DaVita Inc.

Good evening. My name is Andy, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the DeVito Second Quarter 2020 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remark, there will be a question-and-answer period. If you would like to ask a question during this time, simply press star and then the number 1 on your telephone keypad. If you would like to withdraw your question, press star, then the number 2. Thank you. Mr. Gustafson, you may begin your conference.

Thank you, and welcome, everyone, to our second quarter conference call. We appreciate your continued interest in our company. I'm Jim Gustafson, Vice President of Investor Relations, and joining me remotely today are Javier Rodriguez, our CEO, Joel Ackerman, our CFO, and Leanne Zumwalt, Group Vice President. 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 actual results to differ materially from those described in the forward-looking statements. For further details concerning these risks and uncertainties, please refer to our second quarter earnings press release and our SEC filings, including our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. Our forward-looking statements are based upon 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. Reconciliation of these non-GAAP measures to the most comparable GAAP financial measures is included in our earnings press release submitted to the SEC and available on our website. I'll now turn the call over to Javier Rodriguez.

Thank you, Jim, and good afternoon, everyone. Thank you for joining us for our second quarter financial results. First, I want to start, as I did last quarter, by acknowledging and thanking all of our teammates, especially the thousands of clinicians who provide our patients with life-sustaining care each and every day. The past several months have been amongst the finest and most exceptional chapters in our history, reflecting the compassion and the dedication of our teammates. The company's strong performance this quarter demonstrates the benefits of our patient-centric, comprehensive kidney care platform, beginning with CKD all the way through ESRD and transplant. The continuity of care that we offer our patients allow us to meet the patient where they are through offering modality options in the hospital, in the patient's home, or in the dialysis center. We're now nearly six months into this pandemic, and if you were to walk into one of our centers, you still would experience a high level of energy and intensity amongst our teammates as they provide for the health and safety of our patients. We have supplemented our effective infection control policies by conducting COVID tests for patients and teammates both within our lab as well as with special partnerships with external labs. These physician and clinician-led efforts have enabled us to maximize the number of patients treated outside of the hospital, which of course is good for patients and has helped reduce the burden on hospitals. While we cannot know for certain what lies ahead, I can say that we feel prepared to continue our work to keep our patients and our teammates safe. We had a strong financial second quarter. As a result, we're raising our adjusted earnings per share guidance for the year by 50 cents to 625 to 675. Our strong operational performance came despite investments and expenses we incurred in response to COVID. offset by savings associated with COVID in the form of reduced travel and health benefit expenses, among other items, which Joel will explain in more detail. Today, I'd like to cover four additional items. Let me start off by talking about treatment volumes and commercial mix, two of the largest uncertainties associated with the pandemic that we identified last quarter. Our patient census has been negatively impacted primarily by COVID-related deaths delayed by patient starts on dialysis. And we expect our treatment volumes for the remainder of the year to fall below the low end of the range of 1.5 to 2.5% provided in September. The patients that unfortunately passed away due to COVID were primarily among our older population and therefore were more frequently covered by government insurance. As a result thus far, we have not seen a material negative impact on our commercial mix, although with only three months of actual data on job losses, any assessment of our commercial patient population and their ability to access private versus government health insurance are preliminary. What we do know is that our private pay census fared better than expected in the quarter as our patients worked hard to maintain their employment and their insurance coverage. While the long-term impact of COVID remain uncertain, some natural offset exists and we believe in the resilience of our business model. For the second topic, I'd like to share some exciting development in our home business. As you know, we start from a leadership position in home with approximately 14% of our patient population on home modality and more than 25% utilizing a home modality at some point during their care journey. Our home growth continues to outpace our in-center dialysis growth by more than five times. And during the pandemic, we've seen a slight uptick in interest from patients wanting to dialyze at home. We now have over 28,000 home patients who receive training, education, lab jobs, and medication at over 1,750 programs across the United States. In fact, 95% of dialysis patients live within 30 miles of a DaVita home program. The scale of our home business is the result of many years of investment that we have made in capabilities, education, and technology to help give patients and physicians the option to choose home dialysis if it is right for them. Let me provide a couple of examples. Several years ago, we launched our home remote monitoring platform, which enabled daily monitoring of vitals for approximately 5,000 of our high-risk patients. In addition, early last year, we released a robust home telehealth platform, which now has a user base of over 19,000 patients. More recently, we've continued building out these platforms to provide patient support features like virtual disease management programs, virtual patient support groups and capabilities that promote continuity of care and support return home therapy for hospitalized patients. We believe that these capabilities have allowed us to significantly increase the frequency of home patient touches to continue to enhance the quality of care and to help extend the amount of time home patients spend on the therapy. The fact that we already had telehealth in place has also served as a significant advantage in our ability to keep these patients and their caregivers connected during the pandemic. A second example we're excited about is a launch of our artificial intelligence system that helps identify PD patients that may be at risk for hospitalization, which is one of the largest causes of home patients switching to in-center dialysis. Home growth and innovation continue to be amongst my top priorities, and we continue to pilot many new programs and ideas around the country to help support patients for whom home dialysis is the best modality. We also believe that our full suite of modality offerings enable us to help patients seamlessly access the right modality at the right time in their dialysis journeys. Our patients can continue to benefit from our national footprint, our physician partnerships, and our unique capabilities as we seek to lead the industry in growing homes. My third topic is calcium and medics. As many of you know, we're now moving into the next phase of calcium and medics reimbursement as CMS proposed including calcium medics in the Medicare Bundle Payment in the recently issued proposed payment rule for 2021. We believe that the DAPA period gave CMS sufficient time to observe utilization and pricing data especially in the light of the mix of IV therapy and oral therapy. Over the last couple of years, our physicians and our clinical teams developed patient-centered protocols to achieve our high-quality standards for care, which in this instance also drove down the cost for healthcare systems because the protocol resulted in a higher mix of low-cost generic drugs and a lower mix of higher-cost IV alternatives. We believe that the new rule will result in similar economics for counseling medics in 2021 as we have guided in 2020, which will help to offset the underfunding of the remaining Medicare bundle. My last topic is Medicare Advantage. As many of you are aware, in 2016, Congress enacted the 21st Century Cures Act to provide all Medicare eligible patients with the option to enroll in Medicare Advantage plans, including all ESRD patients. We believe that the ending of the barriers that have prevented active dialysis patients from enrolling in Medicare Advantage will be a positive development for many patients, providers, and managed care organizations as this new rule will expand the opportunity to provide coordinated care to patients who suffer from multiple chronic conditions. Unfortunately, CMS's recent ruling that loosened MA network adequacy requirements for only dialysis services calls into question the breadth of the choices available to dialysis patients. There are many factors that will shape the eventual enrollment in Medicare Advantage plans, and although we have no clear visibility, we do continue to believe that enrollment in MA plans by ESRBD patients will be gradual over the coming year. Now, I'll pass it on to Joe to provide an update on our Q2 results and to discuss our financial outlook.