DVA reported Q4 adjusted earnings o $1.11 beating The Street's estimate of $0.98. As we expected, labor supply and wage rates have softened, although there is still considerable churn as demonstrated by the monthly BLS data. The structural problems remain. The company is forecasting flat to negative volume growth and hopes excess mortality - 900 patients in 4Q - will ease. The mortality data is not cooperating at this point, however.
A bigger question, one we are wrestling with more globally, is whether admits will return to their 2% annual growth rate? The company says they have picked up but we know excess mortality among diabetics is as notable as it is among dialysis patients. It remains, for us, an open question. The Leverage Ratio came is a 4.03, a 12bp increase over 3Q and flirting with the 5.00 covenant. The anticipated center closures of 50-70 in 2023 should help but maybe it doesn't....
Let me know your thoughts.
Emily Evans
Managing Director – Health Policy
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