Good evening. My name is Sheila, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the DaVita Fourth Quarter 2020 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press star then the number two. Thank you. Mr. Gustafson, you may begin your conference. Thank you. Welcome everyone to our fourth quarter conference call. We appreciate your continued interest in our company. I'm Jim Gustafson, Vice President, Investor Relations, and joining me today are Javier Rodriguez, our CEO, and Joel Ackerman, our CFO. Please note that during this call, we may make forward-looking statements within the meaning of federal securities laws. All of these statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. For further details concerning these risks and uncertainties, please refer to our fourth quarter earnings press release and our SEC filings, including our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, and any subsequent filings we make with the SEC. Our forward-looking statements are based upon information currently available to us, and we do not intend and undertake no duty to update these statements except as may be required by law. Additionally, we'd like to remind you that during this call, we will discuss some non-GAAP financial measures. A reconciliation of these non-GAAP measures to the most comparable GAAP financial measures is included in our earnings press release submitted to the SEC and available on our website. I will now turn the call over to Javier Rodriguez. Thanks, Jim. Good afternoon. Thank you for joining the call today to discuss our 2020 performance and thoughts on 2021. For DaVita, 2020 showcased our caregivers and their commitment to patients with kidney disease. COVID created challenges that we could never have imagined one year ago. These challenges, clinical, operational, and financial, led to opportunities for us to harness the strength of our teams and our platform to support our patients and our community. When I reflect on the year, three things particularly stand out. First, our caregivers team's focus on health and safety of our patients. Second, the creativity and innovation showed by our organization to adapt to the changing landscape. Third, the love, empathy, and dedication of our teams to each other and to our patients. Despite the good work in 2020, the challenges of COVID remain. The latest surge has been particularly difficult for our patients and our care teams. The disproportionate impact COVID has on patients with underlying health issues and the elderly continues to manifest itself in the dialysis community. The higher rates of patient mortality that we talked about last quarter unfortunately accelerated in November and continued through January. We estimate that our patient census at the end of 2020 was approximately 7,000 less than what it would have been otherwise absent COVID. As we look to the future, some leading indicators such as fewer new COVID cases, fewer hospitalizations, and the recent vaccination effort give us hope. This leads me to our clinical focus on vaccine. Over the past few months, we've been engaging with the federal government, with state agencies, and the CDC to identify ways for our caregivers and patients to gain access to the vaccine. We are uniquely positioned to administer vaccines safely and efficiently in our clinics given our infrastructure, our clinical expertise delivering flu vaccines each year, and our ability to monitor patients' health each week. Our conversations with the CDC and federal government are ongoing, and we're getting set up in their direct vaccine distribution system to be ready to start the moment we get the green light. In states like Minnesota and several large counties across California, where we have been able to secure direct allocation, vaccination rates are as high as 70%, both because we have access, but also because general acceptance rates are higher when patients see other patients receiving the vaccine. Across much of the rest of the country, the logistics of signing up and the access at separate vaccine sites has been challenging for many patients. Therefore, our ultimate goal remains to obtain direct allocation from the federal government. On to our financial performance. Despite the challenges of COVID, we significantly outperformed our original financial guidance for 2020. We knew it would be a tough year to deliver profit growth given the headwinds from calcimimetic revenue decline and the cost of fighting the ballot initiative in California. COVID hit, the challenge to deliver growth only increased as COVID created significant uncertainty on our financial results. Despite this uncertainty, we grew our adjusted operating income by double digits absent the impact of calcimimetic, ballot costs, and net COVID impact. We delivered growth in adjusted earnings per share from continuing operations of 34% and generated free cash flow from continuing operations of almost $1.2 billion while returning $1.4 billion to our shareholders through our share buyback. In Q4 specifically, we experienced a net COVID impact of approximately $60 million, which was higher than we expected. Through the first three quarters of the year, the net COVID impact was reduced as it increased travel and G&A spend. In Q4, we saw an accelerated impact of higher mortality coming out of the holiday season, combined with fewer offsets, and results with a negative COVID impact that was roughly $35 million higher than what we anticipated, bringing our Q4 earnings below the guidance range we provided last quarter. Excluding this increased COVID impact in Q4, our earnings. As we look ahead to the coming year, our guidance range will be $7.75-$8.75 per share, which incorporates our expected impact of COVID and demonstrates our belief in the underlying earnings growth of our business. We believe that our core performance in 2020 creates a solid foundation for us to deliver on the long-term financial goals. Before I hand it over to Joel to cover our quarter and our outlook in greater detail, let me touch briefly on our recent Medicare Advantage enrollment. As a reminder, 2021 is the first year in which existing dialysis patients have the option to enroll in a Medicare Advantage plan. Previously, MA coverage for ESRD had been limited only to patients already enrolled in MA plans before kidney failure, or to certain patients in MA Special Needs Plans. By the end of 2020, the percentage of our Medicare patients who were enrolled in MA plans was approaching 30%. Based on our preliminary enrollment data, we now expect our percentage of MA patients among Medicare patients to be in the mid-30s in 2021, which is still below the national average. As you would expect, the new enrollment was predominantly from Medicare patients previously without secondary coverage, because these patients will benefit from the expanded benefits of MA and the cap on out-of-pocket expenses. The growth in the ESRD MA population creates opportunities for us to build additional momentum towards value-based care where we've been investing. This is an exciting trend, and we're eager to lead the way with our payer and nephrology partners to deliver comprehensive care to our patients, which we believe will help lead to better clinical outcomes and lower overall cost of care. Our 