Q1 2020 Earnings Call
[music].
Thank you and welcome everyone to our first.
Ladies and gentlemen, good evening.
Name is Scott and I will be your conference with later today.
This time I would like to welcome everyone you Devito first quarter 2020 earnings call.
All lines of inflation you to prevent any background noise. After the speaker's remarks, there will be a question and answer period.
I would like to ask a question. During this time simply press star and when the number one on your telephone keypad.
If you would like to withdraw your question Press Star then the number two.
Thank you.
Mr. Discipline, you May now begin your conference.
Thank you and welcome everyone to our first quarter graphical I. Appreciate your continued interest in our company.
Good afternoon, Vice President Investor Relations and joining me remotely today are Javier Rodriguez, our CEO Joel Ackerman, our CFO only ends on Wall Street Vice President please.
Please note that during this call we will make forward looking statements within the meaning of the federal security laws.
All of these statements are subject to known and unknown risks and uncertainties that could cause the actual results could differ materially from those described in the forward looking state.
Okay.
For further details concerning these risks and uncertainties. Please refer to our first quarter earnings press release, and or if they see filings, including our most recent annual report on form 10-K, and subsequent quarterly reports for the first quarter of 2020 on form 10-Q, we should be.
Filed today.
Forward looking statements are based upon information currently available to us and we do not intend and undertake no duty to update you take digitally you'd like to remind you that during this call. We will discuss some non-GAAP financial measures reconciliation of these non-GAAP financial measures to comparable GAAP financial measures is included in our earnings press release submitted to the.
You see and available on our website.
I'll now turn the call over to Javier Rodriguez.
Thank you Jim and good afternoon, everyone I hope that you and your families are healthy.
Let me begin by expressing my sincere appreciation for the 65000 nurses Peyton sertich missions social workers.
System and other caregivers worldwide, including many Nonclinical workers, who are on the front lines of care with arc resistant partners. These people are living up to the meaning of Davita, which is <unk> like during this global crisis.
Workers and dedicated to helping others is a source of energy and inspiration.
I want to them that gratitude to all health care organizations and caregivers around the world.
For todays call I'll discuss three top.
Response to the crisis.
Impact of Kogan on our business in our decision relating to the care that.
The capital market I talked about the strength of our platforms and our ability to provide continuity of care of dialysis patients across all sites. It's here from the hospitals the patient foam and in arc when there are.
Our sponsor cobot highlights the resilience in the strength of our teammates and demonstrates the power connecting the multi platform. Let me give you a few examples to bring it to life.
Right.
We're leveraging our national scale with resources team and our geographic footprint open and operate dedicated clinics and.
Yes, the dialysis patients who are or suspected to be so good positive, which has helped to free up crushed it possible resources.
The dial this industry in partnership with the government has joined together to help.
Maintain continuity of care for dialysis patients by creating isolated cohort capacity it can be accessed by other providers.
No.
This is an I thought leader at home dialysis is served our patients well by supporting continued growth of home dialysis. During this crisis and helping to provide continuity of care for all of our creative as they may have moved between allies in home in hospital or incentives due to the buyer.
In addition, we've been able to utilize our leading telehealth capabilities to allow us to expand the treatment of Arts basin in the safety of their home well maintaining access to their care provider team.
With the support of the government, we're now using that telehealth platform to provide further support.
Instead or patient care.
Finally, no over 900 hospitals, where we deliver acute services, we've been able to allocate resources and ship caregiver areas that most need to help support patients and our hospital partners.
Next let me address some of the trends, we're seeing wall covering the expectations for the short and long term business impact of cobot and throw the virus.
Good thing similar do graphic ways, its tobin impact if you've read about in the news initially the CDC wanted all come with positive patients treated in the hospital is it pets.
Pandemic spread however, the CDC quickly recognize this was not possible insurance providers like to be that you've been able to focus on infection control well before coded to alleviate the burden from the hospitals to treat stable pacing and then I'll pay synthetic.
Today, nearly 70% of to be the pacing for either cobot positive or suspected to be filled with positive or treatment one of our outpacing static.
The operational cost is maintaining treatment three times, a week deep cobot positive or suspected to be basin.
I'm cohort your Sip and clinic, there's been nothing short of extraordinary all while maintaining talked in its here over 230000 patients showing no symptoms of the virus, but our at risk with multiple other co morbidity.
The near term impact on our business is still dynamic and somewhat uncertain. However, we're able to our firmer guidance for 2020 at that time, just maybe in contrast to what you've heard from other providers were maybe facing volume or liquidity issues due to the significant drop off on elective procedures have you know golf is is not optional.
It is like sustaining treatment that our patients need multiple times each week.
The long term because we have less visibility we believe the economic impact is focused on our business well lagged the impact was the broader economy.
Scope of the impact is hoping on our business will be based primarily on the duration.
