UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
For the Fiscal Year Ended
December 31, 2004
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-4034
DAVITA INC.
601 Hawaii Street
El Segundo, California 90245
Telephone number (310) 536-2400
Delaware | 51-0354549 | |
(State of incorporation) |
(I.R.S. Employer Identification No.) |
Securities registered pursuant to Section 12(b) of the Act:
Class of Security: | Registered on: | |
Common Stock, $0.001 par value |
New York Stock Exchange | |
Common Stock Purchase Rights |
New York Stock Exchange |
The Registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and has been subject to such filing requirements for the past 90 days.
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K will be in the Registrants definitive proxy statement, which is incorporated by reference in Part III of this Form 10-K.
The Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
As of June 30, 2004, the number of shares of the Registrants common stock outstanding was approximately 100.2 million shares and the aggregate market value of the common stock outstanding held by non-affiliates based upon the closing price of these shares on the New York Stock Exchange was approximately $3.1 billion.
As of February 1, 2005, the number of shares of the Registrants common stock outstanding was approximately 99.0 million shares and the aggregate market value of the common stock outstanding held by non-affiliates based upon the closing price of these shares on the New York Stock Exchange was approximately $4.2 billion.
Documents incorporated by reference
Portions of the Registrants proxy statement for its 2005 annual meeting of stockholders are incorporated by reference in Part III of this Form 10-K.
PART I
Item 1. Business.
The Companys annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are made available free of charge through the Companys website, located at http://www.davita.com , as soon as reasonably practicable after the reports have been filed with the Securities and Exchange Commission, or SEC. The SEC also maintains a website at http://www.sec.gov where these reports and other information about the Company can be obtained.
Overview
DaVita Inc. is a leading provider of dialysis services in the United States for patients suffering from chronic kidney failure, also known as end stage renal disease, or ESRD. We currently operate or provide administrative services to approximately 660 outpatient dialysis centers located in 37 states and the District of Columbia, serving approximately 54,000 patients. We also provide acute inpatient dialysis services in approximately 370 hospitals. All other activities, which currently account for approximately 4% of our consolidated revenues, relate to our core business of providing renal care services.
Gambro Healthcare Acquisition. On December 6, 2004, we entered into an agreement to acquire Gambro Healthcare, Inc., or Gambro Healthcare, one of the largest dialysis service providers in the United States, for a purchase price of approximately $3.05 billion in cash. We currently plan to finance this transaction and refinance our existing credit facility through the issuance of notes and the entry into a new senior secured credit facility. In conjunction with the acquisition, we will enter into a 10 year product supply agreement with Gambro Renal Products Inc. to provide a significant majority of our dialysis equipment and supplies. We expect that the acquisition will increase our revenues by more than 80% based on 2004 levels. The timing of the completion of the acquisition transaction is dependent on the governments Hart-Scott-Rodino antitrust review process. On February 18, 2005, the Company received a request from the Federal Trade Commission, or FTC, for additional information in connection with the acquisition. This request extends the waiting period imposed by the Hart-Scott-Rodino Act until thirty days after the Company and Gambro Healthcare have substantially complied with the request, unless that period is voluntarily extended by the parties or is terminated sooner by the FTC. In connection with obtaining antitrust clearance, we may decide to, or the FTC or other regulatory agencies with jurisdiction may require us to, divest certain of our or Gambro Healthcares dialysis centers. The description of our business environment and risks that follow generally apply to Gambro Healthcare.
The dialysis industry
The loss of kidney function is normally not reversible. ESRD is the stage of advanced kidney impairment that requires routine dialysis treatments or a kidney transplant to sustain life. Dialysis is the removal of toxins, fluids and salt from the blood of ESRD patients by artificial means. Patients suffering from ESRD generally require dialysis at least three times per week for the rest of their lives.
Since 1972, the federal government has provided universal reimbursement for dialysis under the Medicare ESRD program regardless of age or financial circumstances. Under this system, Congress establishes Medicare reimbursement rates for dialysis treatments and related supplies, tests and medications. Approximately 70% of our patients are under the Medicare reimbursement programs. Medicare reimbursements account for approximately 50% of our total revenues.
ESRD patient base
There are more than 300,000 ESRD dialysis patients in the United States. The recent historical compound annual growth rate in the number of ESRD dialysis patients has been approximately 4% to 5%. The growth rate is attributable to the aging of the population, increased incidence rates for diseases that cause kidney failure such as diabetes and hypertension, lower mortality rates for dialysis patients, and growth rates of minority populations with higher than average incidence rates of ESRD.
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Treatment options for ESRD
Treatment options for ESRD are hemodialysis, peritoneal dialysis and kidney transplantation.
| Hemodialysis |
Hemodialysis, the most common form of ESRD treatment, is usually performed in outpatient facilities (centers). It may also be done while a patient is hospitalized, or at home. The hemodialysis machine uses an artificial kidney, called a dialyzer, to remove toxins, fluids and salt from the patients blood. The dialysis process occurs across a semi-permeable membrane that divides the dialyzer into two distinct chambers. While blood is circulated through one chamber, a pre-mixed fluid is circulated through the other chamber. The toxins, salt and excess fluids from the blood cross the membrane into the fluid, allowing cleansed blood to return into the patients body. Each hemodialysis treatment typically lasts approximately three and one-half hours. Hemodialysis is usually performed three times per week.
| Peritoneal dialysis |
A patient generally performs peritoneal dialysis at home. The most common methods of peritoneal dialysis are continuous ambulatory peritoneal dialysis, or CAPD, and continuous cycling peritoneal dialysis, or CCPD. All forms of peritoneal dialysis use the patients peritoneal, or abdominal, cavity to eliminate fluid and toxins. Because it does not involve going to a center three times a week for treatment, peritoneal dialysis is an alternative to hemodialysis for patients who desire more freedom in their lifestyle. However, peritoneal dialysis is not a suitable method of treatment for many patients, including patients who are unable to perform the necessary procedures and those at greater risk of peritoneal infection.
CAPD introduces dialysis solution into the patients peritoneal cavity through a surgically placed catheter. Toxins in the blood continuously cross the peritoneal membrane into the dialysis solution. After several hours, the patient drains the used dialysis solution and replaces it with fresh solution. This procedure is usually repeated four times per day.
CCPD is performed in a manner similar to CAPD, but uses a mechanical device to cycle dialysis solution through the patients peritoneal cavity while the patient is sleeping or at rest.
| Transplantation |
Although transplantation, when successful, is generally the most desirable form of therapeutic intervention, the shortage of suitable donors, side effects of immunosuppressive pharmaceuticals given to transplant recipients and dangers associated with transplant surgery for some patient populations limit the use of this treatment option.
Services we provide
In 2004, outpatient hemodialysis treatments, peritoneal dialysis treatments and hospital inpatient hemodialysis treatments accounted for approximately 88%, 8% and 4% of our total dialysis treatments, respectively.
Outpatient dialysis services
We currently operate or provide administrative services to approximately 660 outpatient dialysis centers that are designed specifically for outpatient hemodialysis. Throughout our network of outpatient dialysis centers, we also provide training, supplies and on-call support services to our peritoneal dialysis patients. With the introduction of smaller, easier to use and portable technologies, we expect home hemodialysis to become an attractive treatment option for some patients.
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As required by law, we contract with a nephrologist or a group of affiliated nephrologists to provide medical director services at each of our centers. In addition, other nephrologists may apply for practice privileges to treat their patients at our centers. Each center has an administrator, typically a registered nurse, who supervises the day-to-day operations of the center and its staff. The staff of each center typically consists of registered nurses, licensed practical or vocational nurses, patient care technicians, a social worker, a registered dietician, biomedical technician support, and other administrative and support personnel.
Many of our centers offer services for home dialysis patients, primarily CAPD and CCPD. Home dialysis services consist of providing equipment and supplies, training, patient monitoring and follow-up assistance to patients who prefer and are able to receive peritoneal dialysis treatments in their homes. Registered nurses train patients and their families or other caregivers to perform either peritoneal or hemodialysis at home. In 2004, peritoneal dialysis and home-based hemodialysis accounted for approximately 8% of our total dialysis treatments.
Hospital inpatient dialysis services
We provide inpatient dialysis services, excluding physician services, to patients in approximately 370 hospitals. We render these services for a per-treatment fee individually negotiated with each hospital. When a hospital requests our services, we typically administer the dialysis treatment at the patients bedside or in a dedicated treatment room in the hospital. Inpatient dialysis services are required for patients with acute kidney failure resulting from trauma, patients in the early stages of ESRD, and ESRD patients who require hospitalization for other reasons. In 2004, acute inpatient dialysis services accounted for approximately 4% of our total dialysis treatments.
Ancillary services
Ancillary services, which currently account for approximately 4% of our total revenues, consist of the following:
| ESRD laboratory services . We own a separately incorporated licensed clinical laboratory, located in Florida, specializing in ESRD patient testing. This specialized laboratory provides both routine laboratory tests covered by the Medicare composite reimbursement rate for dialysis and other physician-prescribed laboratory tests for ESRD patients. Our laboratory provides these tests primarily for our own ESRD patients throughout the United States. These tests are performed to monitor a patients ESRD condition, including the adequacy of dialysis, as well as other diseases a patient may have. Our laboratory utilizes a proprietary information system which provides information to our dialysis centers regarding critical outcome indicators. |
| Management fee income . We currently operate or provide administrative services to 34 dialysis centers which are wholly-owned or majority-owned by third parties. Management fees are established by contract and are typically based on a percentage of revenues generated by the centers. We also provide management and administrative services to 17 physician-owned vascular access clinics that provide surgical and interventional radiology services for dialysis patients. |
| Disease management services. We provide advanced care management services to employers, health plans and government agencies for employees/members diagnosed with chronic kidney disease, including renal failure. Through a combination of clinical coordination, medical claims analysis, and information technology, we endeavor to assist our customers and patients in obtaining superior renal health care and improved clinical outcomes, as well as helping to reduce overall medical costs. |
| ESRD clinical research programs. DaVita Clinical Research conducts research trials of new pharmaceuticals and medical devices with dialysis patients, and provides administrative support for research conducted by DaVita-affiliated nephrology practices. |
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Quality care
We believe our reputation for providing quality care is a key factor in attracting patients and physicians and in securing contracts with healthcare plans. We engage in organized and systematic efforts through our quality management programs to monitor and improve the quality of services we deliver. These efforts include the development and implementation of patient care policies and procedures, clinical education and training programs, education and mentoring related to our clinical guidelines and protocols, and audits of the quality of services rendered at each of our centers.
Our quality management programs are monitored by our field personnel under the direction of our Chief Medical Officer and Director of Quality Management. As of December 31, 2004, approximately 50 regional quality management coordinators implemented these programs in our centers. The corporate and regional teams work with each centers multi-disciplinary quality management team, including the medical director, to implement the programs.
We have a national physician council of twelve physicians to advise our senior management on all clinical issues impacting our operations across the country. In addition, we have an eight-physician laboratory advisory committee which acts as a medical advisory board for our clinical laboratory. Our Chief Medical Officer participates in the national physician council and laboratory advisory committee meetings.
Sources of revenueconcentrations and risks
Direct dialysis services, including the administration of pharmaceuticals during dialysis treatments, currently represent approximately 96% of our total revenues, with lab services, management fees, disease management services and research programs accounting for the balance. Approximately 60% of our total dialysis revenues are from government-based programs, principally Medicare and Medicaid, with the balance from more than 600 commercial payors, under more than 1500 commercial healthcare plans and approximately 300 managed-care contracts. Approximately 50% of our total dialysis revenues are associated with Medicare patients, which represent nearly 70% of our total patients. No single payor accounts for more than 5% of total dialysis revenues.
Medicare reimbursements
Under the Medicare ESRD program, reimbursement rates for dialysis are established by Congress. The Medicare composite rate set by the Centers for Medicare and Medicaid Services, or CMS, determines the Medicare reimbursement available for a designated group of dialysis services, including the dialysis treatment, supplies used for that treatment, specified laboratory tests and certain pharmaceuticals. The Medicare composite rate is subject to regional differences based upon several factors, including regional differences in wage levels. Other services and pharmaceuticals are eligible for separate reimbursement under Medicare and are not part of the composite rate, including erythropoietin, or EPO, vitamin D analogs, and iron supplements.
Medicare reimburses dialysis providers for the treatment of ESRD patients who are eligible for participation in the Medicare ESRD program. ESRD patients receiving dialysis become eligible for primary Medicare coverage at various times, depending on their age or disability status, as well as whether they are covered by an employer group health plan. Generally, for a patient not covered by an employer group health plan, Medicare becomes the primary payor either immediately or after a three-month waiting period. For a patient covered by an employer group health plan, Medicare generally becomes the primary payor after 33 months, or earlier if the patients employer group health plan coverage terminates. When Medicare becomes the primary payor, the payment rate we receive for that patient shifts from the employer group health plan rate to the Medicare reimbursement rate.
For each covered treatment, Medicare pays 80% of the amount set by the Medicare reimbursement system. The patient is responsible for the remaining 20%, and in most cases a secondary payor, such as Medicare
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supplemental insurance, a state Medicaid program or a commercial health plan, covers all or part of these balances. Some patients who do not qualify for Medicaid but otherwise cannot afford secondary insurance can apply for premium payment assistance from charitable organizations, normally through a program offered by the American Kidney Fund. We and other dialysis providers support the American Kidney Fund and similar programs through voluntary contributions. If a patient does not qualify for state Medicaid assistance based on financial need and does not purchase secondary insurance through a private insurer, we are generally unable to collect the 20% portion of the ESRD composite rate that Medicare does not pay.
The Medicare composite rates set by Congress for the dialysis treatment that were in effect for 2004 were between $121 and $144 per treatment, with an average rate of $131 per treatment. Historically, there have been very few changes to the Medicare composite rates. Since 1972, the rate has declined over 70% in terms of inflation adjusted dollars. The Medicare composite reimbursement rate was increased by $1.00 in 1991, by 1.2% in 2000, and by 2.4% in 2001. A 1.6% increase became effective on January 1, 2005, however other changes to the Medicare reimbursement rates, as discussed below, more than offset the effect of this increase.
Medicare reimburses for home dialysis services provided by dialysis centers that are designated as the supplier of home supplies and services, and provides all dialysis treatment-related services, including equipment and supplies. The center is reimbursed using a methodology based on the Medicare composite rate. The reimbursement rates for home dialysis are determined prospectively and are subject to adjustment by Congress. Most of our centers are approved to provide home dialysis services.
Effective January 1, 2005, under the Medicare Prescription Drug Improvement and Modernization Act of 2003, or MMA, reimbursement rates for the primary separately billable pharmaceuticals provided to ESRD patients in dialysis centers will be at average acquisition payment amounts, or AAP. While these reimbursement rates will result in lower reimbursements to ESRD providers for pharmaceuticals, the MMA also provided for an offsetting adjustment to the composite rate. This adjustment to the composite rate, however, was inadequate to offset the effect of the lower reimbursement rates for pharmaceuticals, resulting in a net reduction of the combined average level of Medicare reimbursements for our Company. The net reduction more than offset the previously established 1.6% increase in the Medicare composite rate that also became effective January 1, 2005. In addition, CMS plans to implement a case-mix adjustment payment methodology on April 1, 2005, which is designed to pay differential composite service rates based on a variety of patient characteristics. If CMS does not appropriately implement the case-mix requirements of MMA, it could adversely affect Medicare reimbursement. CMS will reset the reimbursement methodology and thus rates for pharmaceuticals in 2006 and the corresponding adjustment to the composite rate. The methodology to be used in adjusting the reimbursement rates in 2006 will be determined by CMS in mid-2005.
In the fall of 2003, CMS announced two new ESRD disease management demonstration projects. The goal of the demonstration projects is to use evidence-based best practices and experienced care managers to oversee ESRD patient care. The program includes two different risk and payment options, full capitation and a fee-for-service outpatient bundled payment. Both options include incentive payments for quality. Our proposal to participate in the full capitation demonstration has been accepted by CMS. At this time we are preparing to participate in two markets and have entered into partnership arrangements with two managed care organizations to assist us with administrative functions. We anticipate that in the early years of this demonstration project we will not be adequately reimbursed to cover our investment for the enrolled Medicare beneficiaries.
MMA requires CMS to establish a new demonstration project for ESRD. The purpose of this new three year demonstration study, to be conducted beginning January 1, 2006, is again to determine the feasibility of an expanded payment outpatient bundle. We expect that CMS will announce further details of the demonstration study by mid-2005. At this time we have not determined if we will participate in this demonstration study.
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Medicaid reimbursements
Medicaid programs are state-administered programs partially funded by the federal government. These programs are intended to provide health coverage for patients whose income and assets fall below state-defined levels and who are otherwise uninsured. In some states, these programs also serve as supplemental insurance programs for the Medicare co-insurance portion of the ESRD composite rate and provide reimbursement for additional services, including some oral medications, that are not covered by Medicare. State regulations generally follow Medicare schedules with respect to reimbursement levels and coverages. Some states, however, require beneficiaries to pay a monthly share of the cost based upon levels of income or assets. We are an authorized Medicaid provider in the states in which we conduct our business.
Commercial (nongovernment) payors
Before Medicare becomes the primary payor, a patients employer group health plan or private insurance plan, if any, is responsible for payment. Commercial reimbursement rates vary significantly, and can be at negotiated rates for contracted payors or based on the patients insurance plans formal or informal coverage terms related to our usual and customary fee schedule. The patient is responsible for any deductibles and co-payments under the terms of his or her employer group health plan or other insurance. The rates paid by nongovernment payors are typically significantly higher than Medicare reimbursement rates, and on average are more than double the Medicare rates. Also, traditional indemnity plans and preferred provider organization, or PPO, plans typically pay at higher rates than health maintenance organization, or HMO, plans. After Medicare becomes the primary payor, the original nongovernment payor, if any, becomes the secondary payor responsible for the 20% of the Medicare reimbursement rates that Medicare does not pay. Secondary payors are not required to reimburse us for the difference between the rates they previously paid and Medicare rates.
Reimbursement for EPO and other pharmaceuticals
Approximately 40% of our total dialysis revenue is associated with the administration of physician-prescribed pharmaceuticals that improve clinical outcomes when included with the dialysis treatment. These pharmaceuticals include EPO, Vitamin D analogs and iron supplements.
EPO is a genetically engineered form of a naturally occurring protein that stimulates the production of red blood cells. EPO is used in connection with all forms of dialysis to treat anemia, a medical complication most ESRD patients experience. The administration of EPO, which is separately billable under the Medicare reimbursement program, accounts for approximately one-fourth of our dialysis revenues. Changes in the levels of physician-prescribed EPO, and government reimbursement policies related to EPO, significantly influence our revenues and operating earnings.
Furthermore, EPO is produced by a single manufacturer, Amgen, and any interruption of supply or product cost increases could adversely affect our operations. Amgen has also developed a new product, darbepoetin alfa, also known as Aranesp ® , that could potentially replace EPO or reduce its use with dialysis patients. The FDA has approved this new product for use with dialysis patients. We cannot predict when, or whether, Amgen will seek to market this product for the dialysis market, how Medicare or other payors will reimburse dialysis providers for its use, whether physicians will prescribe it instead of EPO or how it will impact our revenues and earnings.
Physician relationships
An ESRD patient generally seeks treatment at a dialysis center near his or her home and at which his or her treating nephrologist has practice privileges. Our relationships with local nephrologists and our ability to meet their needs and the needs of their patients are key factors in the success of a dialysis center. Over 2,000 nephrologists currently refer patients to our centers. As is typical in the dialysis industry, one or a few physicians, including the centers medical director, usually account for all or a significant portion of a dialysis centers patient referral base. Our medical directors provide a substantial portion of our patient referrals.
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Participation in the Medicare ESRD program requires that treatment at a dialysis center be under the general supervision of a director who is a physician. We have engaged physicians or groups of physicians to serve as medical directors for each of our centers. At some centers, we also separately contract with one or more physicians to serve as assistant or associate medical directors or to direct specific programs, such as home dialysis training programs. We have contracts with approximately 420 individual physicians and physician groups to provide medical director services.
Medical directors enter into written contracts that specify their duties and fix their compensation generally for periods of five to ten years. The compensation of our medical directors is the result of arms length negotiations and generally depends upon an analysis of various factors such as the physicians duties and responsibilities and the physicians professional qualifications and experience, among others.
Our medical director agreements generally include covenants not to compete. Also, when we acquire a center from one or more physicians, or where one or more physicians own interests in centers as co-owners with us, these physicians have agreed to refrain from owning interests in competing centers within a defined geographic area for various time periods. These agreements not to compete restrict the physicians from owning or providing medical director services to other dialysis centers, but do not prohibit the physicians from referring patients to any dialysis center, including competing centers. Many of these agreements not to compete expire at the same time as the corresponding medical director agreements, although some continue for a period of time beyond expiration. We have from time to time experienced competition from a new dialysis center established by a former medical director following the termination of his or her relationship with us.
Government regulation
Our dialysis operations are subject to extensive federal, state and local governmental regulations. These regulations require us to meet various standards relating to, among other things, government reimbursement programs, dialysis facilities and equipment, management of centers, personnel qualifications, maintenance of proper records, quality assurance programs and patient care.
All of our dialysis centers are certified by CMS, as is required for the receipt of Medicare reimbursement. In some states our dialysis centers also are required to secure additional state licenses. Governmental authorities, primarily state departments of health, periodically survey our centers to determine if we satisfy applicable federal and state standards and requirements, including the conditions of participation in the Medicare ESRD program.
Our business could be adversely impacted by:
| Loss or suspension of federal certifications; |
| Loss or suspension of authorization to participate in the Medicare or Medicaid programs; |
| Loss or suspension of licenses under the laws of any state or governmental authority from which we generate substantial revenues; |
| Refunds of reimbursement received because of any failures to meet applicable reimbursement requirements; |
| Exclusion from government healthcare programs; |
| Significant reductions or lack of inflation adjusted increases in reimbursement or reduction of coverage for dialysis and ancillary services; |
| Fines and penalties for noncompliance; |
| Loss of referrals from medical directors; or |
| Refund of payments received from government payors and government health care program beneficiaries. |
To date, we have not had significant unanticipated difficulty in maintaining our licenses or our Medicare and Medicaid authorizations. However, we expect that our industry will continue to be subject to significant government regulation and scrutiny, the scope and application of which are difficult to predict. This regulation and scrutiny could adversely impact us in a material way.
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CMS continues to study the regulations applicable to Medicare licensure and authorization. On February 4, 2005, CMS published a proposed rule that would revise the conditions of coverage for ESRD Facilities. The revised requirements would, among other things, establish performance expectations for facilities, eliminate many procedural requirements from the current conditions of coverage, and promote continuous quality improvement. The proposed regulations are still subject to revision based on public comments in the rulemaking process and would not become effective until issued as final regulation. It is not possible to predict any changes that might be made in a final rule or when a final rule might be published.
Fraud and abuse under federal law
The anti-kickback statute contained in the Social Security Act imposes criminal and civil sanctions on persons who receive or make payments in return for:
| The referral of a Medicare or Medicaid patient for treatment; |
| The ordering or purchasing of items or services that are paid for in whole or in part by Medicare, Medicaid or similar federal and state programs; or |
| Arranging for or recommending the ordering or purchasing of such items. |
Federal criminal penalties for the violation of these laws include imprisonment, fines and exclusion of the provider from future participation in the Medicare and Medicaid programs. Civil penalties for violation of these laws include up to $50,000 in monetary penalties per violation, repayments of up to three times the total payments between the parties and suspension from future participation in Medicare and Medicaid. Some state anti-kickback statutes also include criminal penalties. The federal statute expressly prohibits traditionally criminal transactions, such as kickbacks, rebates or bribes for patient referrals. Court decisions have also held that, the statute is violated whenever one of the purposes of remuneration is to induce referrals.
The Department of Health and Human Services regulations create exceptions or safe harbors for some business transactions and arrangements. Transactions and arrangements structured within these safe harbors do not violate the anti-kickback statute. A business transaction or arrangement must satisfy each and every element of a safe harbor to be protected by that safe harbor. Transactions and arrangements that do not satisfy all elements of a relevant safe harbor are not necessarily inappropriate, but may be subjected to greater scrutiny by enforcement agencies.
Some medical directors and other referring physicians own our common stock, which they either purchased in the open market or received from us as consideration in an acquisition of dialysis centers from them. We believe that these interests materially satisfy the requirements for the safe harbor for investments in large publicly traded companies.
Our medical directors refer patients to our centers and these arrangements must be in compliance with the federal anti-kickback statute. Among the available safe harbors is one for personal services. However, most of our agreements with our medical directors do not satisfy all seven of the requirements of the personal services safe harbor. We believe that, because of the nature of our medical directors duties, it is impossible to satisfy the anti-kickback safe-harbor requirement that if the services provided under the agreement are on a part-time basis, as they are with our medical directors, the agreement must specify the schedule of intervals of service, their precise length and the exact charge for such intervals. Accordingly, while we believe that our agreements with our medical directors satisfy most of the elements of this safe harbor, our arrangements do not qualify for safe harbor protection. We believe our agreements do not violate the federal anti-kickback statute. We also note that there is little guidance available as to what constitutes fair market value for medical director services. Although the final Phase II, Stark II regulations (described below) created a so-called safe harbor method of establishing the fair market value of physician compensation, this methodology, which is not required by the rule, is very restrictive, and has been challenged in court. Regardless of the outcome of the challenge, we do not believe that this method produces a reasonable estimate of the fair market value of dialysis facility medical director services.
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CMS recognizes that compensation exceeding amounts determined by the safe harbor method do not necessarily exceed fair market value, but that such compensation is not assured of a favorable finding upon review. None of our medical director agreements establishes compensation using the newly established safe harbor method; rather compensation under our medical director agreements is the result of individual negotiation and the Company believes exceeds amounts determined in that manner. While we believe that compensation under our medical director agreements is the result of arms length negotiations and results in fair market value payments of medical director services, an enforcement agency could potentially challenge the level of compensation that we pay our medical directors. Accordingly, we could in the future be required to change our practices, face criminal or civil penalties, pay substantial fines, return certain reimbursements received from governmental payors and beneficiaries or otherwise experience a material adverse effect as a result of a challenge to these arrangements. One of the areas that the inquiry by the United States Attorneys Office for the Eastern District of Pennsylvania described below covers is our financial relationships with physicians. Although we believe that the terms and conditions of our medical director agreements are consistent with healthcare regulatory requirements, healthcare enforcement authorities could take a contrary view.
At 84 of our dialysis centers, physicians who refer patients to the centers hold interests in partnerships or limited liability companies owning the centers, and these ownership arrangements must be in compliance with the anti-kickback statute. Although there is a safe harbor for investment interests in small entities, none of our joint ventures satisfies all of the requirements for protection by this safe harbor. We note that physician joint ventures are not prohibited but instead require a case by case evaluation under the anti-kickback statute. We have structured our joint ventures to satisfy as many safe harbor requirements as possible and we believe that these investments are offered on a fair market value basis and provide returns to the physician investors only in proportion to their actual investment in the venture. Notwithstanding these efforts, since the arrangements do not qualify for safe harbor protection, these arrangements could be challenged and if found to violate the statute would have a material adverse impact on our earnings as well as subject us to possible criminal or civil penalties.
We lease approximately 93 of our centers from entities in which physicians hold ownership interests and we sublease space to referring physicians at approximately 87 of our dialysis centers. These arrangements must be in compliance with the anti-kickback statute. We believe that we are in compliance with the safe harbor for space rentals in all material respects.
Because we are purchasing and selling items and services in the operation of our centers that may be paid for, in whole or in part, by Medicare or a state healthcare program and because we acquire certain items and services at a discount, we must ensure compliance with the federal anti-kickback statute. Subject to certain requirements and limitations, discounts representing reductions in the amounts the Company is charged for items or services based on arms-length transactions can qualify for safe harbor protection if the Company fully and accurately reports the discounts in the applicable Medicare cost reports. While some of the safe harbor criteria are subject to interpretation, we believe that our vendor contracts with discount provisions materially satisfy the requirements for safe harbor protection and do not violate the anti-kickback statute. If the government challenged our discount arrangements, we could face criminal, civil and administrative sanctions.
