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DaVita HealthCare Partners Inc. Comments On The Final CMS ESRD Rates And Provides Initial 2014 Operating Income Guidance

DaVita HealthCare Partners Inc. (NYSE: DVA) today commented on the final Centers for Medicare and Medicaid Services (CMS) Medicare ESRD rule for 2014 and announced initial 2014 operating income guidance.

Final CMS Rule

LeAnne Zumwalt, Group Vice President said, “On the dialysis rule, the bad news is that CMS appears to have accepted the premise that the language in the American Taxpayer Relief Act of 2012 required it to make a partial rebasing of the bundle. This could unfairly result in cuts of nearly $30 per treatment over a three to four year period by looking only at pharmaceutical economics. This means that Medicare dialysis rates will be flat in 2014 and 2015 in an environment of increasing expenses.

“The good news is that Medicare rates will not be decreased next year, when most thought rates would be down. In addition, we get to work with Congress and CMS on trying to mitigate future cuts, and CMS has a number of appropriate reimbursement levers to pull to offset cuts a few years out if it chooses to do so, since Medicare reimbursement already fails to cover the full cost of caring for Medicare patients.”

Guidance

Given the issuance of the final CMS rule, the company is now in a position to provide initial 2014 guidance and expects 2014 enterprise operating income to be in a range of $1.675 to $1.850 billion.

The company expects 2014 operating income for our dialysis services and related ancillary business to be in the range of $1.425 to $1.540 billion. The primary reasons for a likely year-on-year decline in operating income are Medicare patient expense increases, commercial rate and mix pressures, and health care exchange dynamics.

The company expects 2014 operating income for HealthCare Partners (HCP) to be in the range of $250 to $310 million. The primary reason for a substantial expected year-on-year decline in HCP operating income in 2014 is the previously announced Medicare Advantage rate cuts, which the company will have limited ability to offset.

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