All right, great. We're gonna get started with our next session here. I'm Steven Valiquette, the healthcare services analyst here at Barclays. This mic is working. Yeah, we're good now. Okay. Yes. Our next company here is DaVita. With us from the company, we have the company's CFO, Joel Ackerman, and also Nic Eliason, a VP, is in the audience as well. This will be a fireside chat. I think with that, we'll just dive right in. Great. All right. Sure. First question here, it seems like for all the provider companies, you know, the topic of labor is still, you know, at the forefront of investors' minds. I guess we'll just dive right into that before we start talking about some of the other parts of the business and some of the growth drivers. Yeah, I think, you know, labor expense, you guys have talked about that getting better. You quantified some amounts on the, you know, the temp staffing portion, but also just another source of savings and quantified that around reducing some of the training costs as well. Maybe just walk through some of the details around this and if there's any color you can, you know, talk about and how that's progressing so far this year, that'd be great as well. Let's just, you know, frame that first as far as the opportunity to improve that year-over-year in 2023 versus 2022. Sure. '22 was clearly a tough year. We were not insulated from it in any way, shape, or form. We saw the challenges on base wage rate, we saw it on contract labor, and we saw it on productivity. The main driver of productivity being turnover, which leads to higher training costs. As we think about 2023, what we're anticipating is a continued challenging year relative to what our labor rates or our labor increases felt like pre-COVID. We think it should be an easier year than 2022. We expect continued wage rate pressure well north of 5%, with overall labor pressure at the middle of our range, probably around 5%. That's wage rate higher than 5, offset by improving contract labor and improving training productivity. Okay, great. You know, across all of our, you know, healthcare provider coverage, you know, a lot of the investor focus and a lot of the discussion really is more around nursing staff, you know, more than anything else. I think, you know, with you guys, I think more of the nursing staff isn't really, you know, at the true epicenter of some of the challenges, but instead it's maybe, you know, just as much, if not more, some of the non-licensed, you know, patient care technicians. I guess I'm just curious to hear a little more color around that variable and how that's maybe different set of challenges versus just trying to, you know, recruit some of the same nurses everybody's, you know, trying to recruit and how maybe there's different ways to tackle that and try to improve that. Sure. You spot on. We saw the challenges both on the nursing side as well as on some of the lower skilled labor we call, excuse me, patient care technicians. The challenges were there, although the challenges were different in the different sectors. Contract labor is not as big an issue on the non-nursing side, but the turnover was even bigger challenge. A lot of our focus this year will be on making sure we're hiring the right patient care technicians, figuring out as quickly as possible whether we think ultimately they'll make it through what is a three-month training program. If we see opportunities to get them out a little bit quicker, recognizing they're not gonna make it through training, that there isn't the right fit between them and working at a dialysis clinic. If we can make those decisions quick, we think we can save on some of the training productivity challenges. Okay. All right. you know, now every healthcare provider industry to some degree is, you know, lobbying, you know, hoping to maybe get some rate relief, from CMS, to offset some of the labor pressure. Just whether it's, you know, related to skilled labor where there's, you know, true licensure and, you know, in this case maybe some of these, you know, non-licensed patient care technicians. I don't know how much that plays a role in, you know, trying to get some rate relief. Maybe just, where do we stand right now and, you know, what's your view on how much dialysis industry maybe is poised to get, you know, some rate relief at least through CMS? Also as, you know, as part of that same discussion, maybe talk about the commercial and MA pricing environment, which I know is usually not that amenable to increase in rates whenever they can help it. Right. Just, you know, any, you know, line of sight to some relief on that side as well. Yeah. We feel good about our revenue per treatment, which is the way we quantify our rate relief being better than it has been in the past. We quantified 2% to 2.5% for 2023, That's a combination of price increases as well as the benefit of mix shift from Medicare fee-for-service to MA, as well as from government to commercial. We feel good about better rates than we've seen in the past. I think the big question on our mind is ultimately will they be enough to overcome the pressure we're seeing on wage rate pressure as well as other inflation. From our standpoint, that remains to be seen. It is hard to know what's gonna happen on the Medicare fee-for-service side. We get our preliminary rates in June or early July. Our understanding of how they do it is it's more on a projection of inflation rather than looking at the past. Ultimately, we need to see where the where does the outside contractor they use lined up on their