Fraud and abuse under state law
Several states, including California, Florida, Georgia, Kansas, Louisiana, Maryland, New York, Utah and Virginia, in which we operate dialysis centers that are jointly owned with referring physicians, have statutes prohibiting physicians from holding financial interests in various types of medical facilities to which they refer patients. Some of these statutes could be interpreted as prohibiting physicians who hold shares of our publicly traded stock from referring patients to our dialysis centers if the centers use our laboratory subsidiary to perform laboratory services for these patients. Some states also have laws similar to the federal anti-kickback statute that may affect our ability to receive referrals from physicians with whom we have financial relationships, such as our medical directors. Some of these statutes include exemptions applicable to our medical directors and other physician relationships or for financial interests limited to shares of publicly traded stock. Some, however, include no explicit exemption for medical director services or other services for which we contract with and
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compensate referring physicians or for joint ownership interests of the type held by some of our referring physicians or for financial interests limited to shares of publicly traded stock. If these statutes are interpreted to apply to referring physicians with whom we contract for medical director and similar services or to referring physicians with whom we hold joint ownership interests or to physicians who hold interests in the Company limited solely to publicly traded stock, we may be required to terminate or restructure some or all of our relationships with or refuse referrals from these referring physicians and could be subject to financial penalties, or could negatively affect the decision of the referring physicians to refer patients to our centers.
Stark II
Another federal law (known as the Stark Law) prohibits a physician who has a financial relationship, or who has an immediate family member who has a financial relationship, with entities (including hospitals) providing designated health services, from referring federal healthcare program patients to such entities for the furnishing of such services, with limited exceptions. Stark Law designated health services include equipment and supplies, home health services, outpatient prescription drugs, inpatient and outpatient hospital services and clinical laboratory services. The Stark Law also prohibits the entity receiving the referral from filing a claim or billing for the services arising out of the prohibited referral. The prohibition applies regardless of the reasons for the financial relationship and the referral; that is, unlike the federal Anti-Kickback Law, no finding of intent to violate the law is required. Sanctions for violation of the Stark Law include denial of payment for the services provided in violation of the prohibition, refunds of amounts collected in violation, a civil penalty of up to $15,000 for each service arising out of the prohibited referral, exclusion from the federal healthcare programs, and a civil penalty of up to $100,000 against parties that enter into a scheme to circumvent the Stark Laws prohibition. Knowing and willful violations of the Stark Law may also serve as the basis for liability under the False Claims Act. The types of financial arrangements between a physician and an entity that trigger the self-referral prohibitions of the Stark Law are broad and include ownership and investment interests and compensation arrangements.
Final regulations implementing the portions of the Stark Law applicable to clinical laboratory services (Stark I) were issued in August 1995. On January 4, 2001, CMS issued Phase I final regulations implementing the Stark Laws application to all designated health services (sometimes referred to as Stark II or the Stark II Regulations). The rules delineated in Phase I of such Regulations were effective on January 4, 2002. The Stark II Regulations include additional guidance regarding CMSs interpretation of the Stark Law. Phase II of the final Stark II Regulations was issued on March 26, 2004 and became effective on July 26, 2004. CMS anticipates issuing a Phase III of the Stark II regulations at a future date.
A financial relationship with an entity under Stark II is defined as an ownership or investment interest in, or a compensation arrangement with, the entity. We have entered into several types of financial relationships with referring physicians. We believe that the compensation arrangements under our medical director agreements materially satisfy the personal services compensation arrangement exception to the Stark II prohibition. Some of our dialysis centers are leased from entities in which referring physicians hold interests and we sublease space to referring physicians at some of our dialysis centers. Payments made by a lessor to a lessee for the use of premises are also excepted from Stark II prohibitions if specific requirements are met. We believe that our leases and subleases with referring physicians materially satisfy this exception to the Stark II prohibitions.
Some medical directors and other referring physicians own our common stock, which they either purchased in the open market or received from us as consideration in an acquisition of dialysis centers from them. There is a Stark II exception for investments in large publicly traded companies, which we believe protects these investment interests.
While nearly all of our stock option arrangements with referring physicians were terminated in 2000, a few medical directors still own options to acquire our common stock because we did not have the contractual right to terminate their options. Under the Stark II regulations, these stock options constitute financial relationships that
11
must meet an applicable exception if the physician makes referrals to DaVita for designated health services. It is possible that CMS could view these interests as prohibited arrangements that must be restructured or for which we could be subject to other significant penalties or prohibit us from accepting referrals from those medical directors.
Some of our medical directors also own equity interests in entities that operate our dialysis centers. The Stark II exception applicable to physician ownership interests in entities to which they make referrals does not encompass the kinds of ownership arrangements that referring physicians hold in several of our subsidiaries that operate dialysis centers. Accordingly, it is possible that CMS could require us to restructure some of these arrangements or could seek to impose substantial fines or additional penalties on us, prohibit us from accepting referrals from those physician owners and/or force us to return certain amounts paid by CMS and program beneficiaries. We believe that the language and legislative history of Stark II and the Stark II regulations indicate that Congress did not intend to include dialysis services and the services and items provided incident to dialysis services as a part of designated health services. The final Stark II regulations exempt from the referral prohibition referrals for clinical laboratory services that are included in the ESRD composite rate. The final Stark II regulations exempt for EPO and certain other dialysis-related outpatient prescription drugs furnished in (or by, in the case of EPO) an ESRD facility. The Final Phase II regulations also confirmed that since home dialysis supplies are not covered as DME, they are not considered designated health services. Accordingly, referrals for composite rate laboratory tests and these dialysis related medications and home dialysis supplies do not violate the Stark II prohibition.
While the Stark II designated health services include inpatient and outpatient hospital services, our arrangements with hospitals for the provision of dialysis services to hospital inpatients and outpatients do not involve prohibited referrals to DaVita and do not create material indirect financial relationships between the hospitals and the physicians providing services for DaVita. This is because under the final Stark II regulations in situations involving such services furnished under arrangements it is the hospital, rather than DaVita, that is considered to be receiving referrals for, furnishing and billing for the designated health services.
Because the Stark II regulations do not expressly address all of our operations, it is possible that CMS could interpret Stark II to apply to parts of our operations. Consequently, it is possible that CMS could determine that Stark II requires us to restructure existing compensation agreements with our medical directors and to repurchase or to request the sale of ownership interests in subsidiaries and partnerships held by referring physicians or, alternatively, to refuse to accept referrals for designated health services from these physicians. We would be materially impacted if CMS interprets Stark II to apply to aspects of our operations and we could not achieve compliance with Stark II. This could subject us to monetary penalties for non-compliance or the cost of achieving that compliance was substantial.
The False Claims Act
The federal False Claims Act, or FCA, is a means of policing false bills or false requests for payment in the healthcare delivery system. In part, the FCA imposes a civil penalty on any person who:
| Knowingly presents, or causes to be presented, to the federal government a false or fraudulent claim for payment or approval; |
| Knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the federal government; |
| Conspires to defraud the federal government by getting a false or fraudulent claim allowed or paid; or |
| Knowingly makes, uses or causes to be made or used, a false record or statement to conceal, avoid or decrease an obligation to pay or transmit, money or property to the federal government. |
The penalties for a violation of the FCA range from $5,500 to $11,000 for each false claim plus three times the amount of damages caused by each such claim. The federal government has used the FCA to prosecute a wide variety of issues such as Medicare fraud, including coding errors, billing for services not rendered, the
12
submission of false cost reports, billing services at a higher reimbursement rate than appropriate, billing under a comprehensive code as well as under one or more component codes included in the comprehensive code and billing for care that is not medically necessary. Although subject to some dispute, at least two federal district courts have also determined that an alleged violation of the federal anti-kickback statute or Stark I and Stark II are sufficient to state a claim for relief under the FCA. In addition to the civil provisions of the FCA, the federal government can use several criminal statutes to prosecute persons who submit false or fraudulent claims for payment to the federal government.
The Health Insurance Portability and Accountability Act of 1996
The Health Insurance Portability and Accountability Act of 1996, or HIPAA, among other things, allows individuals who lose or change jobs to transfer their insurance, limits exclusions for preexisting conditions and establishes a pilot program for medical savings accounts. In addition, HIPAA also expanded federal attempts to combat healthcare fraud and abuse by making amendments to the Social Security Act and the federal criminal code. Among other things, HIPAA created a new Health Care Fraud Abuse Control Account, under which advisory opinions are issued by the Office of Inspector General, or OIG, regarding the application of the anti-kickback statute; criminal penalties for Medicare and Medicaid fraud were extended to other federal healthcare programs; the exclusion authority of the OIG was expanded; Medicare and Medicaid civil monetary penalty provisions were extended to other federal healthcare programs; the amounts of civil monetary penalties were increased, and a criminal healthcare fraud statute was established.
HIPAA also includes provisions relating to the privacy of medical information. The Department of Health and Human Services, or HHS, published HIPAA privacy regulations in December 2000 and modified these regulations in August 2002. Implementation of these provisions has required us to develop extensive policies and procedures, and to implement administrative safeguards with respect to private health information in our possession. Compliance with the privacy regulations was required beginning April 2003. HIPAA also includes provisions relating to standards for electronic transactions and electronic signatures. Under HIPAA, compliance with the standards for electronic transactions was required beginning October 2003. We believe we are in substantial compliance with these new requirements.
Other regulations
Our operations are subject to various state hazardous waste and non-hazardous medical waste disposal laws. These laws do not classify as hazardous most of the waste produced from dialysis services. Occupational Safety and Health Administration regulations require employers to provide workers who are occupationally subject to blood or other potentially infectious materials with prescribed protections. These regulatory requirements apply to all healthcare facilities, including dialysis centers, and require employers to make a determination as to which employees may be exposed to blood or other potentially infectious materials and to have in effect a written exposure control plan. In addition, employers are required to provide or employ hepatitis B vaccinations, personal protective equipment and other safety devices, infection control training, post-exposure evaluation and follow-up, waste disposal techniques and procedures, and work practice controls. Employers are also required to comply with various record-keeping requirements. We believe that we are in material compliance with these laws and regulations.
A New York statute prohibits publicly-held companies from owning the health facility license required to operate a dialysis center in New York. Although we own substantially all of the assets, including the fixed assets, of our New York dialysis centers, the licenses are held by privately-owned companies with which we have agreements to provide a broad range of administrative services, including billing and collecting. The New York State Department of Health has approved these types of arrangements; however, we cannot guarantee that they will not be challenged as prohibited under the relevant statute. We have a similar management relationship with physician practices in several states which prohibit the corporate practice of medicine, and with a privately- owned company in New Jersey for several New Jersey dialysis centers. We have had difficulty securing licenses
13
for new centers in New Jersey in our own name because the New Jersey Department of Aging and Senior Services refuses to grant new licenses to companies that have more than a small number of outstanding survey issues throughout all of their centers in the entire United States, regardless of the respective size of the companies operations.
A few states have certificate of need programs regulating the establishment or expansion of healthcare facilities, including dialysis centers. We believe that we are in material compliance with all applicable state certificate of need laws.
Although we have implemented an aggressive corporate compliance program, as discussed below, and believe we are in material compliance with current applicable laws and regulations, our industry will continue to be subject to substantial regulation, the scope and effect of which are difficult to predict. Our activities could be reviewed or challenged by regulatory authorities at any time in the future.
United States Attorney inquiries
On October 25, 2004, we received a subpoena from the United States Attorneys Office, or U.S. Attorneys Office, for the Eastern District of New York in Brooklyn. The subpoena covers the period from 1996 to present and requires the production of a wide range of documents relating to our operations, including our laboratory services. The subpoena also includes specific requests for documents relating to testing for parathyroid hormone levels, or PTH, and to products relating to vitamin D therapies. We believe that the subpoena has been issued in connection with a joint civil and criminal investigation. Other participants in the dialysis industry received a similar subpoena, including Fresenius Medical Care, Renal Care Group and Gambro Healthcare. To our knowledge, no proceedings have been initiated against us at this time. Compliance with the subpoena will require management attention and legal expense. We cannot predict whether legal proceedings will be initiated against us relating to this investigation or, if proceedings are initiated, the outcome of any such proceedings. In addition, criminal proceedings may be initiated against us in connection with this inquiry. If a court determines that there has been wrongdoing, the penalties under applicable statutes could be substantial.
In February 2001, the Civil Division of the U.S. Attorneys Office for the Eastern District of Pennsylvania in Philadelphia contacted us and requested our cooperation in a review of some historical practices, including billing and other operating procedures and financial relationships with physicians. We cooperated in this review and provided the requested records to the U.S. Attorneys Office. In May 2002, we received a subpoena from the U.S. Attorneys Office and the Philadelphia Office of the OIG. The subpoena requires an update to the information we provided in our response to the February 2001 request, and also seeks a wide range of documents relating to pharmaceutical and other ancillary services provided to patients, including laboratory and other diagnostic testing services, as well as documents relating to our financial relationships with physicians and pharmaceutical companies. The subpoena covers the period from May 1996 to May 2002. We have provided the documents requested and continue to cooperate with the United States Attorneys Office and the OIG in its investigation. If this review proceeds, the government could expand its areas of inquiry. If a court determines that there has been wrongdoing, the penalties under applicable statutes could be substantial.
At this time, we are unable to determine:
| When these matters will be resolved; |
| What position the U.S. Attorneys Offices in Brooklyn and in Philadelphia will take regarding any of our practices and any potential liability on our part; |
| Whether any additional areas of inquiry will be opened; and |
| Any outcome of this inquiry, financial or otherwise. |
An adverse determination from either one of these inquiries or from additional inquiries could have a material adverse impact on our business, results of operation and financial condition. As described above under the subheading Government regulation, the penalties under the federal anti-kickback law, Stark laws and False Claims Act and other federal and state statutes can be substantial.
14
Corporate compliance program
We have implemented a company-wide corporate compliance program as part of our commitment to comply fully with all applicable laws and regulations and to maintain the high standards of conduct we expect from all of our teammates. We continuously review this program and enhance it as necessary. The primary purposes of the program include:
| Increasing through training and education, the awareness of our teammates and affiliated professionals of the necessity of complying with all applicable laws and regulations in an increasingly complicated regulatory environment; |
| Auditing our dialysis centers, laboratories and billing offices on a regular basis to identify any potential instances of noncompliance in a timely manner; and |
| Ensuring that we take steps to resolve instances of noncompliance or to address areas of potential noncompliance as promptly as we become aware of them. |
We have a code of conduct that each of our teammates and affiliated professionals must follow and we have a confidential toll-free hotline (888-272-7272) for teammates to report potential instances of noncompliance. Our Chief Compliance Officer administers the compliance program. The Chief Compliance Officer reports directly to our Chief Executive Officer and to the Compliance Committee of our board of directors.
Insurance
We carry insurance for property and general liability, professional liability, directors and officers liability, workers compensation, and other coverage in amounts and on terms deemed adequate by management based on our claims experience and expectations for future claims. Future claims could, however, exceed our applicable insurance coverage. Physicians practicing at our dialysis centers are required to maintain their own malpractice insurance and our medical directors maintain coverage for their individual private medical practices. Our liability policies also cover our medical directors for the performance of their duties as medical directors.
Capacity and location of our centers
We are able to increase our capacity by extending hours at our existing centers, expanding our existing centers, developing new centers, and through acquisitions. The development of a typical outpatient center by our Company generally requires approximately $1.5 million for leasehold improvements, equipment and first-year working capital. Based on our experience, a new center typically opens nine to thirteen months after the property lease is signed, normally achieves operating profitability by the ninth to eighteenth month of operation and normally reaches maturity within three to five years. Acquiring an existing center requires a substantially greater initial investment, but profitability and cash flow are initially more predictable. To a limited extent, we enter into agreements to provide administrative services to third-party-owned centers in return for management fees, typically based on a percentage of revenues.
The table below shows the growth of our Company by number of dialysis centers.
2004
|
2003
|
2002
|
2001
|
2000(1)
|
|||||||||||
Number of centers at beginning of year |
566 | 515 | 495 | 490 | 572 | ||||||||||
Acquired centers |
51 | 27 | 11 | 21 | 10 | ||||||||||
Developed centers |
44 | 30 | 19 | 7 | 11 | ||||||||||
Net change in third-party centers with services agreements |
5 | (1 | ) | (2 | ) | (16 | ) | (1 | ) | ||||||
Divestitures, closures and terminations |
(8 | ) | (5 | ) | (8 | ) | (7 | ) | (102 | ) | |||||
|
|
|
|
|
|
|
|
|
|
||||||
Number of centers at end of year |
658 | 566 | 515 | 495 | 490 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(1) | We sold substantially all of our operations outside the continental United States in 2000. |
15
As of December 31, 2004, we operated or provided administrative services to 658 outpatient dialysis centers, of which 624 are consolidated in our financial statements. Of the remaining 34 centers, we own minority interests in nine centers, which are accounted for as equity investments, and provide administrative services to 25 centers in which we have no ownership interest. The locations of the 624 centers included in our consolidated financial statements at December 31, 2004 were as follows;
State |
Centers
|
State |
Centers
|
State |
Centers
|
|||||
California |
95 |
Illinois |
19 |
Ohio |
5 | |||||
Texas |
54 |
Louisiana |
16 |
District of Columbia |
4 | |||||
Florida |
46 |
Indiana |
12 |
South Carolina |
3 | |||||
Georgia |
36 |
Washington |
11 |
South Dakota |
3 | |||||
North Carolina |
36 |
Kansas |
10 |
Connecticut |
2 | |||||
Michigan |
30 |
Arizona |
9 |
Delaware |
2 | |||||
Minnesota |
28 |
Iowa |
8 |
New Mexico |
2 | |||||
Virginia |
26 |
Kentucky |
8 |
Oregon |
2 | |||||
New York |
25 |
Missouri |
8 |
Utah |
2 | |||||
Pennsylvania |
24 |
Nebraska |
8 |
Massachusetts |
1 | |||||
Maryland |
23 |
New Jersey |
8 |
West Virginia |
1 | |||||
Colorado |
22 |
Nevada |
7 |
Wisconsin |
1 | |||||
Oklahoma |
22 |
Alabama |
5 |
Competition
The dialysis industry is highly competitive, particularly in terms of acquiring existing dialysis centers. Competition for qualified physicians to act as medical directors and for inpatient dialysis services agreements with hospitals is intense. We have also experienced competition from former medical directors or referring physicians who have opened their own dialysis centers. In addition, we experience competitive pressures in connection with negotiating contracts with commercial healthcare payors.
The four largest dialysis companies, Fresenius Medical Care, Renal Care Group, Gambro Healthcare and us, account for approximately 65% of outpatient dialysis treatments provided in the United States. Approximately half of the centers not owned by one of these four large companies are owned or controlled by hospitals or non-profit organizations. Hospital-based and non-profit dialysis units typically are more difficult to acquire than physician-owned centers. Because of the ease of entry into the dialysis business and the ability of physicians to be medical directors for their own center or centers, competition for growth in existing and expanding markets is not limited to the large competitors with substantial financial resources.
Our largest competitor, Fresenius also manufactures a full line of dialysis supplies and equipment in addition to owning and operating dialysis centers. This may give them cost advantages over us because of their ability to manufacture their own products. Fresenius has been our largest supplier of dialysis products. However, in connection with our agreement to acquire Gambro Healthcare, we will enter into a supply agreement that obligates us to purchase a significant majority of our hemodialysis product supply and equipment requirements from Gambro Renal Products at fixed prices for ten years, subject to certain terms and conditions. Our purchases of products in the categories generally offered by Fresenius and Gambro Renal Products represent approximately 8% of our total operating costs.
A portion of our business also consists of monitoring and providing supplies for ESRD treatments in patients homes. Other companies provide similar services. Aksys, NxStage, Renal Solutions and Fresenius have developed hemodialysis systems designed to enable patients to perform hemodialysis on a daily basis in their homes. To date there has not been significant adoption of these home dialysis systems by our patients or physicians. We are unable to determine how these systems will affect our business over the longer term.
16
Teammates
As of December 31, 2004, we had approximately 15,300 teammates:
Licensed professional staff (nurses, dieticians and social workers) |
5,900 | |
Other patient care and center support staff and laboratory personnel |
7,500 | |
Corporate, billing and regional administrative staff |
1,900 |
Our dialysis business requires nurses with specialized training for patients with complex care needs. Recruitment and retention of nurses are continuing concerns for health care providers generally because of the disparity between the supply and demand for nurses, which has led to a nursing shortage. We have an active program of investing in our professional healthcare teammates to help ensure we meet our recruitment and retention targets, including expanded training opportunities, tuition reimbursements, and other
Item 2. Properties.
We own the land and building for only two of our dialysis centers. Our remaining dialysis centers are located on premises that we lease. Our leases generally cover periods from five to ten years and typically contain renewal options of five to ten years at the fair rental value at the time of renewal or at rates subject to periodic consumer price index increases. Our outpatient dialysis centers range in size from 500 to 30,000 square feet, with an average size of approximately 6,500 square feet.
We maintain our corporate headquarters in approximately 50,000 square feet of office space in El Segundo, California, which we currently lease for a term expiring in 2013. Our business office in Tacoma, Washington is in a 107,000-square foot facility leased for a term expiring in 2009. We maintain a 57,000-square foot facility in Berwyn, Pennsylvania, which we currently lease for a term expiring in 2012, principally for additional billing and collections staff. We also maintain administrative offices in a 8,000-square foot facility in Exton, Pennsylvania leased for a term expiring in 2008, and in a 12,500 square foot facility in Vernon Hills, Illinois leased for a term expiring in 2011. Our Florida-based laboratory is located in a 40,000-square foot facility owned by us, with a long-term ground lease, and we lease 15,000 square feet of additional space for our laboratory administrative staff for a term expiring in 2007. We have 30,000 square feet of office space in Torrance, California, formerly used as our corporate headquarters, under lease until 2008. Currently, 17,000 square feet of this office space is subleased and the remaining portion of this space remains currently unused.
Some of our dialysis centers are operating at or near capacity. However, we believe that we have adequate capacity within most of our existing dialysis centers to accommodate additional patient volume through increased hours and/or days of operation, or, if additional space is available within an existing facility, by adding dialysis stations. We can usually relocate existing centers to larger facilities or open new centers if existing centers reach capacity. With respect to relocating centers or building new centers, we believe that we can generally lease space at economically reasonable rates in the area planned for each of these centers. Expansion of existing centers or relocation of our dialysis centers is subject to review for compliance with conditions relating to participation in the Medicare ESRD program. In states that require a certificate of need or center license, additional approvals would generally be necessary for
Item 3. Legal Proceedings.
See the heading United States Attorney inquiries in Item 1. Business of this report for information on our cooperation regarding the subpoena received from the U.S. Attorneys Office for the Eastern District of New York requesting documents relating to our operations, including our laboratory services and documents relating to PTH and Vitamin D therapies and with the U.S. Attorneys Office for the Eastern District of Pennsylvania in a review of some historical practices, including billing and other operating procedures and our financial relationships with physicians.
17
In addition, we are subject to claims and suits in the ordinary course of business. We do not believe that the ultimate resolution of these additional pending or threatened proceedings, whether the underlying claims are covered by insurance or not, will have a material adverse effect on our financial condition, results of operations or cash flows.
Item 4. Submission of Matters to a Vote of Securities Holders.
No matters were submitted to a vote of security holders during the fourth quarter of 2004.
18
PART II
Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock is traded on the New York Stock Exchange under the symbol DVA. The following table sets forth, for the periods indicated, the high and low closing prices for our common stock as reported by the New York Stock Exchange. The closing prices have been adjusted to retroactively reflect the effect of a stock split in the second quarter of 2004.
High
|
Low
|
|||||
Year ended December 31, 2004: |
||||||
1st quarter |
$ | 31.86 | $ | 25.33 | ||
2nd quarter |
34.17 | 29.19 | ||||
3rd quarter |
32.18 | 27.38 | ||||
4th quarter |
39.62 | 29.40 | ||||
Year ended December 31, 2003: |
||||||
1st quarter |
$ | 17.06 | $ | 13.03 | ||
2nd quarter |
17.96 | 13.01 | ||||
3rd quarter |
21.67 | 17.89 | ||||
4th quarter |
26.67 | 21.97 |
The closing price of our common stock on February 1, 2005 was $42.15 per share. According to The Bank of New York, our registrar and transfer agent, as of February 1, 2005, there were 2,318 holders of record of our common stock. Since our recapitalization in 1994, we have not declared or paid cash dividends to holders of our common stock. We have no current plans to pay cash dividends. Also, see the heading Liquidity and capital resources under Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations and the notes to our consolidated financial statements.
The following table sets forth information with respect to repurchases of our common stock during the quarter ended December 31, 2004.
Period |
Total number of shares purchased |
Average price paid per share |
Total number of shares purchased as part of publicly announced plans or programs |
Approximate dollar value of shares that may yet be purchased under the plans or programs(1) |
||||||
October 1, 2004 through October 31, 2004 |
300,300 | $ | 30.14 | 300,300 | $ | 249,121,411 | ||||
November 1, 2004 through November 30, 2004 |
| | | 249,121,411 | ||||||
December 1, 2004 through December 31, 2004 |
| | | 249,121,411 | ||||||
|
|
|
|
|
|
|||||
Total |
300,300 | $ | 30.14 | 300,300 | $ | 249,121,411 | ||||
|
|
|
|
|
|
(1) | On September 11, 2003, the Company announced that the Board of Directors authorized the Company to repurchase up to $200 million of the Companys common stock, with no expiration date. On November 2, 2004, the Company announced that the Board of Directors approved an increase in the Companys authorization to repurchase shares of its common stock by an additional $200 million. The Company is authorized to make purchases from time to time in the open market or in privately negotiated transactions, depending upon market conditions and other considerations. |
19
Item 6. Selected Financial Data.
The following table presents selected consolidated financial and operating data for the periods indicated. The following financial and operating data should be read in conjunction with Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements filed as part of this report.
