QUOTE AND NEWS
Motley Fool  Jul 21  Comment 
Shareholder drama, executive shakeups, and analyst downgrades made these three names the worst performers in the stock market today
Market Intelligence Center  Jul 17  Comment 
Wednesday’s trading in DaVita Inc (DVA) gives options traders an opportunity for a 9.17% return. By selling the Oct. '14 $72.50 call and buying the Jan. '15 call at the $60.00 level for a net debit of $11.45, traders will book a profit as long...
TheStreet.com  Jun 30  Comment 
NEW YORK (TheStreet) -- RATINGS CHANGES Adobe was upgraded to buy at TheStreet Ratings. DaVita was initiated at Jefferies with a buy rating. Diversifying its business model by leveraging on trends in health care, Jefferies said. Twelve-month...
Benzinga  Jun 30  Comment 
Analysts at Nomura initiated coverage on Receptos (NASDAQ: RCPT) with a “buy” rating. The target price for Receptos is set to $63. Receptos' shares closed at $40.43 on Friday. ISI Group initiated coverage on shares of Varian Medical Systems...
Market Intelligence Center  Jun 16  Comment 
MarketIntelligenceCenter.com's patented algorithms have selected a trade on DaVita Inc (DVA) that returns 12.36% in 124 days for an annualized return rate of 36%. This diagonal spread pairs a short position in the Oct. '14 $70.00 call, with a long...
NPR  Jun 12  Comment 
The Garden State costs Medicare more than any other state for ambulance rides per kidney dialysis patient. A crackdown is set to start, but at one big dialysis center, ambulances remain everywhere.
newratings.com  Jun 10  Comment 
WASHINGTON (dpa-AFX) - DaVita HealthCare Partners Inc. (DVA) said Tuesday that it plans to offer $1.75 billion principal amount of senior notes due 2024. DaVita said it plans to use the net proceeds from the offering to repay, concurrently with...
SeekingAlpha  May 29  Comment 
By John Balison: End-stage renal disease (ESRD) is a condition where the kidneys stop working well enough to effectively remove waste, toxins, and fluids from blood. Historically in the U.S., people with ESRD have been treated with hemodialysis...
SeekingAlpha  May 28  Comment 
ByBrian Grosso: DaVita (DVA) has been publicly traded since the mid '90s, but its stock did not perform well initially. Shares hit an all-time low of about 90 cents in March 2000 before taking off for 7600% cumulative gains or 36.3% annually over...
Market Intelligence Center  May 28  Comment 
For a hedged play on DaVita Inc (DVA) MarketIntelligenceCenter.com’s algorithms selected the Oct. '14 $67.50 covered call for a net debit in the $65.35 area. That is also the break-even stock price for the covered call. This trade will return...




 

DaVita (NYSE: DVA) is the second largest provider of dialysis services in the United States with about 1/3 of the market. The company has more than 1,300 outpatient dialysis facilities and 800 acute units hospitals.[1]

DaVita is heavily dependent on both Medicare and private insurance programs. Over 87% of its patients are covered by Medicare, making the government program the single largest source of revenue for the company. Any changes to Medicare reimbursement policy for dialysis or related services could have a substantial impact on the company's performance - and dialysis has been a frequent target of Medicare budget cuts, most of which have been successfuly parried by coalitions dialysis companies, drug manufacturers, doctors and patient groups. Although only 13% of DaVita's clients pay using private insurance, DaVita charges these patients 2 to 3 times more than those affiliated with Medicare, and most of the company's margin comes from these patients. DaVita is facing pressure from insurance companies to lower its rates for privately insured patients. If the insurance companies are able to negotiate better rates, it could have a disproportionate impact on the company's earnings.

Business Overview

Dialysis services are used by people diagnosed with chronic kidney disease (CKD), also known as end stage renal disease. Dialysis removes toxins, fluids and salt from the blood, and patients usually require dialysis at least three times per week for the rest of their lives or a kidney transplant.

