4-the expected growing presence of "substitutes"

1-IMO long term trends will continue to bring equity returns along the lines of utilities but the complex nature of the industry is likely to make the returns less steady. Have to decide if this is simply for the long run or for opportunistic forays through the regulatory cycle.

2-I have no problems with the tight cost structure that DVA has put in place (fewer registered nurses per business volume, occasional cockroach on the wall story) but reasonable "regulatory" questions will keep coming when comparing key results (mortality, hospitalizations) because DVA may have some explaining to do (or penalties to pay) when relative poor results may be tied to factors under their control (shorter dialysis duration, less use of cardio-protective medications, infections (significant problem in this patient population) diagnosis, prevention and effective treatment).

3-The capture in place is associated with incentives that are poorly aligned (versus patient care) and IMO this issue will become more acute from within (profession) and from the regulators and policy makers. Main problems: a) patients are directed to dialysis too early b) with bundling, expected cost containment trends and accountability issues, "costly" patients who need dialysis treatments may be pushed out of the large dialysis organizations and c) certain patients for whom dialysis is not the best option may be kept on dialysis.

4-Combined with actions taken to deal with the issues in 3-, there are areas that can be improved as substitutes to dialysis: better primary and secondary prevention care. Also (opinion: end-of-life care will change a lot and, by definition, dialysis is often a component of the end coming soon), "improved" end-of-life care may result in a significantly decreased demand for dialysis services.


All in all, DVA has achieved a scale and market share based on an aggressive cost structure that makes sense in providing an essential "public" service and IMO the recent California legislation is more noise than anything but, from a cheery consensus long term point of view, return expectations perhaps should be moderated.

https://www.ajkd.org/article/S0272-6386(16)00113-X/pdf
http://www.medpac.gov/docs/default-source/reports/mar18_medpac_ch6_sec.pdf?sfvrsn=0
https://www.ajkd.org/article/S0272-6386(17)30732-1/pdf
https://www.ajkd.org/article/S0272-6386(18)30479-7/pdf
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on August 31, 2018, 06:44:57 AM
I agree wholeheartedly with Cigarbutt here.

DooDilugence- DVA couldn’t dump the patients because they still would get paid the prevailing Medicaid rates. DVA accepts these rates( which barely cover costs) right now for the majority of patients, so they can’t refuse service on existing patients either, imo.
If DVA would refuse service to existing patients, and patients die because of this, the ensuring lawsuits would probably do the company in.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on August 31, 2018, 07:06:58 AM
I agree wholeheartedly with Cigarbutt here.

DooDilugence- DVA couldn’t dump the patients because they still would get paid the prevailing Medicaid rates. DVA accepts these rates( which barely cover costs) right now for the majority of patients, so they can’t refuse service on existing patients either, imo.
If DVA would refuse service to existing patients, and patients die because of this, the ensuring lawsuits would probably do the company in.

Davita's acceptance of Medicare's prevailing rates is a fine point which I didn't pay attention to until you pointed it out.

I also agree with Cigarbutt's insightful thoughts.

I believe the business will survive for a long time (while constantly being beaten & battered by those with opposing interests.)
A tight focus on operational excellence might minimize the ability of opponents to gain traction.
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on August 31, 2018, 07:59:31 AM
I agree wholeheartedly with Cigarbutt here.

DooDilugence- DVA couldn’t dump the patients because they still would get paid the prevailing Medicaid rates. DVA accepts these rates( which barely cover costs) right now for the majority of patients, so they can’t refuse service on existing patients either, imo.
If DVA would refuse service to existing patients, and patients die because of this, the ensuring lawsuits would probably do the company in.

Davita's acceptance of Medicare's prevailing rates is a fine point which I didn't pay attention to until you pointed it out.

I also agree with Cigarbutt's insightful thoughts.

I believe the business will survive for a long time (while constantly being beaten & battered by those with opposing interests.)
A tight focus on operational excellence might minimize the ability of opponents to gain traction.
DaVita has reduced costs to the national healthcare; DaVita clinics are better than hospitals and smaller operations; and as long as people continue to eat and drink more than they need, dialysis will continue to grow with continued global population growth and/or GDP.

The largest risk to the business might be when kidneys can be printed?  I don't see other forms of dialysis sticking as in other countries?
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on August 31, 2018, 08:54:26 AM
I agree wholeheartedly with Cigarbutt here.

DooDilugence- DVA couldn’t dump the patients because they still would get paid the prevailing Medicaid rates. DVA accepts these rates( which barely cover costs) right now for the majority of patients, so they can’t refuse service on existing patients either, imo.
If DVA would refuse service to existing patients, and patients die because of this, the ensuring lawsuits would probably do the company in.

Davita's acceptance of Medicare's prevailing rates is a fine point which I didn't pay attention to until you pointed it out.

I also agree with Cigarbutt's insightful thoughts.

I believe the business will survive for a long time (while constantly being beaten & battered by those with opposing interests.)
A tight focus on operational excellence might minimize the ability of opponents to gain traction.
DaVita has reduced costs to the national healthcare; DaVita clinics are better than hospitals and smaller operations; and as long as people continue to eat and drink more than they need, dialysis will continue to grow with continued global population growth and/or GDP.

This is the same reason I'm confident in NVO too.
Many people simply will not modify their behavior to avoid health problems.

Quote
The largest risk to the business might be when kidneys can be printed?  I don't see other forms of dialysis sticking as in other countries?

Agreed.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Cigarbutt on September 01, 2018, 05:45:57 AM
DaVita has reduced costs to the national healthcare; DaVita clinics are better than hospitals and smaller operations; and as long as people continue to eat and drink more than they need, dialysis will continue to grow with continued global population growth and/or GDP.

The largest risk to the business might be when kidneys can be printed?  I don't see other forms of dialysis sticking as in other countries?

In essence, I agree with your long-term assessment.

Reaching the long term trajectory however may be more rocky because of regulatory risk and social perception as DVA and other large dialysis providers can be depicted like the Frosted Mini-Wheats cereals ie they seem to have a dual personality. They are efficient providers and excellent at capital allocation but are often described as "predatory" entities racking up "obscene profits" through "greed". Standard Oil had such a dual personality and, with muckrackers such as Ida Tarbell and associated underlying political and social movements, the company eventually lost the public opinion battle, the Supreme Court (1911) called it "unreasonable" and was eventually broken up.

Even if you (and I) are convinced that DVA is bringing a huge net positive to society, in certain scenarios, the regulatory monster may look into the growing dialysis industrial complex and impose a way to "share" the efficiencies between the profit line and the end-consumers (patients). In the end, an argument could be made that Rockefeller was made richer by the anti-trust laws and the forced break-ups and DVA can certainly adapt but helpful to consider that regulatory challenges will continue to be on the horizon.
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on September 01, 2018, 07:46:40 AM
I think if DVA reduce their debt, though their roe will be reduced, the stock will become much less volatile.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Cigarbutt on September 03, 2018, 09:18:24 AM
I think if DVA reduce their debt, though their roe will be reduced, the stock will become much less volatile.
1+
Also, it may be reasonable to expect that DVA will come to work in an environment where they will be bounded by an "authorized" capital structure.

Going forward, using leverage to maximize returns may become more difficult because of the ease of regulatory measurement.

IMO, the main competitive moat in the more stringent environment (I think this has been well explained by Mr.B using different words, earlier in this thread), will continue to be the capacity to be ahead of regulators by explaining the overall net gains brought to the system by running a large and efficient operation. What could be considered gaming of the system when returns are shared in order to make a "reasonable" profit can be reconciled using an intelligent dialogue with the agencies showing that gains from efficiencies are reasonably passed on to the immediate customers (dialysis patients) and customers at large (population) while maintaining satisfactory outcomes. There is room for relatively "aggressive" strategies on the operating side because, if costs happen to be lower than planned when negotiating reasonable returns, DVA can focus on efficiency gains for justification and not be looked upon as a firm cutting costs to the point of causing a negative impact on clinical outcomes.

This is a tough game to play but Kent Thiry and his team have been unusually good at this in the last few years overall and it is reasonable to expect more of the same going forward although regulatory volatility is to be expected.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on September 03, 2018, 02:47:23 PM
I think if DVA reduce their debt, though their roe will be reduced, the stock will become much less volatile.
1+
Also, it may be reasonable to expect that DVA will come to work in an environment where they will be bounded by an "authorized" capital structure.

Going forward, using leverage to maximize returns may become more difficult because of the ease of regulatory measurement.

IMO, the main competitive moat in the more stringent environment (I think this has been well explained by Mr.B using different words, earlier in this thread), will continue to be the capacity to be ahead of regulators by explaining the overall net gains brought to the system by running a large and efficient operation. What could be considered gaming of the system when returns are shared in order to make a "reasonable" profit can be reconciled using an intelligent dialogue with the agencies showing that gains from efficiencies are reasonably passed on to the immediate customers (dialysis patients) and customers at large (population) while maintaining satisfactory outcomes. There is room for relatively "aggressive" strategies on the operating side because, if costs happen to be lower than planned when negotiating reasonable returns, DVA can focus on efficiency gains for justification and not be looked upon as a firm cutting costs to the point of causing a negative impact on clinical outcomes.

This is a tough game to play but Kent Thiry and his team have been unusually good at this in the last few years overall and it is reasonable to expect more of the same going forward although regulatory volatility is to be expected.

Thiry does seem pretty adept at politics.

https://www.denverpost.com/2018/06/22/unaffiliated-voters-impact-colorado-election-2018/
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on September 13, 2018, 08:21:43 AM
rumors that the bill gets a veto?
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on September 13, 2018, 09:34:24 PM
rumors that the bill gets a veto?

For now it's just a rumor started by this guy (fingers crossed X)

"Analyst Gary Taylor raised his rating on the shares to Neutral from Underweight, maintaining a $68 price target. He writes that it’s now more likely that California’s governor will veto a recently passed bill, which would curtail the financial arbitrage dialysis providers get from charitable premium assistance. Shares of DaVita are down nearly 10% since the bill was passed, and Taylor sees better prospects for it the stock to recover near term. In the longer run, however, he warns that the concerns about charitable premium assistance may persist, as it’s a “cat and mouse” game between insurers and dialysis providers."

https://www.barrons.com/articles/after-the-bell-dow-jumps-150-points-on-whispers-of-trade-resolution-1536873464
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on October 01, 2018, 04:36:33 AM
Vetoed
https://www.axios.com/dialysis-industry-win-california-bill-veto-335eccdc-82cf-4575-921c-38cf1302a7e7.html
Title: Re: DVA – DaVita HealthCare Partners
Post by: mwtorock on October 01, 2018, 06:32:33 AM
Vetoed
https://www.axios.com/dialysis-industry-win-california-bill-veto-335eccdc-82cf-4575-921c-38cf1302a7e7.html

A good win for the company.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Cigarbutt on October 01, 2018, 07:22:11 AM
Vetoed
https://www.axios.com/dialysis-industry-win-california-bill-veto-335eccdc-82cf-4575-921c-38cf1302a7e7.html

A good win for the company.

1+
But, longer term, "fighting" the regulatory beast will continue to be a Herculean task as every time a head is chopped off, two heads will grow, just like the Lernaean Hydra. It can be done but requires a sword and fire, perhaps a nice challenge for Mr. Thiry.
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on October 01, 2018, 07:23:07 AM
Vetoed
https://www.axios.com/dialysis-industry-win-california-bill-veto-335eccdc-82cf-4575-921c-38cf1302a7e7.html

Fantastic!
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on October 01, 2018, 10:13:55 AM
Vetoed
https://www.axios.com/dialysis-industry-win-california-bill-veto-335eccdc-82cf-4575-921c-38cf1302a7e7.html

Fantastic!
It's hard to gather support when you kill your voters and their families
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on October 15, 2018, 08:09:36 AM
Our California ballot comes up Nov 6th:

https://lao.ca.gov/BallotAnalysis/Proposition?number=8&year=2018

Let's hope CA voters are rational and defeat it.

Pretty clear, that dialysis is growing problem in CA, and the state will need private providers to expand into poor
and rural areas to cope with this problem, unless the state wants to open and run more clinics themselves.
This dialysis issue is likely the most serious health crisis CA has, exacerbated by the influx of immigrants, who
are tying up the emergency rooms in poor/rural areas.  Somebody has to take care of these people.

If passed, I don't see why private providers would bother to expand their operations in CA, when their are
other states that would welcome new clinics with open arms.

We will see if the voters get it.

https://www.sfchronicle.com/business/article/California-s-Proposition-8-seeks-to-cap-revenue-13299978.php
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on October 20, 2018, 08:14:46 AM
How do I find out if CALPERS is still long Davita?

Not that it matters, just curious.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Cigarbutt on October 20, 2018, 09:39:54 AM
How do I find out if CALPERS is still long Davita?
Not that it matters, just curious.
Hi DooDiligence,

What you may want to do is to access the Edgar filing site, plug in "california public employees", go to their filings, get to the 13-Fs and open the information table.
https://www.sec.gov/edgar/searchedgar/companysearch.html

A few months ago, looked at the funding aspect of pension funds (private and public) and looked at CalPERS.
https://www.calpers.ca.gov/page/about/organization/facts-at-a-glance/solid-foundation-for-the-future
Won't tell you about conclusions reached concerning their solid foundation as saturation point has been reached in terms of sentiment input.

