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Takeaway: Labor cost trends, share battles and what about that sale of DMG?

DVA reports after the close and there is some optimism that FMS’s reported 6% health care services revenue growth supported by a positive 4% trend in North American patients will also be reflected in DVA’s print. With our estimate of 2-3% demographic driven patient growth in North American, primarily coming from a Medicare population, it seems possible FMS took patient share in the quarter.

DVA | THOUGHTS INTO THE PRINT - Dialysis Patient Growth

FMS reported soft commercial rates partially offset by improved Medicare rates. Labor cost trends remain an issue, both key points for our DVA short thesis.

DVA | THOUGHTS INTO THE PRINT - wagesHC

We expect DVA’s sale of DMG to UNH to be a hot topic. On UNH’s earnings call, management reported that they have “a clear path to approval” of the transaction. In announcing he was stepping aside as CEO (more on that in a moment), Kent Thiry characterized the transaction as almost done. We too don’t see many anti-trust objections in the sale – none that cannot be resolved anyway – but with 18 months having passed since announcement leaves us hopeful for some clarity on the call.

Thiry’s decision to leave the CEO spot before completing the sale is a little surprising especially since there had been little to signal such a change. Given Thiry’s interest in Colorado politics and Sen. Michael Bennet’s entry in the presidential race there may be a political opportunity Thiry does not wish to pass up.

Finally, another topic DVA will have to address is the new approach to ESRD treatment CMS announced recently in a speech by Secretary Azar to the National Kidney Foundation. FMS’s acquisition of NextStage makes their interest and enthusiasm for the new approach credible. DVA’s home dialysis strategy has been more difficult to discern so the commentary should be instructive.

Call with questions.

Thomas Tobin
Managing Director


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Emily Evans
Managing Director – Health Policy



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