DaVita's profits drop as it works to close medical group sale

DaVita's profit took a hit in 2018 as the company works to close on the sale of its medical group to UnitedHealth Group.

Net income attributable to the Denver-based dialysis provider was $159 million in 2018, compared with $664 million in 2017, according to the company's results. DaVita saw a net loss of nearly $150 million in the fourth quarter of 2018, compared with net income of $303 million in the fourth quarter of 2017.

The company generated operating income of $1.5 billion on total revenue of $11.4 billion last year, compared with $1.8 billion in operating income on revenue of $10.9 billion in 2017. DaVita's operating income declined 16% year-over-year, even as total operating revenue grew almost 5% in that time.

On the company's earnings call Thursday morning DaVita CEO Kent Thiry said the federal government shutdown "very negatively impacted" the pending sale of DaVita Medical Holdings to UnitedHealth's Optum, but assured the audience the deal will still go through. In December, the companies announced DaVita had agreed to sell the medical group for $4.34 billion, $560 million less than the previously agreed upon price.

Javier Rodriguez, CEO of DaVita Kidney Care, said on the call that the company's capital expenditure costs came in less than expected last year, and will likely decline even further in 2019. That's partially because DaVita won't need as many new dialysis centers in the coming years as more of its patients opt for home dialysis, given it now has a steady source of the necessary supplies, he said. In 2018, DaVita trained more than 13,000 new home dialysis patients.

"As you know, home growth has an incremental benefit of being more capital efficient," Rodriguez said.

DaVita spent $93 million on advocacy in 2018, which the company said was spent countering union policy efforts, including ballot initiatives. DaVita and fellow dialysis provider Fresenius Medical spent heavily to fight California's Proposition 8, which would have limited dialysis profits to 15% of the direct costs of patient care. Voters rejected the measure in November.

DaVita's operating cash flow was $1.8 billion in 2018, down 7.4% from 2017, when it was $1.9 billion.

As of the end of 2018, DaVita provided dialysis services to about 227,700 patients at about 2,700 outpatient centers in the U.S. In the fourth quarter of 2018, the company opened 34 new dialysis centers in the U.S., acquired another 13, closed two and sold one.