Not sure if having CalPers as a partner is relevant but, if political ramifications are considered, some have suggested that CalPERS' buying activity may be a relative contrarian indicator.
http://accfcorpgov.org/wp-content/uploads/2017/12/CalPERS-Report-Final.pdf

How's the weather in Florida these days? Here, the colors are absolutely beautiful.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on October 20, 2018, 07:00:05 PM
How do I find out if CALPERS is still long Davita?
Not that it matters, just curious.
Hi DooDiligence,

What you may want to do is to access the Edgar filing site, plug in "california public employees", go to their filings, get to the 13-Fs and open the information table.
https://www.sec.gov/edgar/searchedgar/companysearch.html

A few months ago, looked at the funding aspect of pension funds (private and public) and looked at CalPERS.
https://www.calpers.ca.gov/page/about/organization/facts-at-a-glance/solid-foundation-for-the-future
Won't tell you about conclusions reached concerning their solid foundation as saturation point has been reached in terms of sentiment input.

Not sure if having CalPers as a partner is relevant but, if political ramifications are considered, some have suggested that CalPERS' buying activity may be a relative contrarian indicator.
http://accfcorpgov.org/wp-content/uploads/2017/12/CalPERS-Report-Final.pdf

How's the weather in Florida these days? Here, the colors are absolutely beautiful.

I'm sure glad that I don't rely on CalPers for income.

Seems like they're shooting themselves in the foot here & should be shorting Davita instead.

---

Color changes are lovely!
We have green & then brown & then green again (which isn't particularly exciting.)

However, rain or shine, the weather here is usually beautiful.
We have hot & we have cold, & then hot again (with a nice bout of cool between each change.)

All we're missing is mountains, but that makes bike riding easier.
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on October 22, 2018, 10:26:27 AM
How do I find out if CALPERS is still long Davita?
Not that it matters, just curious.
Hi DooDiligence,

What you may want to do is to access the Edgar filing site, plug in "california public employees", go to their filings, get to the 13-Fs and open the information table.
https://www.sec.gov/edgar/searchedgar/companysearch.html

A few months ago, looked at the funding aspect of pension funds (private and public) and looked at CalPERS.
https://www.calpers.ca.gov/page/about/organization/facts-at-a-glance/solid-foundation-for-the-future
Won't tell you about conclusions reached concerning their solid foundation as saturation point has been reached in terms of sentiment input.

Not sure if having CalPers as a partner is relevant but, if political ramifications are considered, some have suggested that CalPERS' buying activity may be a relative contrarian indicator.
http://accfcorpgov.org/wp-content/uploads/2017/12/CalPERS-Report-Final.pdf

How's the weather in Florida these days? Here, the colors are absolutely beautiful.

I'm sure glad that I don't rely on CalPers for income.

Seems like they're shooting themselves in the foot here & should be shorting Davita instead.

---

Color changes are lovely!
We have green & then brown & then green again (which isn't particularly exciting.)

However, rain or shine, the weather here is usually beautiful.
We have hot & we have cold, & then hot again (with a nice bout of cool between each change.)

All we're missing is mountains, but that makes bike riding easier.
Calpers is making a big mistake here by supporting prop 8.

That said, avg return per clinic is something like 17% and the bill limits to 15%, but from what I can see, there are many, many ways around not paying a dime to insurers...this bill likely has more to do with the creation of a new union than the insurers fighting back?
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on October 22, 2018, 11:44:39 AM
Fortunately there is quite a lot of opposition from groups that count:

https://noprop8.com


This is all about a union land grab. Hopefully voters see through it.
Title: Re: DVA – DaVita HealthCare Partners
Post by: gfp on November 07, 2018, 05:48:06 AM
Davita won on Proposition 8 in California -
https://www.cnbc.com/2018/11/07/buffett-owned-davita-jumps-after-voters-reject-cap-on-dialysis-revenue.html
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on November 13, 2018, 12:20:17 PM
Why the big drop today? Anything material?

I can't find any new or significant bad news.
Title: Re: DVA – DaVita HealthCare Partners
Post by: ander on November 13, 2018, 12:51:20 PM
I've been looking as well - was going to ask the same question. The only thing that I came across was JPM research report cutting numbers (for the most part shifting deal closing to Q1 '19 and shifting more share buybacks until later), but that's not significant in my opinion (PT and rating were unchanged). FMC was mostly flat and ARA was down about 5% so don't think it's an industry issue.
Title: Re: DVA – DaVita HealthCare Partners
Post by: vince on November 13, 2018, 01:10:12 PM
I've been looking as well - was going to ask the same question. The only thing that I came across was JPM research report cutting numbers (for the most part shifting deal closing to Q1 '19 and shifting more share buybacks until later), but that's not significant in my opinion (PT and rating were unchanged). FMC was mostly flat and ARA was down about 5% so don't think it's an industry issue.

Haven't owned this or studied up for a while.  I noticed the cheap price today and when digging I see one variable that turned me off last time....the huge increase in capex.  And it seems based on the call it's not temporary but looks like semi-permanent level.  Anyone know why and maybe some analysis around it.  Imo, this is no longer a conservative investment if that's the case, more debt, more regulatory problems, more insurance pressure, and way lower fcf.  Awesome business fundamentals but too many expensive unknowns and without the excellent fcf, safety is diminished.
Title: Re: DVA – DaVita HealthCare Partners
Post by: ander on November 14, 2018, 05:41:59 AM
Are you stripping out maintenance capex versus growth capex? It’s double-digit FCF yield to equity when you do adjust for that. I’ve looked at maintenance capex and growth capex per center. I believe on an earnings call earlier this year they also gave us data to confirm that math as well. (Sorry, am on the road and don’t have my model in front of me for exact numbers).
Title: Re: DVA – DaVita HealthCare Partners
Post by: ander on November 14, 2018, 05:51:51 AM
Actually found an exchange on the Q2 ‘18 conference call. I recall there being another one where they gave us unit development costs.

John W. Ransom - Raymond James & Associates, Inc.

Hi. I'm next to a very chatty and loud Southwest gate agent, so sorry for the background noise if there is any, two quick questions for me. As you think about CapEx after this year, have you done any more analysis of the relationship of CapEx and growth? Is there a way you could bracket expectations for next year, or is it too early to do that?

Joel Ackerman - DaVita, Inc.

So for next year, we are comfortable saying that we will head back down to a number that's more closely aligned with our 2017 number, and that our view is that 2018 had a couple of things worth roughly $100 million that were unusual, and those will go away, so, something in the low $800 million.

John W. Ransom - Raymond James & Associates, Inc.

Okay, so that's roughly – that's almost 2x your depreciation. Is that just the permanent plateau, no matter what?

Joel Ackerman - DaVita, Inc.

Hold on one second.

John W. Ransom - Raymond James & Associates, Inc.

Okay.

Kent J. Thiry - DaVita, Inc.

Why don't you give us a few minutes to reflect on the question and see we can come back in a satisfactory way?

John W. Ransom - Raymond James & Associates, Inc.

It just seems like a big number, but...

Joel Ackerman - DaVita, Inc.

Let me take it.

John W. Ransom - Raymond James & Associates, Inc.

Sure.

Joel Ackerman - DaVita, Inc.

The $800 million – I'm sorry, John. The $800 million is – I wouldn't call it a new plateau. It's definitely tied to our growth. Remember, most of that is not maintenance CapEx, it's development CapEx. We are thinking about ways to get the number down both through small initiatives around lower cost to build de novos, in lowering our IT spend and stuff like that, as well as some larger ideas that I mentioned briefly on the call last quarter. That said, I don't think we're prepared to guide to any trend on the number ahead of what we've said about 2019.

Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on November 14, 2018, 06:23:33 AM
Why the big drop today? Anything material?

I can't find any new or significant bad news.

Perhaps a NYT article on transplants??
Title: Re: DVA – DaVita HealthCare Partners
Post by: sleepydragon on November 14, 2018, 08:12:18 AM
I am glad I sold this a few weeks before the CA vote. Sold a bit earlier than I should.
I bought it because the market made a mistake on the business model and there was a lot of wrong information from guys like Chanos.
My biggest concerns now is the debt they have. The business is not high return on investment if you include the debt they have to use. And the interest rate is going higher and that will hurt them..
Title: Re: DVA – DaVita HealthCare Partners
Post by: vince on November 14, 2018, 08:47:34 AM
Are you stripping out maintenance capex versus growth capex? It’s double-digit FCF yield to equity when you do adjust for that. I’ve looked at maintenance capex and growth capex per center. I believe on an earnings call earlier this year they also gave us data to confirm that math as well. (Sorry, am on the road and don’t have my model in front of me for exact numbers).

Didn't adjust for that because I don't know what's going on.  I do remember maybe 250-300 million maintenance capex and they would go over with some growth capex of maybe 150 million.  But 800-900 is a big change and they are guiding for that to continue without a timeline for it to normalize.  So I ask again if anyone knows detail about this change, thx
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on November 14, 2018, 09:31:57 AM
Why the big drop today? Anything material?

I can't find any new or significant bad news.

Perhaps a NYT article on transplants??
Management mentioned in the last call they're out of the market i.t.o. buybacks until the deal clears which will give them almost $5Bn to reduce debt and restart buybacks. Probably out for at least this quarter then.
I think you can expect Chanos et al to make hay while the sun shines.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on November 14, 2018, 07:36:02 PM
Why the big drop today? Anything material?

I can't find any new or significant bad news.

Perhaps a NYT article on transplants??
Management mentioned in the last call they're out of the market i.t.o. buybacks until the deal clears which will give them almost $5Bn to reduce debt and restart buybacks. Probably out for at least this quarter then.
I think you can expect Chanos et al to make hay while the sun shines.

Thanks, I forgot about that guy.

I'm guessing that owning Davita will be gut wrenching from time to time.

We'll see what happens when the DMG/Optum thing closes.
Title: Re: DVA – DaVita HealthCare Partners
Post by: ander on November 16, 2018, 07:35:47 AM
I saw UBS initiated with a Sell rating. I don't have access to the note. Anyone know if any incremental fundamental insights in the note?
Title: Re: DVA – DaVita HealthCare Partners
Post by: ander on November 16, 2018, 07:42:53 AM
Actually got the note. Some excerpts.

DVA's stock has underperformed for 3-4 years while cloaked in a cloud of controversy.
Poor execution (DMG), California risks, payer/federal policy oversight, investigations and
now perceived interloper risks all color a complicated backdrop. DVA carries elevated
tail-risks into 2019 that potentially compromise earnings, sentiment, and the valuation.
We see exogenous factors limiting upside in the multiple (labor union and UNH/CVS
strategies) and heightened risk from payer mix and underwhelming organic growth not
priced into the outer-years threatening downward revisions to earnings. Sell.

Heightened attention on payer mix and pricing
US Renal Dialysis System (USRDS) data indicates pre-65 incidence rates (proxy for
commercial population) has declined for two years. 1Q18 rates decelerated 3% y/y
(steepest ever). If this trend continues, it raises the specter of long-term headwinds to
mix and margin compression.

Tail-risk remains elevated into 2019
The cons outweigh the pros (valuation). Probability of labor union (SEIU) success in
California grows in 2019 as Governor Newsom is pro-union (returned campaign
contributions to dialysis organizations). Our 2021e EPS contemplates a $140m OI cut
(minimum staffing bill). Perceived 'interloper' risks grow as CVS/UNH discuss emerging
dialysis strategies. Closing DMG is the only NT catalyst we see and well-known
buybacks are likely discounted. Industry in-fighting on the PATIENTS Act makes
underwriting long-term growth via integrated care difficult. Industry backdrop is tough.

Valuation: Our DCF-derived PT of $64 implies 11.9x 2020E EPS
Title: Re: DVA – DaVita HealthCare Partners
Post by: ander on November 27, 2018, 08:56:32 AM
Note the 8-k from yesterday after the close, but dated from last week (at least I only saw it on the wires yesterday). Increases debt covenants for deal closing. Maybe implies they’re buying back more shares recently and currently.

http://investors.davita.com/static-/785e52fe-a376-41c1-99ca-6056ad0fafb0
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on November 27, 2018, 02:16:56 PM
What I find interesting about dva is from a p equity perspective of steady state cash flow. There's a huge divergence between maintenance and growth capex here, perhaps 400m, likely even less M capex ex ROW, which you could sell. Importantly, you could actually not grow this company and soak up all that cash without hurting the business in the usa. Most companies don't have such a divergence and when they do it's not very clear exactly what's required for true maintenance considering all the extraneous factors/moat, etc. For a cherry on top, you can lever it to the sky. You can maintain the vast majority of those cash flows in recessions to add to whatever else your doing.
Title: Re: DVA – DaVita HealthCare Partners
Post by: vince on November 27, 2018, 05:42:43 PM
What I find interesting about dva is from a p equity perspective of steady state cash flow. There's a huge divergence between maintenance and growth capex here, perhaps 400m, likely even less M capex ex ROW, which you could sell. Importantly, you could actually not grow this company and soak up all that cash without hurting the business in the usa. Most companies don't have such a divergence and when they do it's not very clear exactly what's required for true maintenance considering all the extraneous factors/moat, etc. For a cherry on top, you can lever it to the sky. You can maintain the vast majority of those cash flows in recessions to add to whatever else your doing.

Flesh, mgmt is guiding to increased levels of capex for the foreseeable future which makes those expenditures maintenance almost by definition. And I dont see a step up in growth rates.  Unless you are privy to information that I havent come across then I wouldnt be so confident that you can categorize the increased levels as growth.  Maybe you can explain how you have determined 400 million of capex as growth?   
Title: Re: DVA – DaVita HealthCare Partners
Post by: kab60 on November 28, 2018, 02:02:13 AM
That's actually a big part of why I've stayed on the sidelines; the capex is high and there's not much growth to show for it. (and then there's the regulatory risks that I can't handicap but I pretty much stop after looking at the cash flows). What's your take on FCF atm flesh and expected growth in those if you don't mind?
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on November 28, 2018, 09:36:11 AM
That's actually a big part of why I've stayed on the sidelines; the capex is high and there's not much growth to show for it. (and then there's the regulatory risks that I can't handicap but I pretty much stop after looking at the cash flows). What's your take on FCF atm flesh and expected growth in those if you don't mind?