2021 guidance range reflects our expected cost and investment to build our model of care for our value-based agreements. Now, let me hand it over to Joel. Thanks, Javier. I'll begin with some additional color on our Q4 results and then focus on our 2021 guidance. Our full year 2020 results exceeded our initial expectations, and the core earnings power of the business remains strong. Our Q4 results reflect the strong headwinds from the latest COVID surge. Operating income was $382 million, and earnings per share from continuing operations was $1.67, below the guidance from our last earnings call. The middle of our adjusted EPS guidance range contemplated a net headwind from COVID of approximately $25 million. As Javier referenced, the actual impact was approximately $60 million. Excluding the impact of COVID, our EPS from continuing operations would've been in the middle of our adjusted guidance range. Relative to Q3, we experienced changes in, first, mortality, which has had a compounding effect throughout the year. Second, a reduction in expense offsets in the quarter, particularly related to the healthcare costs for our teammates, which had helped to temper the net financial impact of COVID in Q2 and in Q3. Third, [high help] our frontline teammates with the hardships of COVID and higher PPE costs. Other than COVID, notable factors for the quarter include non-acquired growth of -0.3% due to the monthly mortality trend worsening during the quarter. Revenue per treatment was up in the quarter as a result of normal fluctuations in Medicare reimbursement and seasonality. Patient care costs increased sequentially, primarily due to various impacts of COVID that I previously mentioned. G&A decreased sequentially, primarily due to the elimination of bad debt costs. We saw continued core profit in our international business offset by a $6 million foreign exchange loss. In the fourth quarter, we purchased 4.2 million shares of our common stock. Additionally, to date in 2021, we repurchased approximately 1.1 million shares. Our share count as of today is approximately 109 million. When estimating our diluted share count in your models, you need to consider the diluted impact of EPS of outstanding equity awards, which in the fourth quarter was approximately 4.3 million shares. Looking forward to 2021, as you can see in the press release, our guidance for adjusted operating income is $1.675 billion-$1.825 billion. Adjusted earnings per share is $7.75-$8.75. Free cash flow is $900 million-$1.15 billion. Our guidance ranges are wider than in a typical year. This is the result of the wide range of potential impacts of COVID on our 2021 results. At the midpoint of our range, we have incorporated an estimate of the net cost associated with COVID of approximately $200 million. Declining treatment volume as a result of higher mortality is the primary driver of the growing impact relative to 2020. Our guidance assumes that the higher mortality will continue for the first half of 2021, and return closer to pre-COVID levels in the second half of the year as a result of widespread use of effective vaccines. However, COVID does introduce a significantly higher level of uncertainty in our forecast, and there are certain scenarios that could result in our performing outside this range. Looking through the impact of COVID, we believe that 2021 will be another year of solid underlying operating income growth with strong free cash flow, and we expect to continue to invest in our strategy and in innovation. Let me now provide a few additional details on our outlook. Ballot costs should be a significant year-over-year tailwind as we spent approximately $67 million in 2020 to defeat the ballot initiative in California. As 2021 is not a general election year, we do not expect this expense to occur. Calcimimetics should be relatively flat year-over-year, although the quarterly contribution will be evenly spread throughout 2021 rather than the declining trend we experienced in 2020. That calcimimetics has become a permanent component of our Medicare run rate, we will no longer call out the financial impact going forward. Other swing factors include the benefit from increasing Medicare Advantage enrollment offset by our investment in our value-based program. These investments include G&A costs associated with enhancing our model of care and start-up costs associated with new contracts. A few more quick notes on 2021. We expect our capital expenditures in 2021 to be similar to our 2020 spend. A reminder that our current run rate interest expense is $60 million-$65 million per quarter. We expect tax rates to remain between 26% and 28%, absent any material changes from the new administration. As usual, Q1 has two fewer treatment days in Q4 and higher bad debt and payroll taxes. Year-over-year, Q1 will have 0.6 fewer treatment days than last year because of the leap year. With that, operator, please open the line for Q&A. Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star one, unmute your phone, and record your name clearly. If you need to withdraw your question, press star two. Again, to ask a question, please press star one. Our first question will come from Justin Lake with Wolfe Research. Your line is open. Thanks. Good afternoon. Appreciate the details there. I wanted to follow up on 2021 and just make sure I understand some of the moving parts here first. Joel, you said $200 million from COVID. Is that comparable to, my math is $60 million this year when I add sequestration and the COVID costs and the savings from COVID together? Yeah. That leaves $140 for mortality. I'll remind everyone that there's a lot of uncertainty associated with COVID. We try to be helpful by focusing on a scenario in the middle of our range. Yes, the $200 is apples to apples with a roughly $60 million number from 2020. Okay. The mortality is the remainder of that $140. On Medicare Advantage, were you saying the costs are an offset? Does that mean Medicare Advantage overall is a net wash, or is there still some benefit from Medicare Advantage? Any color you can add to that in terms of how meaningful it is would be helpful. Yeah. The way I think about the MA is the penetration rate went up, call it 5%. A couple of percent is what we would normally see in a typical year, and 3% is the result of the Cures Act and the fact that some of our patients had access for the first time. We think about the upside from that 3%, and that's in the same range as the excess spending we're doing in 2021 related to the growth of our value-based contract business, what we call IKC or Integrated Kidney Care. A positive from that extra 3%, an investment related to Integrated Kidney Care, and those two things are roughly in the same ballpark. Think of those as a wash in terms of impact on 2021 OI growth. Got it. Last question from me. I've been covering the stock a long time, and I've always struggled to think about the decremental margins on lost membership, patients, right? And patient treatments. I assume with the mortality is probably more focused on the Medicare side, number one. Can you confirm that to me? Secondly, can you help us understand, it's really helpful, the $140 million, but how much revenue are you losing there so we can try to understand the decremental margin on