Q2 2021 DaVita Inc Earnings Call
Good evening My name is Misty and I'll be your conference facilitator today at this time I would like to welcome everyone to the Davita second quarter 2021 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period, if you'd like to ask a question. During this time.
Press Star and then the number 1 on your telephone keypad, if you'd like to withdraw your question Press Star then the number Q. 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 and our company I'm, Jim Gustafson, Vice President and Investor Relations and joining me today are Javier Rodriguez, our CEO and Joel Ackerman. Our CFO. Please note that during this call we may make forward looking statements within the meaning.
Of the federal Securities laws and all of these statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described and the forward looking statements for.
Further details concerning these risks and uncertainties. Please refer to our first 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, and any subsequent filings that we make with the SEC are forward looking statements are based upon the information currently available to us and.
And we do not intend and undertake no duty to update these statements except as may be required by law. Additionally, we'd like to remind you that during this call. We will discuss some non-GAAP financial measures. A reconciliation of these non-GAAP measures for the most comparable GAAP financial measures is included in our earnings press release submitted to the SEC and them.
<unk> on our website I will now turn the call over to Javier Rodriguez.
Thank you Jim and good afternoon, we are excited to talk to you today about our strong Q2 performance, our 2021 financial outlook and recent developments on our effort to transform kidney care for.
First let me start the conversation with a clinical highlights and kidney transplant is the best treatment option for eligible patients with kidney failure.
Davita and worked hard over the years to help our patients gain access to transplant through education and direct support for patients to get on and stay on the transplantation weight and lift.
The cumulative impact is meaningful last December we announced the milestone of 100000 Davita patients who have received transplant.
Year 2000.
For further advance the cause of transplantation Davita and the National Kidney Foundation are collaborating on a year long pilot aimed at improving health equity and kidney transplantation with a focus on living donors.
And the increasing and living donor transplants expands access to transplantation by increasing the availability of Oregon, which has been the limiting factor and the number of transplants performed annually.
This pilot provides high touch and customized information to patients and families seeking a kidney transplantation from a living donor.
We look forward to learning more from this pilot improving the health equity a kidney transplant and continuing to be the leader and supporting our patients through.
Receive kidney transplant.
Shifting to the latest update on Covid, we have made incredible progress and our efforts to combat the COVID-19 pandemic over the past several months, new COVID-19 infections, among our patients continue to drop significantly through the last week of June down more than 95% from the peak in early January however.
Similar to the rest of the country. We have started to see an uptick over the last few weeks as of last week on a rolling 7 day average basis, new infections are still down more than 90% from the peak.
Thus far our mortality continues to remain low on an absolute basis as we believe that our vaccinated patients are more protected from severe cases of COVID-19.
We continue to educate our patients about the benefits of vaccine to reduce vaccine hesitancy and we remain confident and our policies and procedures designed to keep our patients and our teammates safe while they are and our care.
Now, let me turn to our financial performance and the second quarter. We delivered strong results in both operating income and earnings per share our margin expanded as we continue to manage costs, while delivering quality care.
As a result, we delivered 6% year over year growth and adjusted operating income and 35% year over year growth and our adjusted earnings per share our free cash flow was particularly strong this quarter and will continue to return cash to our shareholders through our stock buyback.
The first half of the year behind US we are now increasing the midpoint of guidance for the full year.
Let me transition to update our progress and our integrated kidney care efforts, otherwise known as Casey value based care for our patients with kidney disease and gaining momentum and appears to have reached an inflection point and we've always believed that coordinating dialysis care with our broader healthcare needs of TKD.
And <unk> patients.
Simultaneous to improve outcomes and reduce total health care costs.
For years, we have been participating and a variety of small programs and pilots to build our integrated care capability and better understand the economics. We believe we are at that point now where we are ready to ship to the next stage of the evolution of integrated care.
You might be wondering why now the trend towards value based care is not new either and kidney care or other segments of healthcare. So what's changed to make the developments of scale business viable today, there's a couple of reasons first with.