projection of inflation for 2024. Broadly, on MA and commercial, we've got all the same dynamics that I think other providers see in terms of challenging conversations with commercial payers and MA payers about getting appropriate wage growth to offset the cost increases. Okay, great. Okay. Just jumping around here a little bit to some different topics. This next topic is something that's certainly not new. It's been talked about, I think, ad nauseam over the past couple of years, but the good news is we're getting maybe, you know, closer to the end of, you know, this overhang. But this kinda just comes back to that subject around just the negative impact on the your business and patient base from COVID mortality. You guys are giving some numbers around this. You know, 2022 saw some improvement versus 2021. Perhaps you could just touch on the 2022 dynamics, but how that bridges into 2023, you know, when thinking about still some impact on overall volume growth and how that's kinda baked into the guidance as well, just to frame that better for everybody. Sure. Volume has undoubtedly been a big challenge for us and an accumulating challenge because every year where we see negative growth, it compounds year after year. Just to set the stage on what we call excess mortality, which is largely driven by mortality associated with COVID, but rather than try and pick out COVID, we just talk about the total excess. The number was running at, call it 6,500 at the beginning of COVID on an annualized basis. As you pointed out, 2022 was better. It was in the low 4,000s, and our expectation for 2023 is it will continue to come down. Built into our guidance is a range, but at the middle of the range is excess mortality of about 3,000 patients. The way we got to that number was, one, to look at what happened during the winter, and there clearly was no winter surge. If you adjust last year's numbers, without a winter surge, you'd get to about 3,000 excess mortality. We basically said, "No excess, no surge," and that's clearly good news. The question was, how do we build out our assumptions for the rest of the year? We decided to leave the assumptions for the rest of the year similar to what they've been last year. Predicting the path of COVID for us has been challenging, and we decided rather than try predict the end of COVID, let's just give a lot of transparency about what's built into our numbers. If investors think numbers are too aggressive or too conservative, they can build that in. We're basically saying we expect mortality or we forecast mortality for the rest of the year to be similar to what we saw last year. Okay. I'm kinda doing this from memory, so I apologize if I butcher this. The, I think the rule of thumb, I think for every 1,000 patients on that algorithm, it's roughly a $50 million revenue impact in either direction. Is that the right way to think about that? It's just a frame of reference. That is a good. Okay. Hold on. I'm just doing quick math in my head. We're both doing the math here. I think you're, I think 2,000 patients would be about $50 million. 1% would be $50 million. Okay. Okay. For the record then, on the transcript, that's the right answer. Not what I said. Okay. Okay, great. Okay. Shifting gears here a little bit again. The, you know, from our keynote session earlier today, most of the discussion was really around value-based care initiatives that's being driven out of the CMS Innovation Center. You know, I tried to get them to dive in a little bit deeper into certain therapeutic areas, you know, like, you know, kidney care, and they, we never really had time in today's session to really dive into that. Certainly for you guys, that's gonna be the, you know, the focal point. You know, you're already heavily involved in that. Obviously, we've talked about that for the past couple of years. You know, aside from even what you're doing with the government, even just with managed care payers, you know, the VBC stuff is evolving at a pretty rapid pace. A couple questions to ask around this overall topic. You know, first, maybe just to frame it for everybody, just take a few minutes to remind everybody again, just the annual amounts. I mean, the way you're looking at this is the, risk Assets under management. You've given some clear numbers on that for 2021, 2022 and your expectation for 2023. If there's any further color on how much of that is coming from just, you know, commercial versus, MA versus the government side, that would help as well. Sure. Value-based care is absolutely here. It's absolutely real. I remember a few years ago, we'd come here and investors were a little tired of hearing us talking about value-based care. It's kind of enough already, this doesn't feel real. We've certainly gotten past that. It went from in 2021, about $1.7 billion of cost under management to north of $3 billion, almost $3.5 billion last year. For 2023, we're expecting that number to be about $5 billion. You can think about that as roughly two-thirds government and one-third MA and commercial. The MA and commercial side is dominated by MA. The biggest piece of the business is with Medicare fee-for-service patients through the CKCC program. The other big chunk is Medicare Advantage. Yep. Okay. Okay. You know, one of the other things that we talked about at the keynote session earlier today as well is just, you know, focus on just, you know, profitability and just the opportunities. You know, there's been some areas of value-based care tied into CMS that, you know, look good on paper, but then in reality ended