Hey buddy, nothing much different to say than whats been said.

Using current capex and operating cash flow of 1.5-1.6b minus 5b in cash ex dmg plus the higher leverage ratio of recent note going towards buybacks you get somewhat cheap. I assume it will grow earnings a few % a year before bb's. I'm assuming around 2-3 b will go towards debt immediately, per the recent note and extra 1b taken out earlier this year for bb's. The reduced shares and debt interest will raise earnings a fair amount ceteris paribus. DMG is adding virtually no gaap eps. It's mostly been negative in any given cy since the time of purchase. Some of the eps gain has been masked by the extra debt, that's about to change, more bb's and less debt together at a lower ev.

Where I probably diverge from some is that I do believe the intrinsic value can largely be attributed to steady state fcf with this name per last post. To get a sense for what capex needs to be you can look at dva pre dmg or healthcare partners, for perhaps a few years or more as a % of sales, ebitda, etc. Fine tune it by considering how large intl was then vs now. Has anything really changed in terms of what capex dva usa should require since then? Should it be more than double or perhaps 25% more?

Moreover, I'm trading risks here. DVA's risks are known and quantified largely, what about the market/economy? We are at the top of a cycle, what's my downside? Pick your multiple and apply 2-3 b plus fcf to buybacks over the next 2-3 years regardless of what happens in the economy. If dva's price does correlate with the market's in a downturn, that's fine. IIRC, dva was down 23% in the great recession vs 54%ish. In the mean time, I can trim and add as needed. This has been a 10-30% position for me for 1.5 years. Right now it's 25%.

Buffett will likely own the 25% limit by q1 19' due to bb's. Capex hides intrinsic value plus all the noise this name generates = needs to be private now before the smoke clears or the price will be much higher. CMS rate starting to go up at close to inflation for first time in a long while in cy 19.

Title: Re: DVA – DaVita HealthCare Partners
Post by: mwtorock on November 28, 2018, 10:01:49 AM

Moreover, I'm trading risks here. DVA's risks are known and quantified largely, what about the market/economy? We are at the top of a cycle, what's my downside? Pick your multiple and apply 2-3 b plus fcf to buybacks over the next 2-3 years regardless of what happens in the economy. If dva's price does correlate with the market's in a downturn, that's fine. IIRC, dva was down 23% in the great recession vs 54%ish. In the mean time, I can trim and add as needed. This has been a 10-30% position for me for 1.5 years. Right now it's 25%.

Buffett will likely own the 25% limit by q1 19' due to bb's. Capex hides intrinsic value plus all the noise this name generates = needs to be private now before the smoke clears or the price will be much higher. CMS rate starting to go up at close to inflation for first time in a long while in cy 19.
[/quote]

Pretty much nailed it.
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on November 28, 2018, 12:26:35 PM
https://www.reuters.com/article/health-davita/davita-settles-with-dialysis-patients-families-over-deaths-for-25-5-mln-idUSL2N1XJ1XB

Lol, just noticed this myself.

Also,

https://www.dmhc.ca.gov/AbouttheDMHC/Newsroom/November28,2018.aspx

Approves acquisition.

Title: Re: DVA – DaVita HealthCare Partners
Post by: kab60 on November 28, 2018, 01:03:19 PM
Very good points and very well put - interesting point on trading risks. Thanks.
Title: Re: DVA – DaVita HealthCare Partners
Post by: vince on November 28, 2018, 09:22:51 PM
That's actually a big part of why I've stayed on the sidelines; the capex is high and there's not much growth to show for it. (and then there's the regulatory risks that I can't handicap but I pretty much stop after looking at the cash flows). What's your take on FCF atm flesh and expected growth in those if you don't mind?

Hey buddy, nothing much different to say than whats been said.

Using current capex and operating cash flow of 1.5-1.6b minus 5b in cash ex dmg plus the higher leverage ratio of recent note going towards buybacks you get somewhat cheap. I assume it will grow earnings a few % a year before bb's. I'm assuming around 2-3 b will go towards debt immediately, per the recent note and extra 1b taken out earlier this year for bb's. The reduced shares and debt interest will raise earnings a fair amount ceteris paribus. DMG is adding virtually no gaap eps. It's mostly been negative in any given cy since the time of purchase. Some of the eps gain has been masked by the extra debt, that's about to change, more bb's and less debt together at a lower ev.

Where I probably diverge from some is that I do believe the intrinsic value can largely be attributed to steady state fcf with this name per last post. To get a sense for what capex needs to be you can look at dva pre dmg or healthcare partners, for perhaps a few years or more as a % of sales, ebitda, etc. Fine tune it by considering how large intl was then vs now. Has anything really changed in terms of what capex dva usa should require since then? Should it be more than double or perhaps 25% more?

Moreover, I'm trading risks here. DVA's risks are known and quantified largely, what about the market/economy? We are at the top of a cycle, what's my downside? Pick your multiple and apply 2-3 b plus fcf to buybacks over the next 2-3 years regardless of what happens in the economy. If dva's price does correlate with the market's in a downturn, that's fine. IIRC, dva was down 23% in the great recession vs 54%ish. In the mean time, I can trim and add as needed. This has been a 10-30% position for me for 1.5 years. Right now it's 25%.

Buffett will likely own the 25% limit by q1 19' due to bb's. Capex hides intrinsic value plus all the noise this name generates = needs to be private now before the smoke clears or the price will be much higher. CMS rate starting to go up at close to inflation for first time in a long while in cy 19.

2 things....First you are valuing DVA using cash flow but then talk about DMG's effect on eps.  DMG had very healthy cash flows (add about 100 million to their earnings annually for 10 years if I remember correctly) because of the asset step up for tax purposes.  Second, while I don't necessarily disagree with your "undervalued based on steady state cash flow" you haven't addressed the issue of elevated capex which means true cash flow is unknown at the moment.  I'm rather perplexed that mgmt (which has been phenomenal historically) hasnt really explained the massive increase.....at least I haven't seen a good explanation but I haven't followed them closely for a while.  I was hoping you had a good explanation for why maintenance capex had doubled all of a sudden.  If we had this information then we could be confident what the longer term run rate would be rather than just guessing based on historical numbers.  But I do tend to agree with you that its probably a good investment at these levels, I just can't tell how good.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on November 29, 2018, 03:05:03 AM
It seems the above discussion around capex is using the term loosely, so I'm assuming that's the case. It's really about FCF at the end of the day.

From the last call,
"Lastly, let me provide guidance for 2018. For our annual adjusted operating income guidance, we're narrowing the
range to $1.5 billion to $1.25 billion. This guidance is at the low end of the range we specified last quarter. There
are two reasons for this. First is, we spent $20 million more for advocacy, but we feel great about the results.
Second is $23 million for a change in our executive, retirement policy which Joel will discuss"


G&A cost increased significantly in the quarter due to two items. First, $45 million in advocacy spend, a $32
million quarter-over-quarter increase
. This is in the dialysis and lab segment. Second,
approximately $23 million non-cash charge for modifying and accelerating existing
equity awards due to the adoption of a retirement policy on the treatment of equity awards held by executive officers.
This is in the corporate G&A segment"

______________
"Justin Lake Analyst, Wolfe Research LLC Q
Okay. And then as we think about the underlying run rate of OI coming out of 2018, again with all these moving
parts, how should we think about the right jump off point for 2018 OI going into 2019, once we remove kind of the
charges that aren't going to continue into next year?

Joel Ackerman Chief Financial Officer, DaVita, Inc. A
Yeah. So, I guess, I would start with kind of the 2018 guidance we've given you and then you'd really want to
normalize for a bunch of things. So there is advocacy, which we've talked about, this retirement policy change,
there's the Medicare bad debt which showed up in the first half of the year; and then two other things I'd call out;
one is DaVita Rx which we've called out as a headwind in the back half of the year of $20 million to $35 million
and the third was a one-time good guide from DHS of $17 million at the beginning of the year which we also
called out."


___________________

"Kevin Mark Fischbeck Analyst, Bank of America Merrill Lynch Q
Yeah, so you took the guidance from $1.5 billion to $1.6 billion down – the high end of the range from $1.6 billion
down to $1.525 billion, so you took it down by about $75 million. And there's two discrete items you called out,
advocacy was $20 million more than you had last quarter and then your stock comp was $23 million more, that's
$43 million right there. But in answer to Justin's question earlier, you kind of said the core business was coming
inline if not slightly better than you thought, so why is the high end coming down even more than the range, than
that $43 million?

Joel Ackerman Chief Financial Officer, DaVita, Inc. A
Yeah, so look we guide to a range for a reason there. There are fluctuations as you would expect and as we look
at those, we're comfortable with coming in at this $1.5 billion to $1.525 billion, I don't think there is anything
specific that I would point out."

_________

I think the key to the above potentially lies in the advocacy costs. Unless I'm reading the above posts incorrectly it seems the FCF is under pressure due to costs other than Capex (advocacy is G&A), but impact on FCF is the same.
___________

"In pursuing Proposition 8, we believe that the SEIU-UHW abuse of ballot initiative process and displays disregard
for patients by putting the union's organizing objectives above access to life-sustaining care. Unfortunately, we do
not anticipate them stopping their efforts. We expect this to cause us to spend considerable resource opposing
these types of initiatives over the next years
. While it's difficult to forecast we're assuming an increase in our
baseline spend of $30 million per year on general advocacies plus whatever incremental spend is necessary to
counter the specific initiative."
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on November 29, 2018, 04:13:05 AM
I haven’t looked at DVA balance sheet in much detail, but the $250-300M in maintenance Capex seems too low relative to the $3.1B in PPE. The dialysis machines and fixtures in their dialysis centers won’t last 10 years for sure ($3.1/10=$310M depreciation). Why not go with their $580M in depreciation  from their annual report. Unless it contains a whole lot of intangible amortization, they ought to be close to the correct number for maintenance capex.
Title: Re: DVA – DaVita HealthCare Partners
Post by: vince on November 29, 2018, 12:46:08 PM
I haven’t looked at DVA balance sheet in much detail, but the $250-300M in maintenance Capex seems too low relative to the $3.1B in PPE. The dialysis machines and fixtures in their dialysis centers won’t last 10 years for sure ($3.1/10=$310M depreciation). Why not go with their $580M in depreciation  from their annual report. Unless it contains a whole lot of intangible amortization, they ought to be close to the correct number for maintenance capex.

Spec, if I reember correctly mgmt has in the past specified what percentage of capex was maintenance and it was significantly lower than 580.  That may have been before the acquisition but even taking that into consideration the 580 looks high and their new run rate is off the charts relative to their historical maintenance capex.  I do believe there is a positive plausible explanation but I just havent seen it....thats why I asked. 
Title: Re: DVA – DaVita HealthCare Partners
Post by: vince on November 29, 2018, 12:50:14 PM
It seems the above discussion around capex is using the term loosely, so I'm assuming that's the case. It's really about FCF at the end of the day.

From the last call,
"Lastly, let me provide guidance for 2018. For our annual adjusted operating income guidance, we're narrowing the
range to $1.5 billion to $1.25 billion. This guidance is at the low end of the range we specified last quarter. There
are two reasons for this. First is, we spent $20 million more for advocacy, but we feel great about the results.
Second is $23 million for a change in our executive, retirement policy which Joel will discuss"


G&A cost increased significantly in the quarter due to two items. First, $45 million in advocacy spend, a $32
million quarter-over-quarter increase
. This is in the dialysis and lab segment. Second,
approximately $23 million non-cash charge for modifying and accelerating existing
equity awards due to the adoption of a retirement policy on the treatment of equity awards held by executive officers.
This is in the corporate G&A segment"

______________
"Justin Lake Analyst, Wolfe Research LLC Q
Okay. And then as we think about the underlying run rate of OI coming out of 2018, again with all these moving
parts, how should we think about the right jump off point for 2018 OI going into 2019, once we remove kind of the
charges that aren't going to continue into next year?

Joel Ackerman Chief Financial Officer, DaVita, Inc. A
Yeah. So, I guess, I would start with kind of the 2018 guidance we've given you and then you'd really want to
normalize for a bunch of things. So there is advocacy, which we've talked about, this retirement policy change,
there's the Medicare bad debt which showed up in the first half of the year; and then two other things I'd call out;
one is DaVita Rx which we've called out as a headwind in the back half of the year of $20 million to $35 million
and the third was a one-time good guide from DHS of $17 million at the beginning of the year which we also
called out."


___________________

"Kevin Mark Fischbeck Analyst, Bank of America Merrill Lynch Q
Yeah, so you took the guidance from $1.5 billion to $1.6 billion down – the high end of the range from $1.6 billion
down to $1.525 billion, so you took it down by about $75 million. And there's two discrete items you called out,
advocacy was $20 million more than you had last quarter and then your stock comp was $23 million more, that's
$43 million right there. But in answer to Justin's question earlier, you kind of said the core business was coming
inline if not slightly better than you thought, so why is the high end coming down even more than the range, than
that $43 million?

Joel Ackerman Chief Financial Officer, DaVita, Inc. A
Yeah, so look we guide to a range for a reason there. There are fluctuations as you would expect and as we look
at those, we're comfortable with coming in at this $1.5 billion to $1.525 billion, I don't think there is anything
specific that I would point out."

_________

I think the key to the above potentially lies in the advocacy costs. Unless I'm reading the above posts incorrectly it seems the FCF is under pressure due to costs other than Capex (advocacy is G&A), but impact on FCF is the same.
___________

"In pursuing Proposition 8, we believe that the SEIU-UHW abuse of ballot initiative process and displays disregard
for patients by putting the union's organizing objectives above access to life-sustaining care. Unfortunately, we do
not anticipate them stopping their efforts. We expect this to cause us to spend considerable resource opposing
these types of initiatives over the next years
. While it's difficult to forecast we're assuming an increase in our
baseline spend of $30 million per year on general advocacies plus whatever incremental spend is necessary to
counter the specific initiative."


