DaVita Q4 2025 DaVita Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 DaVita Inc Earnings Call
Speaker #1: 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 would like to ask a question during this time, simply press star, then the number one on your telephone keypad.
Speaker #1: If you'd like to withdraw, thank you, and welcome to our fourth.
Speaker #1: Your question, press star, then the number two. Thank you. Mr. Eliason, you may begin your
Speaker #2: Nic Eliason, Group Vice President of Investor Relations, and joining me today are
Speaker #2: 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.
Operator: Please note that during this call, we may make forward-looking statements within the meaning of the federal securities laws. All of these statements are subject to known and unknown risks and uncertainties that could cause the actual results to differ materially from those described in the forward-looking statements. For further details concerning these risks and uncertainties, please refer to our fourth quarter earnings press release and our SEC filings, including our most recent annual report on Form 10-K, all subsequent quarterly reports on Form 10-Q, and other subsequent filings that we make with the SEC. Our forward-looking statements are based on information currently available to us, 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.
Operator: Please note that during this call, we may make forward-looking statements within the meaning of the federal securities laws. All of these statements are subject to known and unknown risks and uncertainties that could cause the actual results to differ materially from those described in the forward-looking statements. For further details concerning these risks and uncertainties, please refer to our fourth quarter earnings press release and our SEC filings, including our most recent annual report on Form 10-K, all subsequent quarterly reports on Form 10-Q, and other subsequent filings that we make with the SEC. Our forward-looking statements are based on information currently available to us, 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.
Speaker #2: All of these statements are subject to known and unknown risks and uncertainties that could cause the actual results to differ materially from those described in the forward-looking statements.
Speaker #2: For further details concerning these risks and uncertainties, please refer to our fourth quarter earnings press release and our SEC filings, including our most recent annual report on Form 10-K, all subsequent quarterly reports on Form 10-Q, and other subsequent filings that we make with the SEC.
Speaker #2: Our forward-looking statements are based on information currently available to us, and we do not intend, and undertake no duty, to update these statements except as may be required by law.
Speaker #2: 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 to the most comparable GAAP financial measures is included in our earnings press release, furnished to the SEC and available on our website.
Operator: A reconciliation of these non-GAAP measures to the most comparable GAAP financial measures is included in our earnings press release, furnished to the SEC, and available on our website. I will now turn the call over to Javier Rodriguez. Thank you, Nick. Good afternoon, everyone, and thank you for joining the call today. As we evaluate 2025, the year represents the latest evidence of our differentiated capabilities, strategy, and platform. We executed it with discipline, met challenges head-on, and delivered on our commitments we set at the beginning of the year. At the same time, we continue to invest to enhance patient care and fuel growth in the years ahead. As a result, we're well-positioned for 2026 and beyond with opportunities to deliver clinical and financial results consistent with our longstanding track record and guidance.
Operator: A reconciliation of these non-GAAP measures to the most comparable GAAP financial measures is included in our earnings press release, furnished to the SEC, and available on our website. I will now turn the call over to Javier Rodriguez. Thank you, Nick. Good afternoon, everyone, and thank you for joining the call today. As we evaluate 2025, the year represents the latest evidence of our differentiated capabilities, strategy, and platform. We executed it with discipline, met challenges head-on, and delivered on our commitments we set at the beginning of the year. At the same time, we continue to invest to enhance patient care and fuel growth in the years ahead. As a result, we're well-positioned for 2026 and beyond with opportunities to deliver clinical and financial results consistent with our longstanding track record and guidance.
Speaker #2: I will now turn the call over to Javier.
Speaker #2: Rodriguez. Thank you, Nick.
Speaker #3: Good afternoon, everyone, and thank you for joining the call today. As we evaluate 2025, the year represents the latest evidence of our differentiated capabilities, strategy, and platform.
Speaker #3: We executed with discipline, met challenges head-on, and delivered on our commitments we set at the beginning of the year. At the same time, we continue to invest to enhance patient care and fuel growth in the years ahead.
Speaker #3: As a result, we're well positioned for 2026 and beyond, with opportunities to deliver clinical and financial results consistent with our long-standing track record and guidance.
Speaker #3: Today, I'll review our fourth quarter results, share insights on our clinical strategy, and wrap up with guidance for 2026. But first, as always, I will start with the clinical highlight.
Operator: Today, I'll review our fourth quarter results, share insights on our clinical strategy, and wrap up with guidance for 2026. But first, as always, I will start with a clinical highlight. This quarter, I want to spotlight the clinical results achieved in our Integrated Kidney Care, or IKC, programs. Patients managed under our IKC models consistently achieve better outcomes than the broader dialysis population. Our IKC patients are 35% more likely to start dialysis with a permanent vascular access, resulting in a better patient experience and costs that are three times lower during the first 180 days of dialysis. IKC patients also experience fewer bloodstream infections, achieve higher vaccination rates, and are more likely to choose home dialysis. We also see more than 10% improvement in treatment adherence with fewer mistreatments. Most importantly, these outcomes lead to what matters most: a better quality of life with fewer hospitalizations.
Operator: Today, I'll review our fourth quarter results, share insights on our clinical strategy, and wrap up with guidance for 2026. But first, as always, I will start with a clinical highlight. This quarter, I want to spotlight the clinical results achieved in our Integrated Kidney Care, or IKC, programs. Patients managed under our IKC models consistently achieve better outcomes than the broader dialysis population. Our IKC patients are 35% more likely to start dialysis with a permanent vascular access, resulting in a better patient experience and costs that are three times lower during the first 180 days of dialysis. IKC patients also experience fewer bloodstream infections, achieve higher vaccination rates, and are more likely to choose home dialysis. We also see more than 10% improvement in treatment adherence with fewer mistreatments. Most importantly, these outcomes lead to what matters most: a better quality of life with fewer hospitalizations.
Speaker #3: This quarter, I want to spotlight the clinical results achieved in our Integrated Kidney Care, or IKC, programs. Patients managed under our IKC models consistently achieved better outcomes than the broader dialysis population.
Speaker #3: Our IKC patients are 35% more likely to start dialysis with a permanent vascular access, resulting in a better patient experience and costs that are three times lower during the first 180 days of dialysis.
Speaker #3: IKC patients also experienced fewer bloodstream infections, achieved higher vaccination rates, and are more likely to choose home dialysis. We also see more than a 10% improvement in treatment adherence, with fewer mistreatments.
Speaker #3: Most importantly, these outcomes lead to what matters most: a better quality of life with fewer hospitalizations. Transitioning to our fourth quarter performance, we delivered results in line with our expectations.
Operator: Transitioning to our fourth quarter performance, we delivered results in line with our expectations. As anticipated, revenue per treatment accelerated in the quarter alongside strength in IKC. This was partially offset by higher-than-expected health benefit costs. For the full year, we achieved adjusted operating income and adjusted earnings per share in the top half of our guidance range despite the impact of cyber incident on our US dialysis business. Let me elaborate briefly on our IKC performance. As we've noted previously, we analyze IKC results on a full-year basis given quarterly volatility driven by timing of revenue recognition. As we look back to our Capital Markets Day in 2021, we outline a five-year path to IKC profitability by 2026. Our strategy is centered on sustainable contract, physician partnership, and a scalable care model supported by technology.
Operator: Transitioning to our fourth quarter performance, we delivered results in line with our expectations. As anticipated, revenue per treatment accelerated in the quarter alongside strength in IKC. This was partially offset by higher-than-expected health benefit costs. For the full year, we achieved adjusted operating income and adjusted earnings per share in the top half of our guidance range despite the impact of cyber incident on our US dialysis business. Let me elaborate briefly on our IKC performance. As we've noted previously, we analyze IKC results on a full-year basis given quarterly volatility driven by timing of revenue recognition. As we look back to our Capital Markets Day in 2021, we outline a five-year path to IKC profitability by 2026. Our strategy is centered on sustainable contract, physician partnership, and a scalable care model supported by technology.
Speaker #3: As anticipated, revenue per treatment accelerated in the quarter, alongside strength in IKC. This was partially offset by higher-than-expected health benefit costs. For the full year, we achieved adjusted operating income and adjusted earnings per share in the top half of our guidance range, despite the impact of cyber incidents on our U.S. operations.
Speaker #3: Dialysis business. Let me elaborate briefly on our IKC performance. As we've noted previously, we analyzed IKC results on a full-year basis given quarterly volatility driven by timing of revenue recognition.
Speaker #3: As we look back to our Capital Markets Day in 2021, we outlined a five-year path to IKC profitability by 2026. Our strategy centered on sustainable contracts, physician partnership, and a scalable care model supported by technology.
Speaker #3: With full-year 2025 results, we're reporting our first profitable year in IKC, which is slightly ahead of schedule. This milestone reinforces two key learnings. First, our hands-on clinical models work.
Operator: With full-year 2025 results, we're reporting our first profitable year in IKC, which is slightly ahead of schedule. This milestone reinforces two key learnings. First, our hands-on clinical models work. As reflected in the outcomes I highlighted earlier, our dedicated IKC caregivers are delivering on the promise of value-based care by keeping patients healthier and out of the hospital. Second, we've proven there's a viable business model that is good for our patients, good for the healthcare system, and can generate value for DaVita and our partners. The business will continue to evolve over time alongside changes in government policy, competitive dynamics, and innovation. Building from this 2025 benchmark, we expect to deliver an incremental $20 million of IKC operating income growth in 2026. Looking more broadly at our business, we see significant opportunities ahead and believe DaVita is uniquely positioned to deliver on them.
Operator: With full-year 2025 results, we're reporting our first profitable year in IKC, which is slightly ahead of schedule. This milestone reinforces two key learnings. First, our hands-on clinical models work. As reflected in the outcomes I highlighted earlier, our dedicated IKC caregivers are delivering on the promise of value-based care by keeping patients healthier and out of the hospital. Second, we've proven there's a viable business model that is good for our patients, good for the healthcare system, and can generate value for DaVita and our partners. The business will continue to evolve over time alongside changes in government policy, competitive dynamics, and innovation. Building from this 2025 benchmark, we expect to deliver an incremental $20 million of IKC operating income growth in 2026. Looking more broadly at our business, we see significant opportunities ahead and believe DaVita is uniquely positioned to deliver on them.
Speaker #3: As reflected in the outcomes I highlighted earlier, our dedicated IKC caregivers are delivering on the promise of value-based care by keeping patients healthier and out of the hospital.
Speaker #3: Second, we've proven there's a viable business model that is good for our patients, good for the healthcare system, and can generate value for DaVita and our partners.
Speaker #3: The business will continue to evolve over time alongside changes in government policy, competitive dynamics, and innovation. Building from this 2025 benchmark, we expect to deliver an incremental $20 million of IKC operating income growth in 2026.