Year ended December 31,
|
|||||||||||||||||
2004
|
2003
|
2002
|
2001
|
2000
|
|||||||||||||
(in thousands, except share data) | |||||||||||||||||
Income statement data: |
|||||||||||||||||
Net operating revenues(1) |
$ | 2,298,595 | $ | 2,016,418 | $ | 1,854,632 | $ | 1,650,753 | $ | 1,486,302 | |||||||
Operating expenses(2) |
1,888,472 | 1,637,883 | 1,470,806 | 1,339,895 | 1,318,460 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Operating income |
410,123 | 378,535 | 383,826 | 310,858 | 167,842 | ||||||||||||
Debt expense |
52,412 | 66,828 | 71,636 | 72,438 | 115,445 | ||||||||||||
Refinancing charges (gains)(3) |
26,501 | 48,930 | (1,629 | ) | 7,009 | ||||||||||||
Other income, net |
4,173 | 3,060 | 3,997 | 2,518 | (6,270 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income before income taxes |
361,884 | 288,266 | 267,257 | 242,567 | 39,118 | ||||||||||||
Income tax expense |
139,630 | 112,475 | 109,928 | 105,252 | 25,633 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income |
$ | 222,254 | $ | 175,791 | $ | 157,329 | $ | 137,315 | $ | 13,485 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Basic earnings per common share(4) |
$ | 2.25 | $ | 1.86 | $ | 1.46 | $ | 1.09 | $ | 0.11 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Diluted earnings per common share(4) |
$ | 2.16 | $ | 1.66 | $ | 1.30 | $ | 1.01 | $ | 0.11 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Weighted average shares outstanding:(4)(6) |
|||||||||||||||||
Basic |
98,727,000 | 94,346,000 | 107,747,000 | 125,652,000 | 122,372,000 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Diluted |
102,861,000 | 113,760,000 | 135,720,000 | 155,181,000 | 124,736,000 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Ratio of earnings to fixed charges(5) |
5.55:1 | 4.43:1 | 4.35:1 | 3.63:1 | 1.32:1 | ||||||||||||
Balance sheet data: |
|||||||||||||||||
Working capital |
$ | 426,985 | $ | 242,238 | $ | 251,925 | $ | 175,983 | $ | 148,348 | |||||||
Total assets |
2,511,959 | 1,945,530 | 1,775,693 | 1,662,683 | 1,596,632 | ||||||||||||
Long-term debt |
1,322,468 | 1,117,002 | 1,311,252 | 811,190 | 974,006 | ||||||||||||
Shareholders equity(6) |
523,134 | 306,871 | 70,264 | 503,637 | 349,368 |
(1) | Net operating revenues include $8,293 in 2004, $24,000 in 2003 and $58,778 in 2002 of Medicare lab recoveries relating to prior years services and $22,000 in 2001 of prior years dialysis services revenue relating to cash settlements and collections in excess of prior estimates. |
(2) | Total operating expenses include recoveries of $5,192 in 2002 and $35,220 in 2001 of accounts receivable reserved in 1999 and net impairment losses of $4,556 in 2000 principally associated with the disposition of the Companys non-continental U.S. operations. |
(3) | Refinancing charges of $26,501 in 2003 represented the consideration paid to redeem the $125,000 5 5 / 8 % Convertible Subordinated Notes due 2006 and the $345,000 7% Convertible Subordinated Notes due 2009 in excess of book value, the write off of related deferred financing costs and other financing fees associated with amending the bank credit agreement. Refinancing charges of $48,930 in 2002 represented the write-off of deferred financing costs associated with the retirement of the $225,000 outstanding 9 1 / 4 % Senior Subordinated Notes due 2011. |
20
(4) | All share and per-share data for all periods presented have been adjusted to retroactively reflect the effects of a 3 for 2 stock split in the second quarter of 2004. |
(5) | The ratio of earnings to fixed charges was computed by dividing earnings by fixed charges. Earnings for this purpose is defined as pretax income from operations adjusted by adding back fixed charges expensed during the period and debt refinancing charges. Fixed charges include debt expense (interest expense and amortization of financing costs), the estimated interest component of rental expense on operating leases, and capitalized interest. |
(6) | Share repurchases consisted of 3,350,100 shares of common stock for $96,540 in 2004, 5,162,850 shares of common stock for $107,162 in 2003, 40,991,216 shares of common stock for $642,171 in 2002 and 1,333,050 shares of common stock for $20,360 in 2001. Debt of $124,700 and $526 was converted into 7,302,528 and 24,045 shares of common stock in 2003. Shares issued in connection with stock awards amounted to 5,106,783 in 2004, 3,539,919 in 2003, 5,131,425 in 2002, 4,711,989 in 2001 and 1,226,319 in 2000. |
21
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Forward looking statements
This Annual report on Form 10-K contains statements that are forward-looking statements within the meaning of the federal securities laws. All statements that do not concern historical facts are forward-looking statements and include among other things, statements about our expectations, beliefs, intentions and/or strategies for the future. These forward-looking statements include statements regarding our expectations for treatment growth rates, revenue per treatment, expense growth, levels of the provision for uncollectible accounts receivable, operating income, cash flow, and capital expenditures. These statements involve substantial known and unknown risks and uncertainties that could cause our actual results to differ materially from those described in the forward-looking statements, including, but not limited to, risks resulting from the regulatory environment in which we operate, economic and market conditions, competitive activities, other business conditions, accounting estimates, and the risk factors set forth in this Annual Report on Form 10-K. These risks, among others, include those relating to the concentration of profits generated from PPO and private indemnity patients, possible reductions in private and government reimbursement rates, changes in pharmaceutical practice patterns or reimbursement policies, our ability to maintain contracts with physician medical directors, and legal compliance risks, including our continued compliance with complex government regulations and the ongoing review by the U.S. Attorneys Office for the Eastern District of Pennsylvania, and the OIG and the subpoena from the U.S. Attorneys Office for the Eastern District of New York and our ability to complete acquisitions of businesses, including the consummation of the Gambro Healthcare acquisition, terms of the related financing, and subsequent integration of the business. We base our forward-looking statements on information currently available to us, and we undertake no obligation to update or revise these statements, other than in connection with our quarterly reporting on Form 10-Q or in our Annual Report on Form 10-K, whether as a result of changes in underlying factors, new information, future events or other developments.
The following should be read in conjunction with our consolidated financial statements and Item 1. Business.
Overview
Our stated mission is to be the provider, employer and partner of choice. We believe our attention to these three areasour patients, our teammates, and our business partners represent the major drivers of our long-term success, aside from external factors such as government policy and physician practice patterns. Accordingly, two principal non-financial metrics we track are quality clinical outcomes and teammate turnover. We have developed our own composite index for measuring improvements in our clinical outcomes, which we refer to as the DaVita Quality Index, or DQI. Our clinical outcomes have improved over each of the past three years, and we ended 2004 with the best clinical outcomes that we have ever achieved. Although it is difficult to reliably measure clinical performance across our industry, we believe our clinical outcomes compare favorably with other dialysis providers in the United States. Over the past three years we have achieved significant reductions in teammate turnover, which has been a major contributor to our performance improvements. We will continue to focus on these fundamental long-term value drivers.
We are pleased with the overall clinical, operating and financial performance levels achieved over the past three years. Although our business has areas of significant potential exposure, as delineated in the risk factors following this discussion and analysis, our operating results over the past three years have not been significantly adversely affected by these risk factors.
Our operations represent a single reporting segment, with approximately 96% of our revenues currently derived directly from providing dialysis services, of which 88% represents on-site dialysis services in 624 centers that are wholly-owned or majority-owned. Our other direct dialysis services, which are operationally integrated with our center operations, relate to patient-performed peritoneal dialysis and acute treatments in hospitals.
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The principal drivers of our revenue are a) the number of treatments, which is primarily a function of the number of chronic patients requiring three treatments per week, and b) average treatment revenue. The total patient base is a relatively stable factor, influenced by a demographically growing need for dialysis, our relationships with referring physicians together with the quality of our clinical care, and our pace of opening and acquiring new centers.
Our year-over-year treatment volume growth for 2004 was 10.8%, compared with 6.7% and 5.0% for 2003 and 2002. Approximately 40% of our growth in each of the last two years was associated with new centers, and approximately 60% was attributable to increased treatments.
Average revenue per treatment is principally driven by our mix of commercial and government (principally Medicare and Medicaid) treatments, the mix and intensity of physician-prescribed pharmaceuticals, commercial and government reimbursement rates, and our dialysis services charge-capture, billing and collecting operations performance.
On average, reimbursement rates from commercial payors are more than double Medicare and Medicaid reimbursement rates, and therefore the percentage of commercial patients to total patients represents a major driver of our total average revenue per treatment. The percent of patients under government reimbursement programs to total dialysis center patients increased approximately 1% over the past two years, and is currently approximately 79%.
In terms of revenue dollars, approximately 60% of our total dialysis revenue is from government or government-based programs. Government reimbursement rates are principally determined by federal (Medicare) and state (Medicaid) policy, have limited potential for rate increases and are sometimes at risk of reductions. Medicare reimbursements represent approximately 50% of our dialysis revenue, and cumulative increases since 1990 total approximately 5%. There were no Medicare reimbursement rate increases for 2003 and 2004. A 1.6% increase became effective on January 1, 2005, however this increase will be more than offset by other structural changes to Medicare dialysis reimbursement rates that also became effective January 1, 2005. Medicaid rates in some states have been under severe budget pressures. Approximately 40% of our dialysis revenue is from commercial healthcare plans and contracted managed-care payors. Commercial rates can vary significantly and a major portion of our commercial rates are contracted amounts with major payors and are subject to intense negotiation pressure. Over the past three years we have been successful in maintaining a relatively stable average reimbursement rate in the aggregate for patients with commercial plans, in addition to obtaining periodic fee schedule increases.
Approximately 40% of our dialysis revenue has been associated with physician-prescribed pharmaceuticals, and therefore changes in physician practice patterns, pharmaceutical protocols, and pharmaceutical intensities significantly influence our revenue levels. Such changes, driven by physician practice patterns and protocols focused on improving clinical outcomes, have accounted for a significant portion of the increase in average revenue per treatment over the past three years.
Our operating performance with respect to dialysis services charge-capture, billing and collection can also be a significant factor in how much average revenue per treatment is actually realized. Over the past three years we have invested heavily in new systems and processes that have helped improve our operating performance and reduce our regulatory compliance risks.
Because of the inherent uncertainties associated with predicting third-party reimbursements in the healthcare industry, our revenue recognition involves significant estimation risks. Our estimates are developed based on the best information available to us and our best judgment as to the reasonably assured collectibility of our billings as of the reporting date. Changes in estimates are reflected in the financial statements based upon on-going actual experience trends, or subsequent settlements and realizations depending on the nature and predictability of the estimates and contingencies.
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Our annual average revenue per treatment increased from $291 in 2002 to $303 in 2003 and to $312 in 2004. These increases were principally due to increases in our standard fee schedules (impacting non-contracted commercial revenue), changes in mix and intensity of physician-prescribed pharmaceuticals, commercial contract negotiations, and continued improvements in revenue capture, billing and collection operations, while maintaining a relatively stable mix of commercial patients and commercial rates.
The principal drivers for our patient care costs are clinical hours per treatment, labor rates, vendor pricing of pharmaceuticals, and business infrastructure and compliance costs. However, other cost categories can also represent significant cost changes such as increased insurance costs experienced in 2003. Our average clinical hours per treatment has improved over the past three years primarily because of reduced teammate turnover and improved training and processes. We believe there is limited opportunity for productivity improvements beyond the levels achieved in 2004, and federal and state policies can adversely impact our ability to achieve optimal productivity levels. Labor rates have increased consistent with general industry trends. For the past three years we have been able to negotiate relatively stable pharmaceutical pricing with our vendors, and expect relatively stable pricing through 2005.
General and administrative expenses have remained relatively constant as a percent of total revenue over the past three years. However, this reflects substantial increases in spending related to strengthening our business and regulatory compliance processes, legal and other professional fees, and expanding support functions. We expect that these higher levels of general and administrative expenses will be generally maintained to support our long-term initiatives and to support our efforts to achieve the highest levels of regulatory compliance.
Although other revenues represent less than 5% of total revenues, successful resolutions of disputed Medicare billings at our Florida lab resulted in recoveries related to prior years services being recognized as current period revenue and operating income of $8 million, $24 million, and $59 million for 2004, 2003, and 2002, respectively. The carrier began making payments on Medicare lab billings in the third quarter of 2002 after four years of withholding all payments. Therefore we were able to begin recognizing Medicare lab revenue as services were provided, incrementally increasing income by such revenue. Medicare lab revenues for 2004 current year services amounted to $34 million.
Gambro Healthcare Acquisition. On December 6, 2004, we entered into an agreement to acquire Gambro Healthcare, Inc., or Gambro Healthcare, a subsidiary of Gambro AB, one of the largest dialysis service providers in the United States, for a purchase price of approximately $3.05 billion in cash. We currently plan to finance this transaction and refinance our existing credit facility through the issuance of notes and the entry into a new senior secured credit facility. In conjunction with the acquisition, we are entering into a 10-year product supply agreement with Gambro Renal Products Inc., a subsidiary of Gambro AB, to provide a significant majority of our dialysis equipment and supplies. We expect that the acquisition will increase our revenues by more than 80% based on 2004 levels. The timing of the completion of the acquisition transaction is dependent on the governments Hart-Scott-Rodino antitrust review process. On February 18, 2005, the Company received a request from the Federal Trade Commission, or FTC, for additional information in connection with the acquisition. The request extends the waiting period imposed by the Hart-Scott-Rodino Act until thirty days after the Company and Gambro Healthcare have substantially complied with the request, unless that period is voluntarily extended by the parties or is terminated sooner by the FTC. In connection with obtaining antitrust clearance, we may decide to, or the FTC or other regulatory agencies with jurisdiction may require us to, divest certain of our or Gambro Healthcares dialysis centers.
Outlook for 2005. We are currently targeting operating income to be between 2% and 6% higher than the 2004 level, exclusive of the effects of the Gambro Healthcare acquisition and related debt financing, and exclusive of the expensing of stock options required by FASB No. 123R. In connection with the Gambro acquisition the Company will be assessing financing alternatives, which could include closing some or all of the financing in advance of the closing of the acquisition. At this time, we expect the Gambro Healthcare acquisition together with the related debt financing to be dilutive to earnings per share, or EPS, in the first year after the
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closing of the acquisition, neutral in the second year, and accretive thereafter. These projections and the underlying assumptions involve significant risks and uncertainties, and actual results may vary significantly from these current projections. These risks, among others, include those relating to the concentration of profits generated from PPO and private indemnity patients, possible reductions in private and government reimbursement rates, changes in pharmaceutical practice patterns or reimbursement policies, our ability to maintain contracts with our physician medical directors, legal compliance risks, including our continued compliance with complex government regulations and the ongoing review by the U.S. Attorneys Office for the Eastern District of Pennsylvania and the OIG and the subpoena from the U.S. Attorneys Office for the Eastern District of New York, and our ability to complete acquisitions of businesses, including the consummation of the Gambro acquisition, terms of the related financing, and subsequent integration of the businesses. You should read Risk Factors in this Annual Report on Form 10-K for more information about these and other potential risks. We undertake no obligation to update or revise these projections, whether as a result of changes in underlying factors, new information, future events or other developments.
Results of operations
Following is a summary of operating results for reference in the discussion that follows:
Year ended December 31,
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2004
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2003
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2002
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(dollar amounts rounded to nearest million, except per treatment data) | |||||||||||||||||||
Net operating revenues: |
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Current period services |
$ | 2,291 | 100 | % | $ | 1,992 | 100 | % | $ | 1,796 | 100 | % | |||||||
Prior years serviceslaboratory |
8 | 24 | 59 | ||||||||||||||||
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2,299 | 2,016 | 1,855 | |||||||||||||||||
Operating expenses and charges: |
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Patient care costs |
1,555 | 68 | % | 1,361 | 68 | % | 1,218 | 68 | % | ||||||||||
General and administrative |
192 | 8 | % | 160 | 8 | % | 154 | 9 | % | ||||||||||
Depreciation and amortization |
87 | 4 | % | 75 | 4 | % | 64 | 4 | % | ||||||||||
Provision for uncollectible accounts |
41 | 2 | % | 36 | 2 | % | 32 | 2 | % | ||||||||||
Recoveries |
(5 | ) | |||||||||||||||||
Minority interests and equity income, net |
14 | 7 | 8 | ||||||||||||||||
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Total operating expenses and charges |
1,889 | 1,638 | 1,471 | ||||||||||||||||
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Operating incomeincluding prior years recoveries, (i.e., including amounts in italics) |
$ | 410 | $ | 379 | $ | 384 | |||||||||||||
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Dialysis treatments |
7,062,424 | 6,373,894 | 5,975,280 | ||||||||||||||||
Average dialysis treatments per treatment day |
22,528 | 20,377 | 19,090 | ||||||||||||||||
Average dialysis revenue per treatment |
$ | 312 | $ | 303 | $ | 291 |
Net operating revenues
Dialysis revenues represented approximately 96% of net operating revenues in 2004, and 97% in 2003 and 2002. Lab and other ancillary services and management fee income accounted for the balance of revenues.
Operating revenues for current period services increased 15% in 2004 and 11% in 2003. Approximately 11% and 7% of the increases in revenue for 2004 and 2003 were due to increases in the number of dialysis treatments and approximately 3% and 4% was attributable to increases in the average dialysis revenue per treatment. The balance of the increase in 2004 was due to additional lab, management fees and ancillary revenue.
Dialysis revenues . Dialysis services include outpatient center hemodialysis, home dialysis and inpatient hemodialysis under contracts with hospitals, which accounted for approximately 88%, 7% and 5% of total
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dialysis revenues, respectively. Major components of dialysis revenues include the administration of EPO and other pharmaceuticals as part of the dialysis treatment, which represents approximately 40% of total dialysis revenues.
Approximately 60% of our total dialysis revenues are from government-based programs, principally Medicare and Medicaid, with the balance from more than 600 commercial payors under more than 1500 commercial healthcare plans and approximately 300 managed-care contracts. Approximately 50% of our total dialysis revenues are associated with Medicare patients, who represent nearly 70% of our total patients.
Services provided to patients covered by commercial healthcare plans are paid on average at more than double the Medicare or Medicaid rates. Patients covered by employer group health plans convert to Medicare after a maximum of 33 months. As of year-end 2004, the Medicare ESRD dialysis treatment rates for our patients were between $121 and $144 per treatment, or an overall average of $131 per treatment, excluding the administration of separately billed pharmaceuticals.
The majority of our net earnings from dialysis services are derived from commercial payors, some of which pay at negotiated reimbursement rates and others which pay based on our usual and customary fee schedule. The commercial reimbursement rates are under continuous downward pressure as we negotiate contract rates with large HMOs and insurance carriers. Additionally, as a patient transitions from commercial coverage to Medicare or Medicaid coverage, the reimbursement rates normally decline substantially. No single payor accounts for more than 5% of total dialysis revenues.
The number of dialysis treatments increased 10.8% in 2004 and 6.7% in 2003. Acquisitions accounted for 5.8% and 2.8% of treatment growth for 2004 and 2003. Non-acquired treatment growth was 5.0% and 3.9% for 2004 and 2003.
The average dialysis revenues recognized per treatment was $312, $303 and $291 for 2004, 2003 and 2002, respectively. The increase in average dialysis revenues per treatment in 2004 and 2003 was principally due to commercial rate increases and changes in intensity of physician-prescribed pharmaceuticals. The average dialysis revenues per treatment for the fourth quarter of 2004 was approximately $311. Our mix of commercial patients and commercial rates, which is a major profitability factor, remained relatively stable during 2004.
Lab and other services. A third-party carrier review of Medicare reimbursement claims associated with our Florida-based laboratory was initiated in 1998. Prior to the third quarter 2002, no Medicare payments had been received since May 1998. Following a favorable ruling by an administrative law judge in June 2002 relating to review periods from January 1995 to March 1998, the carrier began releasing funds for lab services provided subsequent to May 2001. During the fourth quarter of 2002, the carrier also released funds for certain claims in review periods from April 1998 through May 2001. During the second half of 2002, the carrier paid us a total of $69 million. Approximately $10 million of these collections related to 2002 lab services provided through June 2002, and the balance of $59 million related to prior years services. In addition to paying the prior-period claims, the carrier also began processing billings for current period services in the third quarter of 2002, at which time we began recognizing current period Medicare lab revenue. In late 2003 the carriers hearing officer rendered partially favorable decisions relating to review periods from April 1998 to May 2000, resulting in our recognition of additional recoveries of $24 million. We filed requests for appeal for the remaining unsettled claims for these review periods. In the third quarter of 2004, an administrative law judge rendered a favorable decision regarding the majority of these unsettled claims, which resulted in our recognition of $8.3 million in additional recoveries. Less than $4 million in disputed Medicare lab billings currently remain unresolved.
Management fee income. Management fee income represented less than 1% of net operating revenues for 2004 and 2003. We operated or provided administrative services to 34 third-party or minority-owned dialysis centers as of December 31, 2004. In 2003 we acquired an outpatient vascular access management business that currently manages the vascular access component at seventeen independent third-party physician practices. Our management fees are principally based on a percentage of the revenue of the managed operations.
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Operating expenses and charges
Patient care costs. Patient care costs are those costs directly associated with operating and supporting our dialysis centers and ancillary operations, and consist principally of labor, pharmaceuticals, medical supplies and facility costs. As a percentage of current period operating revenues, patient care costs were 68% for all periods presented. On a per-treatment basis, patient care costs increased approximately $7 and $11 in 2004 and 2003, respectively. The increases in 2004 and 2003 were principally due to higher labor costs and increases in the levels of revenue generating physician-prescribed pharmaceuticals. The increase in 2003 was also due to higher insurance costs. The higher labor costs reflect rising labor rates and the effect of the increase in the number of newly opened centers not yet at normal productivity levels, partially offset by general labor productivity improvements. We believe there is limited opportunity for productivity improvements beyond the levels achieved in 2004.
General and administrative expenses. General and administrative expenses consist of those costs not specifically attributable to the dialysis centers and ancillary operations, and include expenses for corporate and regional administration, including centralized accounting, billing and cash collection functions, and regulatory compliance oversight. General and administrative expenses as a percentage of current period operating revenues were 8.4%, 8.0% and 8.6% in 2004, 2003 and 2002, respectively. In absolute dollars, general and administrative expenses increased by approximately $32 million in 2004 and $6 million in 2003. The increase in 2004 principally consisted of higher labor costs, professional fees for legal and compliance initiatives, and increases in support infrastructure for corporate initiatives and business expansion. The increase in 2003 was principally due to higher labor costs. The substantial increases in labor costs for 2004 and 2003 principally related to strengthening our business and regulatory compliance processes, as well as expanding support functions.
Depreciation and amortization. Depreciation and amortization was approximately 4% of current period operating revenues for each of the past three years. The increase in depreciation and amortization from $75 million in 2003 to $87 million in 2004 was principally due to new center developments and acquisitions.
Provision for uncollectible accounts. The provisions for uncollectible accounts receivable were approximately 2% of current period operating revenues for each of the three years. During 2002, we realized recoveries of $5 million associated with aged accounts receivable that had been reserved in 1999. The recoveries resulted from improvements made in our billing and collection processes.
Minority interests and equity income, net. Minority interests net of equity income increased in 2004 by approximately $7 million due to an increase in new centers having minority partners as well as growth in the earnings of our joint ventures.
Impairments and valuation adjustments . We perform impairment or valuation reviews for our property and equipment, amortizable intangibles, and investments in and advances to third-party dialysis businesses at least annually and whenever a change in condition indicates that a review is warranted. Such changes include shifts in our business strategy or plans, the quality or structure of our relationships with our partners, or when a center experiences deteriorating operating performance. Goodwill is also assessed at least annually for possible valuation impairment using fair value methodologies. No significant impairments or valuation adjustments were recognized during the periods presented.
Other income
Other income, which was a net of approximately $4 million, $3 million and $4 million for 2004, 2003 and 2002, respectively, consisted principally of interest income.
Debt expense and refinancing charges
Debt expense for 2004, 2003 and 2002 consisted of interest expense of approximately $50 million, $64 million and $69 million, respectively, and amortization of deferred financing costs of approximately $2 million
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in 2004, and $3 million in 2003 and 2002. The decrease in interest expense in 2004 as compared to 2003 was due to changes in the mix of our debt instruments. For most of 2003 we incurred higher interest rates on our senior subordinated notes, which were paid off in the second half of 2003 and replaced with lower interest rate borrowings from our credit facility. This decrease was partially offset by the effect on interest rates from our swap agreements and higher average debt balances. The reduction in interest expense in 2003 as compared to 2002 was primarily due to lower average interest rates and lower average debt balances.
Reclassification of previously reported extraordinary losses. In accordance with SFAS No. 145 Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 14, and Technical Corrections, which became effective as of January 1, 2003, an after-tax loss of $29.4 million in 2002 associated with the extinguishment of debt was reclassified from an extraordinary item to a pre-tax refinancing charge of $49 million. In 2003, the refinancing charges of $27 million related to the consideration paid in excess of book value to redeem our Convertible Subordinated Notes and the write-off of deferred financing costs and financing fees associated with the amendment of our bank credit agreement. In 2002, the refinancing charges of $49 million related to debt restructuring, which included retiring $225 million of 9 1 / 4 % Senior Subordinated Notes due 2011 and extinguishing our then existing senior credit facilities.
Provision for income taxes
The provision for income taxes for 2004 represented an effective tax rate of 38.6%, compared with 39.0% and 41.0% in 2003 and 2002. The reduction in the effective tax rate for 2004 was primarily due to lower state income taxes. The reduction in the effective tax rate for 2003 was primarily due to a lower provision for state income taxes and utilization of previously unrecognized tax losses. The effective tax rate for 2005 is currently projected to be comparable to the 2004 level.
Liquidity and capital resources
Cash flow from operations during 2004 amounted to $420 million, including after-tax Medicare lab recoveries of $17 million, compared with $294 million for 2003. Non-operating cash outflows in 2004 included $128 million for capital asset expenditures including $83 million for new center developments, $265 million for acquisitions (net of divestitures), and $97 million for stock repurchases. Non-operating cash outflows for 2003 included $100 million for capital asset expenditures including $58 million for new center developments, $97 million for acquisitions, and $107 million for stock repurchases. During 2004, we acquired a total of 51 dialysis centers and opened 44 new dialysis centers. During 2003 we acquired 27 dialysis centers for $84 million (including controlling ownership interests in two centers in which we previously had minority ownership) and opened 30 new dialysis centers. Other 2003 acquisitions related to ancillary operations. The largest acquisition during 2004 was the purchase of common stock of Physicians Dialysis, Inc. (PDI), for approximately $150 million, which added 24 centers.
On December 6, 2004 we entered into an agreement to acquire all of the outstanding common stock of Gambro Healthcare, Inc. for a purchase price of approximately $3.05 billion in cash. The timing of the closing of the acquisition transaction is dependent on the governments Hart-Scott-Rodino anti-trust review process. In connection with the Gambro acquisition we will be assessing financing alternatives, which could include closing some or all of the financing in advance of the closing of the acquisition. See Note 18 to our Consolidated Financial Statements included in this Annual Report on Form 10-K. We have obtained acquisition financing commitments from a group of financial institutions, however such commitments are subject to customary conditions.
We expect to spend approximately $100 million to $120 million for capital asset expenditures in 2005. This includes approximately $50 to $60 million for routine maintenance items and $50 to $60 million for new center developments. This level of capital asset expenditures is consistent with our 2004 level. We expect to open between 30 to 40 new centers in 2005.
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The accounts receivable balance at December 31, 2004 and 2003 represented approximately 70 and 69 days of net revenue, net of bad debt provision.
As of December 31, 2004, we had undrawn credit facilities totaling $116 million of which $23 million was committed for outstanding letters of credit.
We believe that we will have sufficient borrowing capacity and operating cash flows to fund our planned acquisitions and expansions and to meet our other obligations over the next twelve months.
2004 capital structure changes. In the third quarter of 2004, we amended our existing credit facilities in order to modify certain restricted payment covenants principally for acquisitions and share repurchases and we extended the maturity of the Term Loan B until June 30, 2010. We also borrowed an additional $250 million under a new Term Loan C principally to fund potential acquisitions and share repurchases. The Term Loan C bears interest at LIBOR plus 1.75% for an overall effective rate of 4.16% at December 31, 2004. The aggregate annual principal payments for the amended Term Loan B and the Term Loan C are approximately $56.1 million and $11.9 million in the first five years of the agreement, and $974.2 million and $238.1 million in the sixth year, respectively. We expect to put new credit facilities in place in connection with the planned Gambro Healthcare acquisition.
Under the previously announced Board authorization for share repurchases, we repurchased a total of 3,350,100 shares of common stock at an average price of $28.82 per share during 2004. On November 2, 2004, our Board of Directors authorized us to repurchase up to an additional $200 million of our common stock, from time to time, in the open market or in privately negotiated transactions. The total outstanding Board authorizations for share repurchases are now approximately $249 million.
In the first quarter of 2004, we entered into an interest rate swap agreement that had the economic effect of modifying the LIBOR-based interest rate to a fixed rate of 3.08%, plus the Term Loan B margin of 2.00%, for an overall effective rate of 5.08% as of December 31, 2004. The total amortizing notional amount of the swap was $135 million matched with the Term Loan B outstanding debt. The agreement expires in January 2009 and requires quarterly interest payments. As of December 31, 2004, the notional amount of this swap was $135 million and its fair value was an asset of $1.7 million, which resulted in additional comprehensive income during the year of $1.1 million, net of tax.
In the third quarter of 2004, we entered into another interest rate swap agreement that had the economic effect of modifying the LIBOR-based interest rate to a fixed rate of 3.64%, plus the Term Loan C margin of 1.75%, for an overall effective rate of 5.39% as of December 31, 2004. The total $75 million non-amortizing notional amount of the swap was matched with the Term Loan C outstanding debt. The agreement expires in August 2008 and requires quarterly interest payments. As of December 31, 2004 the fair value of the swap was an asset of $0.1 million, which resulted in additional comprehensive income during the year of $0.06 million, net of tax.
At December 31, 2004, approximately 25% of our outstanding variable rate debt was economically fixed at an effective weighted average interest rate of 5.27% and our overall credit facility effective weighted average interest rate was 4.60% based upon current margins in effect ranging from 1.75% to 2.00%.
On December 10, 2004 we entered into two forward interest rate swap agreements that will have the economic effect of modifying the LIBOR-based interest rate to a fixed rate at 3.875% effective July 1, 2005. The total amortizing notional amount of these two swaps is $800 million and both expire in January 2010 and require quarterly interest payments beginning in October 2005. As of December 31, 2004, the aggregate notional amount of these swaps was $800 million and their fair value was an asset of $0.4 million, which resulted in additional comprehensive income during the year of $0.2 million, net of tax.
As a result of our swap agreements, we will have over 80% of our outstanding variable rate debt economically fixed.
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2003 capital structure changes. In the first quarter of 2003, we borrowed $150 million that was available under the Term Loan A of our credit facility. The Term Loan A bears interest at LIBOR plus 2.00% for an overall effective rate of 3.19% at December 31, 2003.