No that's the stating virus and its impact on unemployment generally.
We expect that these factors would have a greatest impact on volume and mix.
Volume as it grows as dialysis population is more uncertain due to the potential impact from the virus on the late stage CKD population and on the health status of our existing yes or de pacing.
They're not commercial mix, because the insurance mix of our patients could be negatively impacted by weakening of the broader economy.
Next I want to not be administration Swift response, and this time if prices the administration collaborated with the dialysis industry by modifying certain policies and regulations to facilitate our.
Great and the intent of the government action and with the release fun, what's to prevent health care providers. Some closing their doors not the healthy company make their earnings targets.
The beat a has been and we'll be able to continue to provide care for our patients, including the uninsured without the need to the federal funding.
As a result, although we haven't heard spot fall within the parameters of the relief fund under the Cares Act Davita has decided not to accept this government financial support at this time.
We believe that isn't the best interest of our company shareholders and our country to allow these dollars to be redistributed to other individuals organization or health care providers.
Truly need it.
Yes, she has been an increased focus over the last year.
And doing the right thing matters in our opinion the Karen.
Okay crisis is an opportunity for companies to lead and contribute.
For the greater good of Society, and we are happy to do our part.
Let me conclude with a comment on to be difficult here in this crisis.
The fact that our front line care givers know that they're part of something bigger ability that's been a key part of our resilient.
They are true heroes, and they know that our entire company or as we say.
Our village is doing what we can support them.
No we still haven't on predictable future with this fires.
But we're thankful that were bill its strong.
No I wanted to drill to provide an update on our Q1 results and to discuss our financial outlook.
Thanks, Javier I want to start by thanking all of our teammates Selflessly provide life sustaining dialysis care to our vulnerable patient.
I am proud to be a part of this would be the village.
Q1 was a strong quarter with relatively little impact from cope with the details are in the press release and I can answer any questions. During Q1, a I'll focus my remark on financial details related to cope.
Sorry, the level of uncertainty that we face going forward is significantly higher than usual the factors driving this includes the severity and duration of to cope with pandemic the impact on her patient population, resulting in a potential decrease in treatment volumes.
And the impact on unemployment and commercial health insurance coverage.
As a result of this uncertainty financial outcomes are harder to forecast than usual and the range of possibilities is wiberg unusual.
Our treating volumes have remained fairly steady so far for the rest of 2020, we expect volumes will be impacted by any changes in mortality.
Transplants, and or new patient Adnan, resulting from cope.
I'm expenses were incurring elevated costs as a result, the additional compensation and reimbursement for certain of our teammates.
Hello.
Some of the person financial impacts of the crisis.
Enhancement to our overtime TTR wouldn't benefit policies.
The creation of dedicated shift to care for patients with Ti firms or suspected cobiz.
Redistribution of teammates machines in supplies across the country.
Labor hours needed to screen patients and teammates to answer out.
Nick.
One funny.
As well as the other cost reductions in our business.
At this time, we're maintaining our 2020 guidance ranges for adjusted earnings per share revenue operating income margin and free cash flow.
But recognize the increased uncertainty given the rapidly changing dynamics related to cope.
The longer term impacted covidiens on.
Certain and difficult to quantify we believed that the two main factors considered or growth and mix first on growth.
Our long term growth could be impacted by changes in the mortality in both the late stage CKD and he has started depopulation due to kogut.
This will depend primarily on the infection rate, they say tally, great an age and health data solutions and affect it.
Second increased unemployment levels will likely lead to fewer patients, having commercial insurance, which creates earnings headwind because of the higher reimbursement rates you will see from commercial insurance plans.
We can't predict the net impact at this time, but I will highlight for important right now.
First.
When you consider it a sensitivity of our business to a recession, we believed that the peak level of unemployment matters more than the shape of the recovery, but many of our patient preference towards.
In coverage in the near term, but maybe slower to return to work in a recovery.
Second when estimating the peak unemployment, it's important to recognize a large number of individual currently included in unemployment numbers are actually furloughs and are still receiving health benefits from lawyers.
Those for locations will eventually return to work may not see any disruptions and how much.
Third a significant number of our commercially insured patients have coverage that is not tied to their current employing this includes patients with individual insurance as well as patients on Cobra.
This should help mitigate the potential change in our mix relative to the increase in on them.
Employment.
Finally.
Our patient lose their employer based coverage yep Yep real coverage options, including exchange plan, where many patients can access tax credits on cost sharing reduction which was not available. It came out at the 2008 for cash.
Oprah and Medicare and or Medicaid.
Looking at our balance sheet cash generation at this time, we did not see material near term negative impact from co bid out of an abundance of caution in March we drew down 500 million dollar.
Our somewhere revolving credit line, which is reflected on our first quarter ending balance sheet.
Given our current cash balance.
Near term outlook, we expect to repay the revolver shortly.