Speaker #3: Looking more broadly at our business, we see significant opportunities ahead and believe DaVita is uniquely positioned to deliver on them. Before turning to those opportunities, let me provide some context on our journey to date.
Operator: Before turning to those opportunities, let me provide some context on our journey to date. Over the past five years, we've navigated wide-ranging challenges from macro events like global pandemic and inflation to supply chain disruption and cyber incident. Through it all, we delivered on our multi-year commitments. We provided high-quality care for our patients, built a solid foundation for the future, and generated compound annual growth in line with our long-term target for adjusted operating income and adjusted EPS. This performance reflects the determination of our teammates and the resilience of our operating model. This experience also gives us the confidence as we look at the opportunities and challenges ahead of us. We're managing two near-term financial headwinds: continued pressure on treatment growth driven by elevated mortality and the revenue per treatment impact from the expiration of enhanced premium tax credits.
Operator: Before turning to those opportunities, let me provide some context on our journey to date. Over the past five years, we've navigated wide-ranging challenges from macro events like global pandemic and inflation to supply chain disruption and cyber incident. Through it all, we delivered on our multi-year commitments. We provided high-quality care for our patients, built a solid foundation for the future, and generated compound annual growth in line with our long-term target for adjusted operating income and adjusted EPS. This performance reflects the determination of our teammates and the resilience of our operating model. This experience also gives us the confidence as we look at the opportunities and challenges ahead of us. We're managing two near-term financial headwinds: continued pressure on treatment growth driven by elevated mortality and the revenue per treatment impact from the expiration of enhanced premium tax credits.
Speaker #3: Over the past five years, we've navigated events like the global pandemic and wide-ranging challenges, from macro inflation to supply chain disruption and cyber incidents. And through it all, we delivered on our multi-year commitments.
Speaker #3: We provided high-quality care for our patients, built a solid foundation for the future, and generated compound annual growth in line with our long-term target for adjusted operating income and adjusted EPS.
Speaker #3: This performance reflects the determination of our teammates and the resilience of our operating model. This experience also gives us confidence as we look at the opportunities and challenges ahead of us.
Speaker #3: We're managing two near-term financial headwinds: continued pressure on treatment growth driven by elevated mortality, and the revenue per treatment impact from the expiration of enhanced premium tax credits.
Speaker #3: Even with these headwinds, and the reality of unknown challenges, we remain confident in our ability to sustain our track record of profit growth. That confidence starts with the most important driver of our long-term success: an unwavering focus on clinical excellence.
Operator: Even with these headwinds and the reality of unknown challenges, we remain confident in our ability to sustain our track record of profit growth. That confidence starts with the most important driver of our long-term success: an unwavering focus on clinical excellence. We're executing a set of targeted initiatives designed to enhance patient care, reduce mortality and mistreatment rates, and ultimately support higher treatment volume growth. I will highlight four specific examples. First is vaccination. For many years, we achieved flu vaccination rates above 90% for our patients and clinical teammates. We're working hard to return to that benchmark. Our patients who received a vaccination early in this flu season have shown a 9% lower risk of hospitalization and a 27% lower risk of mortality compared to their unvaccinated peers. Protecting our vulnerable patients from the flu, COVID, and pneumonia is a clinical imperative.
Operator: Even with these headwinds and the reality of unknown challenges, we remain confident in our ability to sustain our track record of profit growth. That confidence starts with the most important driver of our long-term success: an unwavering focus on clinical excellence. We're executing a set of targeted initiatives designed to enhance patient care, reduce mortality and mistreatment rates, and ultimately support higher treatment volume growth. I will highlight four specific examples. First is vaccination. For many years, we achieved flu vaccination rates above 90% for our patients and clinical teammates. We're working hard to return to that benchmark. Our patients who received a vaccination early in this flu season have shown a 9% lower risk of hospitalization and a 27% lower risk of mortality compared to their unvaccinated peers. Protecting our vulnerable patients from the flu, COVID, and pneumonia is a clinical imperative.
Speaker #3: We're executing a set of targeted initiatives designed to enhance patient care, reduce mortality and mistreatment rates, and ultimately support higher treatment volume growth. I will highlight four specific examples.
Speaker #3: First is vaccination. For many years, we achieved flu vaccination rates above 90% for our patients and clinical teammates. And we're working hard to return to that benchmark.
Speaker #3: Our patients who received a vaccination early in this flu season have shown a 9% lower risk of hospitalization and a 27% lower risk of mortality compared to their unvaccinated peers.
Speaker #3: Protecting our vulnerable patients from the flu, COVID, and pneumonia is a clinical imperative. Second is GLP-1 adoption and adherence. A growing body of GLP-1s can reduce major adverse cardiac events and mortality for many dialysis patients.
Operator: Second is GLP-1 adoption and adherence. A growing body of evidence confirms that GLP-1s can reduce major adverse cardiac events and mortality for many dialysis patients. We're actively working with physicians to help our patients navigate the clinical, operational, and financial complexities of these drugs. Third is advancing dialysis technologies to remove middle molecules. Innovations such as medium-cutoff dialyzers and hemodiafiltration enable the clearance of a broader range of toxins from the body during the treatment. These technologies help the patients recover more quickly after dialysis and show promise of reducing mortality by as much as 20% or more. Finally, today, we announce a strategic clinical partnership with Elara Caring, a leading home care provider, to establish an ESKD-focused offering. This model spans Elara's skilled home health, personal care, and hospice service lines and is designed to lower hospitalizations and mistreatment rates while improving the overall patient experience.
Operator: Second is GLP-1 adoption and adherence. A growing body of evidence confirms that GLP-1s can reduce major adverse cardiac events and mortality for many dialysis patients. We're actively working with physicians to help our patients navigate the clinical, operational, and financial complexities of these drugs. Third is advancing dialysis technologies to remove middle molecules. Innovations such as medium-cutoff dialyzers and hemodiafiltration enable the clearance of a broader range of toxins from the body during the treatment. These technologies help the patients recover more quickly after dialysis and show promise of reducing mortality by as much as 20% or more. Finally, today, we announce a strategic clinical partnership with Elara Caring, a leading home care provider, to establish an ESKD-focused offering. This model spans Elara's skilled home health, personal care, and hospice service lines and is designed to lower hospitalizations and mistreatment rates while improving the overall patient experience.
Speaker #3: We're evidence confirms that actively working with physicians to help our patients navigate the clinical, operational, and financial complexities of these drugs. Third is advancing molecules.
Speaker #3: Innovations such as medium cutoff dialyzers and technologies that clear a broader range of toxins enable the treatment of patients with hemodialfiltration. These technologies help patients recover more quickly after dialysis and show promise of reducing mortality by as much as 20%. Today, we announced a strategic clinical partnership with Elara Caring, a leading home care provider, to establish an ESKD-focused offering.
Speaker #3: This model spans Elara's skilled care and hospice service, home health, and personal lines, and is designed to lower hospitalizations and mistreatment rates while improving the overall patient experience.
Speaker #3: Joel will provide more details about the investment we're making alongside this strategic partnership. Together, these clinical initiatives demonstrate how our patient-centered strategy directly supports our business objectives.
Operator: Joel will provide more details about the investment we're making alongside this strategic partnership. Together, these clinical initiatives demonstrate how our patient-centered strategy directly supports our business objectives. By improving quality of life, reducing hospitalization, and advancing clinical outcomes, we continue to believe we're on a path back to at least 2% volume growth. In parallel, we maintain a diligent focus on costs and innovation to improve efficiency, continue sustainable US dialysis margins, and deliver durable financial performance. With that backdrop, we remain confident in our ability to deliver Adjusted Operating Income growth over the next three years that is consistent with our long-term growth target of 3% to 7%. On Adjusted EPS, with our current capital allocation program and removing the headwinds from our investment in Mozarc, we see an opportunity to exceed our long-term Adjusted EPS guidance of 8% to 14%.
Operator: Joel will provide more details about the investment we're making alongside this strategic partnership. Together, these clinical initiatives demonstrate how our patient-centered strategy directly supports our business objectives. By improving quality of life, reducing hospitalization, and advancing clinical outcomes, we continue to believe we're on a path back to at least 2% volume growth. In parallel, we maintain a diligent focus on costs and innovation to improve efficiency, continue sustainable US dialysis margins, and deliver durable financial performance. With that backdrop, we remain confident in our ability to deliver Adjusted Operating Income growth over the next three years that is consistent with our long-term growth target of 3% to 7%. On Adjusted EPS, with our current capital allocation program and removing the headwinds from our investment in Mozarc, we see an opportunity to exceed our long-term Adjusted EPS guidance of 8% to 14%.
Speaker #3: By improving quality of life, reducing hospitalization, and advancing clinical outcomes, we continue to believe we're on a path back to at least 2% volume growth.
Speaker #3: In parallel, we maintain a diligent focus on costs and innovation to improve efficiency, continue sustainable U.S. dialysis margins, and deliver durable financial performance. With that backdrop, we remain confident in our ability to deliver adjusted operating income growth over the next three years that is consistent with our long-term growth target of 3% to 7%.
Speaker #3: On adjusted EPS, with our current capital allocation program and removing the headwinds from our investment in MOSAIC, we see an opportunity to exceed our long-term adjusted EPS guidance of 8% to 14%.
Speaker #3: Taken together, these priorities reinforce our ability to generate sustainable shareholder value and continued leadership in kidney care. I'll wrap up my comments with our guidance for 2026.
Operator: Taken together, these priorities reinforce our ability to generate sustainable shareholder value and continued leadership in kidney care. I'll wrap up my comments with our guidance for 2026. We expect adjusted operating income within a range of $2.085 to 2.235 billion, which represents 3.2% growth at the midpoint. Our guidance for adjusted earnings per share is $13.60 to $15.00 even, reflecting a 33% growth at the midpoint. This guidance exceeds our long-term EPS targets, reflecting our expectation for another year of strong operating performance and the cumulative benefits of our capital allocation strategy. Finally, we expect to generate free cash flow between $1 billion and 1.25 billion. I will now turn it over to Joel to discuss our financial performance and outlook in more detail. Thank you, Javier.
Operator: Taken together, these priorities reinforce our ability to generate sustainable shareholder value and continued leadership in kidney care. I'll wrap up my comments with our guidance for 2026. We expect adjusted operating income within a range of $2.085 to 2.235 billion, which represents 3.2% growth at the midpoint. Our guidance for adjusted earnings per share is $13.60 to $15.00 even, reflecting a 33% growth at the midpoint. This guidance exceeds our long-term EPS targets, reflecting our expectation for another year of strong operating performance and the cumulative benefits of our capital allocation strategy. Finally, we expect to generate free cash flow between $1 billion and 1.25 billion. I will now turn it over to Joel to discuss our financial performance and outlook in more detail. Thank you, Javier.
