I wanna thank everyone for joining us today. It's my pleasure to be introducing DaVita. DaVita is one of the largest providers of dialysis services across the globe. Presenting today, we have Joel Ackerman as the CFO, as well as Nic Eliason, who's from Investor Relations. With that, I think we'll just jump into Q&A. Great. All right. You know, I guess one of the things that we've been struggling with from a modeling perspective for you guys has just been the volume trajectory. Obviously, COVID's created a mortality headwind for you. You started to see some improvement in Q1, but can you tell us, you know, how you think about volume and treatment growth through the rest of the year? Where do you see the normal number? You know, it was 4% for a long time, and you started to be 2% into COVID. Where do we get back to? Sure. I'd highlight three dynamics as we think about volume. One is what you mentioned, excess mortality. Obviously, that's been a huge headwind for the whole industry as well as us. It has gotten better since the beginning of COVID. If you think of our excess mortality number being in the 6,000 range in 2021, that was down to a little above 4,000 in 2022. We wholly expect that number to continue to improve during 2023, and we've seen that. The winter surge was significantly lower in 2023 than what we experienced in 2022, and mortality, excess mortality rates have continued to come down. Q1 was a good sign there. We are still cautious about making any very clear predictions about what the rest of the year has installed for us and the rest of the industry. We have continued to assume there will be elevated mortality throughout the year, somewhere in the 2,500 range-3,000 range. We saw a little bit less than 1,000 in Q1. That would mean you'd likely to hit those numbers, you'd have to see some sort of increase in the summer the way we've seen before. While some may have a more optimistic view than what we've built into our guidance, because it's been so hard to predict, we wanted to just be crystal clear with what we've built into our guidance. I wouldn't say we have any better information on this than others do. That's excess mortality. Mistreatment rate was a dynamic we first really started calling out last year. Mistreatment is nothing new to dialysis. It's historically run at about a 6% level for many, many years. Think of half of that roughly the result of patients going into the hospital, the other half being missing treatments for a variety of other reasons. That number ticked up, and last year was running at about 7%. You can think of that as about a 100 basis points headwind on volume. We have not seen that number begin to improve significantly this year. For our guidance, we've assumed that remains elevated for the year. Therefore, it's not a year-over-year headwind, but it's certainly we're not assuming any benefit. The third component is the net patient growth, excluding excess mortality, and I'll address your second part of your question as well. That number leading into COVID was running at about 2%, as you mentioned, and you can think of that as roughly 4,000 patients a year. We have no reason to believe that once all of the dynamics associated with COVID play through, that that number will be any lower. I think 2%, to the best of our knowledge, is the right assumption once we're through all of the current dynamics. In terms of where we are now, that 4,000 number came down significantly last year. It was running at about half that level. In Q1, we saw that bounce back, and we saw significant improvement in that net patient growth, excluding excess mortality. The big question on our mind, and we tried to be very careful in calling this out on the earnings call, is this just one good data point, or is this the beginning of a trend? Given how this number has moved around historically from quarter to quarter, we are being cautious about declaring this a trend. Presumably, we'll know more next quarter, whether Q1 was a bit of an anomaly and we're still running at a lower net patient growth number, or whether that has somehow turned around and we're now back on a better trend. When we think about that net patient growth number, is there a way to think about? I think, I think one of the biggest concerns is that just when excess mortality kind of normalizes, we're gonna re-normalize back to a growth rate that's less than two, because we hear all about, you know, the weight loss of, you know, diabetes drugs being more efficacious. We hear managed care companies constantly talking about diabetes management. Like, is that not having an impact so far? If not, won't it have an impact at some point in the future just when things start to get better? Right. We get a lot of questions about what's happening in the, in the CKD market and what impact that should have today or in the future about our new to dialysis admissions, the incidence rate, you can call it a bunch of different things. Let me take the two pieces separately. From a clinical standpoint, in terms of the impact of SGLT2 inhibitors and the GLP-1 drugs, we are not baking in any impact of that. Our clinical team is saying they don't believe there's any impact from that today. In terms of what will happen in the future, I think the GLP-1, those are new, and people are skeptical about whether those will ever have any impact. On the SGLT2 inhibitors, you can see it happening both ways. It could take a patient who otherwise would