In July 2003, we completed a call for redemption of all of our outstanding $125 million 5 5 / 8 % Convertible Subordinated Notes due 2006 by issuing 7,302,528 shares of our common stock from treasury stock for the conversion of nearly all the 5 5 / 8 % Notes, and redeemed the balance for cash and accrued interest.
In July 2003, we also entered into an amended credit agreement in order to, among other things, lower the overall interest rate. We also acquired an additional $200 million of borrowings under the replacement Term Loan B, which amounted to $1.042 billion. In November 2003, we entered into a second amended and restated credit agreement in order to again lower the interest rate on the Term Loan B and to modify certain covenants.
In 2003 we completed a call for redemption of our $345 million, 7% Convertible Subordinated Notes due 2009. The 7% notes were redeemed for $363 million in cash, including accrued interest and 24,045 shares of common stock.
In the fourth quarter of 2003, we entered into an interest rate swap agreement that had the economic effect of modifying the LIBOR- based interest rate to a fixed rate of 3.39%, plus the Term Loan B margin of 2.00% for an overall effective rate of 5.39% as of December 31, 2004. The total amortizing notional amount of this swap was $135 million and was matched with Term Loan B outstanding debt. The agreement expires in November 2008 and requires quarterly interest payments. As of December 31, 2004, the notional amount of this swap was approximately $135 million and its fair value was an asset of $0.6 million which resulted in additional comprehensive income during the year of $1.3 million, net of tax.
During 2003, we repurchased a total of 5,162,850 shares of our common stock for approximately $107 million, or an average of $20.76 per share, pursuant to authorizations by the Board of Directors.
Off-balance sheet arrangements and aggregate contractual obligations
In addition to the debt obligations reflected on our balance sheet, we have commitments associated with operating leases, letters of credit and our investments in third-party dialysis businesses. Nearly all of our facilities are leased. We have potential acquisition obligations for several jointly-owned centers, in the form of put options exercisable at the third-party owners discretion. These put obligations, if exercised, would require us to purchase the third-party owners interests at either the appraised fair market value or a predetermined multiple of earnings or cash flow. We also have potential cash commitments to provide operating capital as needed to several third-party centers including minority owned centers and centers that we operate under administrative services agreements.
The following is a summary of these contractual obligations and commitments as of December 31, 2004 (in millions):
Within
One Year |
2-3 Years |
4-5 Years |
After 5 Years |
Total
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Scheduled payments under contractual obligations: |
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Long-term debt |
$ | 52 | $ | 80 | $ | 629 | $ | 607 | $ | 1,368 | |||||
Capital lease obligations |
1 | 4 | 1 | 2 | 8 | ||||||||||
Operating leases |
74 | 132 | 102 | 189 | 497 | ||||||||||
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$ | 127 | $ | 216 | $ | 732 | $ | 798 | $ | 1,873 | ||||||
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Potential cash requirements under existing commitments: |
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Letters of credit |
$ | 23 | $ | 23 | |||||||||||
Acquisition of dialysis centers |
56 | 15 | 19 | 13 | 103 | ||||||||||
Working capital advances to third-parties under administrative services agreements |
15 | 15 | |||||||||||||
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$ | 94 | $ | 15 | $ | 19 | $ | 13 | $ | 141 | ||||||
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Contingencies
Our revenues may be subject to adjustment as a result of (1) examination by government agencies or contractors, for which the resolution of any matters raised may take extended periods of time to finalize; (2) differing interpretations of government regulations by different fiscal intermediaries or regulatory authorities; (3) differing opinions regarding a patients medical diagnosis or the medical necessity of services provided; (4) retroactive applications or interpretations of governmental requirements; and (5) claims for refunds from private payors.
On October 25, 2004, we received a subpoena from the United States Attorneys Office, or U.S. Attorneys Office, for the Eastern District of New York in Brooklyn. The subpoena covers the period from 1996 to present and requires the production of a wide range of documents relating to our operations, including our laboratory services. The subpoena also includes specific requests for documents relating to testing for parathyroid hormone levels, or PTH, and to products relating to vitamin D therapies. We believe that the subpoena has been issued in connection with a joint civil and criminal investigation. Other participants in the dialysis industry received a similar subpoena, including Fresenius Medical Care, Renal Care Group and Gambro Healthcare. To our knowledge, no proceedings have been initiated against us at this time. Compliance with the subpoena will require management attention and legal expense. We cannot predict whether legal proceedings will be initiated against us relating to this investigation or, if proceedings are initiated, the outcome of any such proceedings. In addition, criminal proceedings may be initiated against us in connection with this inquiry. If a court determines that there has been wrongdoing, the penalties under applicable statutes could be substantial.
In February 2001 the Civil Division of the U.S. Attorneys Office for the Eastern District of Pennsylvania in Philadelphia contacted us and requested our cooperation in a review of some historical practices, including billing and other operating procedures and financial relationships with physicians. We cooperated in this review and provided the requested records to the U.S. Attorneys Office. In May 2002, we received a subpoena from the U.S. Attorneys Office and the Philadelphia Office of the OIG. The subpoena requires an update to the information we provided in our response to the February 2001 request, and also seeks a wide range of documents relating to pharmaceutical and other ancillary services provided to patients, including laboratory and other diagnostic testing services, as well as documents relating to our financial relationships with physicians and pharmaceutical companies. The subpoena covers the period from May 1996 to May 2002. We have provided the documents requested and continue to cooperate with the United States Attorneys Office and the OIG in its investigation. If this review proceeds, the government could expand its areas of concern. If a court determines that there has been wrongdoing, the penalties under applicable statutes could be substantial.
In addition to the foregoing, we are subject to claims and suits in the ordinary course of business. Management believes that the ultimate resolution of these additional pending proceedings, whether the underlying claims are covered by insurance or not, will not have a material adverse effect on our financial condition, results of operations or cash flows.
Critical accounting estimates and judgments
Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States. These accounting principles require us to make estimates, judgments and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities, and contingencies. All significant estimates, judgments and assumptions are developed based on the best information available to us at the time made and are regularly reviewed and updated when necessary. Actual results will generally differ from these estimates. Changes in estimates are reflected in our financial statements in the period of change based upon on-going actual experience trends, or subsequent settlements and realizations depending on the nature and predictability of the estimates and contingencies. Interim changes in estimates are applied prospectively within annual periods. Certain accounting estimates, including those concerning revenue recognition and provision for uncollectible accounts, impairments and valuation adjustments, and accounting for income taxes, are considered
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to be critical in evaluating and understanding our financial results because they involve inherently uncertain matters and their application requires the most difficult and complex judgments and estimates.
Revenue recognition. There are significant estimating risks associated with the amount of revenue that we recognize for a reporting period. The rates at which we are reimbursed are often subject to significant uncertainties related to wide variations in the coverage terms of the more than 1,500 commercial healthcare plans under which we receive reimbursements, often arbitrary and inconsistent reimbursements by commercial payors, ongoing insurance coverage changes, differing interpretations of contract coverage, and other payor issues. Revenue recognition uncertainties inherent in our operations are addressed in AICPA Statement of Position (SOP) No. 00-1. As addressed in SOP No. 00-1, net revenue recognition and allowances for uncollectible billings require the use of estimates of the amounts that will actually be realized considering, among other items, retroactive adjustments that may be associated with regulatory reviews, audits, billing reviews and other matters.
Revenues associated with Medicare and Medicaid programs are recognized based on a) the reimbursement rates that are established by statute or regulation for the portion of the reimbursement rates paid by the government payor (eg. 80% for Medicare patients) and b) for the portion not paid by the primary government payor, the estimated amounts that will ultimately be collectible from other government programs paying secondary coverage (eg. Medicaid secondary coverage), the patients commercial health plan secondary coverage, or the patient.
Commercial healthcare plans, including contracted managed-care payors, are billed at our usual and customary rates; however, revenue is recognized based on estimated net realizable revenue for the services provided. Net realizable revenue is estimated based on contractual terms for the patients under healthcare plans with which we have formal agreements, non-contracted healthcare plan coverage terms if known, estimated secondary collections, historical collection experience, historical trends of refunds and payor payment adjustments (retractions), inefficiencies in our billing and collection processes that can result in denied claims for reimbursements, and regulatory compliance issues. Determining applicable primary and secondary coverage for our more than 50,000 patients at any point in time, together with the changes in patient coverages that occur each month, requires complex, resource-intensive processes. Collections, refunds and payor retractions typically continue to occur for up to three years and longer after services are provided.
Our range of dialysis revenue estimating risk is generally expected to be within 1% of total revenue, which can represent as much as 5% of operating income. Changes in estimates are reflected in the financial statements based on on-going actual experience trends, or subsequent settlements and realizations depending on the nature and predictability of the estimates and contingencies. Changes in revenue estimates for prior periods are separately disclosed and reported if material to the current reporting period and longer term trend analyses. For example, we recognized $22 million of prior period dialysis revenue in 2001 related to cash recoveries in excess of previous estimates made possible by improvements in our billing and collecting operations.
Lab service revenues for current period dates of services are recognized at the estimated net realizable amounts to be received after considering possible retroactive adjustments that may be made as a result of the ongoing third-party carrier review.
Impairments of long-lived assets . We account for impairment of long-lived assets, which include property and equipment, investments, amortizable intangible assets and goodwill, in accordance with the provisions of SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets or SFAS No. 142 Goodwill and Other Intangible Assets, as applicable. Impairment reviews are performed at least annually and whenever a change in condition occurs which indicates that the carrying amounts of assets may not be recoverable. Such changes include changes in our business strategies and plans, changes in the quality or structure of our relationships with our partners and deteriorating operating performance of individual dialysis centers. We use a variety of factors to assess the realizable value of assets depending on their nature and use. Such assessments are primarily based upon the sum of expected future undiscounted net cash flows over the expected period the asset
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will be utilized, as well as market values and conditions. The computation of expected future undiscounted net cash flows can be complex and involves a number of subjective assumptions. Any changes in these factors or assumptions could impact the assessed value of an asset and result in an impairment charge equal to the amount by which its carrying value exceeds its actual or estimated fair value.
Accounting for income taxes . We estimate our income tax provision to recognize our tax expense for the current year and our deferred tax liabilities and assets for future tax consequences of events that have been recognized in our financial statements, measured using enacted tax rates and laws expected to apply in the periods when the deferred tax liabilities or assets are expected to be realized. Deferred tax assets are assessed based upon the likelihood of recoverability from future taxable income and to the extent that recovery is not likely, a valuation allowance is established. The allowance is regularly reviewed and updated for changes in circumstances that would cause a change in judgment about the realizability of the related deferred tax assets. These calculations and assessments involve complex estimates and judgments because the ultimate tax outcome can be uncertain or future events unpredictable.
Variable compensation accruals . We estimate variable compensation accruals quarterly based upon the annual amounts expected to be earned and paid out resulting from the achievement of certain teammate-specific and/or corporate financial and operating goals. Our estimates, which include compensation incentives for bonuses, awards and benefit plan contributions, are updated periodically due to changes in our economic condition or cash flows that could ultimately impact the actual final award. Actual results may vary due to the subjective nature of fulfilling employee specific and/or corporate goals, as well as the final determination and approval of amounts by our Board of Directors.
Significant new accounting standard for 2005
In December 2004, the Financial Accounting Standards Board (FASB) issued Statement No. 123R, Share-Based Payment, that amends FASB Statements No. 123 and 95, and supersedes APB Opinion No. 25 Accounting for Stock Issued to Employees. This statement requires a company to measure the cost of employee services received in exchange for an award of equity instruments, such as stock options, based on the grant-date fair value of the award and to recognize such cost over the requisite period during which an employee provides service. The grant-date fair value will be determined using option-pricing models adjusted for unique characteristics of the equity instruments. The statement also addresses the accounting for transactions in which a company incurs liabilities in exchange for goods or services that are based on the fair value of the Companys equity instruments or that may be settled through the issuance of such equity instruments. The statement does not change the accounting for transactions in which a company issues equity instruments for services to non-employees or the accounting for employee stock ownership plans. This statement is effective beginning in the third quarter of 2005, and requires us to recognize compensation costs on outstanding awards for which the requisite service has not yet been rendered. We currently project that the adoption of this standard will reduce pre-tax income by less than $10 million for the second half of 2005.
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RISK FACTORS
This Annual Report on Form 10-K contains statements that are forward-looking statements within the meaning of the federal securities laws. These statements involve known and unknown risks and uncertainties including the risks discussed below. The risks discussed below are not the only ones facing our business. Please read the cautionary notice regarding forward-looking statements under the heading Managements Discussion and Analysis of Financial Condition and Results of Operations.
If the average rates that private payors pay us decline, then our revenues, earnings and cash flows would be substantially reduced.
Approximately 40% of our dialysis revenues are generated from patients who have private payors as the primary payor. The majority of these patients have insurance policies that reimburse us on terms and at rates materially higher than Medicare rates. Based on our recent experience in negotiating with private payors, we believe that pressure from private payors to decrease the rates they pay us may increase. If the average rates that private payors pay us decline significantly, it would have a material adverse effect on our revenues, earnings and cash flows.
If the number of patients with higher paying commercial insurance declines, then our revenues, earnings and cash flows would be substantially reduced.
Our revenue levels are sensitive to the percentage of our reimbursements from higher-paying commercial plans. A patients insurance coverage may change for a number of reasons, including as a result of changes in the patients or a family members employment status. For a patient covered by an employer group health plan, Medicare generally becomes the primary payor after 33 months, or earlier if the patients employer group health plan coverage terminates. When Medicare becomes the primary payor, the payment rate we receive for that patient shifts from the employer group health plan rate to the Medicare reimbursement rate. If there is a significant reduction in the number of patients under higher-paying commercial plans relative to government-based programs that pay at lower rates it would have a material adverse effect on our revenues, earnings and cash flows.
Future declines, or the lack of further increases, in Medicare reimbursement rates would reduce our revenues, earnings and cash flows.
Approximately one half of our dialysis revenues are generated from patients who have Medicare as their primary payor. The Medicare ESRD program reimburses us for dialysis and ancillary services at fixed rates. Unlike most other Medicare programs, the Medicare ESRD program does not provide for periodic inflation increases in reimbursement rates. Increases of 1.2% in 2000 and 2.4% in 2001 were the first increases in the composite reimbursement rate since 1991, and were significantly less than the cumulative rate of inflation over the same period. For 2002 through 2004, there was no increase in the composite reimbursement rate. Effective January 1, 2005, there was an increase of only 1.6%. Increases in operating costs that are subject to inflation, such as labor and supply costs, have occurred and are expected to continue to occur regardless of whether there is a compensating increase in reimbursement rates. We cannot predict with certainty the nature or extent of future rate changes, if any. To the extent these rates decline or are not adjusted to keep pace with inflation, our revenues, earnings and cash flows would be adversely affected.
Changes in the structure of, and reimbursement rates under, the Medicare ESRD program could substantially reduce our revenues, earnings and cash flows.
The Medicare composite reimbursement rate covers the cost of treatment, including the supplies used in those treatments, specified laboratory tests and certain pharmaceuticals. Other services and pharmaceuticals, including EPO, vitamin D analogs and iron supplements, are separately billed. Changes to the structure of the composite rate and separately billable reimbursement rates became effective on January 1, 2005. These changes
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more than offset the 1.6% composite rate increase that also became effective January 1, 2005. In addition, effective April 1, 2005, the Centers for Medicare and Medicaid Services, or CMS, plans to implement a case-mix adjustment payment methodology which is designed to pay differential composite service rates based on a variety of patient characteristics. If the case-mix adjustment is not properly implemented it could adversely affect the Medicare reimbursement rates. Future changes in the structure of, and reimbursement rates under, the Medicare ESRD program could substantially reduce our revenues, earnings and cash flows.
CMS continues to study the ESRD reimbursement system through a number of demonstration projects which will take place over the next few years. The changes that went into effect on January 1, 2005 include changes in the way we are reimbursed for certain pharmaceuticals that are currently billed outside the composite rate. Pharmaceuticals are approximately one half of our total Medicare revenues. If Medicare begins to include in its composite reimbursement rate pharmaceuticals, laboratory services or other ancillary services that it currently reimburses separately, or if there are further changes to or decreases in the reimbursement rate for these items without a corresponding increase in the composite rate, it would have a material adverse effect on our revenues, earnings and cash flows.
Changes in state Medicaid programs or reimbursement rates could reduce our revenues, earnings and cash flows.
More than 5% of our dialysis revenues are generated from patients who have Medicaid as their primary coverage. State governments may propose reductions in reimbursement rates, limitations on eligibility or other changes to Medicaid programs from time to time. If state governments reduce the rates paid by those programs for dialysis and related services, limit eligibility for Medicaid coverage or adopt changes similar to those adopted by Medicare, then our revenues, earnings and cash flows could be adversely affected.
Changes in clinical practices and reimbursement rates or rules for EPO and other pharmaceuticals could substantially reduce our revenues, earnings and cash flows.
The administration of EPO and other pharmaceuticals accounts for approximately 40% of our total dialysis revenues. Changes in physician practice patterns and accepted clinical practices, changes in private and governmental reimbursement criteria, the introduction of new pharmaceuticals and the conversion to alternate types of administration could have a material adverse effect on our revenues, earnings and cash flows.
For example, some Medicare fiscal intermediaries (Medicare claims processing contractors) are seeking to implement local medical review policies for EPO and vitamin D analogs that would effectively limit utilization of and reimbursement for these pharmaceuticals. CMS has proposed a draft reimbursement policy that would direct all fiscal intermediaries with respect to reimbursement coverage for EPO. It is possible that the draft policy, if finalized, will affect physician prescription patterns and the timing of our cash flows due to changes in auditing methodology by fiscal intermediaries.
Adverse developments with respect to EPO and the introduction of Aranesp ® could materially reduce our earnings and cash flows and affect our ability to care for our patients.
Amgen is the sole supplier of EPO and may unilaterally decide to increase its price for EPO at any time. For example, Amgen unilaterally increased its base price for EPO by 3.9% in each of 2002, 2001 and 2000. Although we have entered into contracts for EPO pricing for a fixed time period that includes discount variables depending on certain clinical criteria and other criteria, we cannot predict whether we will continue to receive the discount structure for EPO that we currently receive, or whether we will continue to achieve the same levels of discounts within that structure as we have historically achieved. An increase in the cost of EPO could have a material adverse effect on our earnings and cash flows.
Amgen has developed and obtained FDA approval for Aranesp ® , a new pharmaceutical used to treat anemia that may replace EPO or reduce its use with dialysis patients. Unlike EPO, which is generally administered in
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conjunction with each dialysis treatment, Aranesp ® can remain effective for between two and three weeks. In the event that Amgen begins to market Aranesp ® for the treatment of dialysis patients, we may realize lower margins on the administration of Aranesp ® than are currently realized with EPO. In addition, some physicians may begin to administer Aranesp ® in their offices, which would prevent us from recognizing revenue or profit from the administration of EPO or Aranesp ® to those physicians patients. A significant increase in the use of Aranesp ® would have a material adverse effect on our revenues, earnings and cash flows.
The investigation related to the subpoena we received on October 25, 2004 from the U.S. Attorneys Office for the Eastern District of New York could result in substantial penalties against us.
We are voluntarily cooperating with the U.S. Attorneys Office for the Eastern District of New York and the OIG with respect to the subpoena we received on October 25, 2004, which requested a wide range of documents, including specific documents relating to testing of parathyroid hormone levels and products relating to vitamin D therapies. Other participants in the dialysis industry received a similar subpoena including Gambro Healthcare, Fresenius Medical Care and Renal Care Group. The U.S. Attorneys Office has also requested information regarding our Florida laboratory. Compliance with the subpoena will require management attention and legal expense. We are unable to determine when these matters will be resolved, whether any additional areas of inquiry will be opened or any outcome of these matters, financial or otherwise. In addition, criminal proceedings may be initiated against us in connection with this inquiry. Any negative findings could result in substantial financial penalties against us, exclusion from future participation in the Medicare and Medicaid programs and criminal penalties.
The pending federal review related to the subpoena we received in May 2002 from the U.S. Attorneys Office for the Eastern District of Pennsylvania could result in substantial penalties against us.
We are voluntarily cooperating with the Civil Division of the U.S. Attorneys Office for the Eastern District of Pennsylvania and the OIG in a review of some historical practices, including billing and other operating procedures, financial relationships with physicians and pharmaceutical companies, and the provision of pharmaceutical and other ancillary services, including laboratory and other diagnostic testing services. The U.S. Attorneys Office has also requested and received information regarding certain of our laboratories. We are unable to determine when these matters will be resolved, whether any additional areas of inquiry will be opened or any outcome of these matters, financial or otherwise. Any negative findings could result in substantial financial penalties against us and exclusion from future participation in the Medicare and Medicaid programs.
If we fail to adhere to all of the complex government regulations that apply to our business, we could suffer severe consequences that would substantially reduce our revenues, earnings and cash flows.
Our dialysis operations are subject to extensive federal, state and local government regulations, including Medicare and Medicaid reimbursement rules and regulations, federal and state anti-kickback laws, Stark II physician self-referral prohibition and analogous state referral statutes, and federal and state laws regarding the collection, use and disclosure of patient health information. The regulatory scrutiny of healthcare providers, including dialysis providers, has increased significantly in recent years. Medicare has increased the frequency and intensity of its certification surveys and inspections of dialysis centers have increased markedly in recent years. In addition, fiscal intermediaries are increasing their prepayment and post-payment reviews.
We endeavor to comply with all of the requirements for receiving Medicare and Medicaid reimbursement and to structure all of our relationships with referring physicians to comply with the anti-kickback laws and the Stark II physicians self-referral law. However, the laws and regulations in this area are complex and subject to varying interpretations. For example, none of our medical director agreements establishes compensation using the anti-kickback safe harbor method; rather, compensation under our medical director agreements is the result of individual negotiation and the Company believes exceeds amounts determined in that manner. If an enforcement agency were to challenge the level of compensation that we pay our medical directors, we could be required to
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change our practices, face criminal or civil penalties, pay substantial fines or otherwise experience a material adverse effect as a result of a challenge to these arrangements.
Due to regulatory considerations unique to each of these states, all of our dialysis operations in New York and some of our dialysis operations in New Jersey are conducted by privately-owned companies to which we provide a broad range of administrative services. These operations account for approximately 6% of our dialysis revenues. We believe that we have structured these operations to comply with the laws and regulations of these states, but we can give no assurances that they will not be challenged.
If any of our operations are found to violate these or other government regulations, we could suffer severe consequences that would have a material adverse effect on our revenues, earnings and cash flows including:
| Mandated practice changes that significantly increase operating expenses; |
| Suspension or termination of our participation in government reimbursement programs; |
| Refunds of amounts received in violation of law or applicable reimbursement program requirements; |
| Loss of required government certifications or exclusion from government reimbursement programs; |
| Loss of licenses required to operate healthcare facilities in some of the states in which we operate, including the loss of revenues from operations in New York and New Jersey conducted by privately-owned companies as described above; |
| Fines, damages or monetary penalties for anti-kickback law violations, Stark II violations, submission of false claims, civil or criminal liability based on violations of law, or other failures to meet reimbursement program requirements and patient privacy law violations; |
| Claims for monetary damages from patients who believe their protected health information has been used or disclosed in violation of federal or state patient privacy laws; and |
| Termination of relationships with medical directors. |
We may be subject to liability claims for damages and other expenses not covered by insurance that could reduce our earnings and cash flows.
The administration of dialysis and related services to patients may subject us to litigation and liability for damages. Our business, profitability and growth prospects could suffer if we face negative publicity or we pay damages or defense costs in connection with a claim that is outside the scope of any applicable insurance coverage. We currently maintain programs of general and professional liability insurance. However, a successful professional liability, malpractice or negligence claim in excess of our insurance coverage could harm our profitability and liquidity.
In addition, if our costs of insurance and claims increase, then our earnings could decline. Market rates for insurance premiums and deductibles have been steadily increasing. Our earnings and cash flows could be materially and adversely affected by any of the following:
| Further increases in premiums and deductibles; |
| Increases in the number of liability claims against us or the cost of settling or trying cases related to those claims; and |
| An inability to obtain one or more types of insurance on acceptable terms. |
If businesses we acquire have unknown liabilities, we could suffer severe consequences that would substantially reduce our revenues, earnings and cash flows.
Our business strategy includes the acquisition of dialysis centers and businesses that own and operate dialysis centers. Businesses we acquire may have unknown or contingent liabilities or liabilities that are in excess of the amounts that we had estimated. These liabilities could include liabilities arising as a result of any failure to adhere to laws and regulations governing dialysis operations, such as violations of federal or state anti-kickback statutes or Stark II. Although we generally seek indemnification from the sellers of businesses we acquire for
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matters that are not properly disclosed to us, we are not always successful. In addition, even in cases where we are able to obtain indemnification, we may discover liabilities greater than the contractual limits or the financial resources of the indemnifying party. In the event that we are responsible for liabilities substantially in excess of any amounts recovered through rights to indemnification, we could suffer severe consequences that would substantially reduce our revenues, earnings and cash flows.
If a significant number of physicians were to cease referring patients to our dialysis centers, whether due to regulatory or other reasons, then our revenues, earnings and cash flows would be substantially reduced.
Many physicians prefer to have their patients treated at dialysis centers where they or other members of their practice supervise the overall care provided as medical directors of the centers. As a result, the primary referral source for most of our centers is often the physician or physician group providing medical director services to the center. If a medical director agreement terminates, whether before or at the end of its term, and a new medical director is appointed, it may negatively impact the former medical directors decision to treat his or her patients at our center. Additionally, both current and former medical directors have no obligation to refer their patients to our centers. Also, if the quality of service levels at our centers deteriorate, it may negatively impact patient referrals and treatment volumes.
Our medical director contracts are for fixed periods, generally five to ten years. Medical directors have no obligation to extend their agreements with us. As of January 1, 2005, there were 59 centers, accounting for approximately 9% of our 2004 treatment volume, at which the medical director agreements require renewal on or before December 31, 2005.
We may take actions to restructure existing relationships or take positions in negotiating extensions of relationships to assure compliance with the safe harbor provisions of the anti-kickback statute, Stark II law and other similar laws. These actions could negatively impact the decision of physicians to extend their medical director agreements with us or to refer their patients to us. If the terms of any existing agreement are found to violate applicable laws, we may not be successful in restructuring the relationship which could lead to the early termination of the agreement, or force the physician to stop referring patients to the centers.
If our joint ventures were found to violate the law, we could suffer severe consequences that would have a material adverse effect on our revenues, earnings and cash flows.
As of December 31, 2004 we operated 128 dialysis centers, representing approximately 15% of our dialysis revenue, that are owned by joint ventures in which we own a controlling interest and one or more physicians or physician practice groups have a minority interest. The physician owners may also provide medical director services to those centers or other centers we own and operate. Because our relationships with physicians are governed by the anti-kickback statute contained in the Social Security Act, we have sought to structure our joint venture arrangements to satisfy as many safe harbor requirements as possible. However, our joint venture arrangements do not satisfy all elements of any safe harbor under the federal anti-kickback statute. Based on the exceptions applicable to ESRD services, we believe that our joint venture arrangements and operations materially comply with the Stark II law. If the joint ventures are found to be in violation of the anti-kickback statute or the Stark provisions, we could be required to restructure the joint ventures or refuse to accept referrals for designated health services from the physicians with whom the joint venture centers have a financial relationship. We also could be required to repay to Medicare amounts received by the joint ventures pursuant to prohibited referrals, and we could be subject to monetary penalties and exclusion from government healthcare programs. If our joint venture centers are subject to any of these penalties, we could suffer severe consequences that would have a material adverse effect on our revenues, earnings and cash flows.
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The level of our current and future debt could have an adverse impact on our business.
We have substantial debt outstanding and if we consummate the proposed Gambro Healthcare acquisition we will incur substantial additional debt. In addition, we may incur additional indebtedness in the future. The level of our current and proposed indebtedness, among other things, could:
| make it difficult for us to make payments on our debt securities; |
| increase our vulnerability to general adverse economic and industry conditions; |
| require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes; |
| expose us to interest rate fluctuations because the interest on the debt under some of our indebtedness may be at variable rates; |
| limit our flexibility in planning for, or reacting to, changes in our business and the markets in which we operate; |
| place us at a competitive disadvantage compared to our competitors that have less debt; and |
| limit our ability to borrow additional funds. |
If additional debt financing is not available when required or is not available on acceptable terms, we may be unable to grow our business, take advantage of business opportunities, respond to competitive pressures or refinance maturing debt, any of which could have a material adverse effect on our operating results and financial condition.