Speaker #3: We expect adjusted operating income within a range of 2.085 billion dollars to 2.235 billion dollars, which represents 3.2% growth at the midpoint. Our guidance for adjusted earnings per share is 13 dollars and 60 cents, to 15 dollars even, reflecting a 33% growth at the midpoint.
Speaker #3: This guidance exceeds our long-term EPS targets, reflecting our expectation for another year of strong operating performance and the cumulative benefits of our capital allocation strategy.
Speaker #3: Finally, we expect to generate free cash flow between $1 billion and $1.25 billion. I will now turn it over to Joel to discuss our financial performance and outlook in more detail.
Speaker #2: Thank you, Javier. First, I'll provide some detail on our fourth quarter and full year 2025 results, and then share a detailed breakdown of our 2026 guidance.
Operator: First, I'll provide some detail on our fourth quarter and full-year 2025 results and then share a detailed breakdown of our 2026 guidance. Fourth quarter adjusted operating income was $586 million, bringing full-year adjusted operating income to $2.094 billion. Adjusted earnings per share from continuing operations for the fourth quarter was $3.40, with full-year adjusted EPS from continuing operations of $10.78. Free cash flow was $309 million in the fourth quarter, which brings full-year free cash flow to just over $1 billion. Starting with US dialysis, treatments declined about 20 basis points versus the fourth quarter of 2024. Although our total patient census growth during the quarter was as we expected, the timing of the census gain was back-end loaded in the quarter. For the full year, US treatments declined by 1.1% versus 2024, in line with our expectations from the Q3 earnings call.
Operator: First, I'll provide some detail on our fourth quarter and full-year 2025 results and then share a detailed breakdown of our 2026 guidance. Fourth quarter adjusted operating income was $586 million, bringing full-year adjusted operating income to $2.094 billion. Adjusted earnings per share from continuing operations for the fourth quarter was $3.40, with full-year adjusted EPS from continuing operations of $10.78. Free cash flow was $309 million in the fourth quarter, which brings full-year free cash flow to just over $1 billion. Starting with US dialysis, treatments declined about 20 basis points versus the fourth quarter of 2024. Although our total patient census growth during the quarter was as we expected, the timing of the census gain was back-end loaded in the quarter. For the full year, US treatments declined by 1.1% versus 2024, in line with our expectations from the Q3 earnings call.
Speaker #2: Fourth quarter adjusted operating income was 586 million dollars, bringing full year adjusted operating income to 2 billion 94 million dollars. Adjusted earnings per share from continuing operations for the fourth quarter was 3 dollars and 40 cents, with full year adjusted EPS from continuing operations of 10 dollars and 78 cents.
Speaker #2: Free cash flow was $309 million in the fourth quarter, which brings full year free cash flow to just over $1 billion. Starting with US dialysis, treatments declined about 20 basis points versus the fourth quarter of 2024.
Speaker #2: Although our total patient census growth during the quarter was as we expected, the timing of the census gain was back-end loaded in the quarter.
Speaker #2: For the full year, U.S. treatments declined by 1.1% versus 2024, in line with our expectations from the Q3 earnings call. Next, revenue per treatment growth accelerated in the fourth quarter as anticipated, up approximately $12 sequentially.
Operator: Next, revenue per treatment growth accelerated in Q4, as anticipated, up approximately $12 sequentially. Q4 growth was the result of four primary factors. First, the resolution of aged receivables consistent with what we forecasted on the Q3 call. Second, normal rate increases and improved yield. Third, private pay mix improved slightly after a dip in Q3. And finally, RPT benefited from the typical seasonal impact of flu vaccines. Full-year RPT was approximately $410, up 4.7% for the year. As you think about RPT for Q1 2026, keep in mind that Q1 bears a typical $5 or more RPT headwind due to patient responsibility amounts early in the year. Patient care costs per treatment increased by approximately $6 sequentially. The increase was primarily the result of seasonal increases, including health benefit costs and higher supply costs.
Operator: Next, revenue per treatment growth accelerated in Q4, as anticipated, up approximately $12 sequentially. Q4 growth was the result of four primary factors. First, the resolution of aged receivables consistent with what we forecasted on the Q3 call. Second, normal rate increases and improved yield. Third, private pay mix improved slightly after a dip in Q3. And finally, RPT benefited from the typical seasonal impact of flu vaccines. Full-year RPT was approximately $410, up 4.7% for the year. As you think about RPT for Q1 2026, keep in mind that Q1 bears a typical $5 or more RPT headwind due to patient responsibility amounts early in the year. Patient care costs per treatment increased by approximately $6 sequentially. The increase was primarily the result of seasonal increases, including health benefit costs and higher supply costs.
Speaker #2: Fourth quarter growth was the result of four primary factors. First, the resolution of aged receivables consistent with what we forecasted on the Q3 call.
Speaker #2: Second, normal rate increases and improved yield. Third, private pay mix improved slightly after a dip in the third quarter. And finally, RPT benefited from the typical seasonal impact of flu vaccines.
Speaker #2: Full-year RPT was approximately $410, up 4.7% for the year. As you think about RPT for the first quarter of 2026, keep in mind that Q1 bears a typical $5 or more RPT headwind due to patient responsibility amounts early in the year.
Speaker #2: Patient care costs per treatment increased by approximately $6 sequentially. The increase was primarily the result of seasonal increases, including health benefit costs and higher supply costs.
Speaker #2: PCCs per treatment finished the year 5.9% higher than 2024, near the top end of our revised range of expectations, but lower than our original guidance for the year.
Operator: PCCs per treatment finished the year 5.9% higher than 2024, near the top end of our revised range of expectations, but lower than our original guidance for the year. As a reminder, approximately half the year-over-year increase in PCCs was from binders in the bundle. Turning to our other segments, international adjusted OI was $21 million, resulting in full-year adjusted operating income of $114 million. This reflects strong operating performance for our international business as we delivered positive organic growth and integrated the recent acquisitions in Latin America. In IKC, as Javier noted, we delivered our first profitable fiscal year. Q4 adjusted OI was $46 million, and full-year adjusted OI was $22 million. We saw strength across all three of the businesses within IKC, and final reconciliations of our 2024 performance resulted in higher-than-expected shared savings revenue.
Operator: PCCs per treatment finished the year 5.9% higher than 2024, near the top end of our revised range of expectations, but lower than our original guidance for the year. As a reminder, approximately half the year-over-year increase in PCCs was from binders in the bundle. Turning to our other segments, international adjusted OI was $21 million, resulting in full-year adjusted operating income of $114 million. This reflects strong operating performance for our international business as we delivered positive organic growth and integrated the recent acquisitions in Latin America. In IKC, as Javier noted, we delivered our first profitable fiscal year. Q4 adjusted OI was $46 million, and full-year adjusted OI was $22 million. We saw strength across all three of the businesses within IKC, and final reconciliations of our 2024 performance resulted in higher-than-expected shared savings revenue.
Speaker #2: As a reminder, approximately half the year-over-year increase in the bundle PCCs was from binders. Turning to our other segments, international adjusted OI was $21 million, resulting in full year adjusted operating income of $114 million.
Speaker #2: This reflects strong operating business as we delivered positive organic growth and integrated the recent acquisitions in Latin America. In IKC, as Javier noted, we delivered our first profitable fiscal year.
Speaker #2: Q4 adjusted OI was $46 million, and full year adjusted OI was $22 million. We saw strength across all three of the businesses within IKC, and final reconciliations of our 2024 performance resulted in higher than expected shared savings revenue.
Speaker #2: Switching to capital allocation, during the fourth quarter we repurchased 2.7 million shares, and we repurchased an additional 1.7 million shares since the end of the quarter.
Operator: Switching to capital allocation, during the fourth quarter, we repurchased 2.7 million shares, and we repurchased an additional 1.7 million shares since the end of the quarter. As is typical, a portion of these shares were repurchased from Berkshire Hathaway pursuant to the terms of our publicly filed repurchase agreement, which formulaically results in Berkshire's ownership remaining at or below 45%. For the full year 2025, we repurchased nearly 13 million shares for approximately $1.8 billion. At year-end, our leverage ratio was 3.26 times consolidated EBITDA, down from the third quarter and at the midpoint of our target leverage range of 3 to 3 and a half times. With that, let me turn to 2026. As Javier said, we were guiding to an adjusted operating income range with a midpoint of $2.16 billion. At this midpoint, we have built in the following assumptions for US dialysis.
Operator: Switching to capital allocation, during the fourth quarter, we repurchased 2.7 million shares, and we repurchased an additional 1.7 million shares since the end of the quarter. As is typical, a portion of these shares were repurchased from Berkshire Hathaway pursuant to the terms of our publicly filed repurchase agreement, which formulaically results in Berkshire's ownership remaining at or below 45%. For the full year 2025, we repurchased nearly 13 million shares for approximately $1.8 billion. At year-end, our leverage ratio was 3.26 times consolidated EBITDA, down from the third quarter and at the midpoint of our target leverage range of 3 to 3 and a half times. With that, let me turn to 2026. As Javier said, we were guiding to an adjusted operating income range with a midpoint of $2.16 billion. At this midpoint, we have built in the following assumptions for US dialysis.
Speaker #2: As shares were repurchased from Berkshire Hathaway, pursuant to the terms of our typical, a portion of these shares publicly filed repurchase agreement, which formulaically results in Berkshire's ownership remaining at or below 45%.
Speaker #2: For 2025, we repurchased nearly 13 million shares for approximately $1.8 billion. At year-end, our leverage ratio was 3.26 times consolidated EBITDA, down from the third quarter and at the midpoint of our target leverage range. Let me turn to 2026.
Speaker #2: As Javier said, of 3 to 3 and a half times operating income range, with a midpoint of $2.16 billion. With that said, we were guiding to an adjusted following assumptions for US dialysis.
Speaker #2: Treatment volume will be approximately flat to 2025. Impact consistent with what we saw in the—this assumes a flu, not assuming any improvement in non-flu mortality though. As Javier outlined, we are working on a number of initiatives to actively drive down mortality among our patients.
Operator: Treatment volume will be approximately flat to 2025. This assumes a flu impact consistent with what we saw in the 2023-2024 season. We are not assuming any improvement in non-flu mortality, though, as Javier outlined, we are working on a number of initiatives to actively drive down mortality among our patients. Last, on admissions, we are assuming 2026 looks similar to 2025, excluding the impact of the cyber incident. To help with modeling our treatments by quarter, we have added a table to the press release showing normalized treatment days by quarter. This number adjusts for the mix of treatment days and holiday shifts, making it the most helpful number to model quarterly treatments. For example, you'll notice a year-over-year normalized treatment day headwind in Q1 2026, which drives our expectation for negative year-over-year US dialysis treatment volume growth in the first quarter of this year. Moving on to RPT.