We also suspended share repurchases in March not repurchase any stock subs.
In the near term you expect to use caution with regard to capital deployment, and we'll look to preserve financial flexibility and liquidity in the face.
The current uncertainty.
We believe that our cash flow generation and our balance sheet put us in a solid position to weather financial and operational challenges brought on by the current pandemic.
This will allow us to continue to focus on what is most important to health and safety at our teammates and delivering high quality care to our patients.
With that operator, please open the line culinary.
Thank you we will now begin to question and answer session.
This is Vince if you want to ask your question. Please press star and the number one.
Please record your name clearly when prompted.
And if you want to withdraw your question. Please press star number two.
Speakers, one woman season wafer to questions.
Alright speakers. Our first question is from Justin Lake of Wolfe Research Sir.
Good afternoon appreciate all the detail a few things here one obviously a really good first quarter I was hoping you could kinda about walk us through a what you saw relative to your own kind of interesting alleged occasion there.
And a baby delineate a you know what do you think core growth was versus kind of any items, we should think about.
Sure. So let me take that Hello, Justin it's true here.
I'd call out three things, although I would say it was.
Broadly a strong quarter across many dimensions in terms of what stood out one RPT was a bit higher than expected, although not in a way that would lead me to change any of my views about the full year.
Check in costs were well managed very broadly I'd I'd highlight productivity farm a G.N. a is three things although.
Yeah. It was a it was a broad strength.
And finally international was a strong contributor.
Part of that was strong fundamental growth.
International just had a good quarter, but I would highlight there was about $10 million of foreign exchange gain in our from Eric Asia Joint venture that is nonrecurring.
A job so that's helpful.
So you talk about or P.T. being a bit higher than expected, but not in a way to change the views on the full year well, there's something that we should think about that you know benefited the quarter to supposedly a close any people take off.
Nothing in particular, the RPT number will will bounce around a little bit from quarter to quarter, So nothing worth highlighting.
And the cost side, I mean game like I'm getting you guys have a core growth number.
So you kind of think about ex moving parts of I'm getting something into team.
Well yeah.
Yeah, I think it's a it's a tricky quarter are you or your thinking Q1 over Q1.
Yeah year over year, Yeah, yeah, well.
Q1 last year was was not a particularly strong quarter and then Kate Q2 came on wells. So there was I'd say there was some variability there. This year. The the typical quarterly seasonality is is gonna be a little turned on its head.
Really Q1 is a week quarter. This this year you've got to the positive Calcimimetic. Since then in the back half of the year, you'll see some negatives from ballot initiatives and as to cope with the impact grows so.
I think as you think about a full year number.
That the margin you're you're calculating the Aries.
Or where the growth rate you're calculating there is something that I would be hesitant to.
Just focus on.
Okay, and I'm done before I jump back into queue can you can you give us that calcimimetic benefit in the you might be impacting the first quarter, maybe both the RPT and to operating income and then you it looks like the numbers being caught in the second quarter by CMS. So how should we think about that for the rest of the Ya. Thanks.
Sure. So I'd say for the full year I wouldn't I don't I wouldn't change anything we've said about calcimimetic switches 40 to 70 million of alive for the full year to Q1 number was 35 million Oh lie benefit.
The our P.T. numbers I'm looking for those the RPT number was nine and a half dollars.
In Q1, and the cost per treatment for 90 in change so $9 and 56.
Of our P T $4 at 94 cents of cost per treatment.
I sort of these though.
Thanks, Thank you as long as certainly our next question is from Andrea Mark of Barclays Sir.
Hi, Good afternoon, just wanted to follow up on the commercial rates looking back at the last recession. It looks like your commercial revenue mix held up better than your commercial treatment mix, that's something that could play out again through potentially higher negotiated rates on a lower base of commercial pace patients should we see more permanent job losses.
Let me grab that way Andrew I think it's it's difficult to compare.
At the end of the last recession of course.
We had a different dynamic going on.
This one is very very unique and so we have.
Number one as Joe said, we now have the exchanges.
And so we don't know what's going to happen there and how many people pick the exchanges, we still have Cobra and then we still have all of these people that have been furloughed and so when you look at this as opposed to the last recession, where we didnt have a whole bunch of people on on what appears to be pause or furloughed for a bit.
We don't know how that dynamic will play out.
Last time, there was there was not a lot of change in the rate dynamic, meaning the rate dynamic stayed similar to what it had been in the past and I have no information.
Well informed that that would change.
Okay, Great and then just a follow up question on Russia.
Yeah. That's got a just a follow up question on home dialysis are you seeing any uptick in interest within your patience to pursue pursue home therapy and second longer term do you think this crisis will potentially accelerate the ship to home dialysis.
Thanks.
Yeah. Its an interesting dynamic dynamic many people are asking that same question for now and again and it's so early in this if we don't know what the long term implications are but for now we saw a slight a downtick so little weakness.