have been incident to dialysis and allow them to remain in earlier stages of CKD longer, and that would be a headwind. On the flip side, it could take patients who otherwise might have died before they were ever incident to ESRD, allow them to live longer, and that would be a tailwind. I think time will tell what's happening there. In terms of the CKD management companies and things that managed care companies are trying to do, we believe in CKD management, we are in that business as well. We think ultimately that is about managing these patients' health better, giving them better access to care, and creating a smoother entry into dialysis rather than what is often called crash into dialysis. ensuring that they're under the care of a nephrologist, they're being well looked after, and they have a smooth start. Nothing we have seen would lead us to conclude that there's been any sort of ability to hold off the onset of ESRD. It absolutely changes the care, but it hasn't changed the incident rate. Okay. I think all that makes sense. When we think about one of the pressures that everybody's been seeing, you know, labor, how are you guys thinking about that? You know, I think initially you'd kind of indicated that maybe some of the mistreatment dynamic was actually labor driven. Yeah. What are you seeing as far as temp labor, wage growth, and ability to accommodate the volume that's coming through? Again, I'll break the wage or the labor cost issue into three buckets. On the contract labor side, we've seen a lot of progress on that. It peaked for us in Q3 at about a $120 million a year run rate, so that was $100 million above what we had seen historically. It came down in Q4. We were expecting continued progress and called out relative to a total contract labor number in 2022 of $100 million. We called out that coming down to $50 million in the year. That's what we said when we gave initial guidance in February. This quarter, we've updated that further, and we're calling out another $15 million of progress. We see that number for the year now somewhere in the range of $35 million for the year relative to what it was pre-COVID of about $20 million. Made a lot of progress, a little bit more to come, but I would say that issue will be largely in the rearview mirror relatively soon. On the wage growth side, we're seeing progress this year. Last year, that number was running [78%]. This year we're forecasting somewhere more in the 5%-6% range. Progress against last year, but still well above the historical norms of, call it, 2.5%-3%. Updating that from what we said in February to what we said on the call a couple of days ago, a little bit of progress there, and we'd probably call out another $10 million of benefit for the year relative to what we were seeing in February. Okay. On the- Actually, just to clarify that because I'm writing and listening. You said 4%-6% is what you're seeing now versus 2%-3%? No. 4%- 5%? 5%-6%. 5%- 6%. Okay. Yeah, in the base wage. We're probably running a little bit better in that range than we thought. Okay. The third topic for us is really productivity, and this is largely about training productivity. We saw that number spike up over the course of last year, largely driven by higher turnover, lower retention rates. We haven't made a lot of progress on that, and we expect the path to progress on that is really gonna be progress in the broader labor markets. What we have seen historically is our retention rates are highly correlated to what's happening in terms of unemployment numbers and wage growth and open positions relative to job seekers in the broader markets. We expect our numbers to improve when those numbers to improve, perhaps with a little bit of a lag. Okay. I guess to go back to that point about contract labor, 'cause think about the Q1 results and the beat in Q1 and then the guidance raise. Part of that outperformance in Q1, I guess, is achieving savings faster rather than necessarily changing the run rate. Right. is kind of the way to think about the labor component, the contract labor. Well, I think there's both in there. Part of it is we achieved the results quicker than we thought, part of it is we've upped our guidance around improvement in contract labor. We just think we'll get to a better point by year-end than what we had thought previously. Okay. It's both. there's a component of both. Okay. When we think about cost growth this high, you know, historically, the rate growth hasn't been anywhere near this high. The company's been able to manage it. Volumes are better in the past than they are right now. How do you think about your ability to manage cost growth, or do you get the appropriate pricing and keep cost growth versus pricing growth in line? Yeah. You're pointing out the reality of our 10-15 year history, which is we have always managed a gap between the rate increases we're getting and the cost pressure on labor and other things that we've seen. We've never gotten RPT increases that match. We've been able to make up that gap. Looking forward, I think, we will continue to see that gap. I expect rate increases to go up a bit associated with the labor pressure and the inflation, but that gap to remain. I think we will continue to look for, and I expect we will find opportunities to bridge that gap with a variety of things associated with cost savings in other areas like pharmaceuticals, like capacity utilization or other ways to get our revenue up, even