With the growth and Medicare advantage payers are looking for innovative ways to manage the increasing number of <unk> patients choosing MA plans. These patients tend to be more complex and most of that MA patients and should benefit from tailored care management.
Second CMS recently initiated the payment models and kidney care, we are preparing to partner with Nephrologists and up to 12 markets beginning in January of next year to participate and Ckc voluntary programs.
Our participation and <unk> model will also provide us with operational scale and more geographies to enter into other value based arrangements.
And lastly, we've increased our confidence and our capability to deliver clinical and economic value at scale and have leaned in on our willingness to take risks.
We believe we are well positioned to win and integrated care because of our strong partnership with Nephrologist, a regular and consistent interactions with patients.
On a broad kidney care platform that spans various modalities and care setting.
And a clinical data set and analytics that we use to create develop clinical intervention to support our patients holistically.
We have a demonstrated track record of improving patient outcome and coordinated care and lowering costs for patients and risk arrangements. For example, and our S. Goes we were able to generate non dialysis cost savings and the high single digits, which translated into more than double the average savings rates compared to the rest of the and.
History over the life of the program.
With our special needs plan, we have been able to lower mortality by 23% relative to other patients within the same center and county.
To give you a better sense of the scale of the business as of today, approximately 10% of our U S dialysis patient and value based care arrangements, and which Davita is responsible for managing and total cost of care. This represents almost $2 billion of annual medical costs under management and.
In addition, we have various other forms of value based care arrangements with payers and what we have economic incentives for improving quality and lowering costs.
And 2022, we expect our integrated kidney care business to double in size.
The number of patients and risk arrangements.
And the $1 under management.
We also expect to see a dramatic increase and the number of CK day lives, we have under risk and 2022.
To prepare for this growth we are currently scaling up our clinical team and further and building out our support function because of the investment as well as the delays and cost savings impact of our model of care and revenue recognition.
We expect to incur and net operating loss of $120 million and 2021, and our U S ancillary segment.
This outcome is consistent with the Oi and headwinds from IAC growth, we called out at the beginning of the year and is of course included in our full year guidance and.
Doubling of the business next year could result in and incremental operating loss and our ancillary segment of $50 million in 2020.2.
We expect significant improvements and our financial performance beginning in 2023 as we begin to recognize savings from the new contract that we entered 2021 and 2022.
Over the 5 plus year horizon, we believe that our <unk> business could become and sustainable driver of significant operating income growth. Currently we serve approximately 200000 dialysis patients across the country, we utilize over $12 billion and healthcare services outside of the dialysis.
<unk>, including the costs of hospitalization outpatient procedures and physician services.
In addition, we see an opportunity to manage the care of upstream TKD patients, who currently do not dialogues and our centers.
Assuming that we are managing the total cost of care for more than half of our dialysis patients as well as others TKD patients at low to single digit margin. We believe that this could be meaningful financial opportunity.
In summary, all of health care has been talking about value base for years, we are excited for davita to lead the way.
With that I'll turn the call over to Joel.
Thanks, Javier we had a strong quarter. Despite the continuing operational challenges presented by Covid, primarily as a result of strong RPT performance and continued discipline on cost for.
For the quarter operating income was $490 million and earnings per share were $2.64.
Our Q2 results include a net COVID-19 headwind of approximately $35 million similar to what we saw in Q1, primarily the impact of excess mortality on volume and elevated PPE costs, partially offset by sequestration relief and reduced travel and meeting.
Expenses.
Turning to volume.
In Q2 treatments per day increased by 4% compared to Q1.
Excess mortality declined significantly in Q2 from approximately 3000 and Q1, 2 fewer than 500 and Q2.
At this point, we are cautiously optimistic that the worst is behind us, but we're closely monitoring the potential impact of the delta Varian, especially within pockets of the country that have lower vaccination rates longer term. We continue to believe that we will return to pre pandemic treatment growth levels.
With an additional tailwind from lower than normal mortality rates.