Operator: Treatment volume will be approximately flat to 2025. This assumes a flu impact consistent with what we saw in the 2023-2024 season. We are not assuming any improvement in non-flu mortality, though, as Javier outlined, we are working on a number of initiatives to actively drive down mortality among our patients. Last, on admissions, we are assuming 2026 looks similar to 2025, excluding the impact of the cyber incident. To help with modeling our treatments by quarter, we have added a table to the press release showing normalized treatment days by quarter. This number adjusts for the mix of treatment days and holiday shifts, making it the most helpful number to model quarterly treatments. For example, you'll notice a year-over-year normalized treatment day headwind in Q1 2026, which drives our expectation for negative year-over-year US dialysis treatment volume growth in the first quarter of this year. Moving on to RPT.
Speaker #2: Assuming 2026 lasts, on admissions, we are looking similar to 2025, excluding the impact of the cyber incident. To help with modeling our treatments by quarter, we have added a table to the press release showing normalized treatment days by quarter.
Speaker #2: Treatment days and holiday shifts make it the most helpful number to model quarterly treatments. For year-over-year normalized Q1 treatment day headwind in 2026, this drives our expectation for negative year-over-year US dialysis treatment volume growth in the first quarter of this year.
Speaker #2: Moving on to RPT. For 2026, we are forecasting growth of 1% to 2%. The primary driver of this is typical rate increases. We also expect an estimated $40 million headwind from the expiration of enhanced premium tax credits for exchange plans, which is largely offset by the elimination of the $45 million headwind in 2025 from the cyber incident.
Operator: For 2026, we are forecasting growth of 1% to 2%. The primary driver of this is typical rate increases. We also expect an estimated $40 million headwind from the expiration of enhanced premium tax credits for exchange plans, which is largely offset by the elimination of the $45 million headwind in 2025 from the cyber incident. We expect total US dialysis costs to grow 1.25% to 2.25%, mostly driven by typical wage rate increases and G&A investments, partially offset by a decline in depreciation and amortization. The net impact of all this at the midpoint of our guidance is an increase in adjusted operating income for the US dialysis business of approximately 1.5%. Also baked into the midpoint of our adjusted OI guidance range is an expectation for each of IKC and international to contribute approximately 1% to enterprise-adjusted OI growth.
Operator: For 2026, we are forecasting growth of 1% to 2%. The primary driver of this is typical rate increases. We also expect an estimated $40 million headwind from the expiration of enhanced premium tax credits for exchange plans, which is largely offset by the elimination of the $45 million headwind in 2025 from the cyber incident. We expect total US dialysis costs to grow 1.25% to 2.25%, mostly driven by typical wage rate increases and G&A investments, partially offset by a decline in depreciation and amortization. The net impact of all this at the midpoint of our guidance is an increase in adjusted operating income for the US dialysis business of approximately 1.5%. Also baked into the midpoint of our adjusted OI guidance range is an expectation for each of IKC and international to contribute approximately 1% to enterprise-adjusted OI growth.
Speaker #2: We expect total U.S. dialysis costs to grow 1.25% to 2.25%, mostly driven by typical wage rate increases and G&A investments, partially offset by a decline in depreciation and amortization.
Speaker #2: The net impact of all this, at the midpoint, is an increase in adjusted operating income of approximately 1 and a half percent. Also baked into the midpoint of our adjusted OI guidance range is an expectation for each of IKC and International to contribute half, approximately 1%, to growth.
Speaker #2: Altogether, these results reflect enterprise adjusted OI and our expectation for 3.2% adjusted operating income growth at the midpoint of our range versus 2025. For seasonality, we expect first quarter adjusted operating income to be approximately 20% of our full-year total at the midpoint.
Operator: Altogether, these results reflect our expectation for 3.2% adjusted operating income growth at the midpoint of our range versus 2025. For seasonality, we expect Q1 adjusted operating income will represent approximately 20% of our full-year guidance, in other words, about $430 million at the midpoint. Below the operating income line, we expect positive other income of approximately $10 million for the year. This represents significant year-over-year improvement in this line item, resulting from no further losses from our investment in Mozarc since we have now recognized cumulative losses equal to our investment. We expect debt expense to decline by $20 to $40 million versus 2025. This is driven by lower interest rates year-over-year, both from the decline in rates and from our repricing and refinancing transactions, which lowered spreads.
Operator: Altogether, these results reflect our expectation for 3.2% adjusted operating income growth at the midpoint of our range versus 2025. For seasonality, we expect Q1 adjusted operating income will represent approximately 20% of our full-year guidance, in other words, about $430 million at the midpoint. Below the operating income line, we expect positive other income of approximately $10 million for the year. This represents significant year-over-year improvement in this line item, resulting from no further losses from our investment in Mozarc since we have now recognized cumulative losses equal to our investment. We expect debt expense to decline by $20 to $40 million versus 2025. This is driven by lower interest rates year-over-year, both from the decline in rates and from our repricing and refinancing transactions, which lowered spreads.
Speaker #2: Below the operating income line, at about 430, we expect positive other income will represent approximately $10 million. In other words, dollars for the year.
Speaker #2: This represents significant year-over-year improvement in this line item, resulting from no further losses from our investment in MOSARC, since we have now recognized cumulative losses equal to our investment.
Speaker #2: We expect debt expense to decline by $20 to $40 million versus 2025. This is driven by lower interest rates year-over-year, both from the declining rates and from our repricing and refinancing transactions, which improves spreads.
Speaker #2: We expect non-controlling interest to be approximately lowered 16% of US dialysis OI, and we expect effective tax rate to be in the range of 24 and a half to 26 and a half allocation, related to percent.
Operator: We expect non-controlling interest to be approximately 16% of US dialysis OI, and we expect effective tax rate to be in the range of 24.5 to 26.5%. Regarding capital allocation, related to Javier's comments, we announced the signing of an approximately $200 million minority investment alongside a majority investment from Ares Management to acquire Elara Caring. After the transaction closes, which we expect to happen mid-year, we expect this to contribute positively to our other income line. In addition, we will continue to repurchase shares in line with our typical framework, keeping in consideration our liquidity, leverage, and the price of our stock relative to our view of intrinsic value. As a reminder, a significant portion of our repurchases will continue to come via direct purchases from Berkshire Hathaway as part of our ongoing repurchase agreement.
Operator: We expect non-controlling interest to be approximately 16% of US dialysis OI, and we expect effective tax rate to be in the range of 24.5 to 26.5%. Regarding capital allocation, related to Javier's comments, we announced the signing of an approximately $200 million minority investment alongside a majority investment from Ares Management to acquire Elara Caring. After the transaction closes, which we expect to happen mid-year, we expect this to contribute positively to our other income line. In addition, we will continue to repurchase shares in line with our typical framework, keeping in consideration our liquidity, leverage, and the price of our stock relative to our view of intrinsic value. As a reminder, a significant portion of our repurchases will continue to come via direct purchases from Berkshire Hathaway as part of our ongoing repurchase agreement.
Speaker #2: Javier's comments, we announced the signing of an approximately $200 million minority investment alongside a majority investment from ARES private equity funds to acquire Elara Caring.
Speaker #2: Closes, which we expect to happen after the transaction mid-year, we expect this to contribute positively to our other income line. In addition, we will continue to repurchase shares in line with our typical framework, keeping in consideration our liquidity, leverage, and the price of our stock relative to our view of intrinsic value.
Speaker #2: As a reminder, a significant portion of our repurchases will continue to come via direct purchases from Berkshire Hathaway as part of our ongoing repurchase agreement.
Speaker #2: At the midpoint of the range, we are guiding to adjusted EPS in 2026 of $14.30. This does not contain any unusual or non-recurring items and is a good starting point from which to model future EPS.
Operator: At the midpoint of the range, we are guiding to adjusted EPS in 2026 of $14.30. This does not contain any unusual or non-recurring items and is a good starting point from which to model future EPS. Our 2026 guidance represents a 33% increase over last year, which is the result of two familiar drivers: increased operating income and lower share count, plus the elimination of the headwind from our share of the losses at Mozarc, as I previously noted. Finally, on free cash flow, the midpoint of our guidance for 2026 is $1.125 billion, reflecting a resilient business with discipline in the deployment of our capital resources. That concludes my prepared remarks for today. Operator, please open the call for Q&A.
Operator: At the midpoint of the range, we are guiding to adjusted EPS in 2026 of $14.30. This does not contain any unusual or non-recurring items and is a good starting point from which to model future EPS. Our 2026 guidance represents a 33% increase over last year, which is the result of two familiar drivers: increased operating income and lower share count, plus the elimination of the headwind from our share of the losses at Mozarc, as I previously noted. Finally, on free cash flow, the midpoint of our guidance for 2026 is $1.125 billion, reflecting a resilient business with discipline in the deployment of our capital resources. That concludes my prepared remarks for today. Operator, please open the call for Q&A.
Speaker #2: Our 2026 guidance represents a 33% increase over last year, which is the result of two familiar drivers: increased operating income and lower share count, plus the elimination of the headwind from our share of the losses at MOSAIC. As I previously noted, the midpoint of our cash flow guidance reflects this improvement.
Speaker #2: guidance for 2026 is 1.125 Finally, on free billion dollars, reflecting a resilient business with discipline in the deployment of our capital resources. That concludes my prepared remarks for today.
Speaker #2: Operator, please open the call for
Speaker #2: Q&A. Thank you,
David Brown: Thank you, sir. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star, then the number two. One moment, please. Kevin Fischbeck with Bank of America, your line is open, sir.
David Brown: Thank you, sir. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star, then the number two. One moment, please. Kevin Fischbeck with Bank of America, your line is open, sir.
Speaker #1: Sir, if you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star, then the number two.
Speaker #1: Kevin Fishback with Bank of America, your line is open, sir. One moment, please.
Speaker #2: Great, thanks. I wanted to get a little more color on the commentary around, I guess, the confidence in getting back to the 2% plus volume number.
Kevin Fischbeck: Great. Thanks. I wanted to get a little more color on the commentary around, I guess, the confidence in getting back to the 2%+ volume number. Obviously, I guess this number that you're looking for in the guidance for 2026 is a little bit better than 2025, but it's still well below that 2%. So is it all about executing on mortalities, or is there something else that you're kind of pointing to that gives you that confidence?
Kevin Fischbeck: Great. Thanks. I wanted to get a little more color on the commentary around, I guess, the confidence in getting back to the 2%+ volume number. Obviously, I guess this number that you're looking for in the guidance for 2026 is a little bit better than 2025, but it's still well below that 2%. So is it all about executing on mortalities, or is there something else that you're kind of pointing to that gives you that confidence?