that lost business, and maybe think about as things normalize, what that could be going forward? Sure. First, let me just clear up on the you keep using the $140. Let me clear up how we're thinking about the $200, and it, in many ways, mimics what we saw in 2020. I would bucket our COVID impact into three categories. One is the direct costs associated with COVID, and think of enhanced benefits we're giving to teammates to help them with the hardship associated with COVID. Think of increased PPE spend. That's bucket one. Bucket two are the offsets. Lower T&E, the Medicare sequestration revenue, lower benefits associated as a self-insured employer. What we saw in 2020 is those were big numbers, but they generally offset each other. It wasn't true quarter to quarter, and that's why you see some of the big swing from Q3 to Q4. If you look at the full year, those two numbers offset each other, and the net impact in 2020 was the result of this accumulating lost treatments associated with some of our patients passing away as a result of COVID. You can think of $60 million as the impact in 2020 associated with mortality. That $60 million in the scenario we laid out grows to $200 million next year. Again in 2021, we're anticipating more or less that the increased cost will be offset by the offsets, although the costs will come down and the offsets will come down. The nature of the cost will be a little bit different. PPE, we anticipate will remain elevated as the unit cost of some of the PPE stays high. Obviously, we'll keep the sequestration for Q1, that will go away. We think T&E will remain low. The health benefits associated with teammates will come down. Again, direct costs and offsets blend to roughly zero, and the $200 million is the impact from mortality. Now let me get to your fundamental question. Two things. Yes, the patients who are passing away from COVID are older on average than our average patient, and as a result, they're more likely to have Medicare and the commercial mix there is lower. In terms of thinking about how it impacts our cost structure, it's tough to model. It depends on where these patients are, how long it takes, over what period this extends. It is safe to say that our G&A, you can think of it as relatively fixed, and a majority of our patient costs are variable. Thanks for the call. Thank you. Our next question will come from Pito Chickering with Deutsche Bank. Your line is open. Good afternoon, guys. Thanks for taking my questions. To Justin's question, if we take the midpoint of guidance and add $200 million to it, the back half of the year is typically over 50% of your operating income for the year. Does that mean the operating income for the back half of the year should be above $975 million? No. Well, are you saying excluding COVID? Correct. You said that COVID is impacting in the first half of the year and then minimal in the back half of the year. Just curious, kind of help me think about the back half of the year, sort of excluding COVID or even actually within your assumptions, kind of how the back half of your operating income should be. Sure. Let me clarify what we meant by the front half of the year. What we were saying in the scenario we're painting there is that the increased mortality that we are seeing in our patient population as a result of COVID would be highly concentrated in the front half of the year. That though, the lost treatments associated with those patients who unfortunately have passed away early, that remains through the back half of the year, and unfortunately will remain through 2022. Those treatments are lost, and what you would see in the back half of the year is you'd hopefully see NAG bottoming out and starting to increase in the back half of the year. It will take some time for the lost treatments to play through the system. I don't think you can say the back half of the year will not be impacted by COVID. It certainly will be impacted by COVID. Okay. That's a nice segue for the 2021 guidance. Can you help us, because you guys didn't provide revenue guidance, can you just help us think about sort of where first quarter treatment growth will be, and then where you're modeling the ranges of fourth quarter treatment growth to be? Has the incidence of the ESRD returned to normalized levels? Are you seeing some modest tailwinds in the lack of kidney transplants? Yeah. If you think about all the other factors that impact NAG in terms of treatment and volume-- in terms of transplant volume and new to ESRD admits, that stuff has largely returned to normal. We're not anticipating much impact of that. The NAG story for 2021 is largely around the mortality question. If you think about Q1, and I'll talk in terms of the NAG, we see NAG continuing to decline in Q1 and then again in Q2, and this is really driven by this scenario we've painted of increasing mortality. It's hard to know where it will bottom out. Again, there's a lot of uncertainty here, but in terms of trying to see what the NAG might be in Q2, you could anticipate something as low as - 2% or even - 3% for that one quarter, and then it'll start to recover from there. If you thought about a full year 2021 NAG, again, we're not guiding to NAG, but just to help you all think about this, I think it's safe to think of a negative NAG for the full year, certainly, probably, I think it's reasonable to model it as somewhere in the - 1% to - 2%. You don't see NAG really return. Remember, NAG is a year-over-year number. You wouldn't see it return to normal till mid-2022. The one other thing I'd point out about NAG is once the mortality has worked its way through the system in terms of on a quarterly basis, we're not seeing excess mortality. Once you've had a full year for the lagging effect of NAG to play through, then you would anticipate us having a bit of a tailwind associated with NAG. The unfortunate mortality that we've seen as a result of COVID should lead to a lower mortality over the next few years as a result of some of the patients who passed away of COVID, would've otherwise passed away in 2022 or 2023, et cetera. You'll certainly see a real headwind on NAG in 2021. You'd expect a bit of a hangover from that in 2022, but going forward from the back half of 2022, and again, this is all caveated on our scenario whereby the vaccines work and our patients get access to them, you'd start seeing a NAG that would be higher than normal in the back half of 2022. I apologize for how many numbers I'm throwing around and how confusing this can be. If anything wasn't clear, please follow up. Great. Thanks so much. Our next question will come from Andrew Mok with Barclays. You may proceed. Hi, good afternoon. Wanted to follow up on the MA discussion. Can you speak to some of the value-based arrangements that you were able to strike with your MA partners for 2021, both in terms of construct and materiality to your patient base? Andrew, let me grab that. The reality is that we have a lot of different structures. If you look at just historically, we had the Special Needs Plans, and then we added the ESCO models, which were the CMMI models. Those are now winding down. Of course, CMMI came up with new models. In that, we have the four choices that CMMI has, and then we had the executive order. That's on the