DaVita CEO warns of potential income declines in coming years

DaVita HealthCare Partners Inc. announced an expected earnings hit for the third quarter on Thursday — and then CEO Kent Thiry warned the company will face headwinds over the next two years that may cause it to lose income more significantly in its primary business of kidney care.

The Denver-based company (NYSE: DVA) reported an 8.4 percent increase in revenues to $3.25 billion for the quarter, as well as year-over-year 34.8 percent increase in quarterly net income to $184.1 million.

But in accounting for an accrual related to its recent $389 million settlement with the federal government regarding physician-kickback allegations, the company reported adjusted income from continuing operations of $194.5 million — a decline of 8.5 percent from the third quarter of 2013.

Thiry still called the quarter a "solid" one, and adjusted income of 90 cents per share met expectations of Wall Street analysts, even if it was down from a 98-cent figure in the third quarter of 2013.

He particularly lauded two recently announced deals in the managed-care division of the business in which it acquired the largest physicians' practice in Colorado Springs and announced a joint venture with Centura Health, the largest health system in Colorado.

But Thiry also offered 2015 guidance of $1.75 billion to $1.9 billion in operating income, a projection he called "relatively flat" and warned will come with the closing of 15 unprofitable dialysis centers by the end of the year.

Then in 2016, he said, the company could struggle to bring in even that much money because of declining Medicare reimbursements and because of the "nerve-wracking" possibility of losing share among private insurers because the company refuses to accept the reimbursement cutbacks that some of its competitors are taking from major payers.

Ed Sealover covers government, health care, tourism, airlines, hospitality and restaurants for the Denver Business Journal and writes for the "Capitol Business" blog. Phone: 303-803-9229.