Mr B...I am not looking at free cash flow and then concluding that it is lower because of capex.  I am looking at the difference between what their capex used to be relative to what mgmt is guiding to.  It's not a question of why fcf is low, we already know its because of elevated capex.  The question is why is it so elevated and more importantly why is mgmt guiding to a higher rate for the forseeable future.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on November 30, 2018, 01:07:40 AM
It seems the above discussion around capex is using the term loosely, so I'm assuming that's the case. It's really about FCF at the end of the day.

From the last call,
"Lastly, let me provide guidance for 2018. For our annual adjusted operating income guidance, we're narrowing the
range to $1.5 billion to $1.25 billion. This guidance is at the low end of the range we specified last quarter. There
are two reasons for this. First is, we spent $20 million more for advocacy, but we feel great about the results.
Second is $23 million for a change in our executive, retirement policy which Joel will discuss"


G&A cost increased significantly in the quarter due to two items. First, $45 million in advocacy spend, a $32
million quarter-over-quarter increase
. This is in the dialysis and lab segment. Second,
approximately $23 million non-cash charge for modifying and accelerating existing
equity awards due to the adoption of a retirement policy on the treatment of equity awards held by executive officers.
This is in the corporate G&A segment"

______________
"Justin Lake Analyst, Wolfe Research LLC Q
Okay. And then as we think about the underlying run rate of OI coming out of 2018, again with all these moving
parts, how should we think about the right jump off point for 2018 OI going into 2019, once we remove kind of the
charges that aren't going to continue into next year?

Joel Ackerman Chief Financial Officer, DaVita, Inc. A
Yeah. So, I guess, I would start with kind of the 2018 guidance we've given you and then you'd really want to
normalize for a bunch of things. So there is advocacy, which we've talked about, this retirement policy change,
there's the Medicare bad debt which showed up in the first half of the year; and then two other things I'd call out;
one is DaVita Rx which we've called out as a headwind in the back half of the year of $20 million to $35 million
and the third was a one-time good guide from DHS of $17 million at the beginning of the year which we also
called out."


___________________

"Kevin Mark Fischbeck Analyst, Bank of America Merrill Lynch Q
Yeah, so you took the guidance from $1.5 billion to $1.6 billion down – the high end of the range from $1.6 billion
down to $1.525 billion, so you took it down by about $75 million. And there's two discrete items you called out,
advocacy was $20 million more than you had last quarter and then your stock comp was $23 million more, that's
$43 million right there. But in answer to Justin's question earlier, you kind of said the core business was coming
inline if not slightly better than you thought, so why is the high end coming down even more than the range, than
that $43 million?

Joel Ackerman Chief Financial Officer, DaVita, Inc. A
Yeah, so look we guide to a range for a reason there. There are fluctuations as you would expect and as we look
at those, we're comfortable with coming in at this $1.5 billion to $1.525 billion, I don't think there is anything
specific that I would point out."

_________

I think the key to the above potentially lies in the advocacy costs. Unless I'm reading the above posts incorrectly it seems the FCF is under pressure due to costs other than Capex (advocacy is G&A), but impact on FCF is the same.
___________

"In pursuing Proposition 8, we believe that the SEIU-UHW abuse of ballot initiative process and displays disregard
for patients by putting the union's organizing objectives above access to life-sustaining care. Unfortunately, we do
not anticipate them stopping their efforts. We expect this to cause us to spend considerable resource opposing
these types of initiatives over the next years
. While it's difficult to forecast we're assuming an increase in our
baseline spend of $30 million per year on general advocacies plus whatever incremental spend is necessary to
counter the specific initiative."


Mr B...I am not looking at free cash flow and then concluding that it is lower because of capex.  I am looking at the difference between what their capex used to be relative to what mgmt is guiding to.  It's not a question of why fcf is low, we already know its because of elevated capex.  The question is why is it so elevated and more importantly why is mgmt guiding to a higher rate for the forseeable future.

Fair enough. Following from the Q1 call might be helpful

"Now, on to CapEx. First, I wanted to add some detail to our disclosure about our development CapEx. Included in the development CapEx in Table 7 of our press release is capital that we spend for buildings we develop from the ground-up, which we then sell and lease back, as well as the full CapEx amount for clinics that are owned with JV partners.
For both these items, a portion of the capital outlay is temporary and eventually covered by either the buyers of the building or our JV partners. To ensure you have the details to take these factors into consideration when evaluating our cash flow, I would point you to a new line we added to Table 7 called sale of self-developed real estate projects, and to the contributions from non-controlling interest line in our cash flow statement. We hope these will help bridge an accounting view of CapEx to more economic view of cash generation of the business. We continue to expect total CapEx for continuing operations to be around $925 million for 2018. This includes some non-recurring capital spend in 2018. We still expect 2019 CapEx to be more in line with 2017 spend of approximately $800 million.
"
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on November 30, 2018, 06:17:50 AM
Mr B - you are all over this - thank you!
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on November 30, 2018, 06:27:19 AM
Mr B - you are all over this - thank you!
Not so sure about that, but thank you.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on November 30, 2018, 07:06:00 AM
Mr B - you are all over this - thank you!

Big ups to this sentiment and I'd add that B is all over a number of other issues.

I'll bet he kills it over the next decade!

Nagging Q, who is in the avatar photo?
Title: Re: DVA – DaVita HealthCare Partners
Post by: Peregrino on November 30, 2018, 07:18:17 AM
It's Mrs. B of the Nebraska Furniture Mart
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on November 30, 2018, 07:32:50 AM
It's Mrs. B of the Nebraska Furniture Mart

Nice, thanks  ;)
Title: Re: DVA – DaVita HealthCare Partners
Post by: vince on November 30, 2018, 08:34:20 AM
It seems the above discussion around capex is using the term loosely, so I'm assuming that's the case. It's really about FCF at the end of the day.

From the last call,
"Lastly, let me provide guidance for 2018. For our annual adjusted operating income guidance, we're narrowing the
range to $1.5 billion to $1.25 billion. This guidance is at the low end of the range we specified last quarter. There
are two reasons for this. First is, we spent $20 million more for advocacy, but we feel great about the results.
Second is $23 million for a change in our executive, retirement policy which Joel will discuss"


G&A cost increased significantly in the quarter due to two items. First, $45 million in advocacy spend, a $32
million quarter-over-quarter increase
. This is in the dialysis and lab segment. Second,
approximately $23 million non-cash charge for modifying and accelerating existing
equity awards due to the adoption of a retirement policy on the treatment of equity awards held by executive officers.
This is in the corporate G&A segment"

______________
"Justin Lake Analyst, Wolfe Research LLC Q
Okay. And then as we think about the underlying run rate of OI coming out of 2018, again with all these moving
parts, how should we think about the right jump off point for 2018 OI going into 2019, once we remove kind of the
charges that aren't going to continue into next year?

Joel Ackerman Chief Financial Officer, DaVita, Inc. A
Yeah. So, I guess, I would start with kind of the 2018 guidance we've given you and then you'd really want to
normalize for a bunch of things. So there is advocacy, which we've talked about, this retirement policy change,
there's the Medicare bad debt which showed up in the first half of the year; and then two other things I'd call out;
one is DaVita Rx which we've called out as a headwind in the back half of the year of $20 million to $35 million
and the third was a one-time good guide from DHS of $17 million at the beginning of the year which we also
called out."


___________________

"Kevin Mark Fischbeck Analyst, Bank of America Merrill Lynch Q
Yeah, so you took the guidance from $1.5 billion to $1.6 billion down – the high end of the range from $1.6 billion
down to $1.525 billion, so you took it down by about $75 million. And there's two discrete items you called out,
advocacy was $20 million more than you had last quarter and then your stock comp was $23 million more, that's
$43 million right there. But in answer to Justin's question earlier, you kind of said the core business was coming
inline if not slightly better than you thought, so why is the high end coming down even more than the range, than
that $43 million?

Joel Ackerman Chief Financial Officer, DaVita, Inc. A
Yeah, so look we guide to a range for a reason there. There are fluctuations as you would expect and as we look
at those, we're comfortable with coming in at this $1.5 billion to $1.525 billion, I don't think there is anything
specific that I would point out."

_________

I think the key to the above potentially lies in the advocacy costs. Unless I'm reading the above posts incorrectly it seems the FCF is under pressure due to costs other than Capex (advocacy is G&A), but impact on FCF is the same.
___________

"In pursuing Proposition 8, we believe that the SEIU-UHW abuse of ballot initiative process and displays disregard
for patients by putting the union's organizing objectives above access to life-sustaining care. Unfortunately, we do
not anticipate them stopping their efforts. We expect this to cause us to spend considerable resource opposing
these types of initiatives over the next years
. While it's difficult to forecast we're assuming an increase in our
baseline spend of $30 million per year on general advocacies plus whatever incremental spend is necessary to
counter the specific initiative."


Mr B...I am not looking at free cash flow and then concluding that it is lower because of capex.  I am looking at the difference between what their capex used to be relative to what mgmt is guiding to.  It's not a question of why fcf is low, we already know its because of elevated capex.  The question is why is it so elevated and more importantly why is mgmt guiding to a higher rate for the forseeable future.

Fair enough. Following from the Q1 call might be helpful

"Now, on to CapEx. First, I wanted to add some detail to our disclosure about our development CapEx. Included in the development CapEx in Table 7 of our press release is capital that we spend for buildings we develop from the ground-up, which we then sell and lease back, as well as the full CapEx amount for clinics that are owned with JV partners.
For both these items, a portion of the capital outlay is temporary and eventually covered by either the buyers of the building or our JV partners. To ensure you have the details to take these factors into consideration when evaluating our cash flow, I would point you to a new line we added to Table 7 called sale of self-developed real estate projects, and to the contributions from non-controlling interest line in our cash flow statement. We hope these will help bridge an accounting view of CapEx to more economic view of cash generation of the business. We continue to expect total CapEx for continuing operations to be around $925 million for 2018. This includes some non-recurring capital spend in 2018. We still expect 2019 CapEx to be more in line with 2017 spend of approximately $800 million.
"

Much appreciated, that definitely makes it clearer.  However, (and keep in mind I haven't done the necessary work in last couple years) I thought they always did this so it is still confusing as to why the change....even 800 is well above what I remember their capex was a few years ago.  Then again, maybe I'm just plain wrong.
Title: Re: DVA – DaVita HealthCare Partners
Post by: flesh on November 30, 2018, 04:14:31 PM
Let's look at dva pre DMG, the last full year is 2011. We'll use 2011 d&a as a proxy for steady state capex. Clearly, this is high level.

In 2011, D&a is 4% of revenue

2007-2011 average of d&a is 31% of OCF

In the ttm, on the dialysis side ex dmg, D&A is 6% of revenue and 42.4% of OCF.

2% of ttm rev is 208m. 11.4% ttm OCF is 160m. NTM OCF is higher than TTM by 75m fyi.

If we take the ttm d&a of 620 and subract 208= 412m. If we subtract 160=460m.

The differences are too large.

DVA was already on a acquisitive spree pre 2011, 2011 d&a had some non economic A in there. If we assume zero margin expansion and capex costs rising with inflation since 2011, the numbers would be a bit worse but still a whole lot better than current D&A. OTOH, international D&A as a % is greater now than then, presumably it will pay off. The way I see intrinsic value is this, dmg gone, international sold (reducing ev but not eps/fcf), maintain but don't grow usa except organically(rare business, moat doesn't suffer). The owner's earnings yield plus interest/ex dmg EV is quite tasty for a durable business. This is what can be created, therefore this is the intrinsic value.

Davita care India was sold recently...they've mentioned trimming some INTL and focusing on only a couple areas this year.

There must be a lot of growth capex happening. I wish I knew where it was going. INTL/new opportunities/the new research center/exogenous factors? I don't know. Are they pulling it forward as well? Perhaps to reduce the price paid to take dva private? Was it to induce favorable outcomes by reducing perceived success relating to all the noise over the years? Cheaper buybacks for brk before take over? Just some ideas.





Title: Re: DVA – DaVita HealthCare Partners
Post by: vince on November 30, 2018, 05:53:40 PM
Let's look at dva pre DMG, the last full year is 2011. We'll use 2011 d&a as a proxy for steady state capex. Clearly, this is high level.

In 2011, D&a is 4% of revenue

2007-2011 average of d&a is 31% of OCF

In the ttm, on the dialysis side ex dmg, D&A is 6% of revenue and 42.4% of OCF.

2% of ttm rev is 208m. 11.4% ttm OCF is 160m. NTM OCF is higher than TTM by 75m fyi.

If we take the ttm d&a of 620 and subract 208= 412m. If we subtract 160=460m.

The differences are too large.

DVA was already on a acquisitive spree pre 2011, 2011 d&a had some non economic A in there. If we assume zero margin expansion and capex costs rising with inflation since 2011, the numbers would be a bit worse but still a whole lot better than current D&A. OTOH, international D&A as a % is greater now than then, presumably it will pay off. The way I see intrinsic value is this, dmg gone, international sold (reducing ev but not eps/fcf), maintain but don't grow usa except organically(rare business, moat doesn't suffer). The owner's earnings yield plus interest/ex dmg EV is quite tasty for a durable business. This is what can be created, therefore this is the intrinsic value.

Davita care India was sold recently...they've mentioned trimming some INTL and focusing on only a couple areas this year.

There must be a lot of growth capex happening. I wish I knew where it was going. INTL/new opportunities/the new research center/exogenous factors? I don't know. Are they pulling it forward as well? Perhaps to reduce the price paid to take dva private? Was it to induce favorable outcomes by reducing perceived success relating to all the noise over the years? Cheaper buybacks for brk before take over? Just some ideas.