Speaker #2: Obviously, I guess this number you're looking for in the guidance for '26 is a little bit better than '25, but it's still well below that 2%.
Speaker #2: So is it all about executing on mortalities, or is there something else that you're kind of pointing to that gives you that?
Speaker #2: confidence? Yeah, Kevin,
Javier Rodriguez: Yeah, Kevin, this is Javier. I appreciate the question. The reality is it is a clinical story. And if you go back and you look at the time when the industry was at its peak of growth, many people thought it was the incidence. But the reality is that it was also a clinical story throughout, meaning mortality was improving year after year. And so to get to that 2%, you have to assume that the things that we outline in our prepared remarks come to fruition. And we think, of course, there's a lag between all of the implementation clinically and the full effect. And so we think that you will start to see some benefits in approximately two years, and you'd probably see the full effect by 2029 or so.
Javier Rodriguez: Yeah, Kevin, this is Javier. I appreciate the question. The reality is it is a clinical story. And if you go back and you look at the time when the industry was at its peak of growth, many people thought it was the incidence. But the reality is that it was also a clinical story throughout, meaning mortality was improving year after year. And so to get to that 2%, you have to assume that the things that we outline in our prepared remarks come to fruition. And we think, of course, there's a lag between all of the implementation clinically and the full effect. And so we think that you will start to see some benefits in approximately two years, and you'd probably see the full effect by 2029 or so.
Speaker #3: This is Javier. I appreciate the question. The reality is, it is a clinical story, and if you go back and look at the time when the industry was at its peak of growth, many people thought it was the incidence, but the reality is that it was also a clinical story throughout.
Speaker #3: Meaning mortality was improving, year after year. And so, to get to that 2%, you have to assume that the things that we outlined in our prepared remarks come to fruition. And we think, of course, there's a lag between all of the implementation clinically and the full effect.
Speaker #3: And so we think that you will start to see some benefits in full effect by '29, or approximately two years, and you probably see the
Speaker #3: so.
Speaker #2: Okay, that's helpful to get that.
Kevin Fischbeck: Okay. That's helpful to get that timing. I forget. You gave some kind of multi-year guidance ranges. Was it three years, you said, or was it five years that you were giving those OI and EPS comments?
Kevin Fischbeck: Okay. That's helpful to get that timing. I forget. You gave some kind of multi-year guidance ranges. Was it three years, you said, or was it five years that you were giving those OI and EPS comments?
Speaker #2: Timing. I forget, you gave some kind of multi-year guidance ranges. Was it three years you said, or was it five years that you were giving those OI and EPS?
Speaker #2: comments? We didn't say
Javier Rodriguez: We didn't say a year, but we think of it in a 3-year or so timeframe.
Javier Rodriguez: We didn't say a year, but we think of it in a 3-year or so timeframe.
Speaker #3: A year, but we think of it in a three-year or so timeframe.
Speaker #2: Okay, and then just last one on the free cash flow number. So, I guess the way to think about it is that number—the $1.125 billion—that's before the $200 million investment.
Kevin Fischbeck: Okay. And then just last one on the free cash flow number. So I guess the way to think about it is that number, the $1.125, that's before the $200 million investment. So if we thought about share repo or so, we should take $200 million out of that to think about additional deployable capital, or is there some other adjustment we should be thinking about?
Kevin Fischbeck: Okay. And then just last one on the free cash flow number. So I guess the way to think about it is that number, the $1.125, that's before the $200 million investment. So if we thought about share repo or so, we should take $200 million out of that to think about additional deployable capital, or is there some other adjustment we should be thinking about?
Speaker #2: So if we thought about share repo or so, we should take $200 out of that to think about additional deployable capital, or is there some other adjustment you're thinking about?
Speaker #3: Yeah, Kevin, that's the right way to think about it, then, and I'd say the starting place would be with leverage level, where we came out right in the middle of the range.
Javier Rodriguez: Yeah, Kevin, that's the right way to think about it then. And I'd say the starting place would be with leverage level, where we came out right in the middle of the range, obviously, with EBITDA growth. If we didn't increase leverage, we'd wind up in the lower half of the range. So that would be the other thing to consider when trying to figure out what's the right number to put in for share repurchases.
Javier Rodriguez: Yeah, Kevin, that's the right way to think about it then. And I'd say the starting place would be with leverage level, where we came out right in the middle of the range, obviously, with EBITDA growth. If we didn't increase leverage, we'd wind up in the lower half of the range. So that would be the other thing to consider when trying to figure out what's the right number to put in for share repurchases.
Speaker #3: Obviously, with EBITDA growth, if we didn't increase leverage, we'd wind up in the lower half of the range. So that would be the other thing to consider when trying to figure out what's the right number to put in for share.
Speaker #3: Repurchases. Okay, but there's no other—
Kevin Fischbeck: Okay. But there's no other obvious use of capital that's kind of the most likely use of capital after that $200 million?
Kevin Fischbeck: Okay. But there's no other obvious use of capital that's kind of the most likely use of capital after that $200 million?
Speaker #2: Obvious use of capital—that's kind of like the most likely use of capital after that $200.
Speaker #1: You. And our next caller is Andrew Thank Maug with Barclays. You may go ahead, sir.
David Brown: Thank you. Our next caller is Andrew Mok, Barclays. You may go ahead, sir.
David Brown: Thank you. Our next caller is Andrew Mok, Barclays. You may go ahead, sir.
Speaker #4: Hi, I appreciate all the color on 2026 guidance. Can you help us understand how mistreatments and mortality trended throughout the fourth quarter? And is there any connection or causality that you've been able to draw between those two items as you've dug into this issue further?
Andrew Mok: Hi. I appreciate all the color on 2026 guidance. Can you help us understand how missed treatments and mortality trended throughout the Q4? And is there any connection or causality that you've been able to draw between those two items as you've dug into this issue further? Thanks.
Andrew Mok: Hi. I appreciate all the color on 2026 guidance. Can you help us understand how missed treatments and mortality trended throughout the Q4? And is there any connection or causality that you've been able to draw between those two items as you've dug into this issue further? Thanks.
Speaker #3: Yeah,
Javier Rodriguez: Yeah. So nothing really to highlight on mortality during the quarter. Missed treatments were up, but typically, you'd see missed treatments up in Q4. And if you looked at Q4 2025 missed treatments, you wouldn't see much difference with Q4 2024 missed treatments. So year-over-year, not much of a change. Our clinical folks would say there absolutely is a correlation between missed treatment rate and mortality, but with some lag between those two metrics.
Javier Rodriguez: Yeah. So nothing really to highlight on mortality during the quarter. Missed treatments were up, but typically, you'd see missed treatments up in Q4. And if you looked at Q4 2025 missed treatments, you wouldn't see much difference with Q4 2024 missed treatments. So year-over-year, not much of a change. Our clinical folks would say there absolutely is a correlation between missed treatment rate and mortality, but with some lag between those two metrics.
Speaker #3: So, nothing really to highlight on mortality during the quarter. Mistreatments were up, but typically you'd see mistreatments up in Q4. And if you looked at Q4 '25 mistreatments, you wouldn't see much difference with Q4 '24 mistreatments.
Speaker #3: So, year over year, not much of a change. I would say our clinical folks would say there absolutely is a correlation between mistreatment rate and mortality, but with some lag between those two metrics.
Speaker #4: Great. And can you provide more detail on how you expect the ACA headwind to play out this year? And maybe comment on how open enrollment performed against your expectations, and what level of attrition you're expecting from that?
Andrew Mok: Great. And can you provide more detail on how you expect the ACA headwind to play out this year and maybe comment on how open enrollment performed against your expectations and what level of attrition you're expecting from here? Thanks.
Andrew Mok: Great. And can you provide more detail on how you expect the ACA headwind to play out this year and maybe comment on how open enrollment performed against your expectations and what level of attrition you're expecting from here? Thanks.
Speaker #4: here. Thanks. I'm sorry,
Javier Rodriguez: I'm sorry, Andrew. I missed the first part of the question.
Javier Rodriguez: I'm sorry, Andrew. I missed the first part of the question.
Speaker #3: Andrew. I missed the first part of the
Speaker #3: Question. Can you give us more
Andrew Mok: Can you give us more detail on how you expect the ACA headwind to play out this year from a cadence perspective and maybe comment on open enrollment, how that played out relative to expectations, and what level of attrition you're expecting on that ACA enrollment throughout the year? Thanks.
Andrew Mok: Can you give us more detail on how you expect the ACA headwind to play out this year from a cadence perspective and maybe comment on open enrollment, how that played out relative to expectations, and what level of attrition you're expecting on that ACA enrollment throughout the year? Thanks.
Speaker #4: Can you provide detail on how you expect the ACA headwind to play out this year from a cadence perspective? Maybe also comment on open enrollment—how that played out relative to expectations—and what level of attrition you're expecting on that ACA enrollment throughout the year?
Speaker #4: Thanks.
Speaker #3: Thank you, Andrew. So the
Javier Rodriguez: Thank you, Andrew. So the number that we gave, we said approximately $40 million this year, $70 million next year, and $10 million the year after that. The reality is that we're seeing what you're seeing in the broader market, which is open enrollment perform better than forecasted by CBO or ourselves. And we're all waiting to see the real number, which is right now, we are measuring selection of a plan or enrollment of a plan. And then, of course, people are trying to see what the payment of the plan will be to see what the yield will be. We don't have any additional color than what you or the marketplace has on what that'll be since it's the first time that these enhanced premium tax credits have gone away. But so far, it has been more resilient than people expected.
Javier Rodriguez: Thank you, Andrew. So the number that we gave, we said approximately $40 million this year, $70 million next year, and $10 million the year after that. The reality is that we're seeing what you're seeing in the broader market, which is open enrollment perform better than forecasted by CBO or ourselves. And we're all waiting to see the real number, which is right now, we are measuring selection of a plan or enrollment of a plan. And then, of course, people are trying to see what the payment of the plan will be to see what the yield will be. We don't have any additional color than what you or the marketplace has on what that'll be since it's the first time that these enhanced premium tax credits have gone away. But so far, it has been more resilient than people expected.
Speaker #3: The numbers that we gave—we said approximately $40 million this year, $70 million next year, and $10 million the year after that. The reality is that we're seeing what you're seeing in the broader market, which is open enrollment performing better than forecasted by CBO or ourselves.
Speaker #3: And we're all waiting to see the real number, which is—right now, we are measuring selection of a plan or enrollment of a plan.
Speaker #3: And then, of course, people are trying to see what the payment of the plan will be, to see what the yield will be. We don't have any additional color than what you or the marketplace has.
Speaker #3: On what that'll be, since it's the first time that these enhanced premium tax credits have gone away. But so far, it has been more resilient than people expected, and we will see once the bills start to come.
