Davita Inc. · NYSE:DVA
Davita — DaVita Healthcare Partners — Investor Day (May 2016)
122 slides from Davita's investor day presentation, May 18, 2016
Slide 1: Capital Markets Day May 18, 2016
Capital Markets Day May 18, 2016 Exhibit 99.1
Slide 2: Forward-looking statements
This presentation contains forward-looking statements within the meaning of the federal securities laws. All statements in this presentation, other than statements of historical fact, are forward-looking statements and include, among other things, statements about our expectations, beliefs, intentio
Slide 3: Chairman & Chief Executive Officer Kent Thiry
Chairman & Chief Executive Officer Kent Thiry
Slide 4: DaVita Medical Group, DaVita International, DaVita Kidney Care
DaVita Medical Group DaVita International DaVita Kidney Care
Slide 5: Enterprise Summary
DaVita Kidney Care Enterprise Summary DaVita International DaVita Medical Group Introduction
Slide 6: OI Outlook 2016-2019
OI Outlook DMG U.S. KC Int’l 5 – 9%1 2 – 7% Breakeven by 2018 2016-2019 OI Outlook Enterprise 3 – 8%1 1. 2016 CAGR guidance excludes non-recurring items, including a goodwill impairment charge and an estimated accrual associated with the HCP hospice business.
Slide 7: Cash generation and uses 2016-2019
Cash generation and uses 2016-2019 Cash Available $M
Slide 8: EPS scenario
EPS scenario Consolidated OI Growth 3% - 8% + Financial Leverage Net Income/EPS Growth 4% - 10% + Share Repurchase/Acq’s EPS Growth 5% - 12%
Slide 9: Bad news / good news
Bad news / good news Rate risk DMG is WIP Compliance risk Bad news Good news Clinical excellence Stable demand & cash flow Market leadership Population health capability Distinctive platform
Slide 10: Enterprise Summary
DaVita Kidney Care Enterprise Summary DaVita International DaVita Medical Group Introduction
Slide 11: DaVita Medical Group
DaVita Medical Group Attractive segment Strong platform/asset Steady progress despite headwinds Rate cuts Capabilities Relationships 2016-2019 Operating Income: 5-9% CAGR1 $1.0B cumulative net cash flow2 Leading Independent Medical Group in America 1. 2016 guidance excludes non-recurring items, incl
Slide 12: Components
Components Moderate Patient growth Rate increases Conversion to Value Per member medical cost Substantial G&A savings Capability investment No new market entries
Slide 13: Operating performance OI 2013-2016
2013 - 2016 OI $M Operating performance OI 1 1. 2016 guidance excludes non-recurring items, including a goodwill impairment charge of $77M and a $16M estimated accrual associated with NV hospice
Slide 14: 2016 EBITDA
2016 EBITDA $M 2001 Operating performance OI D&A2 1. 2016 guidance excludes non-recurring items, including a goodwill impairment charge of $77M and a $16M estimated accrual associated with NV hospice 2. Assumed $170M of D&A expense
Slide 15: 2016 tax-adjusted EBITDA
2016 tax-adjusted EBITDA Tax step-up3 $M D&A2 2001 Operating performance OI 1. 2016 guidance excludes non-recurring items, including a goodwill impairment charge of $77M and a $16M estimated accrual associated with NV hospice 2. Assumed $170M of D&A expense 3. Pre-tax equivalent ($167M) of ~ $100M a
Slide 16: Our journey
Our journey Legacy New 2013 Learn 2014 2015 2016-17 Change senior mgmt Transform team Drive to excellence 32 of 40 Bad deals Fix deals Colorado Springs Begin to grow/shift mix R&D Everett
Slide 17: President, DaVita Medical Group California Jim Rechtin
President, DaVita Medical Group California Jim Rechtin
Slide 18: What is our outlook? DaVita Medical Group
What is our outlook? How reasonable is the outlook? Why do we like this business? DaVita Medical Group
