DaVita HealthCare Partners reported a 34.8% increase in net income during the third quarter of 2014, despite an uneven performance across its two divisions.
Denver-based DaVita operates its core kidney-care business as well as multispecialty group HealthCare Partners, which it acquired in 2012. It has struggled to boost margins in the latter group while its kidney-care division has helped its overall results.
The company reported $184.1 million in net income on $3.3 billion in revenue in the third quarter compared with $136.6 million in net income on $3 billion in revenue during the same period in 2013.
Its kidney-care business reported a 40.1% increase in operating income in the period while HealthCare Partners experienced a 52% decrease in operating income. Kidney care accounted for 89.3% of DaVita's total revenue for the quarter.
As a result, DaVita tightened its guidance for full-year operating income to a range of $1.785 billion to $1.835 billion. It had previously forecast a range of $1.755 billion to $1.84 billion for the two business segments.
While it also forecast an increase in operating income for 2015—in the range of $1.75 billion to $1.9 billion—executives on an earnings call warned that 2016 might not be so rosy.
The company is grappling with lower Medicare reimbursement in both divisions and suggested that it could lose some commercial contracts as insurers move to create narrow network plans. DaVita relies on higher commercial rates to offset lower Medicare payments—which account for the majority of its revenue—and will end contracts before accepting lower commercial rates.
DaVita has 35% of the U.S. dialysis market and saw an overall 5.1% increase in its per-day dialysis volume in the period, or a 4.4% increase when excluding acquisitions. The company opened 29 new centers and acquired another 15 in the U.S., while it closed or sold two centers and merged nine with others. It also acquired a new center and opened two more internationally.
HealthCare Partners also provided care to 12% more capitated members, with an undisclosed portion of that growth coming from acquisitions.
The company plans to continue its acquisition spree. Last month, it added Colorado Springs Health Partners, a multispecialty medical group with more than 100 providers. It also on Thursday disclosed a joint venture with Centura Health to provide coordinated care in Colorado and Kansas. That deal represents a new type of acquisition that will be central to the company's strategy going forward, executives said on the call.
DaVita last month also finalized a $389 million settlement with the federal government to settle allegations that it induced physicians to send patients to its dialysis centers in return for a financial stake. The company said it has already set aside a reserve to cover its costs.
Follow Beth Kutscher on Twitter: @MHbkutscher