government side. There's a fair amount of innovation on the value base. On the commercial side, we of course, are now doing more with our MA partners, and so we've structured anything from shared savings to something that looks a little more like a full cap. As you can see, the menu is extensive, and the more important thing to grab out of it is that we're committed to moving to value-based, and we're taking bite sizes to make sure that we can deliver on all the commitments that we're making. That's why we're investing to make sure that we can deliver on whatever way the format comes. Does that help, Andrew? Yeah. Do you have a patient number in terms of mix, in terms of what's in value-based arrangements today? We do, but that number is gonna fluctuate dramatically because of the filing of all these government CMMI products, and so we are not sure how that whole process is gonna play out since they start in April and how many patients are gonna enroll. That'll be the bulk and the largest size of it. Got it. Okay. That's helpful. Can you comment more broadly on how the pandemic and excess mortality is influencing your strategy around patient clinic optimization and home dialysis more broadly? Do you see an acceleration in both of those initiatives playing out over the next 12 to 18 months? Thanks. Appreciate it. The short answer is no, because the most important thing is that we have the modality of choice for the patient and the physician that think it's appropriate for the right care, and so that is first and foremost and the first thing that is considered. Secondly, of course, if there's an area that's severely impacted, we are looking at that to see what capacity is in those centers. We're taking a close look at it. As you can imagine, our centers are needed in most of these communities, and it's something that we have to be very responsible of, because if you have mortality, there's still other patients there. As you know, for a very long time, we've carried several hundred centers that have lost money. It's a very difficult decision, one that we don't take lightly, whether we close a center or not. Got it. Just lastly, you mentioned that the vaccine rates are as high as 70% among your patients in some geographies. Do you have a vaccination rate for your total patient population today? Thanks. Yeah. The patient vaccine rate is low, the teammate vaccine rate is actually starting to get into the 40%. We are working, as I said in the remarks, very diligently with the government, because our hope is that we can get direct allocation. If we were to use the normal flu vaccine as an example, we get close to 90% across the entire cohort, and we do it in a very quick time period. We're making a case to the government. Of course, as you know and you've read, there's a lot of demand in a lot of different groups. We're trying to break through that line. Got it. Thanks for all the color. Thank you. Our next question will come from Kevin Fischbeck with Bank of America. Your line is open. Great. Thanks. Wanted to ask a little bit more about the MA investments. It sounds like it's going to offset the benefit from it this year. Are these investments ones that you need to kind of get in and then that book of business will become more profitable over time? Or are you making an investment, kind of assuming that there'll be another 5% or 10% patients ultimately moving in, so this is kind of an investment that you're going to need more MA patients to come in to actually kind of leverage and start to make a profit on? How should we think about the margin profile of MA patients over time that are in a capitated arrangement? Yeah. There's a lot we're going to learn about that over the next few years, Kevin, but I think low to mid single digits is a reasonable margin if you think about it as using a full cap kind of accounting approach on some of these. We don't take in all the revenue, so that plays with the margin. In terms of a margin per patient, you'd wind up at about the same dollar amount. Kevin, maybe let me pull up just a little, because it might not be clear what kind of investments we're making for value-based. There's two categories that I think of. One is sort of G&A stuff, software, models of care for non-ESRD things like diabetes, mental health, end of life, those type of models that would scale in different kinds of frameworks. There's a startup cost for each individual contract that has a custom element to it, so care models, health assessments, and other things that are specific to each contract. Hopefully that helps. Yeah, no, that does. I guess just to make sure I'm clear about when you talk about low double digits, given your point about the revenue, I think that the revenue for a typical dialysis patient in MA is about $96,000, at least in premiums. Are you talking about something like 85% of that number as kind of how you're thinking about the revenue, or are there other adjustments that I'd have to make? I would say if I were trying to model that, again, a lot of uncertainty going forward, I would think about us making a margin on the component of the cost that is not dialysis. Think of us as a medical manager, a value-based care deliverer on the, call it two-thirds of that $90,000 that doesn't go to dialysis. The dialysis cost is relatively fixed. I'd apply the margin number to that $60,000 number. Okay, that's helpful. I guess the 7,000 patient impact from mortality, I guess that's about 3% to treatments in the quarter. Does that mean that you think that a normalized treatment growth for the business is now 3%? I mean, you guys have been doing more like 2% or even less kind of heading into COVID. Is that where you think things ultimately get back to post-COVID? Are you kind of saying that those other dynamics have normalized, but only because of COVID, and when COVID goes away, those factors will come back in and lead to a sub three industry growth? Kevin, I appreciate the math you're trying to do, which is use the loss treatment count to back into what our normal NAG would've been. It's a very tough piece of analysis to do. The 7,000 was an end of quarter number, you can't just multiply that. It was actually a little bit more weighted towards November and December when the spike began. I don't think you can back into a NAG number. Frankly, we're having trouble backing into it because there is a lot of play in the question of excess mortality and which of these patients really passed away of COVID versus other things. I'd avoid trying to interpolate to what our underlying NAG is. Okay, just last question. The guidance is, as you mentioned, a little bit wider than normal, and I understand COVID creates a lot of uncertainty. Is it just really this mortality thing? Is that the thing that we should be watching most, or are there other kind of major swing factors we should be keeping our eye on? Well, I think there are a bunch of other swing factors that could impact the year. If I were to run down the list, obviously there's the effectiveness of the vaccine and the variants, and that will play through on the mortality line. There's the potential economic impact of COVID and how that could play through with private pay mix. Early in the pandemic, we talked a lot about that, and we were very concerned about it. We've