Javier Rodriguez: And we will see once the bills start to come if people pay. We will say that our patients during the pandemic and at other time periods, because they are so ill and needing of the healthcare system, are really sophisticated understanding their insurance needs. So on average, they will go out of their way to stay insured. And that's why last call, we said that there was basically two populations: our current patient population, which we think will be more resilient, and then you have the incoming population, which is, in essence, right now, a CKD population that might not value insurance as much as someone that's already had their kidneys fail. And that's why the number grows over time. But we will obviously be watching it during the quarter, and we will see once the payments go into effect.
Javier Rodriguez: And we will see once the bills start to come if people pay. We will say that our patients during the pandemic and at other time periods, because they are so ill and needing of the healthcare system, are really sophisticated understanding their insurance needs. So on average, they will go out of their way to stay insured. And that's why last call, we said that there was basically two populations: our current patient population, which we think will be more resilient, and then you have the incoming population, which is, in essence, right now, a CKD population that might not value insurance as much as someone that's already had their kidneys fail. And that's why the number grows over time. But we will obviously be watching it during the quarter, and we will see once the payments go into effect.
Speaker #3: If people pay, we will say that our patients during the pandemic and at other time periods, because they are so ill and needing of the healthcare system, are really sophisticated in understanding their insurance needs.
Speaker #3: So on average, they will go out of their way to stay insured. And that's why last call we said that there were basically two populations.
Speaker #3: Our current patient population, which we think will be more resilient, and then you have the incoming population, which is in essence right now a CKD population that might not value insurance as much as someone that's already had their kidneys fail.
Speaker #3: And that's why the number grows over time. But we will obviously be watching it during the quarter, and we will see once the payments go into—
Speaker #3: effect. Great.
Andrew Mok: Great. Can I just ask a follow-up on that? Do you have a sense for how many of your ACA patients receive premium assistance? Thanks.
Andrew Mok: Great. Can I just ask a follow-up on that? Do you have a sense for how many of your ACA patients receive premium assistance? Thanks.
Speaker #4: If I could, could I just ask a follow-up on that? Do you have a sense for how many of your ACA patients receive premium assistance?
Speaker #4: Thanks.
Speaker #3: I do not
Javier Rodriguez: I do not, because that obviously has a lot of categories from the enhanced premium tax credits to the normal ones. You get into the income levels and other things. I do not break it down into more detail.
Javier Rodriguez: I do not, because that obviously has a lot of categories from the enhanced premium tax credits to the normal ones. You get into the income levels and other things. I do not break it down into more detail.
Speaker #3: Because that obviously has a lot of categories, from the enhanced premium tax credit to the normal ones, and you get into the income levels and other things.
Speaker #3: So I do not break it down into more detail.
Andrew Mok: Okay. Thank you.
Andrew Mok: Okay. Thank you.
Speaker #3: Thank Okay, thank you.
Speaker #3: you. Thank
Javier Rodriguez: Thank you.
Javier Rodriguez: Thank you.
Speaker #1: You. Our next caller is Justin Lake with Wolf Research. Your line is open.
David Brown: Thank you. Our next caller is Justin Lake with Wolfe Research. Your line is open, sir.
David Brown: Thank you. Our next caller is Justin Lake with Wolfe Research. Your line is open, sir.
Speaker #1: sir. Thanks.
Justin Lake: Thanks. Good morning. A couple of things. First, on the ability to offset the exchange headwind with the tailwind or kind of the non-recurrence of that cyber headwind from 2025. My recollection was the last time you guys talked about this, that the cyber headwind this year, while it hurt the Q2, was offset by some better collections and therefore wouldn't be as big a tailwind as it might have been in 2026. Did I remember that incorrectly, or have you found other initiatives on the reimbursement side?
Justin Lake: Thanks. Good morning. A couple of things. First, on the ability to offset the exchange headwind with the tailwind or kind of the non-recurrence of that cyber headwind from 2025. My recollection was the last time you guys talked about this, that the cyber headwind this year, while it hurt the Q2, was offset by some better collections and therefore wouldn't be as big a tailwind as it might have been in 2026. Did I remember that incorrectly, or have you found other initiatives on the reimbursement side?
Speaker #5: Good morning. A couple of things. First, on the ability to offset the exchange headwind with the tailwind or the kind of the non-recurrence of that cyber 2025, my recollection was the last time you guys talked about this, that the cyber headwind this year, while it hurt the second quarter, was offset by some better collections.
Speaker #5: And therefore, it wouldn't be as big a tailwind as it might have been. In 2026—did I remember that incorrectly, or have you found other initiatives on the reimbursement side?
Speaker #3: Yeah, so let me try and lay out all the pieces for you, Justin, here. So we called out a $70 million headwind from cyber.
Javier Rodriguez: Yeah. So let me try and lay out all the pieces for you, Justin, here. So we called out a $70 million headwind from cyber. $25 million of that is volume, and most of that recurs because it's just census that was lost, and we're not going to get back in 2026. The balance was $45 million, and that was an RPT headwind. We think that RPT headwind is offset in 2026 basically by the enhanced premium tax credit headwind. So you don't see a year-over-year growth problem in RPT because both years have a $40 to 45 million dollar negative. In terms of some of the other stuff we called out, in particular around Q4 and the resolution of some older claims, there's really nothing in the year from that to call out. We have resolution of older claims every year.
Javier Rodriguez: Yeah. So let me try and lay out all the pieces for you, Justin, here. So we called out a $70 million headwind from cyber. $25 million of that is volume, and most of that recurs because it's just census that was lost, and we're not going to get back in 2026. The balance was $45 million, and that was an RPT headwind. We think that RPT headwind is offset in 2026 basically by the enhanced premium tax credit headwind. So you don't see a year-over-year growth problem in RPT because both years have a $40 to 45 million dollar negative. In terms of some of the other stuff we called out, in particular around Q4 and the resolution of some older claims, there's really nothing in the year from that to call out. We have resolution of older claims every year.
Speaker #3: Twenty-five million of that is volume, and most of that recurs because it's just census that was lost and we're not going to get back in 2026.
Speaker #3: The balance was $45 million, and that was an RPT headwind. We think that RPT headwind is offset in 2026, basically, by the enhanced premium tax credit headwind.
Speaker #3: So you don't see a year-over-year growth problem in RPT, because both years have a $40 to $45 million negative. In terms of some of the other stuff we called out, in particular around Q4 and the resolution of some older claims, there's really nothing in the year from that to call out.
Speaker #3: We have resolution of older claims every year. Looking back now, the 2025 number is roughly the same as what we saw in 2024. And the 2026 number we would expect to be similar in 2025.
Javier Rodriguez: Looking back now, the 2025 number is roughly the same as what we saw in 2024. The 2026 number, we would expect to be similar in 2025. I wouldn't call that out as unusual in any year. What was unusual was the concentration in Q4 of 2025, which is why we called it out last quarter.
Javier Rodriguez: Looking back now, the 2025 number is roughly the same as what we saw in 2024. The 2026 number, we would expect to be similar in 2025. I wouldn't call that out as unusual in any year. What was unusual was the concentration in Q4 of 2025, which is why we called it out last quarter.
Speaker #3: So, I wouldn't call that out as unusual in any year. What was unusual was the concentration in Q4 of ’25, which is why we called it out last quarter.
Speaker #5: Got it. And then going back to IKC, can you give us a little more color in terms of what drove the outperformance in 2024 versus what you had previously booked?
Justin Lake: Got it. And then going back to IKC, can you give us a little more color in terms of what drove the outperformance in 2024 versus what you had previously booked and the level of confidence you have that that can continue and grow from there?
Justin Lake: Got it. And then going back to IKC, can you give us a little more color in terms of what drove the outperformance in 2024 versus what you had previously booked and the level of confidence you have that that can continue and grow from there?
Speaker #5: And the level of confidence you have that that can continue and grow from there?
Speaker #3: Sure. Let me grab that one, Justin, Javier. A couple of things that we've talked about as it relates to IKC. So just a quick housekeeping reminder.
Javier Rodriguez: Sure. Let me grab that one, Justin, Javier. A couple of things that we've talked about as it relates to IKC. So just a quick housekeeping reminder: have to look at it on an annualized view because it moves pretty dramatically quarter to quarter. We think of it in three categories. The first one is dollars under management. You can think of it as volume. And that's been relatively flat. We talked about it last time. Secondly, the model of care cost and the G&A cost, which we've done a nice job of remaining flat there. And then the third category, which is the shared savings. And in that, of course, there is contracting and performance to what you're doing to add value to the system. As it relates to that 2024 reconciliation, we did better in that shared savings part that I just talked about. Does that help you?
Javier Rodriguez: Sure. Let me grab that one, Justin, Javier. A couple of things that we've talked about as it relates to IKC. So just a quick housekeeping reminder: have to look at it on an annualized view because it moves pretty dramatically quarter to quarter. We think of it in three categories. The first one is dollars under management. You can think of it as volume. And that's been relatively flat. We talked about it last time. Secondly, the model of care cost and the G&A cost, which we've done a nice job of remaining flat there. And then the third category, which is the shared savings. And in that, of course, there is contracting and performance to what you're doing to add value to the system. As it relates to that 2024 reconciliation, we did better in that shared savings part that I just talked about. Does that help you?
Speaker #3: We have to look at it on an annualized view because it moves pretty dramatically quarter to quarter. We think of it in three categories. The first one is dollars under management.
Speaker #3: You can think of it as volume, and that's been relatively flat. We talked about it last time. Secondly, the model of care cost and the G&A cost, which we've done a nice job of keeping flat there.
Speaker #3: And then the third category, which is the shared savings. And in that, of course, there is contracting and performance to what you're doing to add value to the system.
Speaker #3: As it relates to that 2024 reconciliation, we did better in that shared savings part that I just talked about. Does that help you?
Speaker #5: Yeah, just how did you do better? Was it inpatient admissions, outpatients? Just curious for a little more color there, and what gives you confidence that that number is going to continue at that level?
Justin Lake: Yeah. Just how did you do better? What was it in patient admissions, outpatients? Just curious for a little more color there, and what gives you confidence that that number is going to continue at that level given how much outperformance?
Justin Lake: Yeah. Just how did you do better? What was it in patient admissions, outpatients? Just curious for a little more color there, and what gives you confidence that that number is going to continue at that level given how much outperformance?
Speaker #5: Given how much
Speaker #5: Outperformance? Yeah, I mean, look, there is a
Javier Rodriguez: Yeah. I mean, look, there's a lot of little things: medication management, transitions of care, segmentation of patient population, having more access to patients earlier. We have new interventions and protocols. One of the difficulties of this business is, of course, understanding exactly what moved the needle. But rather, the cumulative portfolio is working, and that's why we felt comfortable giving a +$20 million for 2026.