We will require a significant amount of cash to service our indebtedness. Our ability to generate cash depends on many factors beyond our control.
Our ability to make payments on our indebtedness and to fund planned capital expenditures and expansion efforts, including any strategic acquisitions we may make in the future, will depend on our ability to generate cash. This, to a certain extent, is subject to general economic, financial, competitive, regulatory and other factors that are beyond our control.
We cannot assure you that our business will generate sufficient cash flow from operations in the future, that our currently anticipated growth in revenue and cash flow will be realized on schedule or that future borrowings will be available to us in an amount sufficient to enable us to service our indebtedness, including the notes, or to fund other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before maturity. Our senior secured credit facilities are secured by substantially all of our and our subsidiaries assets. As such, our ability to refinance our debt or seek additional financing could be limited by such security interest. We cannot assure you that we will be able to refinance our indebtedness on commercially reasonable terms or at all.
If the current shortage of skilled clinical personnel continues, we may experience disruptions in our business operations and increases in operating expenses.
We are experiencing increased labor costs and difficulties in hiring nurses due to a nationwide shortage of skilled clinical personnel. We compete for nurses with hospitals and other health care providers. This nursing shortage may limit our ability to expand our operations. If we are unable to hire skilled clinical personnel when needed, our operations and treatment growth will be negatively impacted, which would result in reduced revenues, earnings and cash flows.
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Provisions in our charter documents, compensation programs and Delaware law may deter a change of control that our stockholders would otherwise determine to be in their best interests.
Our charter documents include provisions that may deter hostile takeovers, delay or prevent changes of control or changes in our management, or limit the ability of our stockholders to approve transactions that they may otherwise determine to be in their best interests. These include provisions prohibiting our stockholders from acting by written consent, requiring 90 days advance notice of stockholder proposals or nominations to our Board of Directors and granting our Board of Directors the authority to issue up to five million shares of preferred stock and to determine the rights and preferences of the preferred stock without the need for further stockholder approval, and a poison pill that would substantially dilute the interest sought by an acquirer that our Board of Directors does not approve.
In addition, most of our outstanding employee stock options include a provision accelerating the vesting of the options in the event of a change of control. We have also adopted a change of control protection program for our employees who do not have a significant number of stock awards, which provides for cash bonuses to the employees in the event of a change of control. Based on the shares of our common stock outstanding and the market price of our stock on December 31, 2004, these cash bonuses would total approximately $149 million if a control transaction occurred at that price and our Board of Directors did not modify the program. These compensation programs may affect the price an acquirer would be willing to pay.
We are also subject to Section 203 of the Delaware General Corporation Law that, subject to exceptions, would prohibit us from engaging in any business combinations with any interested stockholder, as defined in that section, for a period of three years following the date on which that stockholder became an interested stockholder. These restrictions may discourage, delay or prevent a change in the control of our Company.
These provisions may discourage, delay or prevent an acquisition of our Company at a price that our stockholders may find attractive. These provisions could also make it more difficult for our stockholders to elect directors and take other corporate actions and could limit the price that investors might be willing to pay for shares of our common stock.
The Gambro Healthcare acquisition is significantly larger than any other acquisition we have made to date. We will face challenges integrating the Gambro Healthcare centers and may not realize anticipated benefits.
The Gambro Healthcare acquisition is the largest acquisition we have attempted to date. There is a risk that, due to the size of the acquisition, we will be unable to integrate Gambro Healthcare into our operations as effectively as we have with prior acquisitions, which would result in fewer benefits to us from the acquisition than currently anticipated as well as increased costs. The integration of the Gambro Healthcare operations will require implementation of appropriate operations, management and financial reporting systems and controls. We may experience difficulties in effectively implementing these and other systems and integrating Gambro Healthcares systems and operations. In addition, the integration of Gambro Healthcare will require the focused attention of our management team, including a significant commitment of their time and resources. The need for management to focus on integration matters, could have a material and adverse impact on our revenues and operating results. If the integration is not successful or if our Gambro Healthcare operations are less profitable than we currently anticipate, our results of operations and financial condition may be materially and adversely affected.
We will assume substantially all of Gambro Healthcares liabilities, including contingent liabilities. If these liabilities are greater than expected, or if there are unknown Gambro Healthcare obligations, our business could be materially and adversely affected.
As a result of the Gambro Healthcare acquisition, we will assume substantially all of Gambro Healthcares liabilities, including contingent liabilities. We may learn additional information about Gambro Healthcares
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business that adversely affects us, such as unknown liabilities, issues relating to internal controls over financial reporting, issues that could affect our ability to comply with the Sarbanes-Oxley Act after we acquire Gambro Healthcare or issues that could affect our ability to comply with other applicable laws, including laws and regulations governing dialysis operations. As a result, we cannot assure you that the Gambro Healthcare acquisition will be successful or will not, in fact, harm our business. Among other things, if Gambro Healthcares liabilities are greater than expected, or if there are obligations of Gambro Healthcare of which we are not aware at the time of completion of the acquisition, our business could be materially and adversely affected.
We have limited indemnification rights in connection with these and other regulatory compliance and litigation matters affecting Gambro Healthcare, as well as known contingent liabilities of Gambro Healthcare that we will assume. For example, Gambro Healthcare was served a complaint regarding a former employee and a putative class of employees in California for claims relating to California labor laws. Although this matter is subject to indemnification under the acquisition agreement, claims relating to this matter may exceed the limit on our indemnification rights. Gambro Healthcare may also have other unknown liabilities which we will be responsible for after the acquisition. If we are responsible for liabilities not covered by indemnification rights or substantially in excess of amounts covered through any indemnification rights, we could suffer severe consequences that would substantially reduce our revenues, earnings and cash flows.
The integration of Gambro Healthcare and the realization of cost savings will require us to make significant expenditures.
In order to obtain the cost savings and operating income that we believe the integration of Gambro Healthcare should provide, we will be required to make significant expenditures. We are in the early stages of planning for the integration process and are uncertain as to the extent and amount of these expenditures. Further, given the amount of indebtedness that we will incur as part of the Gambro Healthcare acquisition, we may not be able to obtain additional financing required for any significant expenditures on favorable terms or at all. In addition, we may not achieve the cost savings we expect through the integration of the Gambro Healthcare operations regardless of our expenditures, which failure would materially and adversely affect our financial results. The costs associated with compliance with the corporate integrity agreement could be substantial and may be greater than we currently anticipate.
If we experience a higher than normal turnover rate for Gambro Healthcare employees after the acquisition, we may not be able to effectively integrate their operations.
In order to successfully integrate the Gambro Healthcare operations into our own, we will require the services of Gambro Healthcares clinical, operating and administrative employees. If we experience a higher than normal turnover rate for Gambro Healthcare employees, we may not be able to effectively integrate Gambro Healthcares systems and operations.
If we lose the services of a significant number of Gambro Healthcares medical directors, our results of operations could be harmed.
Certain of Gambro Healthcares contracts with its medical directors provide that the contract is terminable upon a change of control of Gambro Healthcare. These termination provisions would be triggered by our acquisition of Gambro Healthcare. If we lose the services of a significant number of Gambro Healthcares medical directors, our results of operations may be harmed.
Our alliance and product supply agreement with Gambro Renal Products Inc. will limit our ability to achieve costs savings with respect to products and equipment we are required to purchase under this agreement.
In connection with the Gambro Healthcare acquisition, we will enter into a ten-year alliance and product supply agreement with Gambro Renal Products Inc., a subsidiary of Gambro AB, pursuant to which we will be
41
required to purchase from Gambro Renal Products specified percentages of our requirements for hemodialysis products, supplies and equipment at fixed prices. This will limit our ability to realize future cost savings in regard to these products and equipment. For the twelve months ended December 31, 2004, our total spending on hemodialysis products, supplies and equipment was approximately 8% of our total operating costs. If Gambro Renal Products is unable to fulfill its obligations under the agreement, we may have difficulty finding alternative sources of supplies on favorable financial terms, further reducing our ability to achieve cost savings. In addition, as we replace existing equipment from other third party manufacturers with Gambro Renal Products equipment, we may incur additional expenses as we transition to this new equipment.
The consummation of the Gambro Healthcare acquisition is subject to a number of conditions; if these conditions are not satisfied or waived, we will not be able to consummate the acquisition.
The stock purchase agreement relating to the Gambro Healthcare acquisition contains a number of conditions which must be satisfied or waived prior to the closing of the acquisition. These conditions include, among others, execution and delivery of the transition services agreement and the alliance product and supply agreement and receipt of regulatory approvals, including antitrust clearance. On February 18, 2005, we received a request from the Federal Trade Commission for additional information in connection with its review of our anti-trust filing. We intend to respond promptly to this request. The effect of the second request is to extend the waiting period imposed by the Hart-Scott-Rodino Act until thirty days after we and Gambro Healthcare have substantially complied with the request, unless that period is extended voluntarily by us and Gambro Healthcare or is terminated sooner by the FTC. In addition, one or more states Attorneys General could attempt to impose conditions or otherwise interfere with the proposed acquisition. In connection with obtaining antitrust clearance, we may decide to, or the Federal Trade Commission or other regulatory agencies with jurisdiction may request that we divest certain of our or Gambro Healthcares dialysis centers. These divestitures could be material. In addition, we will require financing in order to consummate the Gambro Healthcare acquisition. We have obtained acquisition financing commitments from a group of financial institutions, however such commitments are subject to customary conditions. We therefore cannot assure you that we will be able to obtain such financing on favorable terms or at all or that we will be able to consummate the Gambro Healthcare acquisition on the terms described herein or at all.
If we do not cause Gambro Healthcare to comply and Gambro Healthcare does not comply with its corporate integrity agreement, or Gambro Healthcare otherwise has failed or fails to comply with applicable government regulations to its operations, we could be subject to additional penalties and otherwise may be materially harmed.
On December 1, 2004, Gambro Healthcare entered into a settlement agreement with the Department of Justice and certain agencies of the United States government relating to the Department of Justices investigation of Gambro Healthcares Medicare and Medicaid billing practices and its relationships with physicians and pharmaceutical manufacturers. In connection with the settlement agreement, Gambro Healthcare, without admitting liability, made a one-time payment of approximately $310 million and entered into a corporate integrity agreement with HHS. In addition, its subsidiary, Gambro Supply Corp., entered a plea of guilty to a one count felony charge related to the conduct of its predecessor, REN Supply Corp., and paid a criminal fine of $25 million. Gambro Supply Corp. was excluded from participation in federal health care programs. However, no other Gambro AB affiliates were so excluded. Gambro Healthcare also agreed to voluntarily cooperate with the government in connection with its further investigation. The corporate integrity agreement applies to all of Gambro Healthcares centers and requires, among other things, that Gambro Healthcare implement additional training, engage an independent review organization to conduct an annual review of certain of its reimbursement claims, and submit to the OIG an annual report with respect to its compliance activities. Moreover, Gambro Healthcare has reached a preliminary understanding with the National Association of Medicaid Fraud Control Units to settle the related claims of the affected state Medicaid programs for a one-time payment of $15 million plus interest accruing at the rate of 5% per annum from December 1, 2004. Completion of the Medicaid settlement is subject to confirmation of certain claims data and negotiation and execution of settlement
42
agreements with the relevant states. As a result of the settlement agreement, private payors and other third parties may initiate legal proceedings against Gambro Healthcare related to the billing practices and other matters covered by the settlement agreement. If we do not cause Gambro Healthcare to comply, and Gambro Healthcare does not comply, with the terms of the corporate integrity agreement or otherwise has failed or fails to comply with the extensive federal, state and local government regulations applicable to its operations, we could be subject to additional penalties, including monetary penalties or suspension from participation in government reimbursement programs, and otherwise may be materially harmed. The costs associated with compliance with the corporate integrity agreement and cooperation with the government could be substantial and may be greater than we currently anticipate.
43
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Interest rate sensitivity
The table below provides information about our financial instruments that are sensitive to changes in interest rates. The table presents principal repayments and current weighted average interest rates on our debt obligations as of December 31, 2004. For our debt obligations with variable interest rates, the rates presented reflect the current rates in effect at the end of 2004 including the economic effects of our swap agreements. These rates are based on LIBOR plus margins based upon performance and leverage criteria plus the impact from the swap agreements. The margins currently in effect range from 1.75% to 2.00%.
Expected maturity date
|
Total
|
Fair Value |
Average interest rate |
||||||||||||||||||||||||
2005
|
2006
|
2007
|
2008
|
2009
|
Thereafter
|
||||||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||||||||
Long-term debt: |
|||||||||||||||||||||||||||
Fixed rate |
$ | 5 | $ | 1 | $ | 3 | $ | 3 | $ | 13 | $ | 13 | 5.53 | % | |||||||||||||
Variable rate |
$ | 48 | $ | 55 | $ | 25 | $ | 15 | $ | 614 | $ | 606 | $ | 1,363 | $ | 1,363 | 4.63 | % |
Our senior credit facility is based on a floating LIBOR interest rate plus a margin, which is reset periodically and can be locked in for a maximum of six months. As a result, our interest expense is subject to fluctuations as LIBOR interest rates change.
We have entered into three interest rate swap agreements, two matched on our Term Loan B outstanding debt and one matched on our Term Loan C outstanding debt. As of December 31, 2004, the total notional amount of these swap agreements was $345 million and the interest rates were economically modified to fixed rates ranging from 3.08% to 3.64% plus the Term Loan margins ranging from 1.75% to 2.00%, in effect as of December 31, 2004. This resulted in an overall effective rate of 5.27% as of December 31, 2004, on approximately 25% of our outstanding debt. Two of the swap agreements expire in 2008 and one in 2009. As of December 31, 2004, the fair value of the swaps was an asset of $2.4 million.
As a result of these swap agreements, our overall effective weighted average interest rate of our credit facility was 4.60% based upon current margins in effect ranging from 1.75% to 2.00% as of December 31, 2004.
We also have entered into two forward interest rate swap agreements that will have the economic effect of modifying the LIBOR-based interest rate to become a fixed rate at 3.875% effective July 1, 2005. The total amortizing notional amount of the two swaps is $800 million and both expire in January 2010 and require quarterly interest payments beginning in October 2005. As of December 31, 2004, the fair value of these swaps was an asset of $0.4 million.
As a result of all of our swap agreements, we will have over 80% of our outstanding variable rate debt economically fixed.
One means of assessing exposure to interest rate changes is duration-based analysis that measures the potential loss in net income resulting from a hypothetical increase in interest rates of 100 basis points across all variable rate maturities (referred to as a parallel shift in the yield curve). Under this model, with all else constant, it is estimated that such an increase would have reduced net income by approximately $5.9 million, $6.5 million and $3.5 million, net of tax, for the years ended December 31, 2004, 2003 and 2002, respectively.
Exchange rate sensitivity
We are currently not exposed to any foreign currency exchange rate risk.
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Item 8. Financial Statements and Supplementary Data.
See the Index to Financial Statements and Index to Financial Statement Schedules included at Item 15. Exhibits, Financial Statement Schedules.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Management has established and maintains disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in the reports filed by the Company pursuant to the Securities Exchange Act of 1934, as amended, or Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and regulations, and that such information is accumulated and communicated to the Companys management including its Chief Executive Officer and Chief Financial Officer as appropriate to allow for timely decisions regarding required disclosures. Management recognizes that these controls and procedures can provide only reasonable assurance of desired outcomes, and that estimates and judgments are still inherent in the process of maintaining effective controls and procedures.
At the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of the Companys Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures in accordance with the Exchange Act requirements. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective for timely identification and review of material information required to be included in the Companys Exchange Act reports, including this report on Form 10-K.
Managements report on internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act, is included in the Report of
Item 9B. Other Information.
To encourage extraordinary effort in areas that can have a significant positive impact on the Companys business, the Company has given certain executives the opportunity to earn special bonuses, which, if earned, would be in addition to any other compensation or benefits for which the executives would otherwise be eligible. Currently, Dr. Charles J. McAllister has a special bonus opportunity of up to $430,000. The memorandum evidencing such opportunity has been filed as an exhibit to this Form 10-K. Also, the Company has understandings with Messrs. Thomas Kelly, Thomas Usilton and Joseph Schohl to pay them special bonuses of up to $250,000, $200,000 and $125,000, respectively, if certain results are successfully achieved in connection with the pending acquisition of Gambro Healthcare. The Company has entered into an amended and restated Employment Agreement with Denise Fletcher, Chief Financial Officer of the Company, which is filed as an Exhibit to this Form 10-K and which modified certain provisions of the original agreement relating to severance.
45
PART III
Item 10. Directors and Executive Officers of the Registrant.
In 2002, we adopted a Corporate Governance Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, and to all of our financial accounting and reporting professionals who are directly or indirectly involved in the preparation, reporting and fair presentation of our financial statements and Exchange Act Reports. The Code of Ethics is posted on the Companys website, located at http://www.davita.com . The Company also maintains a Corporate Code of Conduct that applies to all of its employees, which is posted on the Companys website.
Under our Corporate Governance Guidelines all Board Committees including the Audit Committee, Nominating and Governance Committee and the Compensation Committee, which are comprised solely of Independent Directors as defined within the listing standards of the New York Stock Exchange, have written charters that outline the committees purpose, goals, membership requirements and responsibilities. These charters are regularly reviewed and updated as necessary by our Board of Directors. All Board Committee charters as well as the Corporate Governance Guidelines are posted on our website located at http://www.davita.com . This information is also available in print to any shareholders who request it.
On June 11, 2004, we submitted to the New York Stock Exchange a certification signed by our Chief Executive Officer that as of May 3, 2004 he was not aware of any violation by us of the NYSE corporate governance listing standards.
The other information required to be disclosed by this item will appear in, and is incorporated by reference from, the section entitled Proposal No. 1. Election of Directors under the subheading Information concerning nominees to our board of directors and the section entitled Executive Officers, Compensation and Other Information under the subheadings Information concerning our executive officers and Section 16(a) beneficial ownership reporting compliance and the section entitled the Audit Committee Financial Expert included in our definitive proxy statement
Item 11. Executive Compensation.
The information required by this item will appear in, and is incorporated by reference from, the section entitled Proposal No. 1. Election of Directors under the subheading Compensation of directors and the section entitled Executive Officers, Compensation and Other Information under the subheadings Executive compensation, Employment agreements and Compensation committee interlocks and insider participation included in our definitive proxy statement relating to our 2005 annual stockholder meeting. The compensation committee report and performance graph required by Items 402(k) and (l) of Regulation S-K are not incorporated herein.
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Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table provides information about our common stock that may be issued upon the exercise of options, warrants and rights under all of our existing equity compensation plans and arrangements as of December 31, 2004, including the 1994 Equity Compensation Plan, the 1995 Equity Compensation Plan, the 1997 Equity Compensation Plan, the 1999 Equity Compensation Plan, the 1999 Non-Executive Officer and Non-Director Equity Compensation Plan, the Special Purpose Option Plan (RTC Plan), the 2002 Equity Compensation Plan, the Employee Stock Purchase Plan and the deferred stock unit arrangements. The material terms of each of these plans and arrangements are described in the notes to the December 31, 2004 consolidated financial statements. The 1999 Non-Executive Officer and Non-Director Equity Compensation Plan and the deferred stock unit arrangements were not required to be approved by our shareholders.
Plan category |
Number of shares to be
issued upon exercise of outstanding options, warrants and rights |
Weighted average
exercise price of outstanding options, warrants and rights |
Number of shares
under equity compensation
|
Total of
shares reflected in columns (a) and (c) |
|||||
(a) | (b) | (c) | (d) | ||||||
Equity compensation plans approved by shareholders |
7,393,107 | $ | 17.56 | 14,446,031 | 21,839,138 | ||||
Equity compensation plans not requiring shareholder approval |
3,509,769 | $ | 13.11 | 67,337 | 3,577,106 | ||||
|
|
|
|
|
|||||
Total |
10,902,876 | $ | 16.13 | 14,513,368 | 25,416,244 | ||||
|
|
|
|
|
Other information required to be disclosed by item 12 will appear in, and is incorporated by reference from, the section entitled Security Ownership of Principal Stockholders, Directors and Officers included in our definitive proxy statement relating to
Item 13. Certain Relationships and Related Transactions.
The information required by this item will appear in, and is incorporated by reference from, the section entitled Certain Relationships and Related Transactions included in our definitive proxy statement
Item 14. Principal Accounting Fees and Services.
The information required by this item will appear in, and is incorporated by reference from, the section entitled Independent Auditors under the subheadings Audit Fees, Audit-Related Fees, Tax Fees, and All Other Fees included in our definitive proxy statement relating to our 2005 annual stockholder meeting.
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Item 15. Exhibits, Financial Statement Schedules.
(a) Documents filed as part of this Report:
(1) Index to Financial Statements:
Page
|
||
Managements Report on Internal Control Over Financial Reporting |
F-1 | |
F-2 | ||
F-3 | ||
Consolidated Statements of Income for the years ended December 31, 2004, 2003 and 2002 |
F-4 | |
Consolidated Balance Sheets as of December 31, 2004 and December 31, 2003 |
F-5 | |
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002 |
F-6 | |
F-7 | ||
F-8 | ||
(2) Index to Financial Statement Schedules: |
||
S-1 | ||
S-2 |
(3) Exhibits:
2.1 | Stock Purchase Agreement dated as of December 6, 2004, among Gambro AB, Gambro, Inc. and DaVita Inc. (16) | |
3.1 | Amended and Restated Certificate of Incorporation of Total Renal Care Holdings, Inc., or TRCH, dated December 4, 1995.(1) | |
3.2 | Certificate of Amendment of Certificate of Incorporation of TRCH, dated February 26, 1998.(2) | |
3.3 | Certificate of Amendment of Certificate of Incorporation of DaVita Inc. (formerly Total Renal Care Holdings, Inc.), dated October 5, 2000.(6) | |
3.4 | Amended and Restated Bylaws of DaVita Inc. (formerly Total Renal Care Holdings, Inc.) dated June 3, 2004.(14) | |
4.1 | Rights Agreement, dated as of November 14, 2002, between DaVita Inc. and the Bank of New York, as Rights Agent. (3) | |
10.1 | Employment Agreement, dated as of October 18, 1999, by and between TRCH and Kent J. Thiry.(4)* | |
10.2 | Amendment to Mr. Thirys Employment Agreement, dated May 20, 2000.(5)* | |
10.3 | Second Amendment to Mr. Thirys Employment Agreement, dated November 28, 2000.(6)* | |
10.4 | Employment Agreement, dated as of November 29, 1999, by and between TRCH and Gary W. Beil.(6)* |
48
10.5 | Employment Agreement, dated as of July 19, 2000, by and between TRCH and Charles J. McAllister.(6)* | |
10.6 | Employment Agreement, dated as of June 15, 2000, by and between DaVita Inc. and Joseph Mello.(8)* | |
10.7 | Employment Agreement, dated as of October 15, 2002, by and between DaVita Inc. and Lori S. Richardson-Pellicioni.(7)* | |
10.8 | Employment Agreement effective as of June 7, 2004, by and between DaVita Inc. and Tom Kelly.(13)* | |
10.9 | Amended and Restated Employment Agreement, effective as of February 28, 2005, by and between DaVita Inc. and Denise K. Fletcher. ü * | |
10.10 | Employment Agreement, effective as of August 16, 2004, by and between DaVita Inc. and Tom Usilton.(14)* | |
10.11 | Employment Agreement, effective as of November 18, 2004, by and between DaVita Inc. and Joseph Schohl. ü * | |
10.12 | Second Amended and Restated 1994 Equity Compensation Plan.(9) * | |
10.13 | First Amended and Restated 1995 Equity Compensation Plan.(9)* | |
10.14 | First Amended and Restated 1997 Equity Compensation Plan.(9)* | |
10.15 | First Amended and Restated Special Purpose Option Plan.(9)* | |
10.16 | 1999 Equity Compensation Plan.(10)* | |
10.17 | Amended and Restated 1999 Equity Compensation Plan.(11)* | |
10.18 | First Amended and Restated Total Renal Care Holdings, Inc. 1999 Non-Executive Officer and Non-Director Equity Compensation Plan.(7) | |
10.19 | 2002 Equity Compensation Plan.(12)* | |
10.20 | Form of Stock Option Agreement for stock options grants to employees under the Companys 2002 Equity Compensation Plan.(14)* | |
10.21 | Form of Restricted Stock Unit Agreement for restricted stock unit grants to employees under the Companys 2002 Equity Compensation Plan.(14)* | |
10.22 | Security Agreement, dated as of April 26, 2002, made by and among DaVita Inc. and the subsidiaries of DaVita Inc. named therein to Credit Suisse First Boston, Cayman Islands Branch, as the Collateral Agent for the lenders party to the Credit Agreement.(17) | |
10.23 | Subsidiary Guarantee, dated as of April 26, 2002, made by the subsidiaries of DaVita Inc. named therein in favor of the lenders party to the Credit Agreement.(17) | |
10.24 | Third Amended and Restated Credit Agreement, dated as of July, 30, 2004, among DaVita Inc., the lenders party thereto, Credit Suisse First Boston, Cayman Islands Branch as Joint Book Manager, and Administrative Agent and Sole Book Manager for the Term Loan B and the Term Loan C, Banc of America Securities LLC as Joint Book Manager and Bank of America N.A., as Syndication Agent.(13) | |
10.25 | Security Agreement Supplement, dated July 30, 2004, made by the subsidiaries of DaVita Inc. named therein in favor of the lenders party.(13) | |
10.26 | Guarantee Supplement, dated July 30, 2004, made by the subsidiaries of DaVita Inc., named therein in favor of the lenders party to the Third Amended and Restated Credit Agreement.(13) | |
10.27 | Amended and Restated Agreement dated December 2, 2004, between Amgen USA Inc. and DaVita Inc. ü ** | |
10.28 | Form of Indemnity Agreement. ü * | |
10.29 | Executive Incentive Plan.(11) * |
49
10.30 | Post-Retirement Deferred Compensation Arrangement. ü * | |
10.31 | Memorandum relating to bonus structure for Charles J. McAllister. ü * | |
10.32 | Director Compensation Philosophy and Plan. ü * | |
12.1 | Computation of Ratios of Earnings to Fixed Charges. ü | |
14.1 | DaVita Inc. Corporate Governance Code of Ethics.(16) | |
21.1 | List of our subsidiaries. ü | |
23.1 | Consent of KPMG LLP. ü | |
24.1 | Powers of Attorney with respect to DaVita. (Included on Page II-1) | |
31.1 | Certification of the Chief Executive Officer, dated February 28, 2005, pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ü | |
31.2 | Certification of the Chief Financial Officer, dated February 28, 2005, pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ü | |
32.1 | Certification of the Chief Executive Officer, dated February 28, 2005, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ü | |
32.2 | Certification of the Chief Financial Officer, dated February 28, 2005, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ü |
ü | Included in this filing. |
* | Management contract or executive compensation plan or arrangement. |
** | Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the SEC. |
(1) | Filed on March 18, 1996 as an exhibit to our Transitional Report on Form 10-K for the transition period from June 1, 1995 to December 31, 1995. |
(2) | Filed on March 31, 1998 as an exhibit to our Form 10-K for the year ended December 31, 1997. |
(3) | Filed on November 19, 2002 as an exhibit to our Form 8-K reporting the adoption of the Rights Agreement. |
(4) | Filed on November 15, 1999 as an exhibit to the Companys Form 10-Q for the quarter ended September 30, 1999. |
(5) | Filed on August 14, 2000 as an exhibit to the Companys Form 10-Q for the quarter ended June 30, 2000. |
(6) | Filed on March 20, 2001 as an exhibit to our Form 10-K for the year ended December 31, 2000. |
(7) | Filed on February 2, 2003 as an exhibit to the Companys Form 10-K for the year ended December 31, 2002. |
(8) | Filed on August 15, 2001 as an exhibit to the Companys Form 10-Q for the quarter ended June 30, 2001. |
(9) | Filed on March 29, 2000 as an exhibit to our Form 10-K for the year ended December 31, 1999. |
(10) | Filed on February 18, 2000 as an exhibit to our Registration Statement on Form S-8 (Registration Statement No. 333-30736). |
(11) | Filed on April 27, 2001 as an exhibit to the Definitive Proxy Statement for our 2001 Annual Meeting of Stockholders. |
(12) | Filed on March 14, 2002 as an exhibit to the Definitive Proxy Statement for our 2002 Annual Meeting of Stockholders. |
(13) | Filed on August 5, 2004 as an exhibit to the Companys Form 10-Q for the quarter ended June 30, 2004. |
(14) | Filed on November 8, 2004 as an exhibit to the Companys Form 10-Q for the quarter ended September 30, 2004. |
(15) | Filed on March 27, 2004 as an exhibit to the Companys Form 10-K for the year ended December 31, 2003. |
(16) | Filed on December 8, 2004 as an exhibit to the Companys Form 8-K. |
(17) | Filed on May 14, 2002 as an exhibit to the Companys Form 10-Q for the quarter ending March 31, 2002. |
50
DAVITA INC.
MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
We are responsible for establishing and maintaining an adequate system of internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with the generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Companys assets that could have a material effect on the financial statements.
During the last fiscal year, the Company conducted an evaluation, under the oversight of the Principal Executive and Principal Financial Officers, of the effectiveness of the design and operation of the Companys internal control over financial reporting. This evaluation was completed based on the criteria established in the report titled Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based upon that evaluation, we have concluded that the Companys internal control over financial reporting was effective as of December 31, 2004.
The Companys consolidated financial statements have also been audited and reported on by our independent registered public accounting firm, KPMG LLP, who issued an attestation report on managements assessment of the effectiveness of the Companys internal control over financial reporting, which is included in this Annual Report.
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
DaVita Inc.:
We have audited the accompanying consolidated balance sheets of DaVita Inc. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2004. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of DaVita Inc. and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of DaVita Inc.s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 25, 2005 expressed an unqualified opinion on managements assessment of, and the effective operation of, internal control over financial reporting.
/s/ KPMG LLP
Seattle, Washington
February 25, 2005
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
DaVita Inc:
We have audited managements assessment, included in the accompanying managements report on internal control over financial reporting, that DaVita Inc. maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). DaVita Inc.s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on managements assessment and an opinion on the effectiveness of the Companys internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating managements assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, managements assessment that DaVita Inc. maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on COSO. Also, in our opinion, DaVita Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of DaVita Inc. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2004, and our report dated February 25, 2005 expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG LLP
Seattle, Washington
February 25, 2005
F-3
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
Year ended December 31,
|
|||||||||
2004
|
2003
|
2002
|
|||||||
Net operating revenues |
$ | 2,298,595 | $ | 2,016,418 | $ | 1,854,632 | |||
Operating expenses and charges: |
|||||||||
Patient care costs |
1,555,070 | 1,360,556 | 1,217,685 | ||||||
General and administrative |
192,082 | 159,628 | 154,073 | ||||||
Depreciation and amortization |
86,666 | 74,687 | 64,665 | ||||||
Provision for uncollectible accounts |
40,960 | 35,700 | 26,877 | ||||||
Minority interests and equity income, net |
13,694 | 7,312 | 7,506 | ||||||
|
|
|
|
|
|
||||
Total operating expenses and charges |
1,888,472 | 1,637,883 | 1,470,806 | ||||||
|
|
|
|
|
|
||||
Operating income |
410,123 | 378,535 | 383,826 | ||||||
Debt expense |
52,412 | 66,828 | 71,636 | ||||||
Refinancing charges |
26,501 | 48,930 | |||||||
Other income, net |
4,173 | 3,060 | 3,997 | ||||||
|
|
|
|
|
|
||||
Income before income taxes |
361,884 | 288,266 | 267,257 | ||||||
Income tax expense |
139,630 | 112,475 | 109,928 | ||||||
|
|
|
|
|
|
||||
Net income |
$ | 222,254 | $ | 175,791 | $ | 157,329 | |||
|
|
|
|
|
|
||||
Earnings per share: |
|||||||||
Basic |
$ | 2.25 | $ | 1.86 | $ | 1.46 | |||
|
|
|
|
|
|
||||
Diluted |
$ | 2.16 | $ | 1.66 | $ | 1.30 | |||
|
|
|
|
|
|
||||
Weighted average shares for earnings per share: |
|||||||||
Basic |
98,727,000 | 94,346,000 | 107,747,000 | ||||||
|
|
|
|
|
|
||||
Diluted |
102,861,000 | 113,760,000 | 135,720,000 | ||||||
|
|
|
|
|
|
See notes to consolidated financial statements.
F-4
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
December 31,
|
||||||||
2004
|
2003
|
|||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ | 251,979 | $ | 61,657 | ||||
Accounts receivable, less allowance of $58,166 and $52,554 |
462,095 | 387,933 | ||||||
Medicare lab recoveries |
19,000 | |||||||
Inventories |
31,843 | 32,853 | ||||||
Other current assets |
44,210 | 43,875 | ||||||
Deferred income taxes |
78,593 | 59,740 | ||||||
|
|
|
|
|
|
|||
Total current assets |
868,720 | 605,058 | ||||||
Property and equipment, net |
412,064 | 342,447 | ||||||
Amortizable intangibles, net |
60,719 | 49,971 | ||||||
Investments in third-party dialysis businesses |
3,332 | 3,095 | ||||||
Other long-term assets |
10,898 | 10,771 | ||||||
Goodwill |
1,156,226 | 934,188 | ||||||
|
|
|
|
|
|
|||
$ | 2,511,959 | $ | 1,945,530 | |||||
|
|
|
|
|
|
|||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Accounts payable |
$ | 96,231 | $ | 71,868 | ||||
Other liabilities |
157,214 | 112,654 | ||||||
Accrued compensation and benefits |
133,919 | 100,909 | ||||||
Current portion of long-term debt |
53,364 | 50,557 | ||||||
Income taxes payable |
1,007 | 26,832 | ||||||
|
|
|
|
|
|
|||
Total current liabilities |
441,735 | 362,820 | ||||||
Long-term debt |
1,322,468 | 1,117,002 | ||||||
Other long-term liabilities |
22,570 | 19,310 | ||||||
Deferred income taxes |
148,859 | 106,240 | ||||||
Minority interests |
53,193 | 33,287 | ||||||
Commitments and contingencies |
||||||||
Shareholders equity: |
||||||||
Preferred stock ($0.001 par value, 5,000,000 shares authorized; none issued) |
||||||||
Common stock ($0.001 par value, 195,000,000 shares authorized; 134,862,283 and 134,806,204 shares issued) |
135 | 135 | ||||||
Additional paid-in capital |
542,714 | 539,575 | ||||||
Retained earnings |
611,287 | 389,083 | ||||||
Treasury stock, at cost (36,295,339 and 38,052,028 shares) |
(632,732 | ) | (620,998 | ) | ||||
Accumulated comprehensive income valuations |
1,730 | (924 | ) | |||||
|
|
|
|
|
|
|||
Total shareholders equity |
523,134 | 306,871 | ||||||
|
|
|
|
|
|
|||
$ | 2,511,959 | $ | 1,945,530 | |||||
|
|
|
|
|
|
See notes to consolidated financial statements.
F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Year ended December 31,
|
||||||||||||
2004
|
2003
|
2002
|
||||||||||
Cash flows from operating activities: |
||||||||||||
Net income |
$ | 222,254 | $ | 175,791 | $ | 157,329 | ||||||
Adjustments to reconcile net income to cash provided by operating activities: |
||||||||||||
Depreciation and amortization |
86,666 | 74,687 | 64,665 | |||||||||
Stock options, principally tax benefits |
42,770 | 20,180 | 22,212 | |||||||||
Deferred income taxes |
29,115 | 20,914 | 62,172 | |||||||||
Minority interests in income of consolidated subsidiaries |
15,135 | 8,908 | 9,299 | |||||||||
Distributions to minority interests |
(10,461 | ) | (7,663 | ) | (6,165 | ) | ||||||
Equity investment income |
(1,441 | ) | (1,596 | ) | (1,791 | ) | ||||||
Loss (gain) on divestitures |
764 | 2,130 | (1,151 | ) | ||||||||
Non-cash debt expense |
2,088 | 3,124 | 3,217 | |||||||||
Refinancing charges |
26,501 | 48,930 | ||||||||||
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures: |
||||||||||||
Accounts receivable |
(61,424 | ) | (41,369 | ) | (17,699 | ) | ||||||
Medicare lab recoveries |
19,000 | (19,000 | ) | |||||||||
Inventories |
4,257 | 3,159 | (342 | ) | ||||||||
Other current assets |
1,780 | (13,297 | ) | (19,089 | ) | |||||||
Other long-term assets |
3,345 | 4,692 | 527 | |||||||||
Accounts payable |
17,764 | (6,875 | ) | 10,822 | ||||||||
Accrued compensation and benefits |
32,899 | 5,821 | 6,837 | |||||||||
Other current liabilities |
42,784 | 9,958 | 2,585 | |||||||||
Income taxes |
(25,995 | ) | 17,810 | (4,821 | ) | |||||||
Other long-term liabilities |
(1,355 | ) | 9,773 | 4,458 | ||||||||
|
|
|
|
|
|
|
|
|
||||
Net cash provided by operating activities |
419,945 | 293,648 | 341,995 | |||||||||
|
|
|
|
|
|
|
|
|
||||
Cash flows from investing activities: |
||||||||||||
Additions of property and equipment, net |
(128,328 | ) | (100,272 | ) | (102,712 | ) | ||||||
Acquisitions and divestitures, net |
(265,042 | ) | (97,370 | ) | (18,511 | ) | ||||||
Investments in and advances to affiliates, net |
14,344 | 4,456 | 5,064 | |||||||||
Intangible assets |
(635 | ) | (790 | ) | (342 | ) | ||||||
|
|
|
|
|
|
|
|
|
||||
Net cash used in investing activities |
(379,661 | ) | (193,976 | ) | (116,501 | ) | ||||||
|
|
|
|
|
|
|
|
|
||||
Cash flows from financing activities: |
||||||||||||
Borrowings |
4,444,160 | 4,766,276 | 2,354,105 | |||||||||
Payments on long-term debt |
(4,236,861 | ) | (4,797,994 | ) | (1,855,199 | ) | ||||||
Debt redemption premium |
(14,473 | ) | (40,910 | ) | ||||||||
Deferred financing costs |
(4,153 | ) | (4,193 | ) | (10,812 | ) | ||||||
Purchase of treasury stock |
(96,540 | ) | (107,162 | ) | (642,171 | ) | ||||||
Stock option exercises |
43,432 | 23,056 | 29,257 | |||||||||
|
|
|
|
|
|
|
|
|
||||
Net cash provided by (used in) financing activities |
150,038 | (134,490 | ) | (165,730 | ) | |||||||
|
|
|
|
|
|
|
|
|
||||
Net increase (decrease) in cash and cash equivalents |
190,322 | (34,818 | ) | 59,764 | ||||||||
Cash and cash equivalents at beginning of year |
61,657 | 96,475 | 36,711 | |||||||||
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents at end of year |
$ | 251,979 | $ | 61,657 | $ | 96,475 | ||||||
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-6
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
AND
COMPREHENSIVE INCOME
(dollars and shares in thousands)
Common stock
|
Additional
paid-in capital |
Retained
earnings |
Treasury stock
|
Accumulated
comprehensive income valuations |
Total
|
|||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||||||||
Balance at December 31, 2001 |
128,114 | $ | 128 | $ | 467,906 | $ | 55,963 | (1,333 | ) | $ | (20,360 | ) | | $ | 503,637 | |||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||
Net income and comprehensive income |
157,329 | 157,329 | ||||||||||||||||||||||||||
Shares issued to employees and others |
67 | 798 | 798 | |||||||||||||||||||||||||
Stock options exercised |
5,131 | 5 | 28,454 | 28,459 | ||||||||||||||||||||||||
Income tax benefit on stock options exercised |
22,150 | 22,150 | ||||||||||||||||||||||||||
Stock option expense |
62 | 62 | ||||||||||||||||||||||||||
Treasury stock purchases |
(40,991 | ) | (642,171 | ) | (642,171 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Balance at December 31, 2002 |
133,312 | $ | 133 | $ | 519,370 | $ | 213,292 | (42,324 | ) | $ | (662,531 | ) | | $ | 70,264 | |||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||
Net income |
175,791 | 175,791 | ||||||||||||||||||||||||||
Unrealized loss on interest rate swaps |
$ | (924 | ) | (924 | ) | |||||||||||||||||||||||
|
|
|
||||||||||||||||||||||||||
Total comprehensive income |
174,867 | |||||||||||||||||||||||||||
|
|
|
||||||||||||||||||||||||||
Shares issued upon conversion of debt |
14,076 | 7,326 | 114,700 | 128,776 | ||||||||||||||||||||||||
Shares issued to employees and others |
63 | 873 | 873 | |||||||||||||||||||||||||
Deferred stock unit shares issued |
(220 | ) | 49 | 770 | 550 | |||||||||||||||||||||||
Stock options exercised |
1,431 | 2 | (14,704 | ) | 2,060 | 33,225 | 18,523 | |||||||||||||||||||||
Income tax benefit on stock options exercised |
20,204 | 20,204 | ||||||||||||||||||||||||||
Stock option expense |
(24 | ) | (24 | ) | ||||||||||||||||||||||||
Treasury stock purchases |
(5,163 | ) | (107,162 | ) | (107,162 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Balance at December 31, 2003 |
134,806 | $ | 135 | $ | 539,575 | $ | 389,083 | (38,052 | ) | $ | (620,998 | ) | $ | (924 | ) | $ | 306,871 | |||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||
Net income |
222,254 | 222,254 | ||||||||||||||||||||||||||
Unrealized gain on interest rate swaps |
2,654 | 2,654 | ||||||||||||||||||||||||||
|
|
|
||||||||||||||||||||||||||
Total comprehensive income |
224,908 | |||||||||||||||||||||||||||
|
|
|
||||||||||||||||||||||||||
Shares issued to employees and others |
56 | 959 | 959 | |||||||||||||||||||||||||
Restricted stock unit shares issued |
(936 | ) | 161 | 2,629 | 1,693 | |||||||||||||||||||||||
Stock options exercised |
(39,497 | ) | 4,946 | 82,177 | 42,680 | |||||||||||||||||||||||
Income tax benefit on stock options exercised |
42,770 | 42,770 | ||||||||||||||||||||||||||
Payment of stock split fractional shares and related costs |
(157 | ) | (50 | ) | (207 | ) | ||||||||||||||||||||||
Treasury stock purchases |
(3,350 | ) | (96,540 | ) | (96,540 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Balance at December 31, 2004 |
134,862 | $ | 135 | $ | 542,714 | $ | 611,287 | (36,295 | ) | $ | (632,732 | ) | $ | 1,730 | $ | 523,134 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
1. Organization and summary of significant accounting policies
Organization
DaVita Inc. operates kidney dialysis centers and provides related medical services primarily in dialysis centers and in contracted hospitals across the United States. These operations represent a single business segment.
Basis of presentation
These consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States. The financial statements include the Companys subsidiaries and partnerships that are wholly-owned, majority-owned, or in which the Company maintains a controlling financial interest. All significant intercompany transactions and balances have been eliminated. Non-consolidated equity investments are recorded under the equity or cost method of accounting as appropriate. Prior year balances and amounts have been classified to conform to the current year presentation.
All share and per-share data have been adjusted for all periods presented to retroactively reflect the effects of a three-for-two stock split in the form of a stock dividend in the second quarter of 2004.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the use of estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities and contingencies. Although actual results in subsequent periods will differ from these estimates, such estimates are developed based on the best information available to management and managements best judgments at the time made. All significant assumptions and estimates underlying the reported amounts in the financial statements and accompanying notes are regularly reviewed and updated. Changes in estimates are reflected in the financial statements based upon on-going actual experience trends, or subsequent settlements and realizations depending on the nature and predictability of the estimates and contingencies. Interim changes in estimates related to annual operating costs are applied prospectively within annual periods.
The most significant assumptions and estimates underlying these financial statements and accompanying notes involve revenue recognition and provisions for uncollectible accounts, impairments and valuation adjustments, accounting for income taxes and variable compensation accruals. Specific estimating risks and contingencies are further addressed within these notes to the consolidated financial statements.
Net operating revenues
Operating revenues are recognized in the period services are provided. Revenues consist primarily of reimbursements from Medicare, Medicaid and commercial health plans for dialysis and ancillary services provided to patients. A usual and customary fee schedule is maintained for our dialysis treatment and other patient services; however, actual collectible revenue is normally at a discount to the fee schedule.
Revenue recognition involves significant estimating risks. The rates at which the Company is reimbursed are often subject to significant uncertainties related to wide variations in coverage terms of the more than 1,500 commercial healthcare plans under which reimbursements are made, often arbitrary and inconsistent reimbursements by commercial payors, on-going insurance coverage changes, differing interpretations of
F-8
DAVITA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in thousands, except per share data)
contract coverage, and other payor issues. Revenue recognition uncertainties inherent in the Companys operations are addressed in AICPA Statement of Position (SOP) No. 00-1 Auditing Health Care Third-Party Revenues and Related Receivables . As addressed in SOP No. 00-1, net revenue recognition and allowances for uncollectible billings require the use of estimates of the amounts that will actually be realized considering, among other items, retroactive adjustments that may be associated with regulatory reviews, audits, billing reviews and other matters.
Revenues associated with Medicare and Medicaid programs are recognized based on a) the reimbursement rates that are established by statute or regulation for the portion of the reimbursement rates paid by the government payor (e.g., 80% for Medicare patients) and b) for the portion not paid by the primary government payor, the estimated amounts that will ultimately be collectible from other government programs paying secondary coverage (eg. Medicaid secondary coverage), the patients commercial health plan secondary coverage, or the patient. Revenues associated with commercial health plans are estimated based on contractual terms for the patients under healthcare plans with which we have formal agreements, commercial health plan coverage terms if known, estimated secondary collections, historical collection experience, historical trends of refunds and payor payment adjustments (retractions), inefficiencies in our billing and collection processes that can result in denied claims for reimbursements, and regulatory compliance issues. Our range of revenue estimating risk is generally expected to be within 1% of total revenue. Changes in revenue estimates for prior periods are separately disclosed if material.
Management and administrative support services are provided to dialysis centers and physician practices not owned by the Company. The management fees are principally determined as a percentage of the managed operations revenues or cash collections and in some cases an additional component based upon a percentage of operating income. Management fees are included in net operating revenues as earned.
Other income
Other income includes interest income on cash investments and other non-operating gains and losses.
Cash and cash equivalents
Cash equivalents are highly liquid investments with maturities of three months or less at date of purchase, valued at market.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market and consist principally of pharmaceuticals and dialysis related supplies.
Property and equipment
Property and equipment are stated at cost reduced by any impairments. Maintenance and repairs are charged to expense as incurred. Depreciation and amortization expenses are computed using the straight-line method over the useful lives of the assets estimated as follows: buildings, 20 to 40 years; leasehold improvements, the shorter of their estimated useful life or the lease term; and equipment, software and information systems, principally 3 to 8 years. Disposition gains and losses are included in current operating expenses.
Amortizable intangibles
Amortizable intangible assets include noncompetition and similar agreements and deferred debt issuance costs, each of which have determinate useful lives. Noncompetition agreements are amortized over the terms of
F-9
DAVITA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in thousands, except per share data)
the agreements, typically ten years, using the straight-line method. Deferred debt issuance costs are amortized to debt expense over the term of the related debt using the effective interest method.
Goodwill
Goodwill represents the difference between the purchase cost of acquired businesses and the fair value of the identifiable tangible and intangible net assets acquired. Goodwill is not amortized but is assessed for valuation impairment as circumstances warrant and at least annually. An impairment charge would be recorded to the extent the book value of goodwill exceeds its fair value. The Company operates as one reporting unit for goodwill impairment assessments.
Impairment of long-lived assets
Long-lived assets, including property and equipment, investments, and amortizable intangible assets, are reviewed for possible impairment at least annually and whenever significant events or changes in circumstances indicate that an impairment may have occurred, including changes in our business strategy and plans. An impairment is indicated when the sum of the expected future undiscounted net cash flows identifiable to an asset or asset group is less than its carrying value. Impairment losses are determined from actual or estimated fair values, which are based on market values, net realizable values or projections of discounted net cash flows, as appropriate. Impairment charges are included in operating expenses. Interest is not accrued on impaired loans unless the estimated recovery amounts justify such accruals.
Income taxes
Federal and state income taxes are computed at current enacted tax rates, less tax credits. Taxes are adjusted both for items that do not have tax consequences and for the cumulative effect of any changes in tax rates from those previously used to determine deferred tax assets or liabilities. Tax provisions include amounts that are currently payable, changes in deferred tax assets and liabilities that arise because of temporary differences between the timing of when items of income and expense are recognized for financial reporting and income tax purposes, which are measured using enacted tax rates and laws expected to apply in the periods when the deferred tax liability or asset is expected to be realized, and any changes in the valuation allowance caused by a change in judgment about the realizability of the related deferred tax assets.
Minority interests
Consolidated income is reduced by the proportionate amount of income accruing to minority interests. Minority interests represent the equity interests of third-party owners in consolidated entities which are not wholly-owned. As of December 31, 2004, third parties held minority ownership interests in 48 consolidated entities.
Stock-based compensation
Stock-based compensation for employees is determined in accordance with Accounting Principles Board Opinion No. 25 Accounting for Stock Issued to Employees , as allowed under SFAS No. 123 Accounting for Stock-Based Compensation . Stock option grants to employees do not result in an expense if the exercise price is at least equal to the market price at the date of grant. Stock option expense is also measured and recorded for certain modifications to stock options as required under FASB Interpretation No. 44 Accounting for Certain Transactions Involving Stock Compensation . Stock options issued to non-employees and restricted stock units are valued using the Black-Scholes model and amortized over the respective vesting periods.
F-10
DAVITA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in thousands, except per share data)
Pro forma net income and earnings per share . If the Company had adopted the fair value-based compensation expense provisions of SFAS No. 123 upon the issuance of that standard, net income and net income per share would be equal to the pro forma amounts indicated below:
Year ended December 31,
|
||||||||||||
Pro formaAs if all stock options were expensed |
2004
|
2003
|
2002
|
|||||||||
Net income: |
||||||||||||
As reported |
$ | 222,254 | $ | 175,791 | $ | 157,329 | ||||||
Add: Stock-based employee compensation expense included in reported net income, net of tax |
1,168 | 1,036 | 753 | |||||||||
Deduct: Total stock-based employee compensation expense under the fair value-based method, net of tax |
(10,109 | ) | (9,554 | ) | (10,182 | ) | ||||||
|
|
|
|
|
|
|
|
|
||||
Pro forma net income |
$ | 213,313 | $ | 167,273 | $ | 147,900 | ||||||
|
|
|
|
|
|
|
|
|
||||
Pro forma basic earnings per share: |
||||||||||||
Pro forma net income for basic earnings per share calculation |
$ | 213,313 | $ | 167,273 | $ | 147,900 | ||||||
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding |
98,694 | 94,253 | 107,681 | |||||||||
Vested restricted stock units |
33 | 93 | 66 | |||||||||
|
|
|
|
|
|
|
|
|
||||
Weighted average shares for basic earnings per share calculation |
98,727 | 94,346 | 107,747 | |||||||||
|
|
|
|
|
|
|
|
|
||||
Basic net income per sharePro forma |
$ | 2.16 | $ | 1.77 | $ | 1.37 | ||||||
|
|
|
|
|
|
|
|
|
||||
Basic net income per shareAs reported |
$ | 2.25 | $ | 1.86 | $ | 1.46 | ||||||
|
|
|
|
|
|
|
|
|
||||
Pro forma diluted earnings per share: |
||||||||||||
Pro forma net income |
$ | 213,313 | $ | 167,273 | $ | 147,900 | ||||||
Debt expense savings, net of tax, from assumed conversion of convertible debt |
13,011 | 19,661 | ||||||||||
|
|
|
|
|
|
|
|
|
||||
Pro forma net income for diluted earnings per share calculation |
$ | 213,313 | $ | 180,284 | $ | 167,561 | ||||||
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding |
98,694 | 94,253 | 107,681 | |||||||||
Vested restricted stock units |
33 | 93 | 66 | |||||||||
Assumed incremental shares from stock plans |
4,271 | 4,256 | 6,277 | |||||||||
Assumed incremental shares from convertible debt |
14,926 | 23,090 | ||||||||||
|
|
|
|
|
|
|
|
|
||||
Weighted average shares for diluted earnings per share calculation |
102,998 | 113,528 | 137,114 | |||||||||
|
|
|
|
|
|
|
|
|
||||
Diluted net income per sharePro forma |
$ | 2.07 | $ | 1.59 | $ | 1.22 | ||||||
|
|
|
|
|
|
|
|
|
||||
Diluted net income per shareAs reported |
$ | 2.16 | $ | 1.66 | $ | 1.30 | ||||||
|
|
|
|
|
|
|
|
|
The fair values of stock option grants were estimated as of the date of grant using the Black-Scholes option-pricing model with the following assumptions: weighted average expected volatility of 37% for 2004 and 40% for 2003 and 2002, risk-free interest rates of 2.91%, 2.07% and 3.99% for 2004, 2003, and 2002, respectively, and weighted average expected lives of 3.5 and dividend yield of 0% for all years presented.
Interest rate swap agreements
The Company has from time to time entered into interest rate swap agreements as a means of managing its exposure to interest rate changes. These agreements are not held for trading or speculative purposes, and have the effect of converting portions of our variable rate debt to a fixed rate. The agreements are effective cash flow hedges. Any gains or losses resulting from changes in the fair values of the swaps are reported in other comprehensive income until such time as the agreements are either redesignated, sold or terminated, at which time the amounts are included in net income. Net amounts paid or received under these swaps have been reflected as adjustments to interest expense.
F-11
DAVITA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in thousands, except per share data)
New accounting standard
In December 2004, the Financial Accounting Standards Board (FASB) issued Statement No. 123R, Share-Based Payment, that amends FASB Statements No. 123 and 95, and supersedes APB Opinion No. 25 Accounting for Stock Issued to Employees. This statement requires a company to measure the cost of employee services received in exchange for an award of equity instruments, such as stock options, based on the grant-date fair value of the award and to recognize such cost over the requisite period during which an employee provides service, usually the vesting period. The grant-date fair value will be determined using option-pricing models adjusted for unique characteristics of the equity instruments. The statement also addresses the accounting for transactions in which a company incurs liabilities in exchange for goods or services that are based on the fair value of the Companys equity instruments or that may be settled through the issuance of such equity instruments. The statement does not change the accounting for transactions in which a company issues equity instruments for services to non-employees or the accounting for employee stock ownership plans. This statement is effective beginning in the third quarter of 2005, and requires the Company to recognize compensation costs on all outstanding awards for which the requisite service has not yet been rendered. The Company currently projects that the adoption of this standard will reduce pre-tax income by less than $10,000 for the second half of 2005.
2. Earnings per share
Basic net income per share is calculated by dividing net income by the weighted average number of common shares outstanding. Diluted net income per share includes the dilutive effect of stock options and unvested restricted stock units (under the treasury stock method) and convertible debt (under the if-converted method).
The reconciliations of the numerators and denominators used to calculate basic and diluted net income per share are as follows:
Year ended December 31,
|
|||||||||
2004
|
2003
|
2002
|
|||||||
(in thousands, except per share) | |||||||||
Basic: |
|||||||||
Net income |
$ | 222,254 | $ | 175,791 | $ | 157,329 | |||
|
|
|
|
|
|
||||
Weighted average shares outstanding during the year |
98,694 | 94,253 | 107,681 | ||||||
Vested restricted stock units |
33 | 93 | 66 | ||||||
|
|
|
|
|
|
||||
Weighted average shares for basic earnings per share calculation |
98,727 | 94,346 | 107,747 | ||||||
|
|
|
|
|
|
||||
Basic net income per share |
$ | 2.25 | $ | 1.86 | $ | 1.46 | |||
|
|
|
|
|
|
||||
Diluted: |
|||||||||
Net income |
$ | 222,254 | $ | 175,791 | $ | 157,329 | |||
Debt expense savings, net of tax, from assumed conversion of convertible debt |
| 13,011 | 19,661 | ||||||
|
|
|
|
|
|
||||
Net income for diluted earnings per share calculation |
$ | 222,254 | $ | 188,802 | $ | 176,990 | |||
|
|
|
|
|
|
||||
Weighted average shares outstanding during the year |
98,694 | 94,253 | 107,681 | ||||||
Vested restricted stock units |
33 | 93 | 66 | ||||||
Assumed incremental shares from stock plans |
4,134 | 4,488 | 4,883 | ||||||
Assumed incremental shares from convertible debt |
| 14,926 | 23,090 | ||||||
|
|
|
|
|
|
||||
Weighted average shares for diluted earnings per share calculation |
102,861 | 113,760 | 135,720 | ||||||
|
|
|
|
|
|
||||
Diluted net income per share |
$ | 2.16 | $ | 1.66 | $ | 1.30 | |||
|
|
|
|
|
|
F-12
DAVITA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in thousands, except per share data)
Options to purchase 178,369 shares at $30.87 to $39.62 per share, 261,803 shares at $18.73 to $26.23 per share and 1,322,025 shares at $15.75 to $22.00 per share were excluded from the diluted earnings per share calculations for 2004, 2003 and 2002, respectively, because they were anti-dilutive. The calculation of diluted earnings per share assumes conversion of both the 5 3 / 8 % and 7% convertible subordinated notes for 2002 and the pro-rata periods such notes were outstanding in 2003.
