Dialysis Provider DaVita Loses Pricing Control
Dialysis provider DaVita posted solid second-quarter financial results, yet chief financial officer Rich Whitney admitted to analysts on the earnings call that Medicare composite rate adjustment provided for in 2009 and 2010 would not be sufficient to compensate for anticipated increases in forward operating costs subject to inflation, such as labor and pharmaceutical supplies. Whitney opined that the dialysis provider would likely continue the trend of steady growth and consistent cash flow going forward. However, it is possible that operating profitability could tumble if the defined scope of new Medicare bundling rules, scheduled to be implemented in 2011, limit coverage for higher-cost cases and cap the utilization of prescribed erythropoiesis-stimulating agents (ESAs), such as Amgen’s Epogen. The company generates approximately…
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