DVA
#Thank you, <UNK>, and good afternoon
Q1 was in line with what we expected in Kidney Care
I'll summarize the financial performance and discuss some of the key business drivers
Non-acquired growth for the quarter was 3.8%, which is within the range of our long-term expectation of 3.5% to 4.5% on an annual basis
Our adjusted operating income was $380 million for the quarter
The decrease versus fourth quarter of 2016 was driven by both normal seasonal factors and other factors that we outlined as part of our 2017 guidance
Let me elaborate on each
First, there were normal seasonal factors, including higher EPO utilization due to the flu season, higher payroll taxes in the first quarter of each year and two fewer treatment days
Second, we faced some swing factors that we've previously disclosed
Let me repeat them and provide some additional color
We'll start with the four headwinds
Number one, we experienced lower enrollment on patients on the ACA plans
Number two, we continue to see an increase of clinical teammate wages
Number three, there was a decline in adjusted operating income in our pharmacy operations
You won't be able to see this in our segment breakout for the first quarter because improvements in other ancillary businesses helped offset this decrease, but you will see the decrease in future quarters
Finally, revenue was higher in the first quarter of 2017, as our forecasted commercial rate decreases take place later in the year
Now let me shift to a couple of the tailwinds
As discussed previously, we have temporarily decreased our compensation accruals in 2017 due to a switch from profit share programs to a 401(k) match program, and we benefited from lower EPO pricing from our recent renegotiated contract with Amgen
The primary adjustment to our Kidney Care adjusted operating income in the first quarter of 2017 was a government settlement that we previously disclosed
As a reminder, we received $538 million in March
Next, we're happy to announce the closing of the acquisition of Renal Ventures effective May 1. We acquired 38 centers in six states
As part of the deal, we had to divest seven centers
The partial year financial impact of this acquisition is already incorporated into our 2017 guidance
Keep in mind that we'll incur some one-time costs to integrate the business
Finally, we just executed an extension to our partnership with Humana to provide integrated care services to approximately 7,500 Humana members with late-stage CKD and ESRD
The ESRD industry continues to move in the direction of integrated care due to the number of comorbid conditions that ESRD patients have
Our strong clinical performance improves the quality of life for patients and puts us in a good position to partner with payers to reduce costs to the healthcare system
As to outlook, we're reaffirming our 2017 Kidney Care adjusted operating income guidance of $1.525 billion to $1.625 billion
As <UNK> mentioned on our last earnings call, we're in a period of greater uncertainty than is usual for our Kidney Care business given the efforts around repeal and replace and the impact those efforts will have on healthcare in our country and on our business
We will continue to monitor political landscape and represent dialysis patients in those discussions
Now, on to <UNK> <UNK> to discuss DMG
Yeah, <UNK>
As you know, there's a wide distribution of rate
And what we want to do is make sure that we do what's right for the long term
So sometimes, we have some of their outliers that we need to bring in, and we do have a small set of out-of-network rates, and so those are sometimes the one we're discussing here
We are seeing the benefit as we expected
And of course, we had to go down, wind down some inventory that we had, but we are experiencing the contract as we anticipated
As it relates to the spike on the seasonal, of course, it's very hard to predict and isolate because of the flu season, it's sort of a moving target, if you will
And with the prescriptions the way they are, meaning every physician gets to make their own, it's almost impossible to diagnose a number
But if you had to put it in a range or you had to bracket it, I'd put it anywhere from $5 million to $15 million or so
On that, it's just basically we're winding down from inventory that was purchased at the previous contract
So, it's probably not worth worrying about
Hi, <UNK>
I did
And we did not provide additional detail on the numbers
We were just clarifying a number that was thrown out
That wasn't a number that we had cited in the past
There are some that are handicapped, which we always do for you
We try to give the best stab in anticipating what's going to transpire during the year
And then there are some that have been agreed to and have an effective date that hasn't been incorporated in Q1.
Correct, it will be in our run rate
Let me see
I don't think I could give you any additional detail on that, <UNK>
What have we disclosed?
The trends on what, <UNK>?
Yeah, we're seeing it moderate, I guess, to use your word, flat
It's in the range but as we disclosed, it's not a very significant number for the year
Yeah
It's really hard to parse through what's going on
And so why patients are doing what they're doing with plans, exiting and other things around it
So instead of giving you a specific answer, let me just give you the total
We're at 3,000, and we're at 2,500. And so we can't parse through with clarity as to why the number changed, but that's probably better just to give you where it ends – well, where it is as opposed to where it ends
It's fair
Well, <UNK>, I'll go first on this one
It varies all over the map and not only by a private payer does it vary by contract, but also even within Medicare and Medicare Advantage, it differs geographically and it differs by what the baselines are that you start with
So it's a wide distribution curve