Yes, but then when you look at it it's it's the placement of catheters.
That really.
Impact of it and then once.
The administration deemed essential that started to pick up in addition, as we've talked about is our platform really matters, meaning it there's a lot of patients that start in center and then through education go home well, we saw that that number or went down a bit because we didn't have a lot of.
Educators and nonessential personnel in the centers, so we would not spread the virus. So therefore, we had less of our patients and center move home.
And so.
When you add it all together, there's still a lot of energy we reached our 25000 patient Mark at home and we think that overtime. We will go back to the patterns that we saw a pre cove, it which is a roughly 10% or so growth.
Okay, great. Thanks.
Thank you Andrew.
Thank you Andrew speakers for next question is from Kevin from Bank of America Kevin.
Great. Thanks, I guess wanted to ask about the you hear that now it's kind of a big hiring push earlier in the year.
And you know you guys, obviously highlighted a bunch of potential.
Pressure going uncertainty or your goes on including your factory economy. So just.
I understand you know what the.
But for the purpose of that took a large increase in hiring was and how you're talking about taking on additional across the country heading into recession.
Yeah. Thanks, Kevin I think when you think of hiring people you got to put it into two categories. One is the DNA that could spread out through all the clinics and then you have the front line care givers, and so, but we announce which was a big hiring was for frontline.
Caregivers and so what you're seeing is that sometimes and in times like this where you've had a nursing shortage and you've had a robust economy.
That it's a great opportunity to have stable workforce.
So that's what you really saw we had openings across the country and so we want to fill them now while there's a lot of people looking for jobs.
We have heard more about kinda back filling open positions that are worried about trying to add to fuel growth and some <unk>.
ER segment or anything like that.
Correct.
Okay, and then I guess, there's been a lot of press about patients with co that in the hospital needing more dialysis has that impacted your business in any way either by managing you know that got hospital outpatient dialysis clinics themselves or hospitals trying to clear out.
Dialysis clinics I'm pushing volume in your direction that everything.
Dynamic there.
But in general the short answer is that it is a lumpy from geography to geography, and so in some geographies, where the hospitals because of all the elective procedures have seen a big decrease in census.
Our acute have seen that as well if covert hasn't hit that area of course, there are other as workovers, it's quite active where we have seen an increase but when you none at all out and there's nothing that you you would notice in the economics model, that's what you're asking.
Fair enough right perfect and then you mentioned.
A number the headwinds around the recession any offsets you can think of I guess, there you had mentioned labor might be easier to combine a recession. How do you think about the the cost save opportunity versus the into revenue pressures in recession.
Yeah, Joe you want to grab it.
Sure. So yeah, I think there they're really two ways to think about the cost mitigation and it really comes in two buckets. One is what you would expect to naturally occur in the context of a recession, which you know could be higher productivity.
Because of lower turnover lower training costs other things related to.
Salary wage and benefit so that would be one bucket and then second is the leavers, we could pull proactively to take costs out of the business recognizing that it's theories mix pressure or volume pressure that we we have things. We can do we've got a resilient business.
This model. So there are actions, we could take to mitigate some of those pressures as well. So there's a there's a natural component to it and a proactive component as well.
I mean do we read anything it's the fact that you're going to mention to the headwinds without guarantees offsets would you expect that during a recession you would grow maybe below the normal range of.
Well I growth or just a road in that range during recession.
I would say it is too early to tell theres just so much we don't know yet about [noise].
How this recession is likely to play out in terms of what the peak job loss will look like how much of that is true job loss versus just furloughs. How this will.
Role or forward and how much if we could mitigate when we think about mix. So.
I would say, it's too early to tell how much of that we'd be able to mitigate from a cost standpoint.
Okay, great. Thanks.
Thank you is all Catherine Speaker summary, next question is from with Mayo keep yes.
Hey, Thanks get up Hey, good afternoon, I just wanted to follow up on Kevin's Hospital question. I mean, that's a business that you guys have had some remarkable growth then in recent years I don't think the number of hospitals that you provide coverage has changed but the revenue associated with those as has been done.
All of digits for many years can you maybe just talk a little bit about some of the factors driving that and how you contract with hospitals.
Sure I'll try to give you a little color and see in general that business is a very tough business because of the cyclicality, meaning up and down in the demand of the hospitals 24, seven so it is.
Very hard business to enter and so this is a place where our platform really shines and the hospital see the value of having the network and having the flow pools, where you can actually have the team to take care of the patient.
So what we've seen is that a lot of hospitals value or our value proposition and of course that would be included in the price and the service and so we've seen that platform go on a significant way.
Okay, So and as I look at the number of of hospitals and that there was 900 and you're growing revenue you know, 13% them and is that the way to think about the organic growth of that but that business.