Slide 19: DaVita Medical Group
DaVita Medical Group 1,600 team clinicians 12K affiliate physicians 1.5M+ total patients 800K PHM lives 250 clinics
Slide 20: DaVita Medical Group key figures
DaVita Medical Group $5.0B Care dollars under management1 $3.9B Revenue1 2016 Operating Income: $175-225M2 2016 EBITDA: $370M (midpoint)2 2016 Tax Adj EBITDA: $537M (midpoint)2 1. LTM 3/31/2016 2. 2016 guidance excludes non-recurring items, including a goodwill impairment charge of $77M and a $16M e
Slide 21: Outperforming MA benchmarks
Outperforming MA benchmarks STAR Measure DMG avg MA Nat’l avg Body mass index (BMI) 4 4 Colorectal cancer 5 3 Diabetes: Blood sugar 5 4 Diabetes: Nephropathy 5 3 Diabetes: Eye exam 4 3 Osteoporosis 4 3 Rheumatoid arthritis 3 3 Breast cancer 5 4 Blood pressure 4 3 Note: Preliminary data as of May 201
Slide 22: Consistent across geographies
Consistent across geographies STAR Measure DMG avg CA FL NV NM CO WA Body mass index (BMI) 4 4 5 5 3 5 5 Colorectal cancer 5 5 5 4 5 5 5 Diabetes: Blood sugar 5 5 5 5 5 5 5 Diabetes: Nephropathy 5 5 5 5 4 4 4 Diabetes: Eye exam 4 4 4 4 4 4 3 Osteoporosis 4 4 4 3 4 5 3 Rheumatoid arthritis 3 3 3 2 5
Slide 23: 2016-2019 drivers
2016-2019 Rate Unit growth Cost Mix Legacy MA growth New market conversion to Value
Slide 24: 2016-2019 5-9% OI CAGR
2016-2019 5-9% OI CAGR1 Rate Unit growth Cost Mix Legacy MA growth New market conversion to Value 1. 2016 guidance excludes non-recurring items, including a goodwill impairment charge and an estimated accrual associated with NV hospice
Slide 25: What is our outlook? DaVita Medical Group
What is our outlook? How reasonable is the outlook? Why do we like this business? DaVita Medical Group
Slide 26: 2016-2019 Rate
2016-2019 Rate Unit growth Cost Mix
Slide 27: Rate
Rate 2017: ~$25M Medicare rate hit 2018 and beyond: Tracks medical expense
Slide 28: 2016-2019 OI outlook: Rate
2016-2019 OI outlook $M Rate 1 1. Mid-point of guidance, excludes non-recurring items, including a goodwill impairment charge of $77M and an estimated accrual associated with NV hospice of $16M
Slide 29: 2016-2019 Legacy MA growth
2016-2019 Rate Unit growth Cost Mix Legacy MA growth
Slide 30: Medicare Advantage growing
Medicare Advantage growing Members (M) Note: Includes cost and demonstration plans, and enrollees in Special Needs Plans as well as other Medicare Advantage plans Source: Kaiser Family Foundation analysis of Congressional Budget Office data Projected
Slide 31: Legacy MA patient growth
4% Legacy MA patient growth Our geography projected at 4-6% per year Significant investments Growing physician network Physician and patient experience
Slide 32: Building capacity
Building capacity 1,000 900 /yr Providers Note: As of Mar 31 of each year. Includes employed PCPs, specialists, hospitalists, and advanced care practitioners Legacy geographies only
Slide 33: Legacy Medicare growth
Legacy Medicare growth Patients (K) Medicare Advantage Medicare FFS1 1. Unique Medicare fee-for-service patients (i.e., not covered by a capitation arrangement) seen in 12 months ending in labeled quarter, e.g., “Dec 2013” = 1/1/13 to 12/31/13 +4% +11% CAGR Total +9%
Slide 34: 2016-2019 OI outlook: Legacy MA growth
2016-2019 OI outlook $M Legacy MA growth Rate 1 1. Mid-point of guidance, excludes non-recurring items, including a goodwill impairment charge of $77M and an estimated accrual associated with NV hospice of $16M
Slide 35: 2016-2019 New market conversion to Value
2016-2019 Rate Unit growth Cost Mix New market conversion to Value
Slide 36: Why value-based contracts?