Our U S dialysis revenue per treatment grew sequentially by almost $6 and this quarter, primarily due to normal seasonal improvements from patients meeting their co insurance and deductible obligations.
We also saw favorable changes in government rate and mix, including the continued growth and the percentage of patients enrolled in Medicare advantage.
Patient care costs, and G&A expense per treatment and total were relatively flat quarter over quarter, our patient care cost decreased sequentially, primarily due to reductions in labor costs, our G&A increased slightly primarily due to charitable contributions and any.
Creases and personnel costs.
As expected our U S dialysis and lab DSO decreased by approximately 6 days in Q2 versus Q1, primarily due to collections on the temporary billing holds related to the winter storms and the first quarter.
The majority of the impact of the storms on DSO and cash flow were reversed in Q2, but we may see and ongoing smaller benefits through the balance of the year.
During the second quarter, we generated a gain of approximately $9 million on 1 of our Davita venture group investments, which hit the other income line on our P&L, we have a small investment and neuro matrix medical that recently went public and the value of this investment at <unk>.
And was $23 million going forward, we will market to market every quarter.
Now turning to some updates on the rest of this year and some initial thoughts on 2022.
As Javier mentioned, we are raising our guidance ranges for 2021 as follows adjusted.
<unk> earnings per share of $8.80.
To $9.40.
Adjusted operating income of $1.8 billion to $1.$8.75 billion and free cash flow of $1 billion to $1.2 billion.
Also we now expect our 2021 effective tax rate on income attributable to davita to be between 24% and 26%.
<unk> and the 26% to 28% range that we had communicated at the beginning of the year.
And these new guidance ranges exclude the potential impact of a significant for Covid surge later this year.
I'll call out 2 notable potential headwinds during the second half for the year.
First as Covid.
We continue to expect the impact of excess mortality will be higher in the back half of the year, then and the first half of the year due to the compounding impact of mortality through 2021.
We're also expecting an uptick on costs related to testing vaccinations and teammates support as a result of the delta of areas. As a result, we are increasing the middle of the range of Covid impact for the full year to $170 million from a 150 million.
That implies a $30 million headwind from Covid and the second half of the year compared to the first half of the year.
As a reminder, this is the middle of what is a wide range of possible impacts depending on the impact of the delta or other variance and any additional COVID-19 mandate.
Second we expect to experience losses, and our U S ancillary segment of approximately $70 million and the second half of the year compared to $50 million and the first half of the year.
This incremental losses, due primarily to new value based care arrangements and startup costs associated with the Ckc seed program that launches in 2022.
Looking forward to 2022, we do not expect anything unusual among the primary drivers of the business, including RPT cost per treatment or capital expenditures.
However, we expect pressure on Oi growth from the increased spend on growing our <unk> business.
And the possibility of union activity in 2022 that we did not face in 2021, and the first year of depreciation expense associated with our new clinical IP platform that we have been developing for the past several years.
We will provide more specific 2022 guidance on a future earnings call operator, let's open the lines for questions.
Okay.
Yes, Sir and is now time for question and answer session of today's call again, if you would like to ask a question over the phone. Please press star followed by 1 on your telephone keypad. If you wish to vote for all your question and compressed our queue. Please make sure that your phone is on mute and record your name when prompted.
Our first question comes from Peter Chickering from Deutsche Bank, Sir Your line is open.
Hey, guys. Good afternoon, and thanks for taking my questions I'll lead off here on the Ik and see that you're talking about the.
You disclosed and scripts are $2 billion of gross revenues and seen that double on 2022 can you remind us how that flows through the P&L and what the Dallas segments and and the other ancillary services.
And when you begin to disclose as revenue and costs on the P&L and model it.
And then and 5 years, where do you think this can go or is it a $12 billion nobody referenced in the script. It's on a margin perspective after year, 1 she put a high single digit.
You know margin on the $2 billion for next year, and then additional drags on 2 billion and new capitation arrangements.
Thank you Laurent.
Thanks Pedro.