Hi, Joe can you break down the revenue and the price or is that not something we want to disclose sure yeah that it's not something we disclose but when it has it has been a faster growing business than the core business, although very small Ann and I would add it it tends to be a lower margin business.
As well.
Okay.
I had another question on Calcimimetic send in a lot of the data is showing a pretty aggressive.
I think uptick and parsabiv use of over Sensipar and the ASP is much higher versus Sensipar can you maybe refresh us just the economics between the two and what your split is today.
I don't think we've broken out that split specifically.
You know even in the as you look at the Spike that we've seen in Calcimimetic profitability starting in in a two years ago and then last year in this year, it's driven largely by the oral and now you know the gaps as you know between.
Hi way ASP declines and how our pricing declines I think as we think about it going forward. Obviously as were as the tobacco period is coming to an end the profitability of cosmetics is is going away I think the important question for US is 2021 and the.
The issue between the the oral genetic and tend the I.V. is how does the bundling work and how we'll.
CMS reimburse us and what a is it by drug by patients or or some other methodology and that's really what will drive the economics.
Okay and their quick reminder, on that with that the physicians pick whether it is ivy or oral and so at the end of that they might have a preference right now there isn't much data and we know that be Ivy is a lot more expensive. So the physicians are feeling their fiduciary.
<unk> responsibility to do.
What's clinically equivalent or appears to be equivalent it.
The clinical equipment at a much cheaper price.
Okay. That's helpful and maybe just one last one back to just the comments on volumes and trying to think about what the impact of coal that will be on this patient population and Javier you mentioned you know looking at some of the CKD stage four or five.
Patients and obviously you know there's going to be an impact on your census today I don't know maybe if you could just elaborate a little bit more on kind of how you're you're thinking about what the longer term impact can be from covert 19 on the SRT population.
Sure and I'll try to be is helpful. As I can win but as you can imagine there's just a lot of dynamics and it's pretty early in the game. So the first and probably the biggest disclosure is a it all depends on the duration in the severity of the virus.
And of course, if we have another wave and all those sort of thing, but if you. If you assume that there isn't going to be another wave just for the argument and to be optimists here you have to start to look at okay did the virus actually impact CKD patients that would have been on dialysis.
And if so.
How much and what magnitude to is if you were going to look at or something that could increase volumes is that the virus actually do damage to people that wouldn't wouldn't have had.
Kidney damage and so that is too early to tell on the other side of course, the preferred kidney replacement therapy would be a transplant.
And if you were going to put a transplant into categories. There was the living donors ended she's donors.
And what we're seeing right now while the virus is active is it the living donors are coming down or because of the risk of infection.
And and so there would be some potential changes in those numbers that would increase volume of dialysis patient.
So those are some of the gives and takes that are going on we don't know how it all net out and so we're keeping a close eye on it.
That's helpful. Thanks, Thank you.
Thank you with speakers. Our next question is from Tito Snickering I've Daiichi Matt.
Sure.
Oh good afternoon, guys. Thanks for taking my questions I'm, a few ones here productivity was strong in the quarter I can you talk about for these drivers of productivity was it consolidation in closing of centers from last year. It sounds like it wasn't a shift to to PD or home therapies. So what other factors.
Led to an increase productivity.
Yeah, nothing nothing specific I would I would highlight other then it's obviously labor is our largest cost item. It's something we spend a lot of time, focusing on and it's just something we need to manage well over the long term in order to deal with the fact that.
Our P.T. increases are are below inflation. So it's just.
Walking and tackling that we just continue to accelerate.
Okay from Copacabana Palace has there been named changes to cover benefits in terms of the link or people can stay on Cobra <unk>.
My understanding is that I don't know of any crowbar expansion, but our patient population can add 11 months because of disability. So there's a disability extension. So in essence, our patient population could have coverage for 29 months.
I do not know if there's a cobot exception.
Okay. There is a lot of you know the concern me or for me in the macro perspective or at this point as be moving just were 2021, a what's the impact that a Medicare advantage can provide to your patients are looking to reduce out of pocket costs and can sort of the uncertainty.
Sort of add or fuel or more people adopting make her advantage didn't disappoint.
Well, there's a lot of different views on your question and at the end of the day. It is just speculation because we don't know it is a very individual and personal decision, but in general what the reason why people would pick and may yeah.
Because it has a max out of pocket.
And.
It has some additional benefits.
And the reason why people would stay in Medicare is because they're used to it it has.
Basically almost unlimited not work if you will it's it doesn't have the restrictions.
If you have secondary coverage it it really helps you in your out of pocket expenses.
And so what we've said in the past and we continue to say is that we don't have any information that would lead us to.
To conclude anything other than our population will likely mirror that of the general population. The only reason why we are so different is because this is the only population that wasn't allowed to enroll in Medicare advantage. So the only people that are there are the ones that enrolled pre their kidneys failing and.