Why value-based contracts? Fee for Service $600 revenue Illustrative example: One Medicare patient for a year Value $10,000 revenue
Slide 37: Quality care = better economics
Quality care = better economics Right care Right diagnosis Right process Appropriate risk adjustment Quality bonus Appropriate utilization
Slide 38: Why value-based contracts?
Why value-based contracts? Fee for Service $600 revenue ~$30 variable contribution Illustrative example: One Medicare patient for a year Value $10,000 revenue ~$500 variable contribution
Slide 39: "Value" takes time & money
“Value” takes time & money Investment FFS margin Value margin OI Blinded example Contract signed
Slide 40: Conversion in new geographies
Conversion in new geographies Washington, New Mexico, Colorado 60K MA patients in non-full-risk contracts Most payors want to move Outlook 50% conversion 30% of average contribution
Slide 41: 2016-2019 OI outlook: New market conversion
2016-2019 OI outlook New market conversion Legacy MA growth Rate 1 $M 1. Mid-point of guidance, excludes non-recurring items, including a goodwill impairment charge of $77M and an estimated accrual associated with NV hospice of $16M
Slide 42: 2016-2019 Cost
2016-2019 Rate Unit growth Cost Mix
Slide 43: Costs
Costs Support Clinical team External medical cost % Investment Savings +
Slide 44: Building platform: examples
Building platform: examples Oracle Security Compliance Business development Care management Predictive analytics JVs Innovation Catch-up Next generation
Slide 45: Google Glass
Google Glass Time savings: 1-2 hours 3-4 more visits Positive patient feedback
Slide 46: Dragon dictation
Dragon 360 dictation “Left knee full range of motion, ballottement normal, grind test normal, anterior drawer negative posterior drawer negative, MCL intact, LCL intact” “Macro knee exam left”
Slide 47: Improving patient experience
Improving patient experience Patient referral processing time Phone call abandonment rate 2013 2015 2013 2015 30% improvement 60% improvement
Slide 48: Remote monitoring and action
Remote monitoring and action Bluetooth scales, BP cuffs Direct link to data warehouse
Slide 49: Telepsychiatry
Telepsychiatry Video setup Map of patient teleconsults
Slide 50: Hospital alignment example
Hospital alignment example Access highest quality hospital in region Patients $5-15M / year savings DMG Hospital Average daily census: from 48 to 76 Improved care coordination
Slide 51: Improving utilization
Improving utilization Senior acute admits per 1000 For continuity, only legacy geographies shown
Slide 52: Costs
Costs Support Clinical team External medical cost % $50M savings off trend (3%) $40M investment Tracks with rates
Slide 53: 2016-2019 OI outlook: Ops savings, investments
2016-2019 $M Ops savings, invest-ments New market conversion Legacy MA growth Rate 1 1. Mid-point of guidance, excludes non-recurring items, including a goodwill impairment charge of $77M and an estimated accrual associated with NV hospice of $16M
Slide 54: 2016-2019: 5-9% OI CAGR
2016-2019: 5-9% OI CAGR 1 Legacy MA growth Rate $M Ops savings, invest-ments New market conversion 1. Mid-point of guidance, excludes non-recurring items, including a goodwill impairment charge of $77M and an estimated accrual associated with NV hospice of $16M
Slide 55: Other opportunities
Other opportunities Commercial (included branded product) Medicaid / Dual-Eligibles Specialty drug management Post-acute management
Slide 56: What is our outlook? DaVita Medical Group
What is our outlook? How reasonable is the outlook? Why do we like this business? DaVita Medical Group
Slide 57: Why do we like this business?
