DaVita Inc.
Q4 2020 Earnings Call Transcript

Published: 11 Feb 2021

[Operator:]

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 speakers' remarks, there will be a question-and-answer period. Mr. Gustafson, you may begin your conference.

[Jim Gustafson:]

Thank you and welcome everyone to our fourth quarter conference call. We appreciate your continued interest in our company. I'm Jim Gustafson, Vice President of Investor Relations and joining me today are Javier Rodriguez, our CEO; and Joel Ackerman, our CFO.

[Javier Rodriguez:]

Thanks Jim. Good afternoon and 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 platforms 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 adopt to the changing landscape; and 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 high 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 efforts give us hope.

[Joel Ackerman:]

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. However, 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. However, as Javier referenced, the actual impact was approximately $60 million. Excluding the impact of COVID, our EPS from continuing operations would have 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 have helped to temper the net financial impact of COVID in Q2 and then in Q3; and third higher direct costs related to COVID including certain benefits to 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 negative 0.3% due to the monthly mortality trend worsening during the quarter.

[Operator:]

Thank you. Our first question will come from Justin Lake with Wolfe Research. Your line is open.

[Justin Lake:]

Thanks. Good afternoon. Appreciate the details there. I wanted to kind of follow-up on 2021 and just make sure kind of I understand some of the moving parts here first. So Joel you said, $200 million from COVID. Is that comparable to -- my math is $60 million this year when I add sequestration in the COVID costs and all the other savings from COVID together? So that would be