And so there's gonna be open enrollment and now the question is what what will be the environment in the fall.
Well patients or be able to sit with someone will they have a web site will they be more nervous more fatigue is the virus still with us or are we in a more normal situation in the short answer is we don't know any of that so I'm just giving you.
The data of how someone with pick one versus another.
Great and then so last question here just from a modeling perspective, a you'd walk through a bunch of costs, which will roll through <unk> for two he was really daddy that there's some dollar value. They can add how much we should be thinking about these new costing Larry and I think to give thanks much.
Yes, so peto. It is it is really tough to predict if.
There there are there a lot of moving pieces and again the uncertainty around Langton severity, if the condemn pandemic et cetera et cetera, I I would also note that as as we think about how we modeled things in the various scenarios we played with <unk>.
Weve.
We generally assumed that were passed the peak, we're kind of add or passed the peak, we've got a whole bunch of a whole range around at what pace. The the pandemic begins to taper.
But we haven't model DNA, a second wave. So just as you think about our guidance and what we're comfortable with I just wanted a point that out in terms of specific numbers. We are thinking the number for April will be somewhere in the 30 to 40 million dollar range.
It's reasonable to expect to expect May will be in the same range and then again, depending on how the pandemic plays out we we'd expect it to start tapering down.
Okay, and actually last when I apologize on share repurchases a they cannot you taking any of the government grants at this point and because your point you're viewing this as sort of passive can you get this point when do you think that.
Yeah, I think he doesn't consider doing share repurchases again, it just more of a third quarter event, where do you guys walk into June and things are better we guys began buying shares back at that point. Thanks, So much.
Yes, so I can't give you a date because we don't have one we are certainly going to be cautious with capital deployment given all the uncertainty I.
I think.
We're likely to keep the pay higher level of liquidity than we have in the past.
So.
Hard to say when or how we're going to think about share repurchases going forward and when some of that caution might relax.
Great. Thanks, much guys great quarter.
Thank you.
Thank you Ms. Hao keno.
Our next question is from Gary Taylor.
Gary.
Hi, Good afternoon, just a few just just to clarify on your last response, Joel when you said 30 to 40 million and.
With that for April and May what that additional expense that you were additional operating expense, you're just saying is it's plausible.
Yeah that would be the incremental operating expense that we would expect related to cope.
Thank you and the decision to return the cares that funding.
That decision you know limit to the first 50 billion that's been distributed heavy heavy made a determination about the full.
Hundreds of 75 billion between the two provider funds or that sort of T TBT depending on.
You know how things would develop.
I might be getting lost in the details the correct me if I'm wrong here, Joel because I might be aggregating pools that I'm not put the cures Act relief fund is how I have it in my head and those are the funds that we decided.
Were the intention another government, which everybody can interpret in different ways, but from our perspective. They were a safety net and they were to be use for people that needed that money because the economic damage was so severe that they can keep their doors open and so while it.
You can tell from the numbers that the Joe gave you we have big expense increases and by the way the numbers that you cited there's a 30 40 is monthly.
So we have had big expenses.
We don't think that that was intention to money. So we're going to get that back.
Okay, and then I sold just a couple of numbers flipping the income statement Joel Wonder if you would comment on I know the equity investment income was almost 18.
Million, a this quarter, it's higher than usual than the other.
The other income down by interest expense flipped.
You know to a negative so 4 million in change both those looked a little.
Unusual any anything a lot on though.
Yeah on on the equity income the the biggest component of that is the 10 million of FX on the Asia joint venture that I called out there is another component to this that relates to the deconsolidation of a few of our clinics.
Starting one 120 20 that the details with this will be in the 10-Q, it's got no impact on U.P.S., but it does take what was Oh Y and turns it into.
A it turns it eat it moves it into equity income it used to flow through revenue and cost and it moves it into equity income and then there's an offset down at the M.C. high level. So those are the big things I'd call out there on the on the other income.
There was a different FX loss loss associated with the international business and that was about $9 million. So those are the big things I'd call out.
Thank you.
And thinking is all Gary our next question is from Matt William Blair Sir.
Hi, good afternoon. Thanks for taking my question I see Oh, Here's my fault, one more time on on the terrorists or dollars I was when you announce.
We see this grant all things equal 13.
I had said you wouldn't you know contemplating keeping it just curious was there additional guidance or regulation from the government that influence your decision or was this a proactive decision by the board and management I, just I understand from April 13th to today.
Yes. It was a the latter which is a proactive decision by the board and management and again you could make it very good case to say the spirit of that was to reimburse.
Oh, hi expenses related to cobot, which we have many including P. P. Additional labor overtime and all the things that we've described on the call.
We came on the other side, which is the government which needs to be totally commended just said we've never had anything like this and so we're going to distribute money to make sure that the well being of Americans are taking care of.