Why do we like this business? Strong fundamentals Cash flow dynamics Optionality
Slide 58: DaVita Medical Group
DaVita Medical Group Attractive segment Strong platform/asset Steady progress despite headwinds Rate cuts Capabilities Relationships 2016-2019 Operating Income: 5-9% CAGR1 $1.0B cumulative net cash flow2 Leading Independent Medical Group in America 1. 2016 guidance excludes non-recurring items, incl
Slide 59: Enterprise Summary
DaVita Kidney Care Enterprise Summary DaVita International DaVita Medical Group Introduction
Slide 60: Strategic premise
Strategic premise Large and growing market Increasing pressure on governments Transferable competence and brand Potential platform for other services
Slide 61: International footprint
Portugal Footprint India China Saudi Arabia Taiwan Singapore Malaysia Poland 124 clinics, 11 countries outside the U.S. Caring for 10,000+ patients Colombia Germany Brazil
Slide 62: International growth
x International growth —e Clinics L_]Patients 12,000 120 10,000 100 8,000 80 6,000 60 4,000 40 2,000 20 0 0 2011 2012 2013 2014 2015 Q116 DaVita. © 2016 DaVita HealthCare Partners Inc. All rights reserved.
Slide 63: Achieving scale
Achieving scale Year Revenue / country 2012 $2 2013 7 2014 11 2015 13 2016E 25 Total revenue $15 67 109 140 ~275 ($ in Millions)
Slide 64: Clinical progress in Malaysia
Clinical progress in Malaysia Clinical metric goal <30% <15% <10% <10% Note: Restricted to patients >90 days on dialysis; n = 24 centers % Feb 2016 July 2013 Goal
Slide 65: Clinical progress in Germany
Clinical progress in Germany % Feb 2016 July 2015 Phosphor. Clinical metric goal ≤ 15% ≤ 20% ≤ 20% ≤ 40% Goal
Slide 66: Clinical progress in Saudi Arabia
Clinical progress in Saudi Arabia KT/V >= 1.2 Hgb >= 10 g/dl
Slide 67: All rights reserved.
© 2016 DaVita HealthCare Partners Inc. All rights reserved.
Slide 68: Financial outlook
Financial outlook 2016 2018 OI Guidance ~($40M) Breakeven
Slide 69: Asia Kidney Care joint venture
Asia Kidney Care joint venture Strong partners Shared vision Partners DVA APAC Asia $300M investment 40% stake 40% 60%
Slide 70: Enterprise Summary
DaVita Kidney Care Enterprise Summary DaVita International DaVita Medical Group Introduction
Slide 71: Chief Executive Officer, DaVita Kidney Care Javier Rodriguez
Chief Executive Officer, DaVita Kidney Care Javier Rodriguez
Slide 72: DaVita Kidney Care agenda
Industry Overview Company Overview Outlook DaVita Kidney Care
Slide 73: Typical dialysis center
80 patients 17 teammates 5 nurses 8 techs 4 other Medical Director 18 machines and chairs $4M revenue Typical dialysis center
Slide 74: Industry overview
Industry overview Stable demand growth Strong cash flow generation Significant government engagement Private payors subsidize government Dynamic payor landscape and ESA marketplace
Slide 75: Stable demand growth
Stable demand growth U.S. dialysis patients (000s) 2000-2013 CAGR: 3.8% Steady industry demand Life-sustaining care Limited therapeutic alternatives Not cyclical or seasonal Strong center loyalty Source: USRDS 2015 Annual Data Report
Slide 76: ESRD population growth profile
ESRD population growth profile Impact on ESRD growth Industry dynamic 65+ age population growing Growing Hispanic population at higher risk Management of diabetes and hypertension Historical improvement in mortality slowing
Slide 77: Significant government engagement
Significant government engagement Dialysis represents ~1% of Medicare patients, but ~7% of total Medicare budget Fragile patient population ~90% of DaVita’s patients funded by government payors Transparent economics
Slide 78: Private payors subsidize government
Private payors subsidize government Treatments Revenue Profit
Slide 79: Dynamic payor landscape
Dynamic payor landscape Constant rate pressure Seeking comprehensive solutions Narrow networks Payor consolidation Healthcare exchanges (double-edged sword)