So you are agreeing with me to a certain degree?  The large increase without a clear explanation has significantly reduced my confidence in this organization and no longer clears my 15% return hurdle (current free cash flow yield plus growth equals 15% with a constant multiple), whereas not so long ago it had my highest confidence assuming I could purchase it at a 10-12 fcf multiple (or less of course) I dont know if this fits neatly into your analysis but the dmg acquisition step up for tax purposes increased amortization well above any economic requirement. All your posts are very much appreciated.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on December 01, 2018, 07:37:38 AM
Let's look at dva pre DMG, the last full year is 2011. We'll use 2011 d&a as a proxy for steady state capex. Clearly, this is high level.

In 2011, D&a is 4% of revenue

2007-2011 average of d&a is 31% of OCF

In the ttm, on the dialysis side ex dmg, D&A is 6% of revenue and 42.4% of OCF.

2% of ttm rev is 208m. 11.4% ttm OCF is 160m. NTM OCF is higher than TTM by 75m fyi.

If we take the ttm d&a of 620 and subract 208= 412m. If we subtract 160=460m.

The differences are too large.

DVA was already on a acquisitive spree pre 2011, 2011 d&a had some non economic A in there. If we assume zero margin expansion and capex costs rising with inflation since 2011, the numbers would be a bit worse but still a whole lot better than current D&A. OTOH, international D&A as a % is greater now than then, presumably it will pay off. The way I see intrinsic value is this, dmg gone, international sold (reducing ev but not eps/fcf), maintain but don't grow usa except organically(rare business, moat doesn't suffer). The owner's earnings yield plus interest/ex dmg EV is quite tasty for a durable business. This is what can be created, therefore this is the intrinsic value.

Davita care India was sold recently...they've mentioned trimming some INTL and focusing on only a couple areas this year.

There must be a lot of growth capex happening. I wish I knew where it was going. INTL/new opportunities/the new research center/exogenous factors? I don't know. Are they pulling it forward as well? Perhaps to reduce the price paid to take dva private? Was it to induce favorable outcomes by reducing perceived success relating to all the noise over the years? Cheaper buybacks for brk before take over? Just some ideas.

So you are agreeing with me to a certain degree?  The large increase without a clear explanation has significantly reduced my confidence in this organization and no longer clears my 15% return hurdle (current free cash flow yield plus growth equals 15% with a constant multiple), whereas not so long ago it had my highest confidence assuming I could purchase it at a 10-12 fcf multiple (or less of course) I dont know if this fits neatly into your analysis but the dmg acquisition step up for tax purposes increased amortization well above any economic requirement. All your posts are very much appreciated.

Capex (excl acquisitions) from the cash flow statement/Rev shed some light (see attached). Clearly a step up Vince (elevated 1 point avg)  post-DMG v pre-DMG (pre/post 2012). Note: "2018 Norm" in the chart is 800m guided normalized capex/Estimated rev for 2018 $11.4Bn, which assumes their guided 800m includes capex for DMG. Basic point is it seems to support the notion that recent capex is above trend, they've been there before '96-'99 and between management guidance and DMG sale there seems to be a decent probability that capex will reduce going forward.
Title: Re: DVA – DaVita HealthCare Partners
Post by: vince on December 01, 2018, 12:23:25 PM
Much appreciated
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on December 11, 2018, 01:38:12 AM
Any news here or just a rehash of old short thesis? Don't have access.


DaVita (DVA) Named Best Short Idea at Hedgeye, Sees 30% Downside - Bloomberg

https://www.streetinsider.com/Analyst+Comments/DaVita+%28DVA%29+Named+Best+Short+Idea+at+Hedgeye%2C+Sees+30%25+Downside+-+Bloomberg/14907524.html
“We think the trend in commercial patient volume, reimbursement, and margins are coming under pressure alongside regulatory problems. We see significant downside in the next 12 months as the company has little flexibility and apparently no plan except for repurchasing stock.”
Analyst is Tom Tobin
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on December 11, 2018, 04:24:58 AM
Any news here or just a rehash of old short thesis? Don't have access.


DaVita (DVA) Named Best Short Idea at Hedgeye, Sees 30% Downside - Bloomberg

https://www.streetinsider.com/Analyst+Comments/DaVita+%28DVA%29+Named+Best+Short+Idea+at+Hedgeye%2C+Sees+30%25+Downside+-+Bloomberg/14907524.html
“We think the trend in commercial patient volume, reimbursement, and margins are coming under pressure alongside regulatory problems. We see significant downside in the next 12 months as the company has little flexibility and apparently no plan except for repurchasing stock.”
Analyst is Tom Tobin

I think it is noteworthy that the larger competitor Fresenius just had a significant earning reset.
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on December 14, 2018, 05:50:41 AM
very different business models...

I've been buying a lot of DVA here recently...expecting a nice Q1 once the deal with UNH gets done...seems to me that the market is under-pricing the upside here ...  I think this one quickly trades to the high 60s, low 70s IMHO
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on December 17, 2018, 06:18:02 AM
I guess we know why it moved down now. Hope they get this done soon:

http://investors.davita.com/static-files/57510643-7d9b-4e1a-873e-b9fefff66b36

Deal reduced $500M.
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on December 17, 2018, 02:42:15 PM
Yes - on the margin its a negative... even still the story doesnt change all that much.  Good for UNH for reworking the deal honestly...the valuation was always high...get it done, turn back into a pure-play and start buying back a ton of stock...
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on February 11, 2019, 09:36:45 AM
I suppose what we're all waiting for now is a closing date

after the price decline, market seems to think they're not going to close?  so what if they didn't, not sure the stock should trade here anyway?

I imagine mgmt is taking advantage of the lower pricing to buy back with cash on hand?  anyone have any add'l thoughts to consider as we approach earnings?
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on February 11, 2019, 11:57:50 AM
I suppose what we're all waiting for now is a closing date

after the price decline, market seems to think they're not going to close?  so what if they didn't, not sure the stock should trade here anyway?

I imagine mgmt is taking advantage of the lower pricing to buy back with cash on hand?  anyone have any add'l thoughts to consider as we approach earnings?

That is what I am waiting for - this DMG deal has to close - but with the FTC shutdown, it could not happen.
Management is NOT buying back stock, as they are at their leverage limits - that has plenty to do with the low price.
On the last call (January) - they clearly indicated their priorities - with the DMG proceeds - first reduce debt significantly and then buy back lots of stock over time.

This DMG deal needs to happen.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on February 12, 2019, 07:06:49 AM
Found this 21 Dec 18 article in the meantime. Isolated source, so not sure how much you can trust it and the Davita filing referred to in the article does not make any reference to the Nevada clinics specifically, so not sure what the connection with Nevada is based on.

https://www.pressreader.com/usa/las-vegas-review-journal/20181221/282179357192793

"Unitedhealth Group’s Optum is dropping plans to purchase the Davita Medical Group physician clinics in Nevada after the Federal Trade Commission investigated the deal’s compliance with antitrust regulations.

Davita, in a U.S. Securities and Exchange Commission filing last week, indicated that while Optum will continue with its planned purchase of Davita, it will carve out the Nevada clinics. That, with 2018 business performance and projections for 2019 performance, will reduce the price it will pay for Davita by $560 million to $4.34 billion."

Anyhow what one could potentially deduce is that a) the significant reduction in the deal value is partly for some assets being excluded, so not just reduced performance, which is what I originally thought and I did not like that. Also b) I would assume that the FTC process would work more or less as follows, review, conditional approval, conditions fulfilled and then approval.

So it tells me that the deal was at that point (21 Dec) probably close to final review and hopefully approval, which would put it on management's Q1 timeline, but then government shutdown happened. I think in some total looks positive to me and probably indicates shutdown being the main holdup.
Title: Re: DVA – DaVita HealthCare Partners
Post by: dwy000 on February 12, 2019, 09:21:03 AM
Found this 21 Dec 18 article in the meantime. Isolated source, so not sure how much you can trust it and the Davita filing referred to in the article does not make any reference to the Nevada clinics specifically, so not sure what the connection with Nevada is based on.

https://www.pressreader.com/usa/las-vegas-review-journal/20181221/282179357192793

"Unitedhealth Group’s Optum is dropping plans to purchase the Davita Medical Group physician clinics in Nevada after the Federal Trade Commission investigated the deal’s compliance with antitrust regulations.

Davita, in a U.S. Securities and Exchange Commission filing last week, indicated that while Optum will continue with its planned purchase of Davita, it will carve out the Nevada clinics. That, with 2018 business performance and projections for 2019 performance, will reduce the price it will pay for Davita by $560 million to $4.34 billion."

Anyhow what one could potentially deduce is that a) the significant reduction in the deal value is partly for some assets being excluded, so not just reduced performance, which is what I originally thought and I did not like that. Also b) I would assume that the FTC process would work more or less as follows, review, conditional approval, conditions fulfilled and then approval.

So it tells me that the deal was at that point (21 Dec) probably close to final review and hopefully approval, which would put it on management's Q1 timeline, but then government shutdown happened. I think in some total looks positive to me and probably indicates shutdown being the main holdup.

Nice find MrB.    So what happens with the Nevada clinics?  Sold to someone else?  I can't imagine it makes economic sense to continue operating this small subset on its own.   If sold to someone else there might be additional proceeds down the road to offset some of the Optum decline.
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on February 12, 2019, 10:28:44 AM
Found this 21 Dec 18 article in the meantime. Isolated source, so not sure how much you can trust it and the Davita filing referred to in the article does not make any reference to the Nevada clinics specifically, so not sure what the connection with Nevada is based on.

https://www.pressreader.com/usa/las-vegas-review-journal/20181221/282179357192793

"Unitedhealth Group’s Optum is dropping plans to purchase the Davita Medical Group physician clinics in Nevada after the Federal Trade Commission investigated the deal’s compliance with antitrust regulations.

Davita, in a U.S. Securities and Exchange Commission filing last week, indicated that while Optum will continue with its planned purchase of Davita, it will carve out the Nevada clinics. That, with 2018 business performance and projections for 2019 performance, will reduce the price it will pay for Davita by $560 million to $4.34 billion."

Anyhow what one could potentially deduce is that a) the significant reduction in the deal value is partly for some assets being excluded, so not just reduced performance, which is what I originally thought and I did not like that. Also b) I would assume that the FTC process would work more or less as follows, review, conditional approval, conditions fulfilled and then approval.

So it tells me that the deal was at that point (21 Dec) probably close to final review and hopefully approval, which would put it on management's Q1 timeline, but then government shutdown happened. I think in some total looks positive to me and probably indicates shutdown being the main holdup.

Nice find MrB.    So what happens with the Nevada clinics?  Sold to someone else?  I can't imagine it makes economic sense to continue operating this small subset on its own.   If sold to someone else there might be additional proceeds down the road to offset some of the Optum decline.
I suppose urgency to sell the Nevada clinics is dictated by profitability?
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on February 12, 2019, 11:04:17 AM
I'd say they are just non-core assets. DaVita proved they are NOT very good at running the DMG business, so get out of all of it as quick as you can.
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on February 15, 2019, 03:43:57 PM
didn't find anything so interesting regarding the quarter except the MA rates are likely to improve

diluted share count, however, has been reduced from 184m to 166m

sure, perhaps they overpaid a little...but if DVA hits the lower end of cash flow from ops guidance ($1.375B) for 2019 without buybacks, the stock trades at 8x 2019 op cash flow

my feeling is that op cash flow will improve after deal closes, and of course, share count will continue to shrink, likely at a faster clip

I suppose the Chanos et al overhang still exists? 
Title: Re: DVA – DaVita HealthCare Partners
Post by: 5xEBITDA on February 16, 2019, 12:59:16 PM
They are really downplaying the AKF legislation issue...it is a legitimate loophole in reimbursement laws they have built the last ~10 years of their business on
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on February 16, 2019, 01:08:00 PM
There is always someone taking potshots at DaVita - unions, insurance payers, etc - that's not going away anytime soon.
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on February 18, 2019, 07:31:30 AM
They are really downplaying the AKF legislation issue...it is a legitimate loophole in reimbursement laws they have built the last ~10 years of their business on
DaVita won the last suit ... the CA governor vetoed for very good reason

The new bill is not so far from the last one...largely sponsored by health insurers who don't want to provide coverage, this new one is likely no different

Winning by hurting people doesn't seem to be the way of the future but the dark side of capital markets
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on February 18, 2019, 07:43:43 AM
They are really downplaying the AKF legislation issue...it is a legitimate loophole in reimbursement laws they have built the last ~10 years of their business on
DaVita won the last suit ... the CA governor vetoed for very good reason

The new bill is not so far from the last one...largely sponsored by health insurers who don't want to provide coverage, this new one is likely no different

Winning by hurting people doesn't seem to be the way of the future but the dark side of capital markets

Yup, it's bogus and won't go away anytime soon, with each new administration, they'll take another shot. But the AKF keeps the system working well
for patients who can not afford these costly lifesaving treatments. The insurance companies get plenty of benefits, given the way the system is set up.
Title: Re: DVA – DaVita HealthCare Partners
Post by: ander on March 04, 2019, 04:58:06 AM
FOCUS-U.S. seeks to cut dialysis costs with more home care versus clinics

https://finance.yahoo.com/news/focus-u-seeks-cut-dialysis-120000932.html
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on March 04, 2019, 05:40:14 AM
Transplants are limited by the availability of transplant organs. the problem with home care is complexity and compliance. A lot of dialysis patients have issues (drug addiction, tendency of negligence, mental etc) and home care requires skill , compliance, hygiene and a partner who can support, when something goes wrong. A lot of patients probably couldn’t do the necessary task them selves at this point or wouldn’t comply. While home care is preferable from a clinical POV (the more frequent treatment cycle causes less issues), the home dialysis systems need to be simplified from a users perspective to increase the addressable market.
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on March 04, 2019, 05:49:34 AM
Transplants are limited by the availability of transplant organs. the problem with home care is complexity and compliance. A lot of dialysis patients have issues (drug addiction, tendency of negligence, mental etc) and home care requires skill , compliance, hygiene and a partner who can support, when something goes wrong. A lot of patients probably couldn’t do the necessary task them selves at this point or wouldn’t comply. While home care is preferable from a clinical POV (the more frequent treatment cycle causes less issues), the home dialysis systems need to be simplified from a users perspective to increase the addressable market.