up being, you know, not that profitable for some of the participating companies. I think for you guys, you know, let's just dive a little bit deeper on the profitability of the VBC initiative. Same thing there. I think you guys have been pretty good about giving some specific numbers as far as, you know, some of the startup, you know, losses or early-stage losses that you've had to kind of endure as you build this up. Also, you got to put some upfront capital in place, and then you kind of get the fruits of that, you know, the following year, et cetera. You know, you mentioned about $125 million of losses you absorbed in 2022 around all this. Might be a similar number in 2023. I think you're just trying to break even on a reported basis in, what, 2025 or 2026, somewhere in there. That's right. Maybe just talk about, you know, that profitability, you know, where the ideal margins kind of lay, you know, play out within the contracts, how close you are to those target margins, at least on a gross margin basis. You can leverage how all that kind of flows over the next couple of years from here. We think of the business around 3 metrics. One is this Assets under management. As I mentioned, that's $5 billion this year. The second is what the net savings percentage is. How much cost savings can we drive through our model of care? Then how much of that we then ultimately need to share, either with payers through a percentage of premium contract or some sort of baseline, then how much we ultimately share with other partners, typically nephrologists. Once you put that all in the mix, you wind up with a net savings percentage. We feel good about the net savings percentage we're driving now on our population. We feel good about the total dollar growth. Then the third metric is really the cost, call it the G&A associated with delivering the model of care as well as any overhead associated with that. We need to see progress on that. We see that cost continuing to rise on a dollar basis, we see it coming down on a per member per month basis. As the Assets under management grow, we maintain this net savings percentage on a bigger, on a higher scale number, we see the PMPM cost to deliver this come down. We think we can get to a profit range that's low single digit% of the Assets under management. Okay. Got it. Okay, another topic that is somewhat intertwined into this discussion is really just your mix of Medicare Advantage business versus Medicare fee-for-service and how this impacts the profit growth for the overall company. Again, across all the healthcare provider companies and entries that we track, you know, I think everybody's seen a greater mix of MA volume versus Medicare fee-for-service for pretty obvious reasons. In some business models, that's a good thing. In other ones, it's a bad thing, depending on the relative payments. I think for dialysis, that's more of a good guy as far as greater growth in MA versus Fee-for-service. I guess one of the questions around that, though, is are you still maintaining that same favorable spread on MA versus Fee-for-service under the value-based care contracts? Or just, you know, will that maybe work against you a little bit over time despite, you know, the greater opportunity for more volume? Just overall though, you know, again, how focused are you on that delta in reimbursement versus the, you know, non, VBC MA contracts and rates versus, fee-for-service and how, you know, and then how that's trending over time. Yeah. you've got the facts all spot on. It is undeniably a positive for us in terms of our revenue per treatment under Medicare Advantage relative to Medicare fee-for-service. That number has remained relatively stable. We have not seen some sort of deterioration in our Medicare Advantage rates relative to Medicare fee-for-service. As a reminder, people were concerned going into 2021. Remember, before 2021, dialysis patients who are on Medicare fee-for-service could not move to Medicare Advantage. That constraint was removed as a result of the 21st Century Cures Act that went into place in early 2021, and that's what drove the big growth in MA penetration in dialysis in both 2021 and 2022. We ended 2020 at less than 30% penetration of Medicare Advantage. We've now basically caught up by and large to where the broader industry is, somewhere in the 50%-ish plus or minus range. Through that, we have not seen deterioration in our MA rates. It's been a both on the volume side and on the rate side, it's been a real positive dynamic for us over the last couple of years. Okay. Great. All right, bouncing around here on a few more topics. We talked about some of the, you know, some of the volume challenges over the past couple of years that prompted you guys to maybe put the foot on the gas a little bit more on some of the rationalization of the facility footprint. I think you closed roughly 130 facilities last year, maybe closing another 50-70 this year. Just curious if you're able to provide any update on the progression of the, you know, so far this year. How well do you think you're retaining the patients of the closed facilities, which is kinda one of the most important variables, you know, around this whole process. Sure. We continue to make good progress. I think we'll be done with the lion's share of that in the first half of the year. We don't do it all on 1 day because there are just local dynamics we need to work through, and nothing more important than patient safety and making sure all these patients find a home. We don't, we don't have the luxury of closing