been very pleased with the resiliency our patients have shown in terms of maintaining their coverage, but I think you can't lose sight of that. PPE costs are something that remain a relatively dynamic issue, less in terms of volume utilization and more in terms of price. Additional government assistance is certainly a possibility, extending the sequestration halt or something like that. Those are a few things I'd point out to keep your eye on. That said, yes, the mortality question is certainly the one that is dominating our modeling for 2021. All right. That's helpful. Thanks. Our next question will come from Lisa Clive with Bernstein. Your line is open. Hi there. A few questions. Number one, just on the $200 million headwind from the COVID mortality, and I guess $140 million of that is incremental. Given your guidance, it looks like you're pretty confident that you can sort of fully offset that, at least at the midpoint of your OI guidance. I'm just trying to understand where this incremental cost savings is coming from, because you've been a pretty lean organization for a long time. Just trying to understand sort of what are the additional levers there, especially when you do expect NAG to be potentially even slightly down for the year. Second question, just on home modalities. Obviously, you have to just do what's best for each patient, but have you seen increased interest in home modalities since the pandemic hit? Specifically, as we think about the shift to home, whether it's PD or HD, are you catching these patients early enough that it makes a difference in terms of whether they stay employed, potentially keep their private insurance where they otherwise would have dropped their job and either gone into COBRA for a period of time or just switched directly into Medicare? I guess I'm really just trying to understand the longer-term impact on patient mix from a greater use of home. Thanks. Sure. Lisa, let me take the first, and I think Javier will grab the second one. As I interpreted your question is, what's the bridge from 2020 to 2021 given the headwind? Here's the way I think about it. If you take our non-GAAP, our adjusted OI in 2021 and add back the $67 million for the ballot initiatives, and then add back the $60 million for COVID, and then you compare that to the middle of our range, adding back COVID, $1,950, you'd get about a 4% growth rate. That's how I think about how is the core doing year over year. To me, 4%, it's a solid, stable year of the core with this very challenging, very uncertain calcimimetic COVID on top of it. The 4%, it's kind of what our normal year would look like, low to mid-single digit revenue growth, stable margins, again, driven by RPT increases below inflation, good cost management. I talked about the MA and the IKC offsetting themselves. That's how I think about the 4% growth. It's a stable, steady year masked by COVID. Lisa, let me grab the second part of that, which is on home modality. The short answer is we have a lot of excitement on the home modality, because it really enhances the quality of life. Our physicians and our patients are responding quite well, and we are innovating a lot so that our patients, when they're home, they have the confidence and security as if they were in center. We're developing a lot of tools like remote monitoring and telehealth and other things so our patients can feel that security of doing dialysis at home. It does continue to grow in a significant way. As it relates to getting the patients earlier, and what does that have impact on mix, the short answer is that that's work in progress. We continue to work with our physician practices to make sure that they're educating the patients, and then we've developed world-class, free to anyone in the community to access training so that you can know your modality selection. The hope is that, of course, you make your selection early enough so that you can have the transition without that big spike or without any depression or mental issues as you acclimate to dialysis. Okay, thanks. Just one follow-up for Joel on the cost structure. Can you just remind us of where you are with your EPO contracts with Amgen? I know you signed a long-term contract with them. When does that renew? Is that a potential avenue for lower costs? Yeah. Lisa, the contract ends at the end of 2022. As you know, we've always been a little challenged as a result of confidentiality agreements in terms of what we can say. It'll certainly be interesting times as that contract ends regarding biosimilars and some other dynamics. It remains to be seen what's going to happen then. Okay. Thanks for the timing on that. That's helpful. Thanks, Lisa. Thank you. Next, we will hear from Whit Mayo with UBS. You may proceed. Thanks. Good afternoon. Back on the mortality dynamic, I was just thinking about hospitalizations that don't result in death, and based off of some of the industry data that we've seen, I don't know if this is right or not, but it's got the rate of hospitalization may be 3x - 4 x higher than the deaths. I know this is dangerous but would imply maybe 20,000 of your patients could have been hospitalized around the same time that you experienced this higher mortality. I can appreciate it's hard to parse out, did COVID drive the mortality or was this another factor? I'm just broadly kind of wanted to hear what you're seeing with just overall hospitalizations and missed visits. I mean, the numbers cumulatively are probably fairly low. Early in the pandemic, we actually saw a benefit from lower missed treatments, which you would suppose is our patients avoiding the hospital. That has largely normalized, so isn't really playing through on the treatment numbers right now. I would remind you, part of our platform, we have a decent-sized acute business, and that has seen some benefits, as a result of this. In terms of the overall impact on the year, it's not significant. Right. I'll stop the mortality. I think that pretty much covers it. Maybe just one other question I had was, I think you guys are back in network with Humana. Maybe technically you were never out of network. That's probably the more accurate statement. Just anything to share about that contract and maybe more broadly, just an update on the network adequacy modifications and any changes that you're seeing differently with how payers are behaving. Just kind of curious on that topic. Sure. Whit, let me grab that one. This is Javier. I think the great outcome of the Humana negotiation is that we both ended up with our goals accomplished. Both Humana and DaVita wanted to make sure that more patients had access, that we were innovating and making sure that we were creating what we call a win-win arrangement, that had better outcomes at a reduced cost. That, unfortunately, has a lot more complexity and takes a lot longer because you have to do a lot of analytics to make sure that we're set up to be a win-win. In general, the MA book, as we told you last time, is mostly contracted and has been for quite some time. The timing of the Humana contract just happened to be at the end of the year. It was, obviously because of its size, it's more complicated. We're very happy with how it ended up, and we're looking forward to a multi-year relationship that delivers on