And I hope I got all of that but please jump in if I didn't catch it so starting off in terms of where it is on the P&L. We've got a segment, our strategic initiatives, which breaks down between U S and international the U S component of strategic initiatives is an excellent proxy.
And for.
Our Ik see P&L.
Simplified what exists in that segment over the last few years have we as we've exited some of the strategic initiatives and other than a couple of small things.
It's everything related to Ik's see through that peanuts through that line. So I think as you think about both revenue and operating income using the U S component of <unk> as a proxy for our <unk> business.
Really good way to look at it so that's number 1.
In terms of where this can go over time.
Look there are a lot of questions around how many members we can enroll here what our savings rate can be how much of that will ultimately capture I think a reasonably simple way to model it would be to start with something like a third of our <unk>.
<unk> in this use our spend per patient, especially if you're looking out a few years of $100000.
And per patient and that'll give you a medical cost under management and then the question is what percent of medical costs under management do we think can turn into <unk> and I would say a reasonable number would be something and the low single digits something equivalent to what a typical <unk>.
They plan would drive US margin. So 123, maybe 4% in that range as a percentage of medical costs under management I think is the right way to think about what the potential for this season and the out years.
And Im sorry, Peter you had I think you had a third question, which I didn't catch yeah. So so there's a few questions parity on their I guess will you guys begin disclosing what those gross revenues are.
As all of the patients under management just to help US model this going forward as well.
So I.
And I don't think were not going to disclose a number that we would call gross revenue I think the number that we will disclose.
B, what the revenue would be if we used gross revenue accounting, which would be the medical costs under management and we've seen this before they're under DMG. There were components for the business that were gross accounting and some were net and we would.
Would disclose medical costs under management or something like that and that's the $2 billion number that we that Javier talked about and the script.
Okay, and then for a quick follow up here on just the treatment growth can you guys disclose the number of patients you had at the end of <unk> and <unk> and so.
And I understand with treatment growth areas and the back half of year as excess mortality and Covid hopefully is behind us and if we assume it remains at current levels is it fair to model and growth going positive in the fourth quarter.
Yes, So look I think the right number to look at is not patients, but treatments per day and the good news, let me try and walk you through first the good news is treatments per day grew in Q2 over Q1, and I think a sequential view of it will we'll get you a better model.
And then a year over year view, so sequentially treatments per day grew in Q2 over 2 over Q1 about 400 treatments per day.
There's a bunch of things going on in there.
And so let.
Let me try and break it down for you first the good news is the new to dialysis treatment starts remained strong. So the question that we've gotten in the past about what has happened.
Within the CK day population as a result of Covid, we continue to see strong new to dialysis treatment.
Admissions. So we don't feel any pressure there right now in terms of Q2 over Q1 Q2 did benefit from the storms in Q1, so youll remember.
And the storms in from.
From Yuriy led to lower treatments lower treatment and volume in Q1, and so the comparison in Q2 was a positive there that said there are a few things weighing on the quarter first acute volumes are down as you would expect with the pandemic getting.
Better and Q2 over Q1 <unk>.
Second excess mortality remained above normal it was well below what we saw in Q1 came down from 3000 approximate of less than 500, but its still remained above normal and finally the mix of treatment days in Q2.
<unk> was unfavorable we do fewer treatments on Tuesday, Thursday, Saturday, and we do on Monday, Wednesdays and Fridays and that had about a 50 basis that was about a 50 basis point headwind in Q2 over Q1. So just to summarize the good news is we're back to a situation where.
<unk> treatments are growing quarter over quarter.
The.
The new to dialysis submissions remains strong that said there continues to be a bit of noise in the in the numbers.
Great. Thanks, so much I'll just step back on queue.
Thank you. Our next question comes from Justin Lake from Wolfe Research. Your line is open Sir.
Yes.
Thanks, I wanted to follow up on the day value based care. So the <unk> question here that'd be that'd be great. If you can give us those numbers and.
Is that going to be just for the for the government programs are you going to be able to you can also puts and he kind of M. A.