+1 - great insights
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on March 04, 2019, 05:50:14 AM
Transplants are limited by the availability of transplant organs. the problem with home care is complexity and compliance. A lot of dialysis patients have issues (drug addiction, tendency of negligence, mental etc) and home care requires skill , compliance, hygiene and a partner who can support, when something goes wrong. A lot of patients probably couldn’t do the necessary task them selves at this point or wouldn’t comply. While home care is preferable from a clinical POV (the more frequent treatment cycle causes less issues), the home dialysis systems need to be simplified from a users perspective to increase the addressable market.
Expanding on the above the sad reality is that the average patient became a dialysis patient because they've not been good at managing certain complexities of life in a disciplined manner e.g. bad lifestyle choices and sticking to a healthy diet. Now you're expecting them to manage home dialysis. Easier said than done.
Title: Re: DVA – DaVita HealthCare Partners
Post by: rogermunibond on March 04, 2019, 06:48:22 AM
George Church lab at Harvard is using CRISPR to create transgenic porcine hearts, kidneys etc for transplant.

Still years off at scale but pretty neat.
Title: Re: DVA – DaVita HealthCare Partners
Post by: rogermunibond on March 05, 2019, 06:08:45 AM
Azar wants to promote in-home dialysis away from centers.

https://www.fiercehealthcare.com/payer/azar-hhs-rethinking-payments-to-expand-access-to-home-dialysis-kidney-transplants
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on March 05, 2019, 03:43:41 PM
My Mom gets periodic antibiotic infusions at home.

Techs frequently don't show up on time or they show up but don't have what's needed to do the treatment.

She prefers going to the hospital to have it done

Maybe in home dialysis will work though.
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on March 06, 2019, 07:47:05 AM
In the Far East, I believe PD is the norm.  In the US, however, in-center HD is--maybe for good reason, maybe not. 

90% of patients are gov't funded since Nixon signed into law.  We all know that these patients are lowest margin for DVA and those covered by private insurance keep the lights on.

Given that a portion of the business might shift away from in-center to inventory management and drug/dialysate reimbursement, I wonder how the economics could not be better for DaVita? More reimbursement for admin and drug and less spend on in-person care?

Has anyone done an analysis of these economics?
Title: Re: DVA – DaVita HealthCare Partners
Post by: ander on March 06, 2019, 10:59:04 AM
https://seekingalpha.com/article/4245721-ethan-watkins-dmg-break-risk-davita-podcast

Seems like there is an increasing concern that the DMG deal breaks which is probably also weighing on the stock.
Title: Re: DVA – DaVita HealthCare Partners
Post by: ander on March 21, 2019, 09:09:20 AM
DaVita (NYSE: DVA) Gains After Capitol Forum Says FTC Vote on UnitedHealth Group (NYSE: UNH) Delayed - Bloomberg

I don't see anything else besides that headline. Anyone have access to why that's good news?
Title: Re: DVA – DaVita HealthCare Partners
Post by: ValueMaven on April 20, 2019, 11:17:24 AM
I've been out of DVA for sometime -- however you have a few catalysts at this point... the closing of the sale of Medical Group to UNH for $4.3bn, and possibly reduced noise around Medicaid for All ...  stock is VERY beaten up at this point and VERY cheap on a earnings-yield perspective.  Who knows but i've started to follow it closely ...
Title: Re: DVA – DaVita HealthCare Partners
Post by: Cigarbutt on April 20, 2019, 05:31:45 PM
...
I've been buying a lot of DVA here recently...expecting a nice Q1 once the deal with UNH gets done...seems to me that the market is under-pricing the upside here ...  I think this one quickly trades to the high 60s, low 70s IMHO
I've been out of DVA for sometime -- however you have a few catalysts at this point... the closing of the sale of Medical Group to UNH for $4.3bn, and possibly reduced noise around Medicaid for All ...  stock is VERY beaten up at this point and VERY cheap on a earnings-yield perspective.  Who knows but i've started to follow it closely ...
For the long-term (10, 20 years or longer), I think that the return will gravitate towards 10% per year.
I find it hard to know what will happen to the share price in the next three months.
Can you comment?


Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on April 29, 2019, 04:16:21 PM
https://www.bizjournals.com/denver/news/2019/04/29/davita-kent-thiry-legacy.html?ana=yahoo&yptr=yahoo

New CEO at DaVita - I am surprised. Hope it does not signal issues with the United HealthCare deal.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on April 29, 2019, 04:33:39 PM
There will be continuity.

---

"At a ceremony announcing plans for the company’s second office tower in the Central Platte Valley in August 2016, Rodriguez rode a zip line down to the stage as “Livin’ La Vida Loca” blared and employees cheered."

https://www.denverpost.com/2019/04/29/davita-ceo-kent-thiry-leaving/
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on April 29, 2019, 04:58:35 PM
https://www.bizjournals.com/denver/news/2019/04/29/davita-kent-thiry-legacy.html?ana=yahoo&yptr=yahoo

New CEO at DaVita - I am surprised. Hope it does not signal issues with the United HealthCare deal.

perhaps what is more likely is that Thiry is considering becoming a politician?
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on April 29, 2019, 05:19:33 PM
https://www.bizjournals.com/denver/news/2019/04/29/davita-kent-thiry-legacy.html?ana=yahoo&yptr=yahoo

New CEO at DaVita - I am surprised. Hope it does not signal issues with the United HealthCare deal.

perhaps what is more likely is that Thiry is considering becoming a politician?

Certainly could be - waiting for this DMG deal to close, with the delays and impairments has been torture.
I'm just paranoid !

I'm sure Javier will do a great job.
Title: Re: DVA – DaVita HealthCare Partners
Post by: walkie518 on May 08, 2019, 04:38:09 PM
BAML published a note today suggesting that figures were in-line

I thought the numbers were awful and the market seems to have reacted accordingly

It doesn't bother me that Thiry wants to step-down, and it's certainly good news if the DMG deal is still on the table, but cash flow doesn't look particularly appealing (resulting from the shutdown and reimbursements?)

My feeling is that selling losses and circling in a month can fix a lot of ills... I doubt the sale gets done anytime in the next couple months?  Anyone have any insight on this topic from studying other deals that have been deferred this long? 
Title: Re: DVA – DaVita HealthCare Partners
Post by: ander on May 08, 2019, 05:29:15 PM
BAML published a note today suggesting that figures were in-line

I thought the numbers were awful and the market seems to have reacted accordingly

It doesn't bother me that Thiry wants to step-down, and it's certainly good news if the DMG deal is still on the table, but cash flow doesn't look particularly appealing (resulting from the shutdown and reimbursements?)

My feeling is that selling losses and circling in a month can fix a lot of ills... I doubt the sale gets done anytime in the next couple months?  Anyone have any insight on this topic from studying other deals that have been deferred this long? 

Re: cash flow, CFO said, "This cash flow was adversely impacted by the timing of working capital. There was an increase in accounts receivable as DSOs for the U.S. dialysis and lab business increased sequentially by 4 days to 64 days in Q1 2019 due to some temporary factors that we expect to normalize over the next couple of quarters. We also saw a reduction of accrued compensation due to timing of 401(k) contribution, bonus payments and a reduction in accounts payable."

And they maintained full year cash flow guidance so I gave them the benefit of the doubt re: cash flow. They tend to come in close even if they miss (excluding DMG misses which were awful) given the predictability of the business.

The unit growth number being 2.4% for Q1 versus guidance of 2.5% to 3.5% was slightly concerning but it's only 1 quarter. But more interestingly they called out slight market share loss from the larger competitors (so I'm guessing Fresenius). I wonder if some of that was home dialysis related - if it was that would be a trend to watch closely.

Re: share buybacks they are always coy and have said in the past they are not going to commit themselves to a certain buyback and cause the stock price to go up on that, so there is always some concern that they will just buy something. My guess is that most of it will go towards share buyback.

Re: closing DMG, my guess is that it will now be in the coming weeks given the consistent commentary by UNH and DVA.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on May 24, 2019, 08:49:16 AM
https://www.forbes.com/sites/brucejapsen/2019/05/23/unitedhealth-were-still-working-on-closing-davita-deal/#7795312f2abf

===

Cramer doesn't like Davita.
I may buy more.
Title: Re: DVA – DaVita HealthCare Partners
Post by: thefatbaboon on June 12, 2019, 07:07:39 AM
Is this deal ever going to happen

 ::)
Title: Re: DVA – DaVita HealthCare Partners
Post by: ander on June 12, 2019, 07:37:23 AM
Is this deal ever going to happen

 ::)

https://news.bloomberglaw.com/mergers-and-antitrust/davita-gains-on-report-ftc-staff-nearing-approving-unh-unit-deal?utm_source=rss&utm_medium=MANW&utm_campaign=0000016b-32ac-dcbd-ad6b-faecfe8e0000

According to Capitol Forum it seems like a vote to approve may happen within the next couple of weeks. Though, I guess the market is saying it doesn't care and / or doesn't believe it.
Title: Re: DVA – DaVita HealthCare Partners
Post by: thefatbaboon on June 12, 2019, 07:59:43 AM
What a saga this HCP investment has been!
Title: Re: DVA – DaVita HealthCare Partners
Post by: ander on June 19, 2019, 12:08:42 PM
https://www.forbes.com/sites/brucejapsen/2019/06/19/unitedhealth-group-wins-ftc-approval-of-davita-deal/#1683cad16e40

"UnitedHealth Group Wins FTC Approval Of DaVita Deal"

Reporter states FTC to announce officially later this afternoon. DVA and UNH have not commented.
Title: Re: DVA – DaVita HealthCare Partners
Post by: ander on June 19, 2019, 02:00:28 PM
https://www.businesswire.com/news/home/20190619005805/en/

Now the deal has finally closed. What a saga.
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on June 19, 2019, 04:35:26 PM
https://www.businesswire.com/news/home/20190619005805/en/

Now the deal has finally closed. What a saga.

brutal wait
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on June 19, 2019, 05:58:25 PM
Cost pressure are relentless. It seems like costs are raising faster than reimbursements, maybe due to labor market tightness? the smaller players are probably sucking air through a straw. Fresenius on the other hand seems to be doing better, due to being more diversified.
Title: Re: DVA – DaVita HealthCare Partners
Post by: ander on June 20, 2019, 08:16:51 AM
Cost pressure are relentless. It seems like costs are raising faster than reimbursements, maybe due to labor market tightness? the smaller players are probably sucking air through a straw. Fresenius on the other hand seems to be doing better, due to being more diversified.

Part of the slower reimbursement rise has been because the out-of-network commercial amounts are coming down. It's pretty small currently but is a small headwind. Labor market has been affecting them like everyone else, but the cost pressures have always been there and like you're saying they manage better than the smaller guys so at some stage rates catch up a little bit as well. Fresenius is doing better on volumes this past quarter but that's lumpy. DVA has had a lot of "one-off" headwinds for the past 3 years. Assuming that those do not go away and are permanent, I still expect them to start growing EBIT in-line with previous history over the next 3 years. A large opportunity is Medicare Advantage patients which start in 2021 -- that could add up to 20% of EBIT alone. I'm looking forward to their Investor Day later this year and also am looking forward to them buying back up to 1/3 of the market cap over the next 12 to 18 mos.
Title: Re: DVA – DaVita HealthCare Partners
Post by: MrB on June 21, 2019, 06:55:23 AM
"buying back up to 1/3 of the market cap over the next 12 to 18 mos."
How do you figure that?
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on June 21, 2019, 08:15:31 AM
The last repurchases in the quarter ended Mar 2018 were poorly timed.

4,197,304 shares for @290m = $69 / share.

No repurchases since then?

The following comes from the Mar 2019 Q1 report & I'm not sure but seem to remember hearing them say that debt reduction would be a priority use of cash from the DMG sale?

---

We may not be able to use the proceeds from the sale of DMG as planned or we may spend or invest the proceeds in ways that may not improve our results of operations or enhance the value of our common stock.

The purchase price for the sale of the DMG business is subject to customary adjustments, both upward and downward, which could be significant. We plan to use the proceeds from the sale of DMG for significant stock repurchases, to repay debt and for general corporate purposes, including growth investments. A number of factors may impact our ability to repurchase stock and the timing of any such stock repurchases, including market conditions, the price of our common stock, our cash flow position, leverage ratios, and legal, regulatory and contractual requirements and restrictions.

(page 113)

Risk Factors (continued)

In addition, we may identify investments or other uses for the proceeds from the sale of DMG that we believe are more attractive than our current intended uses. Further, there can be no assurance that any investment of the proceeds from the sale of DMG will yield a favorable return.

Under the terms of the equity purchase agreement, we are subject to certain contractual restrictions while the sale of DMG is pending, and certain post-closing contractual obligations that, in some cases, could have a material adverse effect on our business, results of operations and financial condition.

Under the terms of the equity purchase agreement, we are subject to certain restrictions on the conduct of the DMG business prior to completing the sale of DMG, which may adversely affect our ability to execute certain of our business strategies, including the ability in certain cases to enter into or amend contracts, acquire or dispose of assets, incur indebtedness or incur capital expenditures. Such limitations could negatively affect our business and operations prior to the completion of the sale of DMG. Each of these risks may be exacerbated by delays or other adverse developments with respect to the completion of the sale of DMG.