3. Accounts receivable
The provisions for uncollectible accounts receivable, prior to offsetting recoveries, were $40,960, $35,700 and $32,069 in 2004, 2003 and 2002, respectively. The provisions before cash recoveries in 2004, 2003 and 2002 were approximately 1.8% of current net operating revenues, respectively. During 2002, continued improvements were made in the Companys billing and collection processes, and cash recoveries of $5,192 were realized during 2002 on accounts receivable reserved in 1999.
4. Other current assets
Other current assets were comprised of the following:
December 31,
|
||||||
2004
|
2003
|
|||||
Supplier rebates and other non-trade receivables |
$ | 26,032 | $ | 29,745 | ||
Operating advances under administrative services agreements |
12,387 | 10,416 | ||||
Prepaid expenses and deposits |
5,791 | 3,714 | ||||
|
|
|
|
|||
$ | 44,210 | $ | 43,875 | |||
|
|
|
|
Operating advances under administrative services agreements are generally unsecured.
5. Property and equipment
Property and equipment were comprised of the following:
December 31,
|
||||||||
2004
|
2003
|
|||||||
Land |
$ | 750 | $ | 820 | ||||
Buildings |
4,868 | 5,494 | ||||||
Leasehold improvements |
329,382 | 261,437 | ||||||
Equipment and information systems |
405,022 | 361,365 | ||||||
New centers and capital asset projects in progress |
19,541 | 19,349 | ||||||
|
|
|
|
|
|
|||
759,563 | 648,465 | |||||||
Less accumulated depreciation and amortization |
(347,499 | ) | (306,018 | ) | ||||
|
|
|
|
|
|
|||
$ | 412,064 | $ | 342,447 | |||||
|
|
|
|
|
|
Depreciation and amortization expense on property and equipment was $75,152, $64,398 and $54,701 for 2004, 2003 and 2002, respectively.
Interest on debt incurred during the development of new centers and other capital asset projects is capitalized as a component of the asset cost based on the respective in-process capital asset balances. Interest capitalized was $1,078, $1,523 and $1,888 for 2004, 2003 and 2002, respectively.
F-13
DAVITA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in thousands, except per share data)
6. Amortizable intangibles
Amortizable intangible assets were comprised of the following:
December 31,
|
||||||||
2004
|
2003
|
|||||||
Noncompetition and other agreements |
$ | 132,503 | $ | 112,407 | ||||
Deferred debt issuance costs |
14,005 | 9,851 | ||||||
|
|
|
|
|
|
|||
146,508 | 122,258 | |||||||
Less accumulated amortization |
(85,789 | ) | (72,287 | ) | ||||
|
|
|
|
|
|
|||
$ | 60,719 | $ | 49,971 | |||||
|
|
|
|
|
|
Amortization expense from noncompetition and other agreements was $11,514, $10,289 and $9,964 for 2004, 2003 and 2002, respectively. Deferred debt issuance costs are amortized to debt expense as described in Note 11.
Scheduled amortization charges from intangible assets as of December 31, 2004 were as follows:
Noncompetition and other agreements |
Deferred debt issuance costs |
|||
2005 |
12,150 | 2,198 | ||
2006 |
10,683 | 1,916 | ||
2007 |
8,640 | 1,647 | ||
2008 |
5,678 | 1,613 | ||
2009 |
3,580 | 1,246 | ||
Thereafter |
11,138 | 230 |
7. Investments in third-party dialysis businesses
Investments in third-party dialysis businesses and related advances were $3,332 and $3,095 at December 31, 2004 and 2003. During 2004, 2003 and 2002, the Company recognized income of $1,441, $1,596 and $1,791, respectively, relating to investments in non-consolidated minority-owned businesses under the equity method. These amounts are included as a reduction to minority interests deductions in the consolidated statement of income.
8. Goodwill
Changes in the book value of goodwill were as follows:
Year ended December 31,
|
||||||||
2004
|
2003
|
|||||||
Balance at January 1 |
$ | 934,188 | $ | 864,786 | ||||
Acquisitions |
222,424 | 70,700 | ||||||
Divestitures |
(386 | ) | (1,298 | ) | ||||
|
|
|
|
|
|
|||
Balance at December 31 |
$ | 1,156,226 | $ | 934,188 | ||||
|
|
|
|
|
|
F-14
DAVITA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in thousands, except per share data)
9. Other liabilities
Other accrued liabilities were comprised of the following:
December 31,
|
||||||
2004
|
2003
|
|||||
Payor deferrals and refunds |
$ | 94,566 | $ | 76,235 | ||
General insurance |
21,847 | 12,056 | ||||
Deferred revenue |
13,089 | 8,727 | ||||
Accrued interest |
3,457 | 878 | ||||
Accrued tax liabilities |
6,549 | 6,229 | ||||
Other |
17,706 | 8,529 | ||||
|
|
|
|
|||
$ | 157,214 | $ | 112,654 | |||
|
|
|
|
10. Income taxes
Income tax expense consisted of the following:
Year ended December 31,
|
|||||||||
2004
|
2003
|
2002
|
|||||||
Current: |
|||||||||
Federal |
$ | 94,626 | $ | 75,817 | $ | 40,094 | |||
State |
17,623 | 15,151 | 7,366 | ||||||
Deferred: |
|||||||||
Federal |
23,508 | 17,966 | 50,012 | ||||||
State |
3,873 | 3,541 | 12,456 | ||||||
|
|
|
|
|
|
||||
$ | 139,630 | $ | 112,475 | $ | 109,928 | ||||
|
|
|
|
|
|
Temporary differences, which gave rise to deferred tax assets and liabilities, were as follows:
December 31,
|
||||||||
2004
|
2003
|
|||||||
Asset impairment losses |
$ | 30,589 | $ | 35,817 | ||||
Receivables, primarily allowance for doubtful accounts |
15,614 | 16,882 | ||||||
Accrued liabilities |
62,478 | 44,861 | ||||||
Other |
11,389 | 11,683 | ||||||
|
|
|
|
|
|
|||
Deferred tax assets |
120,070 | 109,243 | ||||||
Valuation allowance |
(35,380 | ) | (37,200 | ) | ||||
|
|
|
|
|
|
|||
Net deferred tax assets |
84,690 | 72,043 | ||||||
|
|
|
|
|
|
|||
Intangible assets |
(100,044 | ) | (73,268 | ) | ||||
Property and equipment |
(52,116 | ) | (42,614 | ) | ||||
Other |
(2,796 | ) | (2,661 | ) | ||||
|
|
|
|
|
|
|||
Deferred tax liabilities |
(154,956 | ) | (118,543 | ) | ||||
|
|
|
|
|
|
|||
Net deferred tax liabilities |
$ | (70,266 | ) | $ | (46,500 | ) | ||
|
|
|
|
|
|
F-15
DAVITA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in thousands, except per share data)
At December 31, 2004, the Company had state net operating loss carryforwards of approximately $12,000 that expire through 2023, and federal net operating loss carryforwards of $9,000 that expire through 2024. The Company has also incurred losses on certain operations that are not included in its consolidated tax return. The utilization of these losses may be limited in future years based on the profitability of these separate-return entities. In prior years, the Company recognized capital losses as a result of impairments and sales of assets for which the realization of a tax benefit is not certain. The valuation allowance against these deferred tax assets was $35,380 as of December 31, 2004. The valuation allowance decreased by $1,820 in 2004 due to changes in the expected utilization of capital losses and the expected utilization of operating losses of consolidated entities with separate tax filings. The valuation allowance decreased by $1,469 in 2003 due to changes in the expected utilization of operating losses of consolidated entities with separate tax filings.
The reconciliation between our effective tax rate and the U.S. federal income tax rate is as follows:
Year ended December 31, |
|||||||||
2004
|
2003
|
2002
|
|||||||
Federal income tax rate |
35.0 | % | 35.0 | % | 35.0 | % | |||
State taxes, net of federal benefit |
3.8 | 4.3 | 4.9 | ||||||
Changes in deferred tax valuation allowances |
(0.3 | ) | (0.4 | ) | 0.1 | ||||
Other |
0.1 | 0.1 | 1.0 | ||||||
|
|
|
|
|
|
||||
Effective tax rate |
38.6 | % | 39.0 | % | 41.0 | % | |||
|
|
|
|
|
|
11. Long-term debt
Long-term debt was comprised of the following:
December 31,
|
||||||||
2004
|
2003
|
|||||||
Senior secured credit facility: |
||||||||
Term Loan A |
$ | 84,507 | $ | 118,310 | ||||
Term Loan B |
1,024,668 | 1,035,889 | ||||||
Term Loan C |
249,375 | |||||||
Acquisition obligations and other notes payable |
8,863 | 5,416 | ||||||
Capital lease obligations |
8,419 | 7,944 | ||||||
|
|
|
|
|
|
|||
1,375,832 | 1,167,559 | |||||||
Less current portion |
(53,364 | ) | (50,557 | ) | ||||
|
|
|
|
|
|
|||
$ | 1,322,468 | $ | 1,117,002 | |||||
|
|
|
|
|
|
Scheduled maturities of long-term debt at December 31, 2004 were as follows:
2005 |
53,364 | |
2006 |
56,192 | |
2007 |
28,088 | |
2008 |
15,268 | |
2009 |
614,178 | |
Thereafter |
608,742 |
F-16
DAVITA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in thousands, except per share data)
Term Loan A
The Term Loan A bears interest at LIBOR plus a margin of 2.00%, for an overall effective rate of 4.17% at December 31, 2004. Depending upon certain financial conditions the interest rate margin could range from 1.50% to 2.75%. The Term Loan A matures in March 2007 and requires principal payments of $33,800 in 2005, $40,100 in 2006 and $10,600 in 2007.
Term Loan B
The Term Loan B bears interest at LIBOR plus a margin of 2.00%, for an overall effective rate of 4.38% at December 31, 2004. The interest rate margin is subject to a potential increase of 0.50% if the Company does not achieve certain financial ratios. During the year the Company amended its existing credit facilities to modify certain restricted payment covenants, principally for acquisitions and share repurchases, and extended the maturity of the Term Loan B until June 30, 2010. The Term Loan B requires principal payments of $11,200 in years 2005 through 2008, $492,700 in 2009 and $487,000 in 2010.
Term Loan C
During the year the Company borrowed an additional $250,000 under a new Term Loan C. The Term Loan C bears interest at LIBOR plus a margin of 1.75%, for an overall effective rate of 4.16% at December 31, 2004. The Term Loan C matures on June 30, 2010 and requires principal payments of $2,500 in years 2005 through 2008, $120,300 in 2009 and $119,000 in 2010.
Revolving Line of Credit
As of December 31, 2004, the Company had $116,000 undrawn lines of credit available, of which $23,000 was committed for outstanding letters of credit.
Interest rate swaps
The Company is party to three currently effective interest rate swap agreements, two matched with Term Loan B outstanding debt and one matched with Term Loan C outstanding debt. Two of the swap agreements expire in 2008 and one expires in 2009. As of December 31, 2004 the aggregate notional amount of these swap agreements was $345,000 and the interest rates were economically modified to fixed rates ranging from 3.08% to 3.64% plus Term Loan margins ranging from 1.75% to 2.00%. This resulted in an overall effective rate of 5.27% on approximately 25% of the Companys outstanding debt as of December 31, 2004. Interest payments are due quarterly. Under these swap agreements, the Company incurred net cash obligations of $5,256 and $341 in 2004 and 2003 which are included in debt expense. The fair value of these swaps was an asset of $2,400, resulting in additional comprehensive income during the year of $2,404, or $3,941 before tax.
As a result of these swap agreements, the Companys overall credit facility effective weighted average interest rate was 4.60% based upon the current margins in effect ranging from 1.75% to 2.00% as of December 31, 2004.
In December 2004, the Company separately entered into two forward interest rate swap agreements that will have the economic effect of modifying the LIBOR-based interest rate to a fixed rate of 3.875% effective July 1, 2005. The total amortizing notional amount of these two swaps is $800,000, both of which expire in January 2010 and require quarterly interest payments beginning in October 2005. As of December 31, 2004, the aggregate notional amount of these swaps was $800,000 and their fair value was an asset of $400, resulting in additional comprehensive income during the year of $250, net of tax.
F-17
DAVITA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in thousands, except per share data)
Debt expense
Debt expense consisted of interest expense of $50,324, $63,705 and $68,420 and amortization and write-off of deferred financing costs of $2,088, $3,123 and $3,216 for 2004, 2003 and 2002, respectively. The interest expense amounts exclude capitalized interest.
2003 transactions
In the third quarter of 2003, the Company completed a call for redemption of all of its outstanding $125,000 5 5 / 8 % Convertible Subordinated Notes due 2006. Holders of the 5 5 / 8 % Notes had the option to convert their Notes into shares of DaVita common stock at a price of $17.08 per share or receive cash of 1.0169 times the principal amount of the 5 5 / 8 % Notes, plus accrued interest. In July 2003, the Company issued 7,302,528 shares of common stock from treasury stock for the conversion of $124,700 of the 5 5 / 8 % Notes, and redeemed the balance for cash. The Company also entered into an amended credit agreement in order to, among other things, lower its overall interest rate. The Company also borrowed an additional $200,000 under the replacement Term Loan B, which amounted to $1,042,000. In November 2003, the Company entered into a second amended and restated credit agreement in order to again lower the interest rate on the Term Loan B and to modify certain covenants.
In the second half of 2003, the Company completed two calls for redemption of all of its outstanding $345,000 7% Convertible Subordinated Notes due 2009. Holders of the 7% Notes had the option to convert their Notes into shares of DaVita common stock at a price of $21.87 per share or receive cash of 1.042 times the principal amount of the 7% Notes, plus accrued interest. The Notes were redeemed for $359,000 in cash and 24,045 shares of common stock.
In 2003, the excess consideration paid over the book value to redeem the Convertible Subordinated Notes and the write-off of deferred financing costs and financing fees associated with amending our bank credit agreement resulted in refinancing charges of $26,501.
12. Leases
The majority of the Companys facilities are leased under non-cancelable operating leases. Most lease agreements cover periods from five to ten years and contain renewal options of five to ten years at the fair rental value at the time of renewal or at rates subject to periodic consumer price index increases. Capital leases are carried for certain equipment.
Future minimum lease payments under non-cancelable operating leases and capital leases are as follows:
Operating
leases |
Capital
leases |
||||||
2005 |
$ | 73,537 | $ | 1,703 | |||
2006 |
69,109 | 1,717 | |||||
2007 |
62,944 | 3,201 | |||||
2008 |
55,863 | 980 | |||||
2009 |
46,466 | 741 | |||||
Thereafter |
189,103 | 2,937 | |||||
|
|
|
|
|
|||
$ | 497,022 | 11,279 | |||||
|
|
||||||
Less portion representing interest |
(2,860 | ) | |||||
|
|
|
|||||
Total capital lease obligation, including current portion |
$ | 8,419 | |||||
|
|
|
F-18
DAVITA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in thousands, except per share data)
Rental expense under all operating leases for 2004, 2003 and 2002 was $80,310, $71,432 and $61,008, respectively. The net book value of property and equipment under capital lease was $7,711 and $7,811 at December 31, 2004 and 2003, respectively. Capital lease obligations are included in long-term debt (see Note 11).
13. Shareholders equity
In the second quarter of 2004, the Board of Directors approved a three-for-two stock split of the Companys common stock in the form of a stock dividend payable on June 15, 2004 to stockholders of record on June 1, 2004. All stockholders entitled to fractional shares received a proportional cash payment. The Companys stock began trading on a post-split basis on June 16, 2004. All share and per-share data for all periods presented have been adjusted to retroactively reflect the effects of the stock split.
During 2003, the Company repurchased a total of 5,162,850 shares of common stock for $107,162 or an average of $20.76 per share, pursuant to announced Board authorizations. During 2004, the Company repurchased a total of 3,350,100 shares of common stock for an average cost of $28.82 per share. On November 2, 2004, the Companys Board of Directors authorized the Company to repurchase up to an additional $200,000 of its common stock in the open market or in privately negotiated transactions. The total outstanding Board authorizations for share repurchases were approximately $249,000 as of December 31, 2004.
Stock-based compensation plans
The Companys stock-based compensation plans are described below.
2002 Plan. On April 11, 2002, the Companys shareholders approved the DaVita Inc. 2002 Equity Compensation Plan. This plan provides for grants of stock awards to employees, directors and other individuals providing services to the Company, except that incentive stock options may only be awarded to employees. The plan requires that stock option grants be issued with exercise prices not less than the market price of the stock on the date of grant and with a maximum award term of five years. Stock options granted under this plan are generally non-qualified awards that vest over four years from the date of grant. Shares available under the 2002 Plan are replenished by shares repurchased by the Company from the cash proceeds and related tax benefits from award exercises under the 2002 and predecessor plans.
On May 21, 2003, the shareholders approved an amendment to reduce shares authorized to the 2002 Plan by 2,491,500 and to authorize plan awards in the form of restricted stock, restricted stock units, stock issuances (full share awards), stock appreciation rights and other equity-based awards. Full share awards reduce total shares available under the plan at a rate of 2.75:1. At December 31, 2004, there were 3,689,246 awards outstanding and 13,787,025 shares available for future grants under the 2002 Plan, including 3,104,517 shares under the 2002 Plan replenishment provision.
Predecessor plans . Upon shareholder approval of the 2002 Plan, the following predecessor plans were terminated, except with respect to options then outstanding: the 1994 Equity Compensation Plan, the 1995 Equity Compensation Plan, the 1997 Equity Compensation Plan, and the 1999 Equity Compensation Plan. Shares available for future grants under these predecessor plans were transferred to the 2002 Plan upon its approval, and cancelled predecessor plan options become available for new awards under the 2002 Plan. Options granted under these plans were generally issued with exercise prices equal to the market price of the stock on the date of grant, vested over four years from the date of grant, and bore maximum terms of five to 10 years. The RTC plan, a special purpose option plan related to the RTC merger, was terminated in 1999. At December 31, 2004 there were 3,703,861 stock options outstanding under these terminated plans.
F-19
DAVITA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in thousands, except per share data)
1999 Plan. The 1999 Non-Executive Officer and Non-Director Equity Compensation Plan provides for grants of stock options to employees and other individuals providing services, other than executive officers and members of the Board of Directors. There are 9,000,000 common shares reserved for issuance under this plan, and options granted under this plan generally vest over four years from the date of grant. Grants are generally issued with exercise prices equal to the market price of the stock on the date of grant and maximum terms of five years. At December 31, 2004 there were 3,339,028 options outstanding and 67,337 shares available for future grants under this plan.
A combined summary of the status of these stock-based compensation plans is as follows:
Year ended December 31,
|
||||||||||||||||||
2004
|
2003
|
2002
|
||||||||||||||||
Awards
|
Weighted
average exercise price |
Awards
|
Weighted
average exercise price |
Awards
|
Weighted
average exercise price |
|||||||||||||
Outstanding at beginning of year |
13,778,004 | $ | 10.97 | 14,837,962 | $ | 9.08 | 16,921,095 | $ | 6.24 | |||||||||
Granted |
2,794,416 | 28.10 | 3,013,876 | 13.53 | 4,154,250 | 15.55 | ||||||||||||
Exercised |
(4,950,399 | ) | 8.62 | (3,490,812 | ) | 5.31 | (5,131,425 | ) | 5.55 | |||||||||
Cancelled |
(889,886 | ) | 12.51 | (583,022 | ) | 9.94 | (1,105,958 | ) | 6.39 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Outstanding at end of year |
10,732,135 | $ | 16.38 | 13,778,004 | $ | 10.97 | 14,837,962 | $ | 9.08 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Awards exercisable at year end |
3,914,200 | 5,159,031 | 5,477,553 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
Weighted-average fair value of awards granted during the year |
$ | 10.53 | $ | 5.01 | $ | 5.33 | ||||||||||||
|
|
|
|
|
|
Awards granted in 2004 and 2003 include 165,766 and 130,127 full share awards, respectively.
The following table summarizes information about stock plan awards outstanding at December 31, 2004:
Range of exercise prices |
Awards
Outstanding |
Weighted
average remaining contractual life |
Weighted
average exercise price |
Awards
exercisable |
Weighted
average exercise price |
|||||||
$ 0.00$ 5.00 |
1,693,394 | 2.9 | $ | 3.36 | 1,418,627 | $ | 4.01 | |||||
$ 5.01$10.00 |
204,855 | 4.0 | 6.13 | 204,855 | 6.13 | |||||||
$10.01$15.00 |
3,025,662 | 2.7 | 13.09 | 943,839 | 12.80 | |||||||
$15.01$20.00 |
3,089,532 | 2.3 | 15.78 | 1,239,587 | 15.84 | |||||||
$20.01$25.00 |
93,417 | 3.7 | 21.25 | 75,417 | 21.43 | |||||||
$25.01$30.00 |
993,525 | 4.6 | 28.15 | 1,875 | 26.23 | |||||||
$30.01$35.00 |
1,546,750 | 4.4 | 30.57 | 30,000 | 30.07 | |||||||
$35.01$40.00 |
85,000 | 5.0 | 38.58 | 0 | 0 | |||||||
|
|
|
|
|
|
|
||||||
10,732,135 | 3.1 | $ | 16.38 | 3,914,200 | $ | 10.53 | ||||||
|
|
|
|
|
|
|
Deferred stock unit arrangements . The Company made awards of restricted stock units to members of the Board of Directors and certain key executive officers in 2003 and 2002. These awards vest over one to four years and are settled in stock as they vest or at a later date at the election of the recipient. Awards of 83,884 and 137,211 shares, with grant-date fair values of $1,152 and $2,159, were made in 2003 and 2002, respectively. Share issuances under these arrangements were 156,384, 49,107 and none during 2004, 2003 and 2002, respectively, and awards of 170,922 shares were outstanding as of December 31, 2004.
F-20
DAVITA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in thousands, except per share data)
Compensation expense, associated with the above stock-based compensation plans and arrangements, of $1,885, $1,695 and $1,246 was recognized in 2004, 2003 and 2002, respectively.
Employee stock purchase plan. The Employee Stock Purchase Plan entitles qualifying employees to purchase up to $25 of the Companys common stock during each calendar year. The amounts used to purchase stock are accumulated through payroll withholdings or through optional lump sum payments made in advance of the first day of the purchase right period. The plan allows employees to purchase stock for the lesser of 100% of the fair market value on the first day of the purchase right period or 85% of the fair market value on the last day of the purchase right period. Purchase right periods begin on January 1 or July 1, and end on December 31. Payroll withholdings and lump-sum payments related to the plan, included in accrued compensation and benefits, were $1,795, $968 and $882 at December 31, 2004, 2003 and 2002. Subsequent to December 31, 2004, 2003 and 2002, 64,169, 56,079 and 62,457 shares, respectively, were issued to satisfy obligations under the plan.
The fair value of the employees purchase rights was estimated as of the beginning dates of the purchase right periods using the Black-Scholes model with the following assumptions for grants on July 1, 2004, January 1, 2004, July 1, 2003, January 1, 2003, July 1, 2002, and January 1, 2002, respectively: dividend yield of 0.0% for all periods and expected volatility of 38% for 2004 periods and 40% for prior periods; risk-free interest rates of 3.0%, 2.6%, 1.1%, 1.1%, 3.6%, 4.0%. Using these assumptions, the weighted-average fair value of purchase rights granted were $7.97, $8.01, $4.79, $5.13, $1.69 and $2.45, respectively.
Shareholder rights plan. The Companys Board of Directors approved a shareholder rights plan on November 14, 2002. This plan is designed to assure that DaVitas shareholders receive fair treatment in the event of any proposed takeover of DaVita.
Pursuant to this plan, the Board approved the declaration of a dividend distribution of one common stock purchase right for each outstanding share of its common stock payable on December 10, 2002 to holders of record of DaVita common stock on November 29, 2002. This rights distribution was not taxable to DaVita shareholders. As a result of the stock split that occurred during the second quarter of 2004, two-thirds of a right are now attached to each share of the Companys common stock. Two-thirds of a right will also attach to each newly issued or reissued share of common stock. These rights will become exercisable if a person or group acquires, or announces a tender offer for, 15% or more of DaVitas outstanding common stock. The triggering persons stock purchase rights will become void at that time and will not become exercisable.
Each right initially entitles its holder to purchase one share of common stock from the Company at a price of $125.00. If the rights become exercisable, and subject to adjustment for authorized shares available, each purchase right will then entitle its holder to purchase $125.00 of common stock at a price per share equal to 50% of the average daily closing price of the Companys common stock for the immediately preceding 30 consecutive trading days. If DaVita is acquired in a merger or other business combination transaction after the rights become exercisable, provisions will be made to allow the holder of each right to purchase $125.00 of common stock from the acquiring company at a price equal to 50% of the average daily closing price of that companys common stock for the immediately preceding 30 consecutive trading days.
The Board of Directors may elect to redeem the rights at $0.01 per purchase right at any time prior to, or exchange common stock for the rights at an exchange ratio of one share per right at any time after, a person or group acquires or announces a tender offer for 15% or more of DaVitas outstanding common stock. The exercise price, number of shares, redemption price or exchange ratio associated with each right may be adjusted as appropriate upon the occurrence of certain events, including any stock split, stock dividend or similar transaction. These purchase rights will expire no later than November 14, 2012.
F-21
DAVITA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in thousands, except per share data)
14. Employee benefit plans
The Company has a savings plan for substantially all employees, which has been established pursuant to the provisions of Section 401(k) of the Internal Revenue Code, or IRC. The plan provides for employees to contribute a percentage of their base annual salaries on a tax-deferred basis not to exceed IRC limitations. The Company does not provide any matching contributions.
During 2000, the Company established the DaVita Inc. Profit Sharing Plan. Contributions to this defined contribution benefit plan are made at the discretion of the Company as determined and approved by the Board of Directors. All contributions are deposited into an irrevocable trust. The profit sharing award for each eligible participant is based upon the achievement of employee-specific and/or corporate financial and operating goals. During 2003 and 2002, the Company recognized plan contribution expense of $11,900 and $17,440, respectively. During 2004 the Company elected to discontinue funding the profit sharing trust and to distribute similar awards directly to the recipients, or at their discretion to their 401(k) accounts.
15. Contingencies
Health care provider revenues may be subject to adjustment as a result of (1) examination by government agencies or contractors, for which the resolution of any matters raised may take extended periods of time to finalize; (2) differing interpretations of government regulations by different fiscal intermediaries or regulatory authorities; (3) differing opinions regarding a patients medical diagnosis or the medical necessity of services provided; (4) retroactive applications or interpretations of governmental requirements; and (5) claims for refunds from private payors.
United States Attorneys inquiries
On October 25, 2004, the Company received a subpoena from the United States Attorneys Office, or U.S. Attorneys Office, for the Eastern District of New York in Brooklyn. The subpoena covers the period from 1996 to present and requires the production of a wide range of documents relating to our operations, including our laboratory services. The subpoena also includes specific requests for documents relating to testing for parathyroid hormone levels, or PTH, and to products relating to vitamin D therapies. We believe that the subpoena has been issued in connection with a joint civil and criminal investigation. Other participants in the dialysis industry received a similar subpoena, including Fresenius Medical Group, Renal Care Group and Gambro Healthcare. To our knowledge, no proceedings have been initiated against us at this time. Compliance with the subpoena will require management attention and legal expense. We cannot predict whether legal proceedings will be initiated against us relating to this investigation or, if proceedings are initiated, the outcome of any such proceedings. In addition, criminal proceedings may be initiated against us in connection with this inquiry. If a court determines that there has been wrongdoing, the penalties under applicable statutes could be substantial.
