DaVita Inc.

Good evening. My name is Debbie, and I will be your conference facilitator for today. At this time, I would like to welcome everyone to the DeVita Third Quarter 2019 Earnings Call. All links have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply please press star and then the number one on your telephone keypad. If you would like to withdraw your question, press the star and then the number two. Thank you. Mr. Gustafson, you may begin your conference.

Thank you, Debbie, and welcome everyone to our third quarter conference call. We appreciate your continued interest in our company. I'm Jim Gustafson, Vice President of Investor Relations, and with me today are Javier Rodriguez, our CEO, Joel Ackerman, our CFO, Leanne Zumwalt, Group Vice President, and Jim Hilger, our Chief Accounting Officer. Please note that during this call, we may make forward-looking statements within the meaning of the federal securities laws. All of these statements are subject to known and unknown risks and uncertainties that could cause the actual results to differ materially from those described in the forward-looking statement. For further details concerning these risks and uncertainties, please refer to our third quarter earnings press release and our SEC filings, including our quarterly report on Form 10-Q for the second quarter of 2019, as updated by our quarterly report for Form 10-Q for the third quarter of 2019. Our forward-looking statements are based on the information currently available to us, and we do not intend and undertake no duty to update these statements. Additionally, we'd like to remind you that during this call, we will discuss some non-GAAP financial measures. The reconciliation of these non-GAAP measures to the most comparable GAAP financial measures is included in our press release, submitted to the SEC, and available on our website. I'll now turn the call over to our CEO, Javier Rodriguez.

Thank you, Jim, and thank you for joining the call today. And as always, I will start with the clinical highlights to remind us that clinical is at the heart of what we do here at DaVita. As we talked about at Capital Markets, over 50% of our patients begin dialysis treatments through the hospital setting, which is bad for the patients and expensive for the system. We're working hard to lower the number by helping the people better manage their chronic kidney disease through two efforts. First, KidneySmart. which is the VEDAS community education program that provides free education on what the kidneys do, diet, medication, and treatment options, including home modalities and transplant. I'm pleased to report that we have educated over 180,000 people through KidneySmart, and we're making a difference. Based on our tracking, we know that KidneySmart education individuals who transition to ESRD have better clinical outcomes. both during and after the transition. Additionally, 32% of kidney-smart educated individuals begin dialysis on a home modality, which is almost five times better than the general population. Our other key effort to improve chronic kidney care is our new nephrology-led entity, the Nephrology Care Alliance, which will enable nephrologists to come together with DaVita to improve the care coordination for patients. In this model, the VEDA will create patient education and predictive analytics, while the physicians will contribute clinical expertise to help the patient slow kidney disease progression and start on home modality. These capabilities are important in both fee-for-service environment and as we continue to grow our value-based care arrangements. We're off to a good start. Two supporting points. Over 500 nephrologists have joined the Alliance, and second, Dr. Leslie Wong from the Cleveland Clinic has agreed to join DaVita to lead the way. Next, a few comments on our Q3 performance and results. Our adjusted operating income results continue to outperform our original estimates at the beginning of the year, and we have raised our 2019 adjusted operating income guidance for the second time this year. Cal State Medics has contributed to our OI performance, and we have delivered a great outcome. In addition to resulting in positive financial results, Our clinical and operational protocols have both improved health outcomes and driven savings to the healthcare system. While we expect at least one more quarter of positive economics, we continue to expect operating income from Calcemedics to be near break even over the long term. Regarding our financial goal of capital efficient growth, our discipline on cost and capital continues with our goal of margin stability. We have delivered strong performance on labor productivity all year while actively managing our capital expenditures spend down. These efforts have generated strong cash flow, a lot of which we have deployed toward share buybacks. Now let me comment on some longer-term issues and developments since our last earnings call. First up, California. We're disappointed that Governor Newsom signed AB290 into law despite clear evidence of the harm this union-backed legislation will cause for many of our most vulnerable patients in California. Because of the law, the American Kidney Fund has made it clear it will have to cease operating its patient assistance program in California as of January 2020. To remind you, this will leave nearly 4,000 low-income, primarily minority patients without financial support that they rely upon to afford health insurance. We, along with other kidney care communities, filed today a legal challenge to AB290 in federal court in California because we believe it violates the United States Constitution. Also in California, we recently learned that the SEIU UHW has introduced another ballot initiative, which could be voted on in November 2020 election. You may recall that in 2018, they sponsored a Proposition 8, which was rejected by the majority of California voters. The union has until April to gather enough signatures to put the proposition on the ballot. We will oppose this new ballot initiative which is simply another attempt to inflict harm on providers, physicians, and patients, and we believe would add significant unnecessary cost to the system and the taxpayers. Now on to more constructive development. Two weeks ago, CMMI released applications for four voluntary integrated care models for CKD and ESRD. I won't get into the significant detail today, but let me make a few points. These models are nephrologist-centric. The models are complex, and we will work to educate the nephrologist to help them evaluate if these models make sense for their practice. For us, the models appear quite challenging in their current form, and they will require significant investments that are unlikely to move the needle on the economics In partnership with the community, we will continue to share the feedback with the government on ways to improve the model design and quality outcomes for patients. Finally, it's been a busy six months, and as many of you heard in capital markets, we laid out strategies for long-term success, including a new set of financial metrics and goals. I'll be the first to acknowledge that we have more work to do to achieve our longer-term objectives, And yet, as I interact with our caregivers, I'm even more confident that we're on a path to improve kidney care for our patients. In closing, we also announced today that Peter Grauer, the lead independent director on our board since 2003 and a member of our board since 1994 after he took total renal care public, plans to retire from the board effective at our annual meeting in 2020. After helping to lead the board through the chief executive transition and the sale of DMG, he believes it is now time to step down. We are forever grateful for his tremendous leadership and role in our organization. Now on to Joel, who will provide additional details on the quarter.