In addition, we agreed to retain certain liabilities of the DMG business for which we have certain indemnification rights against the original 2012 HealthCare Partners (“HCP”) sellers. An escrow was established in connection with our acquisition of the DMG business from the HCP sellers as security for these indemnification rights, including with respect to the OIG investigation into certain patient diagnosis coding practices. We have submitted an indemnification claim against the sellers secured by the escrow for any and all liabilities incurred relating to these matters and intend to pursue recovery from the escrow. However, we can make no assurances that the indemnification and escrow will cover the full amount of our potential losses related to these matters, which could have a material adverse effect on our business, results of operations and financial condition.

(page 114)

---

Sounds sufficiently dubious.

I'm not smart enough to figure out what the best use of this capital would be, but they list the weighted average interest rate at a hair over 5% for the quarter.

It seems like if they put more cash into repurchasing at present levels, they MAY be able to sell into the market IF prices improve & then use proceeds for debt reduction & capex?

I'm not saying this would or could happen.

-

On another note, when looking at the reports, I noticed a line that says "distributions to non-controlling interests" for $44.2m.

Does a portion of this go to Berkshire?  ???
Title: Re: DVA – DaVita HealthCare Partners
Post by: Cigarbutt on June 21, 2019, 10:29:13 AM
...
-

On another note, when looking at the reports, I noticed a line that says "distributions to non-controlling interests" for $44.2m.

Does a portion of this go to Berkshire?  ???
Apologies for two reasons:
1-I no longer follow DVA closely, did not check recent disclosures and this is from memory.
2-The following comments may trigger cognitive dissonance. :)

Let's say you are a kidney specialist who owns a (or several) dialysis centers and DVA makes an offer that you can't refuse. They set up a joint venture and you keep a minority interest that determines your income allocation and other benefits from the venture.

I could not get comfortable with the level of transparency related to these joint ventures. Some suggest that there is a potential for poor (and inapproprate) incentives.
https://catalyst.nejm.org/dialysis-nephrologists-joint-venture/

There is an ex-colleague of mine who used to say that there is an often overlooked and so far anatomically unidentified nerve that connects your brain (primitive part) to the pocket where you store your wallet.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on June 21, 2019, 11:31:32 AM
...
-

On another note, when looking at the reports, I noticed a line that says "distributions to non-controlling interests" for $44.2m.

Does a portion of this go to Berkshire?  ???
Apologies for two reasons:
1-I no longer follow DVA closely, did not check recent disclosures and this is from memory.
2-The following comments may trigger cognitive dissonance. :)

Let's say you are a kidney specialist who owns a (or several) dialysis centers and DVA makes an offer that you can't refuse. They set up a joint venture and you keep a minority interest that determines your income allocation and other benefits from the venture.

I could not get comfortable with the level of transparency related to these joint ventures. Some suggest that there is a potential for poor (and inapproprate) incentives.
https://catalyst.nejm.org/dialysis-nephrologists-joint-venture/

There is an ex-colleague of mine who used to say that there is an often overlooked and so far anatomically unidentified nerve that connects your brain (primitive part) to the pocket where you store your wallet.

Aha, I thought that since BRK owns a minority interest, this was partially going to them.

I'm sure your explanation is clearly spelled out in the footnotes somewhere.

Thanks  ;)
Title: Re: DVA – DaVita HealthCare Partners
Post by: ander on June 21, 2019, 05:57:59 PM
To answer a few of the questions.

The NCI or non-controlling interests is related to the centers where do not have full ownership - the structure is different state by state.

Re: the debt paydown, look at the schedule but they have debt maturities in the near-term and part of the provision was from the sale of DMG all proceeds above $750 needed to go to debt paydown. They have said on earnings call, that they will pay it all down, re-lever and then do their share buyback. They might be doing some in small amounts from current FCF.

Re: 1/3 of market cap being repurchased, they have guided to 3 to 3.5x leverage and have at times been comfortable being higher. So they have about 1x leverage to get to 3.5x which is $2,200 Ebitda (so $1.1 to $2.2B) and the company generates about $800 million of FCF so that would be $1.2 B over 18 months. So $2.3 to $3.4 B of repurchases. Mkt cap of $8.7 B. Implies 26% - 39% buyback.

Can go into more detail.
Title: Re: DVA – DaVita HealthCare Partners
Post by: Spekulatius on June 21, 2019, 09:04:52 PM
Their last guidance implied $575M in FCF ($1.375B operating cash flow -$800M in Capex). Even that looks like a stretch, given first quarter results.
http://pressreleases.davita.com/2019-05-07-DaVita-Inc-1st-Quarter-2019-Results (http://pressreleases.davita.com/2019-05-07-DaVita-Inc-1st-Quarter-2019-Results)

They need to turn the business around. Increasing leverage now with falling cash flow is risky.
Title: Re: DVA – DaVita HealthCare Partners
Post by: ander on June 24, 2019, 11:02:59 AM
Their last guidance implied $575M in FCF ($1.375B operating cash flow -$800M in Capex). Even that looks like a stretch, given first quarter results.
http://pressreleases.davita.com/2019-05-07-DaVita-Inc-1st-Quarter-2019-Results (http://pressreleases.davita.com/2019-05-07-DaVita-Inc-1st-Quarter-2019-Results)

They need to turn the business around. Increasing leverage now with falling cash flow is risky.

That was taking only low end of guidance for OCF and CapEx. OCF guidance was $1.375 B to $1.575 B. CapEx was $800 million to $840 million. Mid point of each is $1.475 B OCF - $820 million of capex which would be $655 million of FCF. Do not believe that is a stretch. I project $800 million of FCF. (Note: we are not adjusting for growth capex which would show higher FCF). But agree, to re-rate they need to grow EBIT and show consistent growth (historically, they had done a great job of beating and raising).
Title: Re: DVA – DaVita HealthCare Partners
Post by: zippy1 on July 09, 2019, 02:33:30 PM
Quote
DaVita, Fresenius Medical Fall on Trump Overhaul Report
Shares of dialysis providers sank on Tuesday amid reports that President Donald Trump will unveil a plan to overhaul the U.S. kidney disease treatment market.
Politico reported earlier that the Trump administration is due to announce a series of initiatives to encourage more kidney treatment at home, and away from standalone clinics. DaVita Inc. fell as much as 8.7%, the most since May 8, while Fresenius Medical Care AG’s American depositary receipts dropped 6.5%. The two companies control the largest share of the U.S. dialysis market through vast networks of clinics. American Renal Associates Holdings Inc. slid as much as 7.6%.

“The prospect of losing patients who cover facility and staffing costs would crimp Ebitda near term, though an official proposal has yet to be made,” Bloomberg Intelligence analyst Jason McGorman wrote in a note earlier, addressing the potential impact on DaVita.
Sell-side analysts have warned investors that a Trump speech Wednesday may bring some volatility for dialysis providers. Raymond James analyst Chris Meekins predicts the president could announce a goal of having 80% of kidney patients either receive a kidney transplant or use home dialysis by 2025.

When asked about Trump’s upcoming announcement, the Department of Health and Human Services pointed to a speech Secretary Alex Azar gave in March that emphasized the need for earlier detection of kidney disease to allow for more in-home dialysis.

https://www.bloomberg.com/news/articles/2019-07-09/dialysis-providers-fall-on-report-trump-is-mulling-an-overhaul (https://www.bloomberg.com/news/articles/2019-07-09/dialysis-providers-fall-on-report-trump-is-mulling-an-overhaul)
https://www.bloomberg.com/news/articles/2019-07-09/dialysis-providers-fall-on-report-trump-is-mulling-an-overhaul (https://www.bloomberg.com/news/articles/2019-07-09/dialysis-providers-fall-on-report-trump-is-mulling-an-overhaul)
Title: Re: DVA – DaVita HealthCare Partners
Post by: Foreign Tuffett on July 10, 2019, 10:19:36 AM
Quote
DaVita, Fresenius Medical Fall on Trump Overhaul Report
Shares of dialysis providers sank on Tuesday amid reports that President Donald Trump will unveil a plan to overhaul the U.S. kidney disease treatment market.
Politico reported earlier that the Trump administration is due to announce a series of initiatives to encourage more kidney treatment at home, and away from standalone clinics. DaVita Inc. fell as much as 8.7%, the most since May 8, while Fresenius Medical Care AG’s American depositary receipts dropped 6.5%. The two companies control the largest share of the U.S. dialysis market through vast networks of clinics. American Renal Associates Holdings Inc. slid as much as 7.6%.

“The prospect of losing patients who cover facility and staffing costs would crimp Ebitda near term, though an official proposal has yet to be made,” Bloomberg Intelligence analyst Jason McGorman wrote in a note earlier, addressing the potential impact on DaVita.
Sell-side analysts have warned investors that a Trump speech Wednesday may bring some volatility for dialysis providers. Raymond James analyst Chris Meekins predicts the president could announce a goal of having 80% of kidney patients either receive a kidney transplant or use home dialysis by 2025.

When asked about Trump’s upcoming announcement, the Department of Health and Human Services pointed to a speech Secretary Alex Azar gave in March that emphasized the need for earlier detection of kidney disease to allow for more in-home dialysis.

https://www.bloomberg.com/news/articles/2019-07-09/dialysis-providers-fall-on-report-trump-is-mulling-an-overhaul (https://www.bloomberg.com/news/articles/2019-07-09/dialysis-providers-fall-on-report-trump-is-mulling-an-overhaul)
https://www.bloomberg.com/news/articles/2019-07-09/dialysis-providers-fall-on-report-trump-is-mulling-an-overhaul (https://www.bloomberg.com/news/articles/2019-07-09/dialysis-providers-fall-on-report-trump-is-mulling-an-overhaul)

Some very brief Twitter commentary from a healthcare analyst on this

https://twitter.com/HedgeyeEEvans/status/1148998868824207360 (https://twitter.com/HedgeyeEEvans/status/1148998868824207360)
Title: Re: DVA – DaVita HealthCare Partners
Post by: thefatbaboon on July 11, 2019, 01:22:55 AM
It's funny the articles and tweets about Davita and Fresenius taking 20% of the Medicare budget.  These companies collect about 20bn in revenues total against a 700bn medicare budget.  And their net profit after expenses and reinvestment is peanuts in the scheme of the health system profit pool.  It's amazing how badly these dialysis companies have lost control of the narrative.  They must surely be the smallest, lowest margin, most un profitable part of the us healthcare system and their publicity has got so bad that even the fintwit community is lambasting them for gouging and over-earning  :o
Title: Re: DVA – DaVita HealthCare Partners
Post by: Cigarbutt on July 11, 2019, 05:54:02 AM
It's funny the articles and tweets about Davita and Fresenius taking 20% of the Medicare budget.  These companies collect about 20bn in revenues total against a 700bn medicare budget.  And their net profit after expenses and reinvestment is peanuts in the scheme of the health system profit pool.  It's amazing how badly these dialysis companies have lost control of the narrative.  They must surely be the smallest, lowest margin, most un profitable part of the us healthcare system and their publicity has got so bad that even the fintwit community is lambasting them for gouging and over-earning  :o
In 1973, Medicare in the US was expanded to cover all who needed dialysis (a first for a specific medical condition). FWIW, this is also when medicine became 'socialized' where I live; the establishment showed significant resistance but was seduced by the promise of more consistent payments, sweeping under the rug the growing but unrecognized issue of who was really in the driver's seat. In 1973, for the US, the initial expansion concerned about 10 000 patients and the expected inflation-adjusted cost was felt to never exceed about 1 billion in today's USD. The number of people covered has been multiplied by about 40 and costs have followed the tapeworm curve.

The outlook is meshed with capacity to adapt.

Under the Berkshire umbrella, recently, it has been decided to sell (unusual move) an insurance sub (Applied Underwriters) because of different vision and strategy among the various subs serving the workers comp market. I would say Berkshire Hathaway is in a similar situation today in the cost-value proposition in healthcare and will need to choose if they keep their DaVita position. Opinion: DaVita is relatively ill positioned to adapt. The outlook is related to the capacity to earn a reasonable return but the definition of 'reasonable' goes way beyond its financial boundary and politicians occasionally respond to their constituents (not meant to turn this into a political discussion, just meant to define the context in which dialysis providers operate).

https://fas.org/sgp/crs/misc/R45290.pdf
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on July 11, 2019, 07:12:21 AM
It's funny the articles and tweets about Davita and Fresenius taking 20% of the Medicare budget.  These companies collect about 20bn in revenues total against a 700bn medicare budget.  And their net profit after expenses and reinvestment is peanuts in the scheme of the health system profit pool.  It's amazing how badly these dialysis companies have lost control of the narrative.  They must surely be the smallest, lowest margin, most un profitable part of the us healthcare system and their publicity has got so bad that even the fintwit community is lambasting them for gouging and over-earning  :o
In 1973, Medicare in the US was expanded to cover all who needed dialysis (a first for a specific medical condition). FWIW, this is also when medicine became 'socialized' where I live; the establishment showed significant resistance but was seduced by the promise of more consistent payments, sweeping under the rug the growing but unrecognized issue of who was really in the driver's seat. In 1973, for the US, the initial expansion concerned about 10 000 patients and the expected inflation-adjusted cost was felt to never exceed about 1 billion in today's USD. The number of people covered has been multiplied by about 40 and costs have followed the tapeworm curve.

The outlook is meshed with capacity to adapt.