In February 2001, the Civil Division of the U.S. Attorneys Office for the Eastern District of Pennsylvania in Philadelphia contacted the Company and requested its cooperation in a review of some historical practices, including billing and other operating procedures and financial relationships with physicians. The Company cooperated in this review and provided the requested records to the U.S. Attorneys Office. In May 2002, the Company received a subpoena from the U.S. Attorneys Office and the Philadelphia Office of the Office of Inspector General, or OIG. The subpoena required an update to the information the Company provided in its response to the February 2001 request, and also sought a wide range of documents relating to pharmaceutical and other ancillary services provided to patients, including laboratory and other diagnostic testing services, as well as
F-22
DAVITA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in thousands, except per share data)
documents relating to the Companys financial relationships with physicians and pharmaceutical companies. The subpoena covers the period from May 1996 to May 2002. The Company has provided the documents requested and continues to cooperate with the United States Attorneys Office and the OIG in its investigation. If this review proceeds, the government could expand its areas of inquiry. If a court determines that there has been wrongdoing, the penalties under applicable statutes could be substantial.
Florida Laboratory
A third-party carrier review of Medicare reimbursement claims associated with the Companys Florida-based laboratory was initiated in 1998. Prior to the third quarter 2002, no Medicare payments had been received since May 1998. Following a favorable ruling by an administrative law judge in June 2002 relating to review periods from January 1995 to March 1998, the carrier began releasing funds for lab services provided subsequent to May 2001. During the fourth quarter of 2002, the carrier also released funds for certain claims in review periods from April 1998 through May 2001. During the second half of 2002, the carrier paid the Company a total of $69,000. Approximately $10,000 of these collections related to 2002 lab services provided through June 2002, and the balance of $59,000 related to prior years services. In addition to the prior-period claims, the carrier also began processing billings for current period services in the third quarter of 2002, at which time the Company began recognizing current period Medicare lab revenue. In late 2003 the carriers hearing officer rendered partially favorable decisions relating to review periods from April 1998 to May 2000, which resulted in the recognition of additional recoveries of $24,000. The Company filed requests for appeal for the remaining unsettled claims for these review periods. In the third quarter of 2004, an administrative law judge rendered a favorable decision regarding the majority of these unsettled claims, which resulted in the recognition of $8,300 in additional recoveries. Less than $4,000 in disputed Medicare lab billings currently remain unresolved.
Other
In addition to the foregoing, DaVita is subject to claims and suits in the ordinary course of business. Management believes that the ultimate resolution of these additional pending proceedings, whether the underlying claims are covered by insurance or not, will not have a material adverse effect on the Companys financial condition, results of operations or cash flows.
16. Concentrations
Approximately 60% of the Companys total dialysis revenues in 2004, 2003 and 2002 are from government-based programs, principally Medicare and Medicaid. Accounts receivable from Medicare and Medicaid were approximately $150,000 as of December 31, 2004. No other single payor accounted for more than 5% of total accounts receivable.
A significant physician-prescribed pharmaceutical administered during dialysis, EPO, is provided by a sole supplier and accounted for approximately one fourth of net operating revenues. Although the Company currently receives discounted prices for EPO, the supplier has unilateral pricing discretion and in the future the Company may not be able to achieve the same cost levels historically obtained.
17. Other commitments
The Company has obligations to purchase the third-party interests in several of its joint ventures. These obligations are in the form of put options, exercisable at the third-party owners discretion. If the put options are exercised, the Company would be required to purchase the minority owners interests at either the appraised fair market value or a predetermined multiple of cash flow or earnings which approximates fair value. As of December 31, 2004, the Companys potential obligations under these put options totaled approximately $103,000
F-23
DAVITA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in thousands, except per share data)
of which approximately $56,000 was exercisable within one year. Additionally, the Company has certain other potential commitments to provide operating capital to several minority-owned centers and to third-party centers that the Company operates under administrative service agreements of approximately $15,000.
The Company is obligated under mandatorily redeemable instruments in connection with certain consolidated partnerships. Future distributions may be required for the minority partners interests in limited-life entities which dissolve after terms of ten to fifty years. As of December 31, 2004, such distributions would be valued below the related minority interests balances in the consolidated financial statements.
Other than operating leases, disclosed in Note 12, and the letters of credit and the interest rate swap agreements, disclosed in Note 11, the Company has no off balance sheet financing arrangements as of December 31, 2004.
18. Acquisitions and divestitures
Acquisitions
Acquisition amounts were as follows:
Year ended December 31,
|
|||||||||
2004
|
2003
|
2002
|
|||||||
Cash paid, net of cash acquired |
$ | 266,265 | $ | 99,645 | $ | 19,977 | |||
Deferred purchase payments and acquisition obligations |
429 | 5,146 | 100 | ||||||
|
|
|
|
|
|
||||
Aggregate purchase cost |
$ | 266,694 | $ | 104,791 | $ | 20,077 | |||
|
|
|
|
|
|
||||
Number of chronic dialysis centers acquired |
51 | 27 | 11 | ||||||
|
|
|
|
|
|
||||
Aggregate purchase costs of acquired dialysis centers |
$ | 262,458 | $ | 84,102 | $ | 20,077 | |||
|
|
|
|
|
|
The assets and liabilities of the acquired operations were recorded at their estimated fair market values at the dates of acquisition and have been included in the Companys financial statements and operating results from their designated effective acquisition dates. The nearest month-end has been designated as the effective date for recording acquisitions that close during the month because partial month accounting cutoffs were not made and partial month results associated with these acquisitions would not have had a material impact on consolidated operating results. Settlements with tax authorities relating to pre-acquisition income tax liabilities may result in an adjustment to goodwill attributable to related acquisitions.
F-24
DAVITA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in thousands, except per share data)
The initial allocations of purchase cost for acquired businesses are recorded at fair values based upon the best available information and are finalized when identified pre-acquisition contingencies have been resolved and information needed to complete the allocation has been received. Adjustments to purchase accounting for prior acquisitions, and payments for acquisitions in process, have been included in the periods recognized. Final allocations have not differed materially from the initial allocations. Aggregate purchase cost allocations were as follows:
Year ended December 31,
|
||||||||||||
2004
|
2003
|
2002
|
||||||||||
Tangible assets, principally leasehold improvements and equipment |
$ | 42,155 | $ | 26,678 | $ | 3,360 | ||||||
Amortizable intangible assets |
19,471 | 7,273 | 1,975 | |||||||||
Goodwill |
222,424 | 70,700 | 15,260 | |||||||||
Liabilities assumed |
(17,356 | ) | (1,777 | ) | (518 | ) | ||||||
Minority interests extinguished |
1,917 | |||||||||||
|
|
|
|
|
|
|
|
|
||||
Aggregate purchase cost |
$ | 266,694 | $ | 104,791 | $ | 20,077 | ||||||
|
|
|
|
|
|
|
|
|
Amortizable intangible assets acquired during 2004, 2003 and 2002 had weighted-average estimated useful lives of nine, ten and ten years, respectively. The total amount of goodwill deductible for tax purposes associated with 2004 acquisitions is approximately $120,000.
The following summary, prepared on a pro forma basis, combines the results of operations as if the acquisitions in 2004 and 2003 had been consummated as of the beginning of 2003, after including the impact of certain adjustments such as amortization of intangibles, interest expense on acquisition financing and income tax effects.
Year ended December 31,
|
||||||
2004
|
2003
|
|||||
(unaudited) | ||||||
Net revenues |
$ | 2,388,321 | $ | 2,207,868 | ||
Net income |
224,875 | 190,076 | ||||
Pro forma basic net income per share |
2.28 | 2.01 | ||||
Pro forma diluted net income per share |
2.19 | 1.79 |
These unaudited pro forma results are not necessarily indicative of what actually would have occurred if the acquisitions had been completed as of the beginning of both of the periods presented. In addition, they are not intended to be a projection of future results and do not reflect the effects of integration costs or operating synergies.
Acquisition of Gambro Healthcare, Inc.
On December 6, 2004, the Company entered into an agreement to acquire the common stock of Gambro Healthcare, Inc. or Gambro Healthcare, one of the largest dialysis service providers in the United States. The purchase price of approximately $3.05 billion reflects (i) a cash purchase price of approximately $1.7 billion, which we refer to as the cash purchase price, and (ii) the assumption of Gambro Healthcare indebtedness, which indebtedness was approximately $1.3 billion on December 31, 2004 (nearly all of which is intercompany indebtedness). The Company will be required to repay the Gambro Healthcare intercompany indebtedness,
F-25
DAVITA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in thousands, except per share data)
including accrued interest, simultaneously with the closing of the Gambro Healthcare acquisition. Under the stock purchase agreement, the cash purchase price increases from December 6, 2004 to the acquisition closing date by 4% per annum for the first 90 days after signing and 8% per annum thereafter. The amount of Gambro Healthcare intercompany debt will increase by the amount of any additional cash contributed by Gambro Inc. to Gambro Healthcare after December 6, 2004 and will be reduced by operating cash flow applied to the intercompany debt after December 6, 2004. The intercompany debt bears interest at a rate of 1% above the twelve-month LIBOR. In connection with the Gambro Healthcare acquisition the Company is assessing financing alternatives, which could include closing on some or all of the financing in advance of the closing of the acquisition. The Company will also enter into a ten-year product supply agreement with Gambro Renal Products Inc., a subsidiary of Gambro AB, pursuant to which the Company will purchase from Gambro Renal Products specified percentages of its requirements for hemodialysis products, supplies and equipment at fixed prices. The stock purchase agreement contains a number of conditions which must be satisfied or waived prior to the closing of the acquisition. These conditions include, among others, receipt of regulatory approvals, including antitrust clearance.
On February 18, 2005, the Company received a request from the Federal Trade Commission for additional information in connection with the pending acquisition of Gambro Healthcare. This request extends the waiting period imposed by the Hart-Scott-Rodino Act until thirty days after the Company and Gambro Healthcare have substantially complied with the request, unless that period is voluntarily extended by the parties or is terminated sooner by the FTC.
Divestitures
The Company divested of certain center operations for cash during 2004 and 2003 which amounted to $1,223 and $2,275, respectively. The Company divested of substantially all of its dialysis operations outside the continental United States during 2000 and completed the sale of its remaining non-continental centers during the second quarter of 2002. Revenues of the non-continental operations were $6,159 for 2002, and the related pre-tax earnings were $1,383.
19. Fair values of financial instruments
Financial instruments consist primarily of cash, accounts receivable, notes receivable, accounts payable, accrued compensation and benefits, other accrued liabilities, interest rate swap agreements and debt. The balances of the non-debt financial instruments as presented in the financial statements at December 31, 2004 approximate their fair values due to the short-term nature of their settlements. Borrowings under credit facilities, of which $1,358,550 was outstanding as of December 31, 2004, reflect fair value as they are subject to fees and adjustable rates competitively determined in the marketplace. The fair value of the interest rate swaps were an asset of approximately $2,800 as of December 31, 2004.
F-26
DAVITA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in thousands, except per share data)
20. Supplemental cash flow information
The table below provides supplemental cash flow information:
Year ended December 31,
|
|||||||||
2004
|
2003
|
2002
|
|||||||
Cash paid: |
|||||||||
Income taxes |
$ | 95,943 | $ | 53,074 | $ | 30,217 | |||
Interest |
48,822 | 73,278 | 69,114 | ||||||
Non-cash investing and financing activities: |
|||||||||
Fixed assets acquired under capital lease obligations |
1,295 | 2,283 | 2,356 | ||||||
Contributions to consolidated partnerships |
9,167 | 2,645 | 2,154 | ||||||
Deferred financing cost write-offs |
73 | ||||||||
Conversion of debt to equity |
125,254 | ||||||||
Liabilities assumed in conjunction with common stock acquisition |
13,991 | 357 |
21. Transactions with related parties
Until March 2002, Peter Grauer, a member of the Companys Board of Directors since 1994, was a managing director of Credit Suisse First Boston, or CSFB. In 2002, CSFB assisted the Company in connection with the issuance of public debt and securing other financing. Fees for these transactions were approximately $6,000. Mr. Grauer is no longer affiliated with CSFB.
22. Selected quarterly financial data (unaudited)
2004
|
2003
|
|||||||||||||||||||||||
December 31
|
September 30
|
June 30
|
March 31
|
December 31
|
September 30
|
June 30
|
March 31
|
|||||||||||||||||
Net operating revenues |
$ | 616,003 | $ | 595,531 | $ | 551,630 | $ | 535,431 | $ | 553,446 | $ | 513,282 | $ | 489,883 | $ | 459,807 | ||||||||
Operating income |
105,171 | 111,652 | 96,467 | 96,833 | 121,190 | 95,211 | 82,800 | 79,334 | ||||||||||||||||
Income before income taxes |
90,447 | 98,921 | 85,876 | 86,640 | 100,498 | 62,910 | 64,195 | 60,663 | ||||||||||||||||
Net income |
56,602 | 60,386 | 52,401 | 52,865 | 62,798 | 38,060 | 38,520 | 36,413 | ||||||||||||||||
Basic net income per common share |
$ | 0.58 | $ | 0.61 | $ | 0.53 | $ | 0.54 | $ | 0.65 | $ | 0.39 | $ | 0.42 | $ | 0.40 | ||||||||
Diluted net income per common share |
$ | 0.56 | $ | 0.59 | $ | 0.50 | $ | 0.51 | $ | 0.61 | $ | 0.36 | $ | 0.37 | $ | 0.35 |
F-27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, we have duly caused this Annual Report on Form 10-K to be signed on our behalf by the undersigned, thereunto duly authorized, in the City of El Segundo, State of California, on February 28, 2005.
DAVITA INC. | ||
By: |
/s/ K ENT J. T HIRY |
|
Kent J. Thiry Chairman and Chief Executive Officer |
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears below constitutes and appoints Kent J. Thiry, Denise K. Fletcher, Gary Beil, and Joseph Schohl, and each of them his or her true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons in the capacities and on the dates indicated.
Signature |
Title |
Date |
||
/s/ K ENT J. T HIRY Kent J. Thiry |
Chairman and Chief Executive Officer (Principal Executive Officer) |
February 28, 2005 | ||
/s/ D ENISE K. F LETCHER Denise K. Fletcher |
Senior Vice President and Chief Financial Officer (Principal Financial Officer) |
February 28, 2005 | ||
/s/ G ARY W. B EIL Gary W. Beil |
Vice President and Controller (Principal Accounting Officer) |
February 28, 2005 | ||
/s/ N ANCY -A NN D E P ARLE Nancy-Ann DeParle |
Director | February 28, 2005 | ||
/s/ R ICHARD B. F ONTAINE Richard B. Fontaine |
Director | February 28, 2005 | ||
/s/ P ETER T. G RAUER Peter T. Grauer |
Director | February 28, 2005 | ||
/s/ M ICHELE J. H OOPER Michele J. Hooper |
Director | February 28, 2005 | ||
/s/ C. R AYMOND L ARKIN , J R . C. Raymond Larkin, Jr. |
Director | February 28, 2005 | ||
/s/ J OHN M. N EHRA John M. Nehra |
Director | February 28, 2005 | ||
/s/ W ILLIAM L. R OPER William L. Roper |
Director | February 28, 2005 |
II-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
DaVita Inc.:
Under date of February 25, 2005, we reported on the consolidated balance sheets of DaVita Inc. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2004, which are included in the Form 10-K. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule in the Form 10-K. The financial statement schedule is the responsibility of the Companys management. Our responsibility is to express an opinion on the financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
Seattle, Washington
February 25, 2005
S-1
SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS
Description |
Balance at
beginning of year |
Amounts
charged to income |
Amounts
written off |
Balance
at end of year |
||||||||
(in thousands) | ||||||||||||
Allowance for uncollectible accounts: |
||||||||||||
Year ended December 31, 2002 |
$ | 52,475 | $ | 32,069 | $ | 35,617 | $ | 48,927 | ||||
Year ended December 31, 2003 |
48,927 | 35,700 | 32,073 | 52,554 | ||||||||
Year ended December 31, 2004 |
52,554 | 40,960 | 35,348 | 58,166 |
S-2
EXHIBIT INDEX
Exhibit Number |
Description |
|
2.1 | Stock Purchase Agreement dated as of December 6, 2004, among Gambro AB, Gambro, Inc. and DaVita Inc. (16) | |
3.1 | Amended and Restated Certificate of Incorporation of Total Renal Care Holdings, Inc., or TRCH, dated December 4, 1995.(1) | |
3.2 | Certificate of Amendment of Certificate of Incorporation of TRCH, dated February 26, 1998.(2) | |
3.3 | Certificate of Amendment of Certificate of Incorporation of DaVita Inc. (formerly Total Renal Care Holdings, Inc.), dated October 5, 2000.(6) | |
3.4 | Amended and Restated Bylaws of DaVita Inc. (formerly Total Renal Care Holdings, Inc.) dated June 3, 2004.(13) | |
4.1 | Rights Agreement, dated as of November 14, 2002, between DaVita Inc. and the Bank of New York, as Rights Agent. (3) | |
10.1 | Employment Agreement, dated as of October 18, 1999, by and between TRCH and Kent J. Thiry.(4)* | |
10.2 | Amendment to Mr. Thirys Employment Agreement, dated May 20, 2000.(5)* | |
10.3 | Second Amendment to Mr. Thirys Employment Agreement, dated November 28, 2000.(6)* | |
10.4 | Employment Agreement, dated as of November 29, 1999, by and between TRCH and Gary W. Beil.(6)* | |
10.5 | Employment Agreement, dated as of July 19, 2000, by and between TRCH and Charles J. McAllister.(6)* | |
10.6 | Employment Agreement, dated as of June 15, 2000, by and between DaVita Inc. and Joseph Mello.(8)* | |
10.7 | Employment Agreement, dated as of October 15, 2002, by and between DaVita Inc. and Lori S. Richardson-Pellicioni.(7)* | |
10.8 | Employment Agreement effective as of June 7, 2004, by and between DaVita Inc. and Tom Kelly.(13)* | |
10.9 | Amended and Restated Employment Agreement, effective as of February 28, 2005, by and between DaVita Inc. and Denise K. Fletcher. ü * | |
10.10 | Employment Agreement, effective as of August 16, 2004, by and between DaVita Inc. and Tom Usilton.(14)* | |
10.11 | Employment Agreement, effective as of November 18, 2004, by and between DaVita Inc. and Joseph Schohl. ü * | |
10.12 | Second Amended and Restated 1994 Equity Compensation Plan.(9) * | |
10.13 | First Amended and Restated 1995 Equity Compensation Plan.(9)* | |
10.14 | First Amended and Restated 1997 Equity Compensation Plan.(9)* | |
10.15 | First Amended and Restated Special Purpose Option Plan.(9)* | |
10.16 | 1999 Equity Compensation Plan.(10)* | |
10.17 | Amended and Restated 1999 Equity Compensation Plan.(11)* | |
10.18 | First Amended and Restated Total Renal Care Holdings, Inc. 1999 Non-Executive Officer and Non-Director Equity Compensation Plan.(7) | |
10.19 | 2002 Equity Compensation Plan.(12)* | |
10.20 | Form of Stock Option Agreement for stock options grants to employees under the Companys 2002 Equity Compensation Plan.(14)* |
Exhibit Number |
Description |
|
10.21 | Form of Restricted Stock Unit Agreement for restricted stock unit grants to employees under the Companys 2002 Equity Compensation Plan.(14)* | |
10.22 | Security Agreement, dated as of April 26, 2002, made by and among DaVita Inc. and the subsidiaries of DaVita Inc. named therein to Credit Suisse First Boston, Cayman Islands Branch, as the Collateral Agent for the lenders party to the Credit Agreement.(17) | |
10.23 | Subsidiary Guarantee, dated as of April 26, 2002, made by the subsidiaries of DaVita Inc. named therein in favor of the lenders party to the Credit Agreement.(17) | |
10.24 | Third Amended and Restated Credit Agreement, dated as of July, 30, 2004, among DaVita Inc., the lenders party thereto, Credit Suisse First Boston, Cayman Islands Branch as Joint Book Manager, and Administrative Agent and Sole Book Manager for the Term Loan B and the Term Loan C, Banc of America Securities LLC as Joint Book Manager and Bank of America N.A., as Syndication Agent.(13) | |
10.25 | Security Agreement Supplement, dated July 30, 2004, made by the subsidiaries of DaVita Inc. named therein in favor of the lenders party.(13) | |
10.26 | Guarantee Supplement, dated July 30, 2004, made by the subsidiaries of DaVita Inc., named therein in favor of the lenders party to the Third Amended and Restated Credit Agreement.(13) | |
10.27 | Amended and Restated Agreement dated December 2, 2004, between Amgen USA Inc. and DaVita Inc. ü ** | |
10.28 | Form of Indemnity Agreement. ü * | |
10.29 | Executive Incentive Plan.(11)* | |
10.30 | Post-Retirement Deferred Compensation Arrangement. ü * | |
10.31 | Memorandum relating to bonus structure for Charles J. McAllister. ü * | |
10.32 | Director Compensation Philosophy and Plan. ü * | |
12.1 | Computation of Ratios of Earnings to Fixed Charges. ü | |
14.1 | DaVita Inc. Corporate Governance Code of Ethics.(15) | |
21.1 | List of our subsidiaries. ü | |
23.1 | Consent of KPMG LLP. ü | |
24.1 | Powers of Attorney with respect to DaVita. (Included on Page II-1) | |
31.1 | Certification of the Chief Executive Officer, dated February 28, 2005, pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ü | |
31.2 | Certification of the Chief Financial Officer, dated February 28, 2005, pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ü | |
32.1 | Certification of the Chief Executive Officer, dated February 28, 2005, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ü | |
32.2 | Certification of the Chief Financial Officer, dated February 28, 2005, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ü |
ü | Included in this filing. |
* | Management contract or executive compensation plan or arrangement. |
** | Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the SEC. |
(1) | Filed on March 18, 1996 as an exhibit to the Companys Transitional Report on Form 10-K for the transition period from June 1, 1995 to December 31, 1995. |
(2) | Filed on March 31, 1998 as an exhibit to the Companys Form 10-K for the year ended December 31, 1997. |
(3) | Filed on November 19, 2002 as an exhibit to the Companys Form 8-K reporting the adoption of the Rights Agreement. |
(4) | Filed on November 15, 1999 as an exhibit to the Companys Form 10-Q for the quarter ended September 30, 1999. |
(5) | Filed on August 14, 2000 as an exhibit to the Companys Form 10-Q for the quarter ended June 30, 2000. |
(6) | Filed on March 20, 2001 as an exhibit to the Companys Form 10-K for the year ended December 31, 2000. |
(7) | Filed on February 2, 2003 as an exhibit to the Companys Form 10-K for the year ended December 31, 2002. |
(8) | Filed on August 15, 2001 as an exhibit to the Companys Form 10-Q for the quarter ended June 30, 2001. |
(9) | Filed on March 29, 2000 as an exhibit to the Companys Form 10-K for the year ended December 31, 1999. |
(10) | Filed on February 18, 2000 as an exhibit to the Companys Registration Statement on Form S-8 (Registration Statement No. 333-30736). |
(11) | Filed on April 27, 2001 as an exhibit to the Definitive Proxy Statement for the Companys 2001 Annual Meeting of Stockholders. |
(12) | Filed on March 14, 2002 as an exhibit to the Definitive Proxy Statement for the Companys 2002 Annual Meeting of Stockholders. |
(13) | Filed on August 5, 2004 as an exhibit to the Companys Form 10-Q for the quarter ended June 30, 2004. |
(14) | Filed on November 8, 2004 as an exhibit to the Companys Form 10-Q for the quarter ended September 30, 2004. |
(15) | Filed on March 27, 2004 as an exhibit to the Companys Form 10-K for the year ended December 31, 2003. |
(16) | Filed on December 8, 2004 as an exhibit to the Companys Form 8-K. |
(17) | Filed on May 14, 2002 as an exhibit to the Companys Form 10-Q for the quarter ending March 31, 2002. |
Exhibit 10.9
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (this Agreement) amends and restates the Employment Agreement originally entered into effective September 13, 2004 (the Effective Date), by and between DaVita Inc. (Employer) and Denise Fletcher (Employee).
In consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the parties hereto, intending to be legally bound hereby, agree as follows:
Section 1. Employment and Duties . Employer hereby employs Employee to serve initially as a Senior Vice President, Special Advisor to the Chief Executive Officer, and then, on November 10, 2004, as Chief Financial Officer. Employee accepts such employment on the terms and conditions set forth in this Agreement. Employee shall perform the duties of Senior Vice President and then as Chief Financial Officer of the Employer and shall perform such other duties as may be assigned from time to time by the Chief Executive Officer. Employee shall work out of Employers El Segundo corporate office. Employee agrees to devote substantially all of her time, energy, and ability to the business of Employer on a full-time basis and shall not engage in any other business activities during the term of this Agreement, provided however , Employee may continue to serve on the three Board of Directors for the other for-profit companies that she is currently serving on and may pursue normal charitable activities so long as such activities do not require a substantial amount of time and do not interfere with her ability to perform her duties. If, as a result of serving on these three Boards, Employees performance were to suffer, Employee and Employers Chief Executive Officer will discuss whether Employee should resign from one Board. If Employee is no longer serving on any of these three Boards, Employee will be able to serve on another Board of Directors so long as she has received permission from the Employers Chief Executive Officer and the Employers Board of Directors. Employee shall at all times observe and abide by the Employers policies and procedures as in effect from time to time.
Section 2. Compensation . In consideration of the services to be performed by Employee hereunder, Employee shall receive the following compensation and benefits:
2.1 Base Salary . Employer shall pay Employee a base salary of $350,000 per annum, less standard withholdings and authorized deductions. Employee shall be paid consistent with Employers payroll schedule. The Base Salary will be reviewed each year during Employers annual review. Employer, in its sole discretion, may increase the Base Salary as a result of any such review.
2.2 Benefits . Employee and/or her family, as the case may be, shall be eligible for participation in and shall receive all benefits under Employers health and welfare benefit plans (including, without limitation, medical, prescription, dental, disability, and life insurance) under the same terms and conditions applicable to most executives at similar levels of compensation and responsibility.
2.3 Performance Bonus .
(a) Employee shall be eligible to receive a discretionary performance bonus (the Bonus) between zero and $350,000, payable in a manner consistent with Employers practices and procedures. The amount of the Bonus, if any, will be decided by the Chief Executive Officer and/or the Board of Directors or the Compensation Committee of the Board in his/its sole discretion.
(b) Employee must be employed by Employer (or an affiliate) on the date any Bonus is paid to be eligible to receive such Bonus and, if Employee is not employed by Employer (or an affiliate) on the date any Bonus is paid for any reason whatsoever, Employee shall not be entitled to receive such Bonus, provided , however , that in the event Employee dies, Employees estate shall be entitled to receive, at such time as bonuses for such year are otherwise paid by Employer, a pro rated Bonus for that portion of any year prior to Employees death (or for the whole year and a portion of a year if such termination occurs after December 31 of any year and prior to the date on which the Bonus for such year is paid) regardless of whether Employee is employed on the date such Bonus is paid.
2.4 Relocation Costs . Employer shall reimburse Employee for relocation costs. Relocation costs include the cost of packing and moving Employees personal property, including her boat and her 3 cars, 60 days of lodging while house hunting, and all trips by Employee and/or her spouse to find a house. Relocation costs do
not include the costs for purchasing a house, including points, closing fees, and attorneys fees (i.e., the cost of a real estate attorney or an attorney to review the contract). Employee has the right to move her personal property at once or move some now and some at a later date, and Employer will reimburse her for all of these costs so long as she moves her property within the first three (3) years of this Agreement.
2.5 Vacation . Employee shall have vacation, subject to the approval of the Chief Executive Officer.
2.6 Stock Options . Employee shall receive options to purchase 150,000 shares of Employer stock. Such options shall have a five-year term and vest 25% on the first anniversary date of the grant, 8.33% on the 20 th month of the grant, and 8.33% every 4 months thereafter. The exercise price shall be the closing price as reported on the New York Stock Exchange on the start date of this Agreement. The options will be reflected in a separate Stock Option Agreement.
2.7 Signing Bonus . Employer will pay Employee a signing bonus of $35,000, less all standard withholdings and authorized deductions.
2.8 Travel . Employee may fly first class for business travel this does not include travel by her spouse for house hunting.
2.9 Acceleration of Vesting . Upon a Change of Control, as that term is defined below, Employees entire award of stock options shall vest immediately.
2.10 Indemnification . Employer agrees to indemnify