if our rates aren't increasing through mix or other opportunities. What exactly does that mean from a rate perspective? What do you normally get versus what do you think you'll get now? I think if you went back a couple of years, you know, numbers were averaging about 1% for this year. We think we're gonna be in north of two, so 2%-2.5%. Largely the result of just these higher cost pressures and payers recognizing that, you know, that needs to flow through to rates. Where that goes going forward, I think you can't, you can't look at one without the other. You have to look at what rate increases we're gonna get hand in hand with what the cost pressures in the market are, and I think those things are not independent variables. The spread hasn't changed in your view? The spread has changed. Last year was a much tougher spread, and that's why you saw the margin contraction. I think the question is, will we see more margin contraction or more margin stability or an increase of margin going forward? We haven't, you know, we haven't updated long-term guidance, so I'm hesitant to go there. I think we certainly see opportunities to bridge that gap going forward. Okay. you know. by the way, including in this year. This year, there are specific cost tailwinds, MIRCERA being kind of, I guess, the biggest one that you pulled. Correct. Can you help quantify that and help us think about how much of that? Is that fully realized this year, or is there a tail in it next year? Yeah. It's not fully realized this year. I'll just remind you what we said. We called out $125 million-$175 million of cost savings this year, driven by MIRCERA, by operating leverage from closing clinics and from some G&A savings. The MIRCERA number, we're getting most of it this year, but not all of it. It is the biggest component of that $125 million-$175 million. If you look to 2024, we'll get some more of the MIRCERA. We'll continue to get operating leverage from the clinics we've closed. We'll continue to look for G&A opportunities. I think if you look at back at DaVita over many years, including well before I joined, I think one thing DaVita has always done well is in the face of these continuing cost pressures and revenue pressure, we found ways to bridge that gap while continuing to deliver high-quality care to our patients. What's the driver to those two ranges, the 125 versus the 175? MIRCERA is a big swing factor in that, and I'd call out two things. One is how quickly the uptake is. Remember, DaVita doesn't prescribe drugs, nephrologists prescribe drugs, and how quickly nephrologists choose to make that switch from EPO to MIRCERA. That's one. The second one, which is probably the bigger one, is how physicians choose to use MIRCERA, at what levels they are prescribing. That will drive a component of the, of the cost side of it. I guess from that perspective, does that mean the 175 is a good number? It's just whether you get it this year or whether you get it next year? Not necessarily because the prescribing patterns, in terms of the amount they prescribe, you get X, you know, mgs per kg or X plus 10, and that'll drive a difference in the cost. Okay. You may never get to where you think you could be is the point. Okay. Right. It's not just a matter of time. Okay. On the, on the rate side of the equation, you know, one of the overhangs from the industry perspective has just been the, Marietta, you know, case. I mean, can you talk a little bit about if you're seeing any indication that that's actually pressuring pricing? Stepping back just to give the context, I'd say what we know in Washington is that we've got bipartisan support for a fix. What we don't know is if and when that fix will come. It is a complicated political environment, as I think everyone knows. From an employer standpoint, we are concerned that employers are out there thinking about how to use this Marietta ruling to fundamentally change the benefit design and the network availability for their employees. From our standpoint, we believe that they are doing this in a deceptive way, not being clear with their patients of how their benefits are changing and how their network availability is changing, and we are not gonna accommodate that. We believe employers have a choice. They can offer a robust in-network benefit or not, if they choose not to, they cannot expect, and they should not expect that they will get the same access to our clinics as they would if they chose a network benefit. That one, that we know. What we don't know is how many employers are thinking about that. They don't call us up and say, "Hey, just we wanted to talk this over with you." Certainly not. They don't even call us to tell us they did this. We have to figure this out through, our understanding and our analysis of claim patterns and claim activity. That's where we are today. I can tell you from a claim activity standpoint, we have not seen an uptick so far in the number of patients who are being discriminated against by their employers. As you know, this is something that has been happening for a while. That's why the Marietta case happened. We track it, and we haven't seen an uptick so far. In terms of how this is playing through with employer conversations, Nic, you wanna take that? Yeah, sure. It's not a topic of that's influencing our payer discussions or negotiations in any way. Right now, obviously, both parties are aware of it, you know, we negotiate with the health plans and