this value-based contract. Okay. Actually just one last one. Joel, I don't think you want to give specific guidance around the quarters here, but any way to think about what% of your earnings you think you may have in the first half versus the second half? I'd hate for us all to get things terribly wrong with how you guys internally are looking at the cadence of earnings. Look, Q1 is usually a weak quarter. We've got higher bad debt, higher payroll taxes. One other thing that's slipping my mind. I'd say relative to last year, it'll be very different because last year, the calcimimetics number really skewed things, as did the ballot initiative. Oh, yeah, there are fewer treatment days in Q1, sorry. I don't think it'll be dramatic. I don't think the pattern will be that different than a normal year, and given the fact that the mortality issues that we are raising will really spike in Q1 and then come down, it's not unreasonable to think of COVID as being relatively evenly spread across the year. Okay. As I think about the first half versus the second half, are you saying we should apply like normal seasonal patterns? Looking back at 2019, 2018, 2017, we could look at that as a reasonable break between your first and second half? I think if you're looking at the core, yes, you could look at historical reasonable patterns and COVID's uncertain enough over the course of the whole year. How it's going to play out quarter by quarter is hard to predict. We obviously saw that in Q4. A relatively even spread across the year seems like a reasonable starting point for a very uncertain number. The big assumption there, Whit, is of course, if the mortality is in the front end of the year, then it continues to play out, which is very different than what happened in 2020, which happened to be the spike ended up in the back end of the year. Analytically, of course, that is on the premise that the vaccines work and that the fourth quarter and the third quarter look more normal than where we are now. Yeah. Thanks for all the color. Thanks. Thank you. Thank you. Our next question will come from John Ransom with Raymond James. Your line is open. Good evening. Given that I'm always looking for simple answers to complicated questions, if we think about 2021 versus 2020, what was your MA mix in 2020? I know you said 2021, how does that compare to 2020? I think what we said is that at the end of 2020, we were getting close to the 30%, and we're now in the mid-30s. Remember, the rest of the market is roughly around 40%, meaning the non-dialysis- No, I know. What was the average for 2020? I know you said the end, what was it? I remember it was mid-20s. Well, if you assume that it moves roughly two percentage points in the year, you can do the math around that, but it's high 20s. I can do 30 minus two, I think. All right. Well, you are good at simplifying things. Yeah. I am simple. Continuing on the simple theme, I know you're going to spend down some of this advantage, but I think we were thinking about the rate lift at something around $50 a treatment. Is that crazy? From Medicare fee for service to Medicare Advantage. Yeah, Whit, I'm sorry, John, we've avoided commenting on this number for a while. You can imagine us sitting across the table from an MA plan and just not wanting them to know exactly what the average rate is. We're not going to comment on it. We wanted to be helpful in terms of thinking about how to model 2021 over 2020, which is why we called out the IKC investment as comparable in scale. You see that they're largely a wash year-over-year. Again, that wash is relative to the extra 3% of MA growth, not the full 5%. We'll get the benefit of the 2% that we get year in, year out, we don't want to comment on what the rate differential is between MA and normal Medicare fee-for-service. Sure. Just, I feel like an underexplored theme is your heroic labor force. If you were to hazard a guess, what percent of your labor force do you think will agree to be vaccinated by the end of the year? It's a great question, John. We've been asking and on the flu, we end up somewhere in the high 80s, low 90s. Right. This is obviously a very unique experience that they're going through, and they've seen what's going on with COVID. Our data shows us right now slightly lower than the normal flu, the question becomes, once you have the vaccine, if you can make it convenient, and you can get the momentum, will that number go back to the normal flu? The short answer is we don't know. Right now, roughly 40% of our labor force in the field has been vaccinated. Sure. Just back on labor for a minute, do you think they are over the hump in terms of sorry, my neighbor has a Porsche with an alarm. There it goes. I don't have a Porsche. I'll mute this in a minute. Do you think they're over the hump, if you will, in terms of burnout and temps and exhaustion? I mean, is that an unusual challenge for you, or do you think that still continues into next year or this year, actually? Well, John, first of all, I really appreciate your empathy for this team, because their commitment and resilience and just dedication has been just incredible and an inspiration to the rest of us. No, they're actually in the thick of things. This spike in the end of the year, beginning of this year, was steeper and more acute than anyone would anticipate, they've been working and trying to keep everybody safe. The fatigue is real. The emotional drain and the attachment that they have to our patients and seeing this mortality that we've talked about is an emotional and a heavy thing to deal with. I think that this is going to have consequences for the entire caregiving system for years to come. Yeah, I do. Lastly, when you think about global risk, and you guys had eight or so years with your former, DaVita Medical Group. How do you think about controlling the 2/3 downstream that you don't control directly? Is it Medicare rates? Is it downstream risk contracts, or is it just, we control the patient, we can make them healthier and they encounter the health system as they will, but we think having a frontline seat with a patient, we can sort of control their behavior to make them healthier than sort of the average that we're shooting against? Well, let me grab it, and then Joel, you can supplement, because I'm not sure I understand exactly where you want to go. At the end of the day, I think the answer is My wife never does either. I never know where I want to go. That's fine. I never would. I never know. The 2/3, we're going to address some of it in our centers ourselves, in areas where we think we can add a lot of value. We're going to deal with providers that we have a lot of trust with in other areas. I think it's going to be a hybrid, and we're learning a lot, and we've learned a lot in our ESCOs as to where we have strength. For example, if you were to do a health assessment in the center when we have a patient for four hours, you can be quite thorough and you can have the systems to make sure that you do the appropriate therapy to intervene. You get the twofer there. In other areas of healthcare, as you know, the challenge is getting a hold of the patient, number one, and then number two, actually doing something about it, intervening. We do have what, let's call it, a strategic