The employment data did not mislead. DVA beat consensus of 1.22 with an adjusted EPS of 1.58, which was itself a decline of $0.07 from a year ago. Much credit goes to a more manageable labor environment especially as it relates to contract labor. Census improved in part due to higher admissions and in part due to lower mortality. This trend is reflected in the 0.90% increase in average treatments per day. Since 1Q is seasonally depressed by copayments and deductibles, things should improve in the back half of the year from a revenue per treatment perspective.
Indeed revenue guidance improved from 1.4B-1.6B for 2023 to 1.475B to 1.25B.
That is the good news. The bad news is that labor costs remain elevated. Management indicated that prior to COVID the SWB CAGR was on the order of 2%. In 2022, it leapt to 8% and in 2023 has settled down around 4-5%. Given the Medicare payment updates of ~2%, the labor-revenue model remains upside down. The other bad news is that the company has reduced the number of dialysis centers by about 100 since 1Q 2022 and plans to close 50-70 in 2023. Those center closures will contribute to higher missed treatments which remain elevated 1% above pre-COVID levels.
Other bad news is the significant drop in productivity. Although employment is at multi-quarter highs, average treatments per employee per day has dropped from 1.40 to 1.36 sequentially and considerably lower than the peak of 1.47 per day in 2019.
The most interesting comment on the conference call related to future incidence. Management cited "upstream" impact of COVID and suggested they did not have enough visibility. We keep watching kidney-related mortality and no decline below baseline has yet occurred.
Let me know if you have any questions.
Have a great rest of your weekend.
Emily Evans
Managing Director – Health Policy
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