Author Topic: DVA DaVita HealthCare Partners  (Read 215746 times)

maybe4less

  • Full Member
  • ***
  • Posts: 210
Re: DVA DaVita HealthCare Partners
« Reply #110 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.


rb

  • Hero Member
  • *****
  • Posts: 3153
Re: DVA DaVita HealthCare Partners
« Reply #111 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.

roark33

  • Hero Member
  • *****
  • Posts: 681
Re: DVA DaVita HealthCare Partners
« Reply #112 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.

 


flesh

  • Sr. Member
  • ****
  • Posts: 331
Re: DVA DaVita HealthCare Partners
« Reply #113 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.

jgyetzer

  • Jr. Member
  • **
  • Posts: 68
Re: DVA DaVita HealthCare Partners
« Reply #114 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.

Spekulatius

  • Hero Member
  • *****
  • Posts: 4297
Re: DVA – DaVita HealthCare Partners
« Reply #115 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.
« Last Edit: May 17, 2017, 05:05:57 PM by Spekulatius »
Life is too short for cheap beer and wine.

flesh

  • Sr. Member
  • ****
  • Posts: 331
Re: DVA DaVita HealthCare Partners
« Reply #116 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.


rb

  • Hero Member
  • *****
  • Posts: 3153
Re: DVA DaVita HealthCare Partners
« Reply #117 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?

winjitsu

  • Full Member
  • ***
  • Posts: 156
Re: DVA DaVita HealthCare Partners
« Reply #118 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 :)]

DeepSouth

  • Full Member
  • ***
  • Posts: 102
Re: DVA DaVita HealthCare Partners
« Reply #119 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.