Javier Rodriguez: Yeah. I mean, look, there's a lot of little things: medication management, transitions of care, segmentation of patient population, having more access to patients earlier. We have new interventions and protocols. One of the difficulties of this business is, of course, understanding exactly what moved the needle. But rather, the cumulative portfolio is working, and that's why we felt comfortable giving a +$20 million for 2026.
Speaker #3: A lot of little things: medication management, transitions of care, segmentation of patient population, having more access to patients earlier. We have new interventions and protocols.
Speaker #3: One of the difficulties of this business is, of course, understanding exactly what moved the needle. But rather, the cumulative portfolio is working, and that's why we felt comfortable giving a plus $20 million or—
Speaker #3: 2026. Got it. Thank
Justin Lake: Got it. Thanks.
Justin Lake: Got it. Thanks.
Speaker #5: Thanks.
Speaker #3: you.
Javier Rodriguez: Thank you.
Javier Rodriguez: Thank you.
Speaker #1: Thank you.
David Brown: Thank you. As a reminder, that is star one if you would like to ask a question. A.J. Rice with UBS. Your line is open.
David Brown: Thank you. As a reminder, that is star one if you would like to ask a question. A.J. Rice with UBS. Your line is open.
Speaker #1: And as a reminder, that is star one if you would like to ask a question. AJ Rice with UBS, your line is open.
Speaker #5: Thanks. Hi, everybody. First, there’s been a lot of discussion, and even talk, about what you’re doing with the IKC business—about either people managing patients with CKD better and more effectively, and then, obviously, there’s discussion about some of the drugs that could have an impact.
A.J. Rice: Thanks. Hi, everybody. First, there's been a lot of discussion and even the talk about what you're doing with the IKC business about either people managing patients with CKD better and more effectively. And then obviously, there's discussion about some of the drugs that could have an impact. And I wondered, what are you seeing about disease progression with someone that has kidney disease, time to get to dialysis, and then are you seeing them stay longer yet on dialysis, or when do you think any of that would have an impact?
A.J. Rice: Thanks. Hi, everybody. First, there's been a lot of discussion and even the talk about what you're doing with the IKC business about either people managing patients with CKD better and more effectively. And then obviously, there's discussion about some of the drugs that could have an impact. And I wondered, what are you seeing about disease progression with someone that has kidney disease, time to get to dialysis, and then are you seeing them stay longer yet on dialysis, or when do you think any of that would have an impact?
Speaker #5: And I wondered, what are you seeing in disease progression with someone that has kidney disease, the time to get to dialysis, and then are you seeing them stay longer yet on dialysis, or when do you think any of that would have an impact?
Speaker #3: Yeah, thanks for the question. The reality is we have not seen anything shift, but you would think that that would take some time, as we've talked about.
Javier Rodriguez: Yeah. Thanks for the question. The reality is we have not seen anything shift, but you would think that that would take some time, as we've talked about. When you talk about these drugs, they're not magic drugs, but rather, it takes some time of being on them to have the effect that you're talking about. So right now, it's too early to tell. And again, we've only been managing these CKD populations for 5 years or so. So that will take longer to play out.
Javier Rodriguez: Yeah. Thanks for the question. The reality is we have not seen anything shift, but you would think that that would take some time, as we've talked about. When you talk about these drugs, they're not magic drugs, but rather, it takes some time of being on them to have the effect that you're talking about. So right now, it's too early to tell. And again, we've only been managing these CKD populations for 5 years or so. So that will take longer to play out.
Speaker #3: When you talk about these drugs, they're not magic drugs. But rather, it takes some time of being on them to have the effect that you're talking about.
Speaker #3: So right now, it's too early to tell. And again, we've only been managing these CKD populations for five years or so. So that will take longer to play out.
Speaker #3: out. Okay.
Justin Lake: Okay. And just maybe a follow-up on the Elara Caring investment. How should we think about that? Is it just a financial investment from your side? Are you going to do things operationally that might make a difference for you? Can you describe a little more of what's going on with that?
Justin Lake: Okay. And just maybe a follow-up on the Elara Caring investment. How should we think about that? Is it just a financial investment from your side? Are you going to do things operationally that might make a difference for you? Can you describe a little more of what's going on with that?
Speaker #5: And then maybe a follow-up on the ALERA Caring investment. How should we think about that? Is it just a financial investment from your side?
Speaker #5: Are you going to do things operationally that might make a difference for you? Can you describe a little more of what's going on with that?
Speaker #3: Sure. Our investment thesis has two pieces to it. One is, of course, we have to have a good capital return. On that $200 million, we want to be disciplined.
Javier Rodriguez: Sure. Our investment thesis has two pieces to it. One is, of course, we have to have a good capital return on that $200 million. We want to be disciplined. We think it's a good-size investment, and we want it to have good capital returns. The second one is to help our patient population. Roughly a quarter of our population uses home health. And by having a specialized kidney protocol, we think we can reduce hospitalization and readmissions and then, of course, try to reduce mistreatments. So it is connecting back to this whole loop of trying to do more for our patients while we have them in our clinic and now outside of the clinic.
Javier Rodriguez: Sure. Our investment thesis has two pieces to it. One is, of course, we have to have a good capital return on that $200 million. We want to be disciplined. We think it's a good-size investment, and we want it to have good capital returns. The second one is to help our patient population. Roughly a quarter of our population uses home health. And by having a specialized kidney protocol, we think we can reduce hospitalization and readmissions and then, of course, try to reduce mistreatments. So it is connecting back to this whole loop of trying to do more for our patients while we have them in our clinic and now outside of the clinic.
Speaker #3: We think it's a good-size investment, and we wanted to have good capital returns. The second one is to help our patient population—roughly a quarter of our population uses home health.
Speaker #3: And by having a specialized kidney protocol, we think we can reduce hospitalization and readmissions and then, of course, try to reduce mistreatments. So it is connecting back to this whole loop of trying to do more for our patients while we have them in our clinic and now outside of the clinic.
Speaker #5: Okay. Thanks a
Justin Lake: Okay. Thanks a lot.
Justin Lake: Okay. Thanks a lot.
Speaker #5: lot. Thank
Javier Rodriguez: Thank you.
Javier Rodriguez: Thank you.
Speaker #1: Thank you. Our next caller is Peter Chickering with Deutsche Bank. Your line is open, sir.
David Brown: Thank you. Our next caller is Pito Chickering with Deutsche Bank. Your line is open, sir.
David Brown: Thank you. Our next caller is Pito Chickering with Deutsche Bank. Your line is open, sir.
Speaker #6: Hey, good afternoon. Thanks for taking my questions. Can you talk about the international business for a little bit? How would you think about the top-line growth, whether it's M&A versus organic, and how would you think about margins within that?
Pito Chickering: Hey. Good afternoon. Thanks for taking my questions. Can you talk about the international business for a little bit? How would you think about the top-line growth, whether it's M&A versus organic, and how would you think about margins within that segment?
Pito Chickering: Hey. Good afternoon. Thanks for taking my questions. Can you talk about the international business for a little bit? How would you think about the top-line growth, whether it's M&A versus organic, and how would you think about margins within that segment?
Speaker #6: segment? Yeah.
Javier Rodriguez: Yeah. I think on international, generally, I would think about the growth both top-line and bottom-line as half M&A and half organic. We would expect the margins to continue to improve as they leverage kind of the fixed overhead both at the international level as well as in the existing market. So international is proving to be a good business for us, a relatively consistent performer, and a contributor of about a point to OI growth over the last few years. And we're expecting more of the same in 2026.
Javier Rodriguez: Yeah. I think on international, generally, I would think about the growth both top-line and bottom-line as half M&A and half organic. We would expect the margins to continue to improve as they leverage kind of the fixed overhead both at the international level as well as in the existing market. So international is proving to be a good business for us, a relatively consistent performer, and a contributor of about a point to OI growth over the last few years. And we're expecting more of the same in 2026.
Speaker #3: I think on international, generally, I would think about the growth—both top-line and bottom-line—as half M&A and half organic. We would expect the margins to continue to improve as they leverage the kind of fixed overhead, both at the international level as well as in the existing market.
Speaker #3: So international has proven to be a good business for us, a relatively consistent performer, and a contributor of about a point to OI growth over the last few years.
Speaker #3: And we're expecting more of the same in 2026.
Speaker #6: Okay, and then I'm going to ask just this question on IKC a little bit differently. Looking at the losses you guys had in '22, '23, and '24—could you just refresh us on those, if you could?
Pito Chickering: Okay. Then I'm going to ask Justin's question on IKC a little bit differently. But looking at the losses you guys had in 2022 and 2023 and 2024, and just refresh us on those if you could, I guess, why should we think about the rate of improvement in 2026 sort of slowing dramatically? It just seems as though the losses have compressed quite significantly as you've gotten scale. And so I'm curious why we wouldn't see the benefits grow sort of levels that we've seen in the last couple of years.
Pito Chickering: Okay. Then I'm going to ask Justin's question on IKC a little bit differently. But looking at the losses you guys had in 2022 and 2023 and 2024, and just refresh us on those if you could, I guess, why should we think about the rate of improvement in 2026 sort of slowing dramatically? It just seems as though the losses have compressed quite significantly as you've gotten scale. And so I'm curious why we wouldn't see the benefits grow sort of levels that we've seen in the last couple of years.
Speaker #6: I guess, why should we think about the rate of improvement in ’26 slowing dramatically? It just seems as though the losses have compressed quite significantly as you've gotten scale, and so I'm curious why we wouldn't see the benefits grow to the sort of levels that we've seen in the last couple of years.
Speaker #3: Yeah, so look, your math is right. I think if you go back over the last three years, the average OI improvement has been somewhere in the $40 to $50 million per year, and now we're seeing—we're calling out—a slowing of that.
Javier Rodriguez: Yeah. So look, your math is right. I think if you go back over the last three years, the average OI improvement has been somewhere in the $40 to 50 million per year. And now we're calling out a slowing of that. I think it's just a natural occurrence as a business matures and gets bigger. There's just less opportunity to continue to drive the margins up. We're not expecting a high-margin business here. And so I think $20 million a year is a comfortable landing spot for us right now in terms of contribution to OI growth.
Javier Rodriguez: Yeah. So look, your math is right. I think if you go back over the last three years, the average OI improvement has been somewhere in the $40 to 50 million per year. And now we're calling out a slowing of that. I think it's just a natural occurrence as a business matures and gets bigger. There's just less opportunity to continue to drive the margins up. We're not expecting a high-margin business here. And so I think $20 million a year is a comfortable landing spot for us right now in terms of contribution to OI growth.
Speaker #3: I think it's just a natural occurrence as a business matures and gets bigger. There's just less opportunity to continue to drive the margins up.