Slide 80: DaVita Kidney Care agenda
Industry Overview Company Overview Clinical Outcomes Integrated Kidney Care Financial Trilogy Outlook DaVita Kidney Care
Slide 81: Kidney Care at a glance
U.S. Facilities1 2,278 U.S. Patients1 182k Kidney Care Teammates1 52k LTM Treatments (U.S.)2 26.4M Kidney Care LTM Revenue2 $10.2B Kidney Care LTM Adjusted OI2,3 $1.7B Kidney Care at a glance 1. As of March 31, 2016 2. LTM as of March 31, 2016 3. Non-GAAP measure, excludes certain one-time items
Slide 82: Continued outperformance in QIP
Continued outperformance in QIP Note: Figures reflect performance in calendar year 2014 and CMS' account of facility ownership as of December 2014 2016 QIP Penalty Facilities 5x more penalties
Slide 83: DVA continues to lead in Five-Star
DVA continues to lead in Five-Star Note: 2016 star ratings 7x fewer 1 Star facilities 2x more 5-Star facilities
Slide 84: Patient-focused quality pyramid
Patient-focused quality pyramid Quality of life Hospitalizations / Experience / Mortality Complex Programs The Fundamentals
Slide 85: Need for care coordination
Need for care coordination Uncoordinated Care Unnecessary Utilization Poorly Managed Overwhelmed/ Confused Pts. Adapt to significant lifestyle changes 12+ Medications; 21+ pills/day Dietary restrictions à specific kidney diet 12+hrs/wk at dialysis 12 hospital days/yr 50%+ crash into dialysis >3 Co-m
Slide 86: Building coordinated care since 2003
CKD Demo Building coordinated care since 2003 2003 2005 Today 2006 2007 2010 2015 ESRD Demo SNP Partnership 3 ESCOs 5 ESRD Partnerships 2013
Slide 87: Success with coordinated care
Sources: 2015 USRDS Annual Report, ESRD National Coordinating Center (“Fistula First Catheter Last” Dashboard data) Success with coordinated care 20% Better 75% Better Hospitalization Catheter
Slide 88: Clinical differentiation from Rx
Source: Chronic Disease Research Group (CDRG):, over 50,000 DVA patients analyzed in “as treated” study 15% fewer days spent in the hospital 21% risk reduction in mortality Clinical differentiation from Rx Survival ratio (% of patients still living) Months since index Hospital days (per patient per
Slide 89: Policy swing factors
Policy swing factors Integrated care legislation Protecting commercial coverage
Slide 90: Financial trilogy
Financial trilogy 4.5% - 6.0% growth Steady Growth # of Treatments Revenue / Tx Expense / Tx - x
Slide 91: Normalized non-acquired growth (NAG)
Normalized non-acquired growth (NAG)
Slide 92: Continuing DeNovo focus
KK Continuing DeNovo focus ae 90-110 72 65 i) 2011 2012 PK) 2014 2015 2016E ©2016 DaVita HealthCare Partners Inc. All rights reserved, Davita. 2
Slide 93: Census of acquired centers
Census of acquired centers 1. Calculated using 2014 census data for acquisitions completed in 2015 Note: excludes mergers in excess of 1,000 patients 1
Slide 94: Financial trilogy
Financial trilogy 0.0% - 1.5% growth Normal Dynamics (other than Exchanges) # of Treatments Revenue / Tx Expense / Tx - x
Slide 95: Medicare reimbursement outlook
Medicare reimbursement outlook 2017: Market basket minus 1.25% 2018: Market basket minus 1.00% 2019+: Market basket
Slide 96: Improving employment rate
Improving employment rate Drivers of commercial volume Impact on payor mix Industry dynamic Affordable Care Act / Exchanges Incidence rate of ESRD
Slide 97: Financial trilogy
Financial trilogy 0.5% - 2.0% growth Normal Dynamics (other than ESAs) # of Treatments Revenue / Tx Expense / Tx - x
Slide 98: Cost per treatment
Cost per treatment Teammate costs Pharma and supplies Other center-level costs G&A and other corporate Component Historical ~2%/yr Dynamic ~2%/yr ~in-line with tx
Slide 99: Dynamic ESA marketplace
Roche (Mircera) Hospira (Retacrit) Sandoz (Binocrit) Dynamic ESA marketplace Today 2017 2018 2019+ Amgen (Aranesp) DVA/AMGN agreement expires Amgen (Epogen)
