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DaVita Inc DVA

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Morningstar’s Analysis

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Economic Moat

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Capital Allocation

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Status Quo Likely to Be Maintained on U.S. Health Insurance and Tax Rates; Some MCO FVEs Increased

Julie Utterback, CFA Senior Equity Analyst

Analyst Note

| Julie Utterback, CFA |

After Sen. Joe Manchin (D-VA) announced opposition to the Build Back Better bill, we do not expect Congress to enact policies that will significantly increase the insured rate in the U.S. beyond recent measures. While we view this development as mildly negative operationally for medical services firms, positively, those concerns appear likely to be at least offset in our fair value estimates by a reversal of our assumption that the U.S. corporate tax rate would rise and recent cash flows. However, maintaining the status quo in the U.S. healthcare system could keep ESG risks alive for medical service firms in the long run.

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Company Profile

Business Description

DaVita is the largest provider of dialysis services in the United States, boasting market share that eclipses 35% when measured by both patients and clinics. The firm operates over 3,100 facilities worldwide, mostly in the U.S., and treats over 240,000 patients globally each year. Government payers dominate U.S. dialysis reimbursement. DaVita receives approximately 69% of U.S. sales at government ( primarily Medicare) reimbursement rates, with the remaining 31% coming from commercial insurers. However, while commercial insurers represented only about 10% of the U.S. patients treated, they represent nearly all of the profits generated by DaVita in the U.S. dialysis business.

Contact
2000 16th Street
Denver, CO, 80202
T +1 720 631-2100
Sector Healthcare
Industry Medical Care Facilities
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Slow Growth
Employees 67,000

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