the employer group activity, you know, happens behind the scenes on how each employer decides to design their benefits. It's not something right now that's showing up as an influence in our payer negotiations in any way. This is important because it is an overhang. I'm just not 100% sure that I'm catching all the nuances from your answer. You're saying that you're concerned that employers would be doing this, or you're actually seeing employers start this process but not actually pull the trigger? I mean. Look, we've seen employers do this for years. That's why the Marietta case came about. Since Marietta, we've been obviously carefully thinking about how we are gonna respond to that. In terms of actual claim numbers coming through, we have not seen the increase. Again, I just wanna remind you, they don't call us. There is a lag between when they start this behavior and when we pick it up. There is an element of uncertainty and a lag in terms of our ability to pick this up. When you say there's not a notable uptick, it's that this has always been going on under the surface. It continues to go on under the surface. Exactly. It's not any higher yet, but it's going on. Exactly. That, that all makes sense. To, to, just maybe completely circle back when you said that it's you can either drop coverage or you can have a network. You can't say we get the best of both worlds. Is that how this normally plays out historically, if the company would say, "We're not covering, but when we get access, we want the in-network rate? I think post-Marietta is a different world than the way this played out in the world pre-Marietta. It's still evolving. It is, I'd say the fundamentals of it are still shifting, we just feel like it's employers have a choice, you can offer an in-network benefit or not. You can't get the best of both worlds. Okay. That makes sense. I guess from a fundamental perspective, you're saying it's not showing up in a rate negotiation, I would think that as a managed care company, it's like I all of a sudden have a new lever. Mm. I could advise my clients not to even put this in-network. Yeah. Like, why hasn't it come to that yet in those negotiations? The conversations we've had is we've not seen health plans taking that perspective. The health plans are proud of the benefit they provide, the comprehensive services and access to care. If anything, employers who want to go around that are they create complexity and that's not always supported by the health plans. Again, it hasn't been a point of contention between us and the payers, and it's not something that the payers are in my experience, utilizing to shape the negotiation in any way. If anything, they would just assume the employer groups use the network and the benefits that are available to them. Okay. All right. How do you think about the payer mix that's been benefiting a lot during COVID, I guess in part maybe because of how mortality affects your population. Do things like redeterminations matter at all to business? Redeterminations is not a big issue for us. We didn't see a big surge in our Medicaid population. Our patients generally, I don't think will be impacted by redeterminations because they're not gonna pass the income test. Usually, they're generally not working. Even if they lost their Medicaid benefit, we think most of them would have access to Medicare as well. We're not concerned about that. Okay. 'Cause I could almost see potential, arguably a benefit, right? That the concept is you get kicked off of Medicaid, and now you either buy insurance on the exchanges or you get insurance through your employer. It almost feels like if anything, it's a, it's a tailwind, right? If- Why wouldn't it be a tailwind? If there were a big change from Medicaid to, you know, the exchanges or even Medicare, it would be a tailwind. We're just not expecting a lot of change in our population. Okay. You're saying that's just because they would have stayed on commercial and not gone to Medicaid in the first place? Okay. Yeah. On your question about commercial mix, commercial mix has been up since COVID started. That's been about half a numerator issue, where just our commercial population has grown, about half a denominator issue, where Medicare patients were passing away at a much higher rate than commercial. There are two components to that story. Yeah. Okay. Can you talk a little bit about, I guess, a recession, that's, you know, it seems like we're heading into a recession? That's how big, I guess, we'll see. How do you think about the company's ability to grow through a recession? I can see, you know, payer mix as a headwind, but labor may be a tailwind. How does it net all come up? Yeah. I think that's the right way to think about it. I don't see it having any real impact on volume growth. On the labor side, it would be a benefit, no doubt. I think the bigger question is what happens on the payer mix side. We, I'll remind you at the very beginning of COVID, we were extremely concerned about payer mix as the country was heading into a recession. There was all this concerns about layoff, and it proved to be a non-issue, and that actually went the other way. That has given us some confidence that our patients enjoy commercial insurance. That is a benefit that they would prefer over Medicare for a variety of reasons, whether it's the nature of the benefit or just the fact that their family then has access to coverage as well. That has given us