Value based contracting commercial value based contract and that you have in there that's above and beyond the dialysis side.
Yes that would include all of that just and it would include MAA would include traditional Medicare as well as anything on the commercial side.
Okay. So that that number will be all profitability and I assume does that does that include or exclude the spending on dialysis. When you talk about the margin are you talking about the $60000, that's ex dialysis and you're talking about the 90 and 95 and that includes dialysis when you gross up for the 2 billion it and.
Includes the dialysis number.
Okay.
The patient number would be more like 100000 or 90000, depending on what time period.
Perfect.
And in terms you mentioned on the on.
On the call on the and the trend the press releases.
And that debt your payer mix changed a little bit for the positive and you talk a little bit about commercial volume versus versus government.
Just and the reality is there's not a lot to say.
As a bit of a numerator denominator issue.
You had more and mortality on.
On Medicare side, and the commercial side held strong as people really valued their income and their insurance and so it was a lot more resilient than we anticipated. So that's that's the dynamic that we're discussing here.
Couple of other things adjusted while you were asking about the value based care and how do we calculate it with dialysis and non dialysis I think it's important to do the math you're doing you subtract the dialysis and then you have to put in there that the payers slash government have a participation and the savings and Nephrologists and has a par.
This patient and the savings and that's how you would trickle down to the percentage is the 1.2 or 3 percentage roughly that Joe talked about.
Okay. Thanks for that and can you just give the Kurt can you help me with the commercial treatment growth on the quarter.
I can tell your commercial mix was up about 20 bps in Q2 over Q1.
Okay, Great and then in turn as a reminder.
You don't get you don't get as much from that.
And Covid when you are.
Your Medicare patients are passing away as you would and in normal times.
Okay and then just last question on you mentioned the 2022 I apologize if I missed this but.
The tax rate.
Change for this year do you expect that to continue in 2022 or is this is this a reasonable new tax rate to assume or.
Should we go back to the original guidance and assume that the tax rate for 2022.
Okay.
There's still a lot we don't know about how it will play out I think it is reasonable to assume some if not all of the benefits. We're seeing this year will continue for another year, but not in perpetuity.
So for 2022, yes, 2023, I would say no.
Okay, Thanks for that and I'll jump back and thanks, Chris.
Thank you.
Thank you. Your next question comes from Kevin Fischbeck from Bank of America. Your line is open Sir.
Alright, great. Thanks.
Wanted to dig into this these investments that you're making around this value based care and just wanted to try the numbers right and you said $1.20. This year and then it sounded like you said $50 million and you say 50 million incremental for like 170 or did you mean to 120 goes to 50.
And incremental.
Incremental okay.
Is there.
I guess as we think about that and number is that a net number.
And start to make a 2% margin on the value based care is that and offset to that or is that kind of inclusive of.
Of any potential profitability.
It's a net number.
And that number okay.
And then.
Alright, and it sounded like you were saying that the 120 included.
And Ah seek ACC as well as that.
True and does that number.
I guess, because I would think about the 120 to $1.70 and.
And the roll up there is that all included.
Yeah, So Kevin.
<unk> doesn't start until the beginning of 2022, but we will start investing in the back half for the year in anticipation of that growth. So.
It's not.
It's expense that we are building and anticipation of growth related to <unk>.
Yeah Okay.
And then as far as and sequential.
Enrollment.
Treatment growth.
Yes, it does look like.
Although its a better way to look at it a lot of puts and takes into that number I guess, what once you get back to normal what what should that number looked like I guess I'd point for them thinking that it means a 1.6% annualized like what what do you think.
When this all normalizes, what is the growth rate and and volume is at a 2% numbers and a 3% number what would it ultimately annualize too.
I think at the end of the day.
Kevin 1 other things as you heard from Joe There is a lot of different dynamics and interplay for for US. The positive is that we're seeing let's call. It the new admin and stabilize pre COVID-19 and.
So the best data, we have right now is it will revert to the pre COVID-19 numbers.