advantage in the access to the patient. Did that answer your question? Well, let's say they go into a local hospital. Are these Medicare rates that you're assuming? I'm just trying to understand sort of the insurance company downstream contracting around access to the rest of the healthcare system and how you- Oh, okay. I think I understand your question. You were saying our margins are the other 2/3, so I'm just trying to figure out how you get that margin there, the two-thirds spend. Yeah, I got you now. Most of the time, the contract assumes that you get the payer's network, and you're basically going after utilization and better care. You're trying to reduce utilization as opposed to price. I got you. That's perfect. Thank you. Thank you. Thank you. Our next question will come from Gary Taylor with JP Morgan. Your line is open. Hi, good afternoon. I wanted to understand a little better the magnitude of this movement you're talking about towards risk-taking with your MA population. Are there any numbers you can give around, going forward, X percent of the MA enrollment is in a capitated contract or a material gain-sharing contract that isn't just a couple points based on quality of care and what that's looked like historically? Is it a material portion, in 2021, of your MA patients that'll be in something close to a capitated contract? It's still relatively small, but growing. Look, I'd say fundamentally, we see this business as being on the right side of healthcare. It's a big opportunity, and we think we've got a right to win because of what Javier was talking about in terms of our ability to deliver quality and manage the care of the non-dialysis side. Today, it's still relatively small. We're keeping a very careful eye on it. I think, to me, the important point that I emphasize is we view this as a new business rather than viewing it as some new way to finance the cost of dialysis. In terms of magnitude today, it's still small. What about as Direct Contracting increases? Obviously, you've got professional global this year. You've got a limited, theoretically, rollout in 10 cities of geographic Direct Contracting next year. You're going to have these same health plans now taking risks for your Medicare fee-for-service population. Would you anticipate doing risk-based contracts if Direct Contracting takes off and grows? Do you have any now? It's an interesting proposition. At the end of the day, I think it's unlikely, but we would be open to explore it, because if someone upstream takes the risk and the example you laid out in Direct Contracting, we would be receiving Medicare fee-for-service in that example of Direct Contracting. Unless they literally said, "Hey, because of your strategic advantage of actually spending so much time with the patient, we think that you can partake with us," that would be very interesting. Of course, the other way to look at it is, can we be the Direct Contracting entity? We will be looking at all these things and see how they play out. That's where it stands now. My last question. Just want to understand this better, and maybe it sounds like I'm just a little stale. I thought you guys had consistently said 25% of Medicare was with MA, so if you're going to average 35% in 2021, that's quite a pickup. I know you're saying it's more like 28 and some would always happen to be incremental, but it's obviously very well understood that MA payers paid above fee for service. I can understand why you don't want to disclose that differential, but we all had estimates of it. If we were going to see MA penetration go to 35%, we had estimates of what that meant to you in terms of incremental rate and EBITDA. I guess the question is, has the movement making all dialysis patients eligible for MA, has that created some price compression in that historic MA book? It doesn't sound like with capitation being so small, that the related investments to that would be enough to offset our estimates of your incremental rate pickup. Any color around that would be helpful. Gary, let's just make sure we're all working with the same MA penetration rate. The 25 number is from a couple of years ago, and that grew 2%, maybe a little bit more each year over the last couple of years. At the beginning of, let me get my years right, at the beginning of 2019, that was probably in the ballpark, but you add a couple of percent, maybe a little more in 2019, and then again in 2020, that's how you get to the number Javier cited, which is coming up right on 30% at the end of 2020 and adding another five points in 2021. Those five points being two points that we would have gotten anyway without the Cures Act because this has been growing 2% a year, and then another 3% for the Cures Act. If you're trying to model what's the upside in 2021 as a result of the Cures Act coming online, I'd use that 3% number. Got it. Any comment about how that's impacted the rate environment? It sounds like it certainly engendered more risk-based discussions, but with the bulk of MA still paying fee for service, have you held up despite the fact that there's more volume moving in that direction? I think in general, the plans have paid a lot of attention to it, but they always have. It's a discussion, and the conversation has really gotten more into a shift of can we do value-based. The short answer is that we didn't have that many at-bats because most of the contracts were longer term, so yet to be seen. Okay, thanks. Thank you. Thank you. Our next question will come from Matt Larew with William Blair. Your line is open. Thanks. Just on new center development, you gave us some nice context around NAG, in terms of new center development, I guess maybe help us think about what 2021 and 2022 might look like? You had mentioned the number fading into mid 2021 and then ramping back up, maybe just curious, given the higher mortality you're seeing, obviously on the outside looking in, we don't have a sense for geographic context on that, has that affected the way you're thinking about new center builds and any change to sort of the 50/50 target home versus non-home? It will impact our thinking about new center development, but there's a long lead time from when you conceive of a center till you build it and you get it certified. I don't think you'd see much impact in the new center numbers in 2021 or even 2022. That said, look, the numbers have come down. We certified a little more than 80 new centers in 2020. I think we actually built something in the mid-40s. If you look forward to next year, again, you'll see the number certified come way down, and the actual number we're going to build next year will probably be more likely in the 20s. That number was coming down fast before COVID. Yep, that's helpful. Then just maybe one more on sort of the value-based care side. Just curious if any of your conversations have at all started to include thought process about moving upstream with payers in the managed CKD population and leveraging some of your pretty robust resources like Kidney Smart? Yes is the short answer. Everybody's new at this, meaning the plans are, and we're working through what that means and what the implications are of going upstream. Of course, there's some regulatory restrictions to deal with. At the end of the day, we're all