some confidence that in the current environment, especially with the exchanges which weren't available in 2008, 2009, whenever the last recession was, that, as you think about this trade-off between better labor costs and a deterioration in payer mix, that we think that'll be a manageable dynamic in a recession. I know the saying, you know, the four most dangerous words from investing is this time is different. Right. That makes sense to me. I guess the other thing that's different potentially in your favor would just be MA. I guess we used to always think about dialysis as like 100% of your profits were commercial, if not more than 100%. Now, MA, I would think you're saying is categorically profitable. Is that fair? MA is profitable. That said, a patient going from commercial to MA is a hit for us. It's not as big a hit as them going to Medicare fee-for-service, and the growth of MA has absolutely been a tailwind. If your point is that in a recession, they might go from commercial to MA, helps a little bit, it's still- It's not as, yeah. ...a big negative. Okay. As far as MA goes, the other big theme is value-based care. Can you talk a little bit about what the opportunity is? Are you progressing along that path the way that you wanted to from a margin perspective? We are progressing along the path. We think about really three metrics as we think about value-based care. One is just growing the dollars under management, the lives under management. We've seen good progress there, almost a doubling last year and another significant growth north of 50% this year. Second is what we call net shared savings. How much of the dollars under management we can ultimately save and keep. I say save and keep because we're sharing some of that with our health plan partners, some of it with our nephrologist partners, and that winds up as a net number. We're targeting somewhere in the 3%-5% range there, and I think we're making good progress on that. Last year came in significantly better than that. Sorry. That's the part you keep or the part you save? That's the part we keep. The piece, the net savings that ultimately DaVita keeps. The third is just managing our costs. We spend money both delivering the savings and then on G&A, and we wanna see that number come down on a PMPM basis over time. I think we feel like we're making good progress on all three of those dimensions. We're seeing the growth we want. We're delivering on that 3%-5% savings. We're seeing our costs come down on a PMPM basis. If you play that through over the course of the next few years, we think we can deliver on the ultimately break even and then profitability. There's two parts of it, right? There's the ESRD and there's the CKD. In an earlier answer, you said, "Hey, it's hard to manage CKD," and yet you've done many managing CKD. Yeah. Like what is the benefit to you? It sounds like that's not part of the profits, if it's not generating profits, then what's the point of doing it? ESRD is something we're, I'd say, having more success at. We've been at longer than CKD. CKD remains early, and I think others have called out that CKD is harder than ESRD. We think it's important because as you think about the ecosystem that we serve in terms of payers and nephrologists and to some extent, patients, they are all involved in both CKD and ESRD. As a dialysis provider, there's a bit of an artificial line there between CKD and ESRD, but we wanna do what's right for our partners, both from the payer side and the neph side and the patient side, and play across that continuum the way they do. Okay, maybe the last topic that usually comes up is shift to home. Where are we in that process? How do you think about ultimately the implications for margins as a shift to home and return on capital? Yeah. Look, I think the shift to home took a bit of a pause as a result of COVID. Educating patients and training patients to go from in-center to home requires a lot of attention and a lot of labor and a lot of hand-holding, both of patients and the sometimes nephrologists as well. As the industry was struggling to staff its clinics, patient safety and making sure the floor was properly staffed was more of a priority than training patients to go home. Hopefully, we're getting to the end of that dynamic, and we can see patient growth accelerate. In terms of the economics of it, nothing has changed. It remains a slightly higher margin business for us because the costs are a bit lower. From a capital standpoint, it is a lower capital business. You don't have to build the clinics with the water rooms and all the stuff that we do for in-center. It's just a much simpler clinic. Feels more like a physician's office. We like home. We think it's good for many patients, not for all patients. It's a modality that we are actively looking to grow because it's the right thing for the patients. It's got good clinical outcomes, and it also happens to be financially beneficial for us. It's, what, it's 15% of your population? Yeah, it's about 15%. Where could that go? We've talked about 25%, which I think we've been quite clear is not a forecast. It's, to some extent, an aspirational goal. We haven't changed that number. I'd say the timing, though, has definitely been pushed out. Yeah. If you give a number, don't give a date, right? If you give a date, don't give a number. Exactly. All right. I think that's all we have time for. Thanks, Kevin. Thank you. Thanks, everyone. Thanks, Kevin.