And then well reconcile well, we don't need time to reconcile we know that we're not a in that spot where where the safety net and so we want to be proactive so that the government gets visibility those people that can give the money back and that money can be redeployed as soon as possible to the people that really need it. So it's really about the spirit.
But that we made the decision.
Yep, Okay fair enough. Thanks.
Actually the getting enough now this morning in I'd like to get enters I'm, just curious what if any at target you might have for that group.
And just sort of getting you'd have to this morning wasn't getting up to me to comical.
Yeah. Thank you, Matt we're really excited about Davita ventures, and basically we have a lot of entrepreneurs that are coming out with all kinds of great things and they're saying can we partner with you and so this venture groups is out there and now I'm really.
Generating demand and so we want to be to partner of choice and as we've talked about capital markets are we're expanding from being dialysis company to being a full kidney care company and that means that we're going to need certain technologies and partners from diagnostic pharmaceuticals to other areas in transplant and so.
So we want to be out there and we're really excited about it.
The only thing I'd add in there is as you think about the magnitude of these investments. We're we're thinking these are likely to be single digit millions and if you think about it in the context of their free cash flow, it's not going to change the number at all so relatively small.
Okay. Thank you.
If you.
Thank you Matt. Our next question is from Lisa Clive of Bernstein Ma'am.
Hi.
Just a question on legislation in Washington, I, clearly DC is.
If he wants a couple of 19 and that's the main focus but do you think the kind of in 19 pandemic makes it more likely that the patient acts could get past could do you have any time insensitive, how life that l. as in Washington today and follow up question I'm Cobra My understanding is even though there.
<unk> 11 month disability extension, almost all patients drop out of Cobra 18 months, because after that point. They go from the Hpeight hundred 2% of the premium to 150%. So is it fair to assume that the only when do you stay on cover everything that has a cat premium support.
Let me grab the Lisa you first of all you've exceeded my knowledge of Cobra and Joel Joel I don't know if you know if you know that technical piece.
And I guess, the other way of I do not just kinda answer Okay. I guess, the other way of asking it because you know if we do you know given that the unemployment numbers that we've been seeing across the country of Cobra become at a much bigger part of you know.
Well, it's a lot more patients and up on Cobra I'm, just trying to understand how long they they actually will end up on it. So if you do have any insights into that that would be helpful.
Yeah, I do not and so but we could get back to you, but I do not have any more insights on that sorry.
But you had a second part of your question Lisa.
Oh I know patients Act you know given yeah. Just wanted to cover 19 has any impact them and and also just general discussions in Washington around that.
Well I'll just say in general I have not had the courage to ask anything because.
Obviously, all hands have been on deck for this covert crisis I'm hopeful that policy makers will see the value of integrated care and that they will see the power of connecting the sites of care and having.
This.
Organized fashion really help because if you look at Davita as an example, and how we're organized with P.P. in how we were able to stand up cohort in centers, how we were able to take care of our teammates with child care. Another thing, we obviously saw that and in other areas.
We did not see that in a lot of the smaller players and so we're hopeful that the government sees that resource organization.
And capabilities around the country is also quite useful and if you connect the sites of care in the technology.
That could benefit the system and the patients. So we will see a post cobot.
Okay, great. Thanks.
Thank you.
Thank you Lisa.
Our next question is from Justin Lake of Wolfe Research Sir.
Thanks for let me jump back in the I've got a few more here first I just wanted to follow up a jewel out to your answer to Peter's question on our costs I understand you don't want to give a specific number but in your prepared remarks, you kind of walk through a you know there are costs associated with total return you gave US you know not insignificant.
New Clos.
In April and May you talked about the $50 million benefit from sequestration and then you also mentioned other cost reduction.
So I'm curious as you bundle those together it looks like it it's a headwind X potentially although cost reductions, but I'm just trying to figure it out relative to where you were kind of in February. When you gave you gonna be original guide or updated it.
How should we think about than that.
Well those those impacts is that a is that an additional headwind your mind or can you kind of offset.
The the you'll be incremental costs from Kroger.
So the way I'm thinking about it is if you.
Start with a strong performance in the core in in Q1 and you.
You offset that with.
The Kobe <unk> costs, and then add back Sequestrations, we kind of feel like and then there. There's some natural costs that come down tea and he is a simple example of that we feel like net net we wind up with.
With a potential headwind that we're comfortable absorbing in without changing our guide. So if you want to think about how do we get to maintaining our guidance strong Q1, the negative of Colgate offset by she does the 50 ish million dollar from the sequestration suspend.
Brian and some other cost offsets.
Hi, pin you down in terms of how much better Q1 was versus your internal expectations. When you set the god the year.
No you cannot pin me down on that.
Okay.
And ER in your 10-Q that you just filed there were a couple of you a investigation subpoena that were out there I know this is the cost of doing business in dialysis and historically for 20 years, but until then we probably they really amounted to March but just wanted to ask you or if there we get anything new or different.