Under the Berkshire umbrella, recently, it has been decided to sell (unusual move) an insurance sub (Applied Underwriters) because of different vision and strategy among the various subs serving the workers comp market. I would say Berkshire Hathaway is in a similar situation today in the cost-value proposition in healthcare and will need to choose if they keep their DaVita position. Opinion: DaVita is relatively ill positioned to adapt. The outlook is related to the capacity to earn a reasonable return but the definition of 'reasonable' goes way beyond its financial boundary and politicians occasionally respond to their constituents (not meant to turn this into a political discussion, just meant to define the context in which dialysis providers operate).

https://fas.org/sgp/crs/misc/R45290.pdf

Footnote 38: Social Security Administration, “DI 45001.001 End-Stage Renal Disease (ESRD) Entitlement Provisions,” at https://secure.ssa.gov/poms.nsf/lnx/0445001001; and CMS, Medicare Coverage. In an effort to spur greater use of home dialysis, the End-Stage Renal Disease Amendments of 1978 (P.L. 95-292) eliminated the three-month waiting period for Medicare coverage if a beneficiary elected home dialysis treatment, subject to certain requirements. In addition, §2145 of the Omnibus Budget Reconciliation Act of 1981 (P.L. 97-35) instituted a new reimbursement formula that provided greater incentives for home dialysis treatment.

Me - Incentives for home dialysis have been around since 1981 & haven't taken hold. What has/have been the impediment(s)?

---

Page 18: When initially implementing the PPS, CMS set the bundled payment rate at 98% of the existing cost of dialysis services. In the American Taxpayer Relief Act of 2012 (P.L. 112-240), Congress authorized CMS to gradually reduce, or rebase, the PPS base rate to take into account cost savings from a sharp decrease in the use of intravenous drugs for treating anemia, along with other payment revisions.81 Congress has included provisions in the Protecting Access to Medicare Act of 2014 (P.L. 113-93) and other statutes making further adjustments to the PPS.82

Me - How can you expect a business to continue to operate if you demand that the companies lose 2% on their services? I knew this already but what am I missing? Is this what's going to happen to all healthcare & pharma providers in the coming years? If so, republican lawmakers need to quit screaming socialism.

---

As to increasing the supply of donor kidneys. What's Trump going to do, start using Mexican detainee kidneys?

---

I agree with thefatbaboon (I know I'm biased due to DVA ownership stake but) FinTwit shorts are representing here but don't seem to be attacking other areas of healthcare which, IMO, are operating under the same profit motives & are doing so in a far more abusive fashion (pharma).

---

I'm staying long & will absorb the pain until these assholes cover.
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on July 11, 2019, 09:04:07 AM

As to increasing the supply of donor kidneys. What's Trump going to do, start using Mexican detainee kidneys?


Squashing my own conspiracy theory.

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6127446/

---

I can't wait for Trump to Tweet

"Mexicans have bad kidneys & that's why we don't want them here."

 ;D
Title: Re: DVA – DaVita HealthCare Partners
Post by: thefatbaboon on July 11, 2019, 10:33:55 AM

"...so great looking and smart, a true Stable Genius!"  ;D ;D ;D ;D

He's on fire today so we could easily get onto Mexico's dodgy kidneys!



Title: Re: DVA – DaVita HealthCare Partners
Post by: thefatbaboon on July 11, 2019, 10:38:18 AM
It's funny the articles and tweets about Davita and Fresenius taking 20% of the Medicare budget.  These companies collect about 20bn in revenues total against a 700bn medicare budget.  And their net profit after expenses and reinvestment is peanuts in the scheme of the health system profit pool.  It's amazing how badly these dialysis companies have lost control of the narrative.  They must surely be the smallest, lowest margin, most un profitable part of the us healthcare system and their publicity has got so bad that even the fintwit community is lambasting them for gouging and over-earning  :o
In 1973, Medicare in the US was expanded to cover all who needed dialysis (a first for a specific medical condition). FWIW, this is also when medicine became 'socialized' where I live; the establishment showed significant resistance but was seduced by the promise of more consistent payments, sweeping under the rug the growing but unrecognized issue of who was really in the driver's seat. In 1973, for the US, the initial expansion concerned about 10 000 patients and the expected inflation-adjusted cost was felt to never exceed about 1 billion in today's USD. The number of people covered has been multiplied by about 40 and costs have followed the tapeworm curve.

The outlook is meshed with capacity to adapt.

Under the Berkshire umbrella, recently, it has been decided to sell (unusual move) an insurance sub (Applied Underwriters) because of different vision and strategy among the various subs serving the workers comp market. I would say Berkshire Hathaway is in a similar situation today in the cost-value proposition in healthcare and will need to choose if they keep their DaVita position. Opinion: DaVita is relatively ill positioned to adapt. The outlook is related to the capacity to earn a reasonable return but the definition of 'reasonable' goes way beyond its financial boundary and politicians occasionally respond to their constituents (not meant to turn this into a political discussion, just meant to define the context in which dialysis providers operate).

https://fas.org/sgp/crs/misc/R45290.pdf

Footnote 38: Social Security Administration, “DI 45001.001 End-Stage Renal Disease (ESRD) Entitlement Provisions,” at https://secure.ssa.gov/poms.nsf/lnx/0445001001; and CMS, Medicare Coverage. In an effort to spur greater use of home dialysis, the End-Stage Renal Disease Amendments of 1978 (P.L. 95-292) eliminated the three-month waiting period for Medicare coverage if a beneficiary elected home dialysis treatment, subject to certain requirements. In addition, §2145 of the Omnibus Budget Reconciliation Act of 1981 (P.L. 97-35) instituted a new reimbursement formula that provided greater incentives for home dialysis treatment.

Me - Incentives for home dialysis have been around since 1981 & haven't taken hold. What has/have been the impediment(s)?

---

Page 18: When initially implementing the PPS, CMS set the bundled payment rate at 98% of the existing cost of dialysis services. In the American Taxpayer Relief Act of 2012 (P.L. 112-240), Congress authorized CMS to gradually reduce, or rebase, the PPS base rate to take into account cost savings from a sharp decrease in the use of intravenous drugs for treating anemia, along with other payment revisions.81 Congress has included provisions in the Protecting Access to Medicare Act of 2014 (P.L. 113-93) and other statutes making further adjustments to the PPS.82

Me - How can you expect a business to continue to operate if you demand that the companies lose 2% on their services? I knew this already but what am I missing? Is this what's going to happen to all healthcare & pharma providers in the coming years? If so, republican lawmakers need to quit screaming socialism.

---

As to increasing the supply of donor kidneys. What's Trump going to do, start using Mexican detainee kidneys?

---

I agree with thefatbaboon (I know I'm biased due to DVA ownership stake but) FinTwit shorts are representing here but don't seem to be attacking other areas of healthcare which, IMO, are operating under the same profit motives & are doing so in a far more abusive fashion (pharma).

---

I'm staying long & will absorb the pain until these assholes cover.

Dont despair DooDiligence!  Luckily we have United Health, the hospital groups, and the pharma companies to protect us from Davita and Fresenius chiseling the system  ;D
Title: Re: DVA – DaVita HealthCare Partners
Post by: Cigarbutt on July 11, 2019, 05:02:25 PM
The Mexican level of care is an interesting reminder, a lot of respect has to be given to the US system for innovation and Kent Thiry agrees with the above arguments but dialysis treatment in the US is more expensive and shows poorer outcomes when compared to other similar developed countries.

Buying DVA a few years ago was prescient in the sense that there was huge potential for economies of scale and scope but the path going forward assumes that there will be more of the same or that it will be possible to adapt. The HHS Secretary has a plan in mind and I would not underestimate a person who is also called a czar and whose father suffered from kidney failure.

https://www.statnews.com/2019/05/29/dialysis-care-offers-lessons-for-achieving-health-equity-in-the-u-s/
https://www.kidney.org/news/hhs-secretary-azar-speaks-transforming-kidney-care-kidney-patient-summit


Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on July 11, 2019, 08:35:22 PM
The Mexican level of care is an interesting reminder, a lot of respect has to be given to the US system for innovation and Kent Thiry agrees with the above arguments but dialysis treatment in the US is more expensive and shows poorer outcomes when compared to other similar developed countries.

Buying DVA a few years ago was prescient in the sense that there was huge potential for economies of scale and scope but the path going forward assumes that there will be more of the same or that it will be possible to adapt. The HHS Secretary has a plan in mind and I would not underestimate a person who is also called a czar and whose father suffered from kidney failure.

https://www.statnews.com/2019/05/29/dialysis-care-offers-lessons-for-achieving-health-equity-in-the-u-s/
https://www.kidney.org/news/hhs-secretary-azar-speaks-transforming-kidney-care-kidney-patient-summit

Thanks.

I don't doubt Azar's motives but this seems like low hanging fruit when you take into consideration the savings that could be achieved in other areas of healthcare, in particular the PBM's & pharma.

---

Azar made the following statement on 10 July,

"For decades, across all of American healthcare, and kidney care in particular, the focus has been on paying for procedures, rather than paying for good outcomes."

https://www.hhs.gov/about/leadership/secretary/speeches/2019-speeches/remarks-on-advancing-american-kidney-health-initiative.html

This seems disingenuous given that pricing is transparent & Davita provides detailed information on outcomes. Unless their reports are falsified, they appear to be doing a good job.

https://www.davita.com/physicians/clinical

---

From the same "NHS July 10, 2019 remarks on advancing American kidney health initiative" link,

"We’ve set out specific, ambitious goals: reducing the number of Americans developing end-stage renal disease by 25 percent by 2030, reducing the number of Americans receiving dialysis in a dialysis center, from 2019 levels, by 80 percent by 2025, and doubling the number of kidneys available for transplant by 2030."

It's easy to toss up nebulous numbers (this administration does a lot of that) but how are you going to reduce ESRD & increase donors?
What does a 25% reduction even mean? And double donors while reducing patients?

I can see the shift to home dialysis being incentivized but what will happen to outcomes?

Home dialysis is not as easy as they are making it sound.

Patient training & monitoring will be needed.

(see attachments)

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The dialysis industry looks like the whipping boy in a world full of bad actors.

Why don't they force pharma transparency & put the hammer on Medicare Part D payments like they do on ESRD?

Betting on the rational behavior of politicians is probably not a good idea & I know that complaining doesn't provide anything worthwhile towards analysis.

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ESRD is not going away & I don't see how they're going to incentivize huge numbers of (edit: compatible) donors.

I'm going to trust that Davita will make the pivot into home dialysis & will continue to provide valuable services at a reasonable cost.

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Thanks again for taking the time to help.

I'm living up to my signature...
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on July 13, 2019, 08:53:38 PM
Why don't they force pharma transparency & put the hammer on Medicare Part D payments like they do on ESRD?

Betting on the rational behavior of politicians is probably not a good idea & I know that complaining doesn't provide anything worthwhile towards analysis.

I'm living up to my signature...

I guess this kind of answers my half baked remarks on pharma pricing?

https://www.forbes.com/sites/brucejapsen/2019/07/11/trumps-aborted-drug-pricing-rule-spares-middlemen-and-the-drug-industry/#3978214ad22e
Title: Re: DVA – DaVita HealthCare Partners
Post by: thefatbaboon on July 14, 2019, 01:28:01 AM
Why don't they force pharma transparency & put the hammer on Medicare Part D payments like they do on ESRD?

Betting on the rational behavior of politicians is probably not a good idea & I know that complaining doesn't provide anything worthwhile towards analysis.

I'm living up to my signature...

I guess this kind of answers my half baked remarks on pharma pricing?

https://www.forbes.com/sites/brucejapsen/2019/07/11/trumps-aborted-drug-pricing-rule-spares-middlemen-and-the-drug-industry/#3978214ad22e

That's a relief, poor PBMs. 

Now hopefully no more time is wasted on the pharma companies as well so we can all get back to focusing where the real fat is: Davita!

Davita is gouging the healthcare system about $6 an hour to administer 120 million hours of treatment to the terminally ill. 

Clearly that's where we should be focusing.
Title: Re: DVA – DaVita HealthCare Partners
Post by: UK on July 17, 2019, 10:53:01 PM
https://www.wsj.com/articles/cvs-begins-clinical-trial-for-home-dialysis-device-11563364801
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on July 18, 2019, 07:31:28 AM
https://www.wsj.com/articles/cvs-begins-clinical-trial-for-home-dialysis-device-11563364801

https://lemelson.mit.edu/resources/dean-kamen

http://www.dekaresearch.com/innovations/

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and holy moly, this is the guy who cleaned up restaurant drink counters (seriously brilliant & I'm not mocking him here).

https://www.coca-colafreestyle.com
Title: Re: DVA – DaVita HealthCare Partners
Post by: cubsfan on July 22, 2019, 05:24:03 AM
Finally, after a long wait:

http://pressreleases.davita.com/2019-07-22-DaVita-Commences-Self-Tender-Offer-To-Purchase-For-Cash-Shares-Of-Its-Common-Stock-For-An-Aggregate-Purchase-Price-Of-No-More-Than-1-2-Billion-At-A-Purchase-Price-Of-Not-Less-Than-53-50-Per-Share-And-Not-More-Than-61-50-Per-Share

Title: Re: DVA – DaVita HealthCare Partners
Post by: Charlie on July 22, 2019, 06:34:55 AM
https://www.marketwatch.com/story/davitas-stock-rallies-after-profit-outlook-raised-2019-07-22?siteid=yhoof2&yptr=yahoo
Title: Re: DVA – DaVita HealthCare Partners
Post by: Charlie on August 19, 2019, 06:14:32 AM
https://finance.yahoo.com/news/davita-announces-preliminary-results-self-103000158.html

Cheers!
Title: Re: DVA – DaVita HealthCare Partners
Post by: DooDiligence on August 19, 2019, 06:35:50 AM
https://finance.yahoo.com/news/davita-announces-preliminary-results-self-103000158.html

Cheers!

Yeah, I sold my all shares & if the price drops again, I may do a repurchase myself.