Author Topic: DVA – DaVita HealthCare Partners  (Read 53466 times)

MrB

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 832
Re: DVA – DaVita HealthCare Partners
« Reply #190 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




Rasputin

  • Full Member
  • ***
  • Posts: 170
Re: DVA – DaVita HealthCare Partners
« Reply #191 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). 

Rasputin

  • Full Member
  • ***
  • Posts: 170
Re: DVA – DaVita HealthCare Partners
« Reply #192 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.

MrB

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 832
Re: DVA – DaVita HealthCare Partners
« Reply #193 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!

MrB

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 832
Re: DVA – DaVita HealthCare Partners
« Reply #194 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

MrB

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 832
Re: DVA – DaVita HealthCare Partners
« Reply #195 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.

Green King

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 722
Re: DVA – DaVita HealthCare Partners
« Reply #196 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.
GK

MrB

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 832
Re: DVA – DaVita HealthCare Partners
« Reply #197 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. 

Green King

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 722
Re: DVA – DaVita HealthCare Partners
« Reply #198 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?
GK

LC

  • Hero Member
  • *****
  • Posts: 1857
Re: DVA – DaVita HealthCare Partners
« Reply #199 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.
"Lethargy bordering on sloth remains the cornerstone of our investment style."
------------------------------------------------------------------
brk.b | khc | nke | mo | renx | c | wppgy | dis | cmp