a dialysis center and finding a who ultimately can't find dialysis anywhere. We do it at a measured pace because of that. From a patient retention standpoint, it is going well. We, we are finding homes within DaVita clinics for the vast majority of the patients who are inconvenienced by this, and that's something we are very deliberate about. Again, it's important from a patient safety, it's important for our relationship with our nephrologists, and it's important for the economics of the, of the center closure process as well. Another topic I wanna make sure we hit on, this kinda has to do with the, you know, some of the home dialysis initiatives and kind of what's going on in the industry. Without officially covering the company right now and, you know, not covering it for the last, you know, couple of years or so, you know, where I left off on the coverage, this was I think, you know, pretty topical a couple of years ago. You had some threats around disruption, et cetera. You guys have talked about for a couple of years now that your mix of, your home dialysis is around, you know, call it 15%, give or take. Your goal is to get that to 25%. Really what I wanna hone in on, though, is just the what's going on in the competitive front around all that. You know, I think a while ago, a couple of years ago and, you know, there was, you know, a wave of competitors that were, you know, focused on home-only dialysis. You know, making a lot of noise about what they might be able to do there. I think, you know, kind of re-exploring that here more recently, I think it hasn't really panned out for most of those companies, whether they were large or small, players. Maybe just give more color for the audience just on, you know, how the competitive landscape has evolved around that and what have been the tripwires for the companies that are focused on home only versus you guys with a more comprehensive offering? Sure. I'd divide that group of companies you're talking about really into two buckets. There's players who were getting into the dialysis management business and thought part of their dialysis management plan would be to encourage patients to dialyze at home, but weren't actually providing home dialysis. They were more in the management business rather than the direct patient care business. Some of those are still out there. I don't know that they're having a ton of impact on actually driving patients home, but they're still out there. The second bucket, which I think is probably the more worrisome one from where you left off two or three years ago. Were companies who said, "We're gonna change the model, and we're actually gonna be direct providers of dialysis, but we're gonna do it in some format of an alternative setting, whether it's home or spare capacity in our drugstore or something like that." To the best of my knowledge, if you added up all of the patients in America who are getting dialysis from one of those providers, I don't think it would fill at least a single DaVita clinic. Those things have proven to be unsuccessful. I don't think they appreciated the dynamic of home dialysis, whereby at any moment in time, home dialysis can be a great modality for an individual patient or an individual doc or even an individual payer. If you look at a patient over their life or a physician managing a whole set of patients or a payer who's got a, you know, a whole bunch of dialysis patients, home is part of the answer part of the time. Ultimately, you need a much broader solution. We have not seen anyone make home-only work so far. Okay. Yeah, definitely helpful. Kinda running low on time here. Maybe one other question or one final question here to touch on a little bit. I guess the other thing that happened over the past couple of years since I last covered the company officially was, you guys had your last analyst day back in, you know, late calendar 2021. You know, I think you laid out some, you know, some pretty strong growth outlook back then for over like a, you know, three to five-year time horizon. You know, 3%-7% operating income growth and getting into double digits on EPS with some of the capital deployment. The timing of that wasn't great. Nobody could have known back then just how rough this labor market would become over the ensuing- Right. you know, 18 months or so. Nobody's fault at that time, obviously. Really the question is, once we get past some of the labor pressure and some of the other, you know, volume challenges tied to, you know, that excess mortality that we talked about. I mean, do you think you're in a position? I mean, 2023 still has, you know, some of that effects from that. Once you get into 2024 and beyond, do you think, you know, some of it will be back on track to kind of resume what you laid out at that last analyst day as far as the growth annualize-. Sure. Look, we don't wanna call the end of COVID whether it happens this year or next year or whatever, but post-COVID, we believe we can get back to that earnings growth. That nothing we've seen, either on the volume side or the RPT side or the cost side, that would say somehow the earning power and the, and the growth model has changed permanently. We feel good about that. Timing remains a question, but, we don't see any reason we can't get back to that 3%-7% low growth. Okay, great. With that, we're a couple of minutes over, I think we'll end it there. Wanna thank you for your time today, and hopefully everyone will enjoy the rest of the conference. Thank you. Great. Thank you, Steve. Thanks for everyone for joining us.