Speaker #3: We're not expecting a high-margin business here, and so I think $20 million a year is a comfortable landing spot for us right now in terms of contribution to—
Speaker #6: Okay. And then
Pito Chickering: Okay. And then last question here, just about new starts. I think you talked about new starts in the fourth quarter and we're back-end loaded. But as you think about new starts for 2026, how do you model that? And specifically, how do you break out the payer mix of those new starts versus, say, previous years as it relates to commercial or HICS or government patients? Thanks.
Pito Chickering: Okay. And then last question here, just about new starts. I think you talked about new starts in the fourth quarter and we're back-end loaded. But as you think about new starts for 2026, how do you model that? And specifically, how do you break out the payer mix of those new starts versus, say, previous years as it relates to commercial or HICS or government patients? Thanks.
Speaker #6: Last question here, just about new starts. I think you mentioned OI growth. You talked about new starts in the fourth quarter and were back-half loaded. But as you think about new starts for 2026, how do you model that?
Speaker #6: And specifically, how do you break out the payer mix of those new starts versus, say, previous years as it relates to commercial or HICS or government patients?
Speaker #6: Thanks.
Speaker #3: Yeah. So far, we're not calling out any dramatic change in new starts for next year. Similar to mortality and, to some extent, mistreatment rates—when we see those things improve, we'll start calling them out.
Javier Rodriguez: Yeah. So we're not calling out any dramatic change in new starts for next year, similar to mortality, and to some extent mistreatment rates. When we see those things improve, we'll start calling them out. But until then, we're comfortable with flattish. In terms of mix, look, new patients have always had a higher commercial mix than the average patient. It's just the natural evolution of a patient as they get older. They tend to migrate toward Medicare. I don't see any change to that pattern going forward.
Javier Rodriguez: Yeah. So we're not calling out any dramatic change in new starts for next year, similar to mortality, and to some extent mistreatment rates. When we see those things improve, we'll start calling them out. But until then, we're comfortable with flattish. In terms of mix, look, new patients have always had a higher commercial mix than the average patient. It's just the natural evolution of a patient as they get older. They tend to migrate toward Medicare. I don't see any change to that pattern going forward.
Speaker #3: But until then, we're comfortable with flattish. In terms of mix—look, new patients have always had a higher commercial mix than the average patient.
Speaker #3: It's just the natural evolution of a patient as they get older. They tend to migrate towards Medicare. I don't see any change to that pattern going forward.
Speaker #6: Okay, so just to be super clear, the new starts that we're seeing coming in are the same commercial mix we've seen, sort of, for the last several years?
Pito Chickering: Okay. So just to be super clear, the new starts that we're seeing coming in are the same commercial mix we've seen sort of for the last several years. Thank you.
Pito Chickering: Okay. So just to be super clear, the new starts that we're seeing coming in are the same commercial mix we've seen sort of for the last several years. Thank you.
Speaker #6: Thank
Speaker #6: you. Yeah.
Javier Rodriguez: Yeah. With the one callout around HICS and that changing. But other than that, I don't see any other new dynamic.
Javier Rodriguez: Yeah. With the one callout around HICS and that changing. But other than that, I don't see any other new dynamic.
Speaker #3: With the one callout around HICS and that changing, but other than that, I don't see any other new dynamic.
Speaker #6: Great. Thanks so much.
Pito Chickering: Great. Thanks so much.
Pito Chickering: Great. Thanks so much.
Speaker #1: Thank you. Our next caller is Ryan Langston with TDCal, and your line is open.
David Brown: Thank you. Our next caller is Ryan Lang with TD Cowen. Your line is open.
David Brown: Thank you. Our next caller is Ryan Lang with TD Cowen. Your line is open.
Speaker #3: Thanks. On the flu vaccine commentary and the prepared remarks, did you say that there was an actual change in the vaccination rates this fourth quarter versus other fourth quarters, or was that just more related to seasonal sequential, or seasonality sequentially?
Joel Ackerman: Thanks. On the flu vaccine commentary and the prepared remarks, did you say that there was an actual change in the vaccination rates this Q4 versus other Q4s, or was that just more related to seasonal or seasonality sequentially?
Joel Ackerman: Thanks. On the flu vaccine commentary and the prepared remarks, did you say that there was an actual change in the vaccination rates this Q4 versus other Q4s, or was that just more related to seasonal or seasonality sequentially?
Speaker #3: I believe what we said in the opening remarks is that, at our high, we were in the 90th percentile, and we aspire to get back to that.
Javier Rodriguez: I believe what we said in the opening remarks is that in our high, we were in the 90th percentile, and we aspire to get back to that. Just to give you a bit of sense, right now, we're at 80%, which is, from a national perspective, quite healthy, but we could do better.
Javier Rodriguez: I believe what we said in the opening remarks is that in our high, we were in the 90th percentile, and we aspire to get back to that. Just to give you a bit of sense, right now, we're at 80%, which is, from a national perspective, quite healthy, but we could do better.
Speaker #3: And just to give you a bit of a sense, right now we're at 80%, which is, from a national perspective, quite healthy, but we could do better.
Speaker #3: Got it. And I know the dialysis. Another thing I'll just point out is flu vaccines do go up in Q4 over Q3, and that does drive a little bit of RPT and a little bit of cost.
Joel Ackerman: Got it. I know the dialysis part.
Joel Ackerman: Got it. I know the dialysis part.
Javier Rodriguez: The other thing I'd just point out is flu vaccines do go up in Q4 over Q3, and that does drive a little bit of RPT and a little bit of cost. That's part of the Q4 over Q3 RPT dynamic as well.
Javier Rodriguez: The other thing I'd just point out is flu vaccines do go up in Q4 over Q3, and that does drive a little bit of RPT and a little bit of cost. That's part of the Q4 over Q3 RPT dynamic as well.
Speaker #3: So that's part of the Q4 over Q3 RPT dynamic as well. Yeah, that makes sense. And then just last thing, I know the dialysis population is a bit different from the individual MA population, but if the kind of flat advance notice holds for 2027 and the final notice, I guess, is there any—maybe just directional—change in what we could assume for outlook in terms of growth for '27?
Joel Ackerman: Yeah. That makes sense. And then just last thing. I know the dialysis population is a bit different from individual MA population, but if the kind of flat advance notice holds for 2027 and the final notice, I guess, is there any maybe just directional change in what we could assume for outlook in terms of growth for 2027? Thanks.
Joel Ackerman: Yeah. That makes sense. And then just last thing. I know the dialysis population is a bit different from individual MA population, but if the kind of flat advance notice holds for 2027 and the final notice, I guess, is there any maybe just directional change in what we could assume for outlook in terms of growth for 2027? Thanks.
Speaker #3: Thanks. Yeah. Thanks for the question, Ryan. One of the things that's worthy of highlighting is that the ESRD population has its own funding pool in MA and actually realized that there was an underfunding, so there was a catch-up.
Javier Rodriguez: Yeah. Thanks for the question, Ryan. One of the things that it's worthy of highlighting is that the ESRD population has its own funding pool in MA and that CMS has actually realized that there was an underfunding, so there was a catch-up. So the dialysis or ESKD population will receive a 6% increase in 2027, which, from our perspective, reflects the reality and would put an MA plan in a position to want to add these patients to the risk pool.
Javier Rodriguez: Yeah. Thanks for the question, Ryan. One of the things that it's worthy of highlighting is that the ESRD population has its own funding pool in MA and that CMS has actually realized that there was an underfunding, so there was a catch-up. So the dialysis or ESKD population will receive a 6% increase in 2027, which, from our perspective, reflects the reality and would put an MA plan in a position to want to add these patients to the risk pool.
Speaker #3: So, the dialysis or ESKD population will receive a 6% increase in 2027, which from our perspective reflects the reality and would put an MA plan in a position to want to add these patients to the risk pool.
Joel Ackerman: Ryan, the one thing I'd add to that is not only is the reimbursement different, but the whole coding regime is different. The questions around V28 and rebasing and the higher coding intensity in a given year, those are not part of or they're a much smaller part of the math for ESRD MA rates. If you look at the notice from last week, you'd see it in there all as well. It's all spelled out. All right. Thank you.
Speaker #3: And Ryan, the one thing I'd add to that is not only is the reimbursement different, but the whole coding regime is different. So the questions around V28 and rebasing, and the higher coding intensity in a given year, those are not part of—or they're a much smaller part of—the math for ESRD MA rates.
Joel Ackerman: Ryan, the one thing I'd add to that is not only is the reimbursement different, but the whole coding regime is different. The questions around V28 and rebasing and the higher coding intensity in a given year, those are not part of or they're a much smaller part of the math for ESRD MA rates. If you look at the notice from last week, you'd see it in there all as well. It's all spelled out. All right. Thank you.
Speaker #3: And if you look at the notice from last week, you'd see it in there as well. So it's all spelled out.
Speaker #3: out. All right.
Speaker #2: Thank you.
Speaker #3: Thank you.
Javier Rodriguez: Thank you.
Javier Rodriguez: Thank you.
Speaker #1: Thank you. At this time, I'm showing no further questions. Speakers, I'll turn the call back over to you for any closing comments.
David Brown: Thank you. At this time, I'm showing no further questions, speakers. I'll turn the call back over to you for any closing comments.
David Brown: Thank you. At this time, I'm showing no further questions, speakers. I'll turn the call back over to you for any closing comments.
Speaker #3: Thank you, Michelle, and thank you all for joining. I hope it is 100% clear that our energy and excitement around clinical opportunities are absolutely off the charts to expand the lives of our patients.
Joel Ackerman: Thank you, Michelle, and thank you all for joining. I hope it is 100% clear that our energy and excitement around clinical opportunities are absolutely off the charts to expand the lives of our patients. We have a powerful alignment between our clinical ambitions and our financial goals. By fulfilling our mission to deliver the best care for our patients, we can also deliver returns for our shareholders. Thank you for your interest, and thank you for joining the call today. Have a good day.
Joel Ackerman: Thank you, Michelle, and thank you all for joining. I hope it is 100% clear that our energy and excitement around clinical opportunities are absolutely off the charts to expand the lives of our patients. We have a powerful alignment between our clinical ambitions and our financial goals. By fulfilling our mission to deliver the best care for our patients, we can also deliver returns for our shareholders. Thank you for your interest, and thank you for joining the call today. Have a good day.
Speaker #3: We have a powerful alignment between our clinical ambitions and our financial goals. By fulfilling our mission to deliver the best care for our patients, we can also deliver returns for our shareholders.
Speaker #3: Thank you for your interest and thank you for joining the call today. Have a good day.
David Brown: Thank you. This concludes today's conference call. You may go ahead and disconnect at this time.
David Brown: Thank you. This concludes today's conference call. You may go ahead and disconnect at this time.