But we see a god that we should consider in would those Ah and what got reported there I guess in New Jersey and California.
No what I would add is of course, we take him very very seriously and we have just been through our corporate integrity agreement we've been out it for five years and we continue to want to lead and show the spirit.
Compliance and the law of compliance and so.
We were disappointed every time, we get them and then of course, they can come through many different ways, including investigations inquiries and you hope that once they see what we're doing a that they're satisfied with that but every time, we get them I can tell you personally I am very.
Very frustrated because.
We talk and live compliance on a daily basis.
So nothing else after that Justin.
Understood and then just a couple about numbers questions here.
You mentioned, the ER or a significant portion of your commercial patients have coverage, that's not part of GE employment <unk>.
I was curious if you could share even just a round number there that half a quarter.
Keep birds anything like that you can tell us.
Yes, so it's really two components to that there's there's cobra and patients who are on the exchanges the numbers in the kind of 25% to 30% I believe.
Okay, so 25% to 30% arent hard to employment.
Right, well or part of the Corbin exchanges okay.
And then you'd be first quarter.
What would you say the ER or can you give us a number in terms of what you think that benefit was it the extra day.
In the quarter.
So the operating result know that hold on I'll I'll get your that number.
Okay, that's where we had gotten done.
And then or California, 80 to 90.
Oh, I know you talked about that being a lower than previous like the 20 bar. The 40, you originally gave.
It will be lower should we think about that just be going to zero now or do you think there's still to be it impact though.
As opposed to give you a number I think what I can tell you is that due to cope with.
Being junction stayed and so basically what that means in layman's terms is is that there's an extension of the case and so unlikely to have much of an impact on less because of the timing and until the fourth quarter, depending how the case goes.
And then it might go into Q1 of 2021.
So the numbers still the same or the timing has shifted and of course the outcome is unknown.
Okay and last one payer mix in the quarter hobby like you said was down.
Can you give us any specificity there or what do you kind of ended the quarter with in terms of commercial much.
I I believe we published it so I can say right Joel.
I believe that is not correct.
<unk>.
There was nothing significant in the movement or for the quarter. We you know what we'll call it out on a quarterly basis. If we think it's important but there was nothing important there.
So still in the 10% range there with it.
Yeah.
Thanks, a lot guys appreciate all the questions.
Thank you Justin.
Thank you Justin our next question is from Jeff Gates of Gates capital management sorry.
Yeah couple of questions first.
I know some volume was the best of all in quarters, you've had a few quarters I'm just wondering if so.
You see any signs of an uptick in volume and what might be driving that number one number two.
Is this environment going to force you to two.
Do less to know those are you won't be able to do as many of you know those.
Capital budget come down at all.
You want to grow yes, yes, sure <unk>, we had we had a reasonable Matt quarter, no doubt I wouldn't call out anything specific yet I don't I wouldn't say, we're ready to declare victory on some.
The efforts, we've been undertaking to drive a nag back up.
And there certainly was a tiny bit in noise at the ended the quarter. So nothing to call out there in in terms of Denovos I think we're going to wait and see what happens to the industry volumes and what happens on on the home side, but I think there's certainly a pie.
Possibility that is if there is a an overall Mac headwind that comes out of co bid and possibly and an accelerated shifts to home that I think you would see a potential decline not just in our de novos, but in industry de novos and that that would bring the capital budget.
Now.
Sure not having any trouble constructing centers that you had plant.
Well I'd say for for 2020, depending on how long does the various state shutdowns last we might see our our capital spend come down a bit there just some projects that we physically can't get done right now.
<unk>.
That will depend on how long thing blast.
Just in well.
Let me finish up by saying that the impact of one day is somewhere in a 10 to 15 million dollar range.
Copney are another question.
Thank you, Jeff and guest speakers, we don't have any questions on as it now.
Okay, well, let me wrap up with a couple of closing remarks.
Number one thank you.
For all the support.
Number two I don't know by can convey in words, how proud I am of our team.
The beauty and the dedication that I've seen over the last 60 days.
Just.
Literally hard to put into words.
The fact that our government.
Our competitors than us, but everything aside.
And cohort it and work together to take care of our patients is just.
Unifill beautiful beautiful.
The clinical focus and the infection control expertise that we have has been critical and helping us through this virus.
0.3, our platform the importance of the platform in connecting the sites of care has been highlighted do this crisis.
The resilience of our team in our business model has been.
Unifill beautiful beautiful financially strong balance sheet in a proven track record of cost management.
Lastly, I do think that philosophically, it's time to come together as a country and we're happy to do our part so thank you for your interest in our company well talk again next quarter.
Thank you speakers, ladies and gentlemen that concludes the vetoes first quarter 2020 screenings calls you may now disconnect. Thank you for participating and have a great Dane.
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