trying to manage the patient as soon as possible to make sure that that transition is as smooth as possible. Okay, thank you. Thank you. Our next question will come from Lisa Clive with Bernstein. Your line is open. Hi, thanks for the follow-up. Can you give us an update on the timeline for the lawsuit over the network adequacy rule, and what do you think the chances are the new rule gets overturned? Assuming it doesn't get overturned, what is your best guess on the impact on the change in dynamics over the next five years? Do you think that MA rates on dialysis treatment could go down? Could the number of clinics decrease if clinics are too far away? Obviously, that doesn't seem to be at all a problem right now, but just thinking out a few years. Thanks. Thanks, Lisa. Let me step up a couple of feet in case people haven't been tracking this. There is a network adequacy demand on MA plans, and for dialysis patients, there was a shift in an objective measure that had time and distance. Then basically they dropped the objective criteria and made it more subjective, just saying you had to have an adequate network. The update on that is that there was basically a technical reason. Then the case is no longer active right now. As we look into whether we and community and patients will pursue the next one, we are actually waiting to make sure that we have harm. We're waiting to see if a plan actually doesn't abide by the spirit of making sure that there's adequacy. Right now, we have not experienced any of that, and we hope that we don't. That's the status on the update. Okay. The original challenge is no longer moving forward? Correct. Okay. Thanks for that clarification. Thank you, Lisa. Thank you. Next we will hear from Justin Lake with Wolfe Research. You may proceed. Hey, thanks for the follow-up. Joel, I wanted to go back to the $60 million that you talked about and it being entirely coming from mortality effectively with everything else washing out. Can you give us some color in terms of how that $60 million progressed through the year? Is it more fourth quarter based, or I assume there was some drag in Q2 and Q3 from mortality? Yeah, there was a bit in two, it grew in three. I think about half of it was in Q4. It's a number that accumulates, right? Right The impact of lost treatments on Q4 is associated with our patients who passed away in Q2 and Q3 and Q4, and that's why you see it accumulating that way, and you'll see that pattern continuing in the front half of the year in 2021. Yeah, that's exactly why I'm asking. It's about $30 million, $10, $20, $30, it sounds like, give or take, is the way to think about it. Yep. I'm actually surprised given the COVID spike in the fourth quarter that it was only up similar to one Q or two Q, three Q. Is there like by the end of the year? The reason for that is the spike happened in November and December. Right. Generally, mortality lags the spike in the infection curve by three or four weeks. Right. That's a good point. Can you give us a number maybe that we can think about as if, just at year-end, given the number of patients that had passed away, what would that number look like if you kind of, not annualized, or maybe we can talk about annualized, that 1231 number? Like if no one else. Yeah Passes, what's the number at your kind of year-end that we're going to see quarterly for the rest of the year? Yeah. I don't have that math in front of me, but again, if you think about how the $200 million in this one scenario we played out, and I just want to emphasize again, this is one scenario. We think it's a reasonable middle scenario, but it could play out in many different ways. If you think about how to model that $200 million over the course of the year, I think you can think about it as relatively flat. Most of the increase in our patients passing away will happen in Q1. Q1 is also more likely to be burdened with some other expenses than the later quarters. It's complicated math. Maybe Q2 is a little higher than Q1 as a result of the mortality growing, but flat across the year is not an unreasonable starting point. Got it. It's going to pick up significantly in the first quarter, then. It's going to go from $30 million a quarter to $60 or $70 million a quarter, call it $60, maybe increase a little from there and then go forward. That's how you're going to be up. Well, actually, I'm wrong. It's not going to increase that much. It'll be $50, like you said, or something a quarter. Okay. I tried to look at the patient count, but you did an acquisition, it looks like in the U.K., that's going to change that number. Is there any way I can get you guys to share that? Maybe before we hop off the call, Javier, I know you had been focused on right-sizing the footprint internationally, so I'm a little surprised to see you to be doing more acquisitions internationally. Maybe you can share with us strategically why that was important? Sure. A couple of things. I think we stayed consistent to the discipline that we outlined at Capital Markets, which is basically we would be very diligent on where we could add clinical value, where we had the right to scale, where we had a talented management team, and we thought from a compliance perspective, it was a place where we could operate safely, and then that we had capital efficiency. The U.K. has been going from a government-led program to a private, and it is a very interesting market where it is predictable, and we understand it. We won a tender, and we think that the returns will be good. Justin, I just add, I think it's a great acquisition for the international team and exciting for them to get into a new country after we had been pruning the platform, maintaining the discipline of capital-efficient growth. From that standpoint, it's great. From a materiality standpoint, in terms of impact on OI, it's pretty small. Do you have the patients acquired for me, Joel? Give or take. I don't have the number off the top of my head. We'll see if we can get it for you. If not, we'll get it to you after the call. Thanks a lot. Thank you, Justin. Thank you. We are showing no further questions at this time. Okay. Well, thank you. Let me close off with some comments here. Number one, our team's commitment and dedication to the safety and health of our patients is absolutely unwavering. It is really sad and unfortunate that our patients' age and comorbid conditions make them significantly more vulnerable to COVID. We are going to work diligently to get as many vaccinated as soon as possible. Number two, we shared with you today some of the dynamics that the pandemic has had on our company, on our patients, and on our teams. I hope it was helpful. Of course, the ranges will follow the trajectory of this very unpredictable pandemic. Lastly, absent the pandemic impact, which is very hard to say that sentence because everything here starts with the pandemic, our business plan has shown resiliency and in line with our multi-year outlook that we discussed at Capital Markets. I end with hopefully some optimism that I, like you, hope that this vaccine can move us past this stage. Thank you for your interest in DaVita, and we'll talk soon. Stay safe. Thank you. That does conclude today's conference. Thank you for participating. You may disconnect at this time.