DaVita's revenue comes from fees charged for dialysis sessions and the sales of complementary treatment drugs such as Epogen. Because dialysis is a life-sustaining treatment, Medicare covers treatments for everyone (including those under 65). This coverage begins within three months for those not covered by a commercial health insurance plan and within 33 months for those initially covered by a commercial payer. Payment for dialysis is usually 2-3x higher for commercial payers than for Medicare.

Business & Financial Metrics[2]

In 2009, DVA generated a net income of $422.7 million on revenues of $6.11 billion. This represents a 13.0% increase in net income and a 7.9% increase in total revenues from 2008, when the company earned $374.2 million on $5.66 billion in revenue.

Business Segments[3]

DVA is divided into two business segments:

  • Dialysis and Related Lab Services (94.8% of total revenue): This segment operates 1,530 outpatient dialysis centers in the United States.[4]
  • Other (5.2% of total revenue): This segment operates the company's DaVita Rx pharmacy,[5] subsidiary HomeChoice Partners which provides infusion therapy services to patients in their own homes, and other medical intiatives.[6]

IMAGE:DVA-Segments2009.jpg[3]

Key Trends and Forces

  • Incidence of kidney disease: Kidney disease is expected to increase with the Aging Baby Boomers and with the incidence of obesity, diabetes and hypertension. The disease has recently grown at 3-4% per year and there are currently about 335,000 ESRD dialysis patients in the United States. Some experts predict that there will be up to a 60% increase in kidney disease by 2020.
  • Decrease in private insurance rates: DaVita charges private insurance much higher rates (2-3x Medicare rates), and there has been some pressure to reduce these rates.[7] Approximately 35% of DaVita's revenue is from private insurance companies, even though private insurance patients represent only 13% of total patients.[8]
  • Increase in kidney transplants: If the government were to change the organ donor system to an “opt-out” one in which individuals must make the decision not to participate, there could be a significant increase in kidney transplants, which would lower the demand for DaVita’s services.[9]
  • Future medical technologies: The widespread use of dialysis is a current reality, but there are potential game-changing adjustments to ESRD treatment that could greatly affect companies like DaVita. While the development of an artificial kidney is far from a reality, it may be a possibility in the future. [10]

Competitors

While DaVita and its competitor Fresenius together account for more than 65% of the outpatient dialysis centers in the United States, the industry is competitive in terms of acquiring existing centers. About half of the centers not owned by these two players are owned or controlled by non-profit organizations or hospitals, and physicians can also buy centers.[11]

  • Fresenius Medical Care: Fresenius is by far DaVita’s largest competitor, with about 1/3 market share and about 150,000 patients.[12] This company may have a cost advantage over DaVita because they manufacture dialysis supplies and equipment. In fact, Fresenius has historically been DaVita’s largest supplier of dialysis products.[13]
  • Nxstage Medical: Nxstage has developed in-home hemodialysis systems for patients to use on a daily basis.[14]

Footnotes

  1. http://www.davita.com/about/
  2. DVA 2009 10-K pg. F-4  
  3. 3.0 3.1 DVA 2009 10-K pg. 43  
  4. DVA 2009 10-K pg. 3  
  5. DVA 2009 10-K pg. 4  
  6. DVA 2009 10-K pg. 5  
  7. DaVita 2006 Annual Report. Section: Risk Factors. Page 68.
  8. DaVita 2006 Annual Report. Section: Management's Discussion. Page 9.
  9. International Lessons for Moving Forward With 'Opt-Out' Organ Donation in the United States
  10. New Device Could Lead to Artificial Kidney Transplants
  11. DaVita 2006 10K, Item I: Business, page 17.
  12. Making a Difference in Dialysis
  13. DaVita 2006 10K, Item I: Business, page 18.
  14. DaVita 2006 10K, Item I: Business, page 18.
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