And so I think that that's the best assumption and we keep we'll keep you posted if that changes.
Okay.
And then it sounds like you're not really seeing anything on the labor side on a number of companies are complaining about labor pressure.
I guess could you talk a little bit about what youre doing there and then.
It sounded like you talked about.
Union issues, but I think you bet you meant kind of ballot initiatives right now actually your labor costs and more valid initiatives that might be a pressure next year.
Yes, So let me grab a couple.
We're not going to complain about the pressure, but it's absolutely there and is a very dynamic and competitive marketplace, we continue to invest and a differentiated workplace and and.
Find that our teammates find great fulfillment and the purpose of the work that we do that said again the marketplace is quite dynamic as it relates to the second question, Yes, we were talking about.
The union might come up with another ballot and so.
We've now Unfortunately every other year have had to deal with it we hope that they're a little more empathetic to the fact that we're in a pandemic and that it is not a good use of the resources, but we just want to continue to talk about at Sonoma and surprise.
Yeah, Okay, and then last question.
I guess.
As we think about.
Uh huh.
Kind of growth and the and the value based care.
Opportunity is what's you're doing differentiated do you think that there's going to be share shifts as a result on this or other smaller players or midsize players going to struggle to do what youre doing and youre listening with the payers and so that you'd actually see a volume lift from this or is this kind of where the industry is going and your push into this is is long.
And the kind of the same so that you wouldn't expect it just really more about the revenue and the margin and it is about.
Gaining share.
It's an interesting play from our perspective, we believe that we're really well positioned and of course, there's a lot of dynamics on volume and mix.
How a patient gets to us all the way from a patient choice to to a payer.
Choice to the physician and so that dynamic has got a lot going on Kent, Ken and the whole chain there really see the value that we create and I think that over time the answer will be yes, because of clinical outcomes, we'll show it and.
And there'll be transparency, where people say gosh, if I could live there longer and I can get more transplant. If I can get my CK D and not be hospitalized I want to go there, but as you know that takes time and so from my perspective, right now I am not assuming a change and sort of a shift and decision making.
Until this plays out a bit more.
Alright, great. Thanks. Thank.
Thank you.
Okay.
Thank you and again, if you would like to ask a question. Please press star followed by 1 please make sure that your phone is on mute. Thank you. Our next question comes from Lisa Clive from Bernstein. Your line is open ma'am.
Hi, Thanks very much.
And if I missed it in the prepared remarks, but what did you say youre vaccinate vaccination rate was for your patience and also what is it for your team mates and second question have you been giving a third doses for selected patients given that the immuno compromised seem to not responded well for them.
And in terms of the efficacy and then lastly, and.
Are you still testing patients and teammates them.
But for every session and just wondering how that is going to evolve and it.
Coming quarters.
Alright, well, let me, let me grab them and then if I Miss any 1 of them. Please come back at me.
Patient vaccinated complete with 2 doses are around 72% or so.
Teammates and 68%.
And we're starting to tracking those people that intend to get a vaccine and we're tracking somewhere and the and the 1 or 2% that are either thinking of getting and are and their first.
Cycle.
To my knowledge, there is nothing of significance.
And the third dosage, yet and our population.
And so I know that the physician community.
Discussing it.
So, but I don't have any major numbers on that and then what was your last question.
And just didn't happen and that testing.
And we didn't test all.
All the patients I think that was it.
And the assumed question.
What we do is we of course test anyone that has any symptoms and then and then of course, our patients get tough for a lot more because they're using so much health care that when they go to other physician offices or hospitals or other things they get tested so.
There are disproportionately tested, but we just test when their symptoms.
Okay. Thanks very much.
Thank you Lisa.
Thank you. Our next question comes from Peter Chickering from Deutsche Bank. Your line is open Sir.
Yes.
Hey, guys. Thanks for taking the follow ups here when they go back to the other kcp's as investors are for confused on this disclosures my understanding today is he collect $2 billion of for gross revenues.
