Fresenius Medical Care and DaVita Inc. reported first-quarter earnings earlier this month, with both companies showing expansion in U.S. operations and abroad and telling investors they expect to meet financial targets for 2019.
For DaVita, the earnings report marked the last for Kent Thiry as company chair and CEO. The Denver-based provider announced earlier this month that Javier J. Rodriguez, currently CEO of DaVita’s dialysis business, would take over as CEO for the company on June 1. Thiry will be the executive chair of the company’s board of directors.
Aside from taking the helm of the company, Rodriquez will have to finalize DaVita’s sale of its medical group (DMG) business to United Healthcare. The sale, first announced in late 2017, includes an agreed-upon reduction in the purchase price from $4.9 billion to $4.4 billion.
Fresenius hits its targets
First-quarter revenue at Fresenius Medical Care increased by 4% to EUR 4,133 million, according to company financial reports. Health care services revenue increased by 3% to EUR 3,317 million. Health care products revenue increased by 6% to EUR 816 million, mainly driven by higher sales of home hemodialysis products — largely as a result of the NxStage acquisition — along with dialyzers, products for acute care treatments, solutions and concentrates, and bloodlines.
“In the first quarter, we achieved healthy organic growth across all regions,” Rice Powell, CEO of Fresenius Medical Care, said during the company’s earnings call. “All of our major initiatives are underway. We have completed the acquisition of NxStage and started its integration process as well as an expansion of the infrastructure necessary for home dialysis. We are well positioned to reach the investment milestones set for 2019, and to meet our full year targets.” The company added about 4,000 employees during the past year, mainly from the NxStage acquisition.
As of March 31, the company was treating 205,775 patients, an increase of 4%, at its 2,559 dialysis clinics, an increase of 6%, in North America compared to the first quarter of 2018. The number of dialysis treatments increased by 3%, while the average revenue per treatment increased by $7 to $355, a 2% increase. Fresenius said the increase was mainly driven by higher utilization of calcimimetics and an increase in the ESRD prospective payment system base rate, partially offset by lower revenue from commercial payers. Cost per treatment in the United States increased by 4%.
DaVita shows lower revenue for quarter
Use of calcimimetics also helped the bottom line for DaVita Inc., although consolidated revenues of $2.74 billion in the first quarter were about $100 million less compared to the first quarter of 2018. Operating income of $341 million was down from $411 million year-to-year. Rodriguez said the company was re-affirming its guidance for 2019, projecting adjusted consolidated operating income in a range between $1.5 billion and $1.6 billion for the remainder of the year.
The company generated revenue of about $17 per treatment — with costs of about $11 per treatment — from administering calcimimetics, “creating a temporary quarter-over-quarter tailwind of just over $20 million,” Joel Ackerman, company chief financial officer, said. “For the rest of 2019, we continue to expect calcimimetics to be one of the biggest swing factors in our [operating income] forecast. Longer term, we continue to expect that calcimimetics will be margin neutral to slightly negative depending on how reimbursement is set.”
Total U.S. dialysis treatments for the first quarter were 7,297,460, or 95,267 treatments per day, representing a per day increase of 2.9% during the first quarter of 2018, the company said.
As of March 31, the company provided dialysis services to approximately 228,900 patients at 2,932 outpatient dialysis centers, of which 2,689 centers were in the United States and 243 centers were in nine countries outside the United States. During the first quarter, the company opened 27 new dialysis centers, acquired two dialysis centers and closed three dialysis centers in the United States.
In his closing remarks, Thiry said the dialysis industry continues to face numerous challenges, including 3 decades of inadequate government payment for the cost of care. “ ... [It is] the presence of an uncomfortable cost subsidy, perhaps one of the most extreme in American health care where the private sector has to subsidize roughly 90% of our patients that our government pays for,” Thiry said. “It's a bad way to organize the health care system, but it's been this way now for 30 years and the good news about it is that it is the same for every single player in the space.”
Despite the financial challenges, Thiry said the industry “has improved care and productivity in ways that the rest of chronic health care industry in America would envy.” - by Mark E. Neumann