Slide 100: DaVita Kidney Care agenda
Industry Overview Company Overview Outlook DaVita Kidney Care
Slide 101: Outlook
Outlook 4.5% - 6.0% growth 0.0% - 1.5% growth 0.5% - 2.0% growth # of Treatments Revenue / Tx Expense / Tx - x 2% – 7% OI Growth
Slide 102: U.S. Kidney Care summary
What is more dynamic? What is the same? U.S. Kidney Care summary Clinical excellence Capital-efficient treatment growth Commercial mix/rate dynamic Few acquisition opportunities ESAs Exchanges Payor evolution Population health
Slide 103: Enterprise Summary
DaVita Kidney Care Enterprise Summary DaVita International DaVita Medical Group Introduction
Slide 104: Interim Chief Financial Officer Jim Hilger
Interim Chief Financial Officer & Chief Accounting Officer Jim Hilger
Slide 105: Capital Structure, Capital Deployment, Enterprise Summary
Capital Structure Capital Deployment Summary Enterprise Summary
Slide 106: Leverage ratio
Leverage ratio Note: Leverage ratio as defined in Credit Agreement 1. Gambro Healthcare acquisition – October 2005; 5.2x leverage pro forma for transaction and 4.5x leverage at end of year after FTC-mandated divestitures 2. HCP acquisition – November 2012 2015 2 1
Slide 107: Debt structure
$ millions Total Debt: $9,210 Other – $359 5% Notes - $1,500 5¾% Notes - $1,250 Sr. Notes $4,500 Term Loans $4,351 Tranche A - $912 Tranche B - $3,439 5⅛% Notes - $1,750 Debt structure Note: Excludes the debt discount associated with the company’s Term Loan B and other deferred financing costs. As o
Slide 108: Debt maturities
Debt maturities $ millions $710 $76 $123 $135 $35 Excludes adjustments for certain items that are contained in the definition per the credit agreement. $1,000 revolver expires in 2019 Note: Does not include maturities of other debt of $359M 3/31/16 LTM EBITDA1 $2,611
Slide 109: Capital Structure, Capital Deployment, Enterprise Summary
Capital Structure Capital Deployment Summary Enterprise Summary
Slide 110: Balanced cash deployment 2001-15
Balanced cash deployment $B Optional debt repayment Share repurchases Other acquisitions HCP Gambro Development 2001-15
Slide 111: Balanced cash deployment 2008-15
Balanced cash deployment Share repurchases Other acquisitions HCP Development Optional debt repayment $B 2008-15
Slide 112: Net share count reduction
x Net share count reduction Jan. 1, 2015 Mar. 31, 2016 © 2016 DaVita HealthCare Partners Inc. All rights reserved. Davita.
Slide 113: Strong cash flows
Strong cash flows Excludes the ~$269M after-tax impact of 2010 and 2011 US Attorney Physician Relationship Investigations payment Excludes the ~$304M after-tax impact of private civil suit Note: Free Cash Flow is a Non-GAAP measure. Free cash flow is defined as cash flow from operations less income
Slide 114: Capital Structure, Capital Deployment, Enterprise Summary
Capital Structure Capital Deployment Summary Enterprise Summary
Slide 115: Cash generation and uses 2016-2019
Cash generation and uses 2016-2019 Cash Available $M
Slide 116: EPS scenario
EPS scenario Consolidated OI Growth 3% - 8% + Financial Leverage Net Income/EPS Growth 4% - 10% + Share Repurchase/Acq’s EPS Growth 5% - 12%
Slide 117: Bad news / good news
Bad news / good news Rate risk DMG is WIP Compliance risk Bad news Good news Clinical excellence Stable demand & cash flow Market leadership Population health capability Distinctive platform
Slide 118: Capital Markets Day May 18, 2016
Capital Markets Day May 18, 2016
Slide 119: Reconciliations for Non-GAAP measures
Reconciliations for Non-GAAP measures
Slide 120: Reconciliations for Non-GAAP measures
Reconciliations for Non-GAAP measures
Slide 121: Reconciliations for Non-GAAP measures
Reconciliations for Non-GAAP measures
Slide 122: Reconciliations for Non-GAAP measures
Reconciliations for Non-GAAP measures