About half of that is located and the dialysis costs and the other half of it and medical costs or other medical costs, though when you referenced and 1% to 4% margin. That's on the full 2 billion. So it should we think about it instead as of 2% to 8% margin on the $1 billion of non dialysis costs.
Either way works.
And we've decided to standardize on the full cost but.
Either way.
Perfectly.
Volume way to do the math.
Okay, perfect and then when we actually hit 1 on patient care costs.
There, obviously was a lot of investor concern on labor inflation and start during 2 Q. Obviously your cost per treatment were down sequentially driven by a number of areas, but as I think about balance for patient care costs over the next couple of years can you give us additional color on what can drive further efficiencies here specifically around center occupancy.
<unk> and ship and home dialysis. Thanks, so much.
Well, let me, let me grab it as it relates to 2 the inflation of course.
Been very good over time, if you do our CAGR over the last 5 years or so I believe we're right at 1% or so slightly below and so we view the levers quite.
Quite thoughtfully over time, and there were managing and essence.
Pharmaceuticals were managing productivity and of course wage rate and then theres other other things like supplies and and other miscellaneous items, which we are very diligent on.
So we don't think those dynamics will change much other than during Covid of course, the PPE has gone up dramatically and we hope that that stabilizes over time.
As it relates to the wage inflation, we have nothing really particular to say about it we are another player and this.
Really dynamic marketplace and it feels like it's shifting quite aggressively right now.
And at a short period or does that sustain itself. So I don't think I can comment on the multiyear and it's fair to say that we are aggressively looking at all of the pharmaceutical and all the options to make sure that our physicians have the choice of their pharmaceutical but.
But at the best price possible.
So I don't know if that got to all of your question I think the last part of it was around capacity utilization and of course, we are watching it very aggressively we went from a time when we were very aggressive on the de Novo build too as you can see.
We really taper that back and we're building a lot more home centers.
<unk> are a lot more capital efficient we will keep that.
That's sort of balance and check because we know that patients need the interplay between the home and the center and so there needs to be that capacity available and as we lost here roughly 5% of our patients. During COVID-19. We are aggressively taking a look at our portfolio to make sure that our patients have access.
And that we are not having centers that are not up the right capacity.
Okay, and then sort of last follow up question for your on the I can see at least for now.
Is it fair to think about the operating income and the dialysis segment being unchanged as you increase your penetration with our K C patients.
Yeah, I think that's fair we are we are trying.
Present this in a way that represents the fact that debt the businesses, they're not independent and so far as they they are intricately. They are they are linked and that's why we think and we're excited about our opportunity to win and I Casey, but trying to present them as separate.
Our income statements. If you will so you can assess how's the core historical dialysis business doing and has the new <unk> business to them.
And then last 1 here is it fair to think that kind of has a role and just for our third quarter results that youll be able to give us additional disclosures.
And the press release around around this sort of new segment or division.
We're taking a careful look about what's the right level of disclosure as the <unk> business grows and making sure that shareholders have a good understanding of the economics of the business the progress the investment spending et cetera. So.
More to come on where we land on that.
Great. Thanks, so much guys.
Thank you.
Thank you there are no further questions on queue at this time.
Okay, well, thank you Missy let me.
And make a couple of closing comments number 1 our core business is strong number 2 we are entering an exciting and dynamic time with an opportunity to deliver a lot of value for our patients by connecting and coordinating their care with payers and nephrologist.
And providers.
0.3, the clinical and the economic prizes are absolutely meaningful and like most valuable prices. There is a lot to do to make the plan a reality.
For if for whatever reason, we cannot accomplish the desired outcomes the.
And the economic risk.
Limited structurally because they're our termination rate right and off ramps.
So in summary, there was a big price with limited downside.
So hopefully that helps you think of how we're thinking about sorry that lets you understand a little of how we're thinking about it.
Thank you for your support and.
And we enter this new chapter together be well everyone.
Yeah.
That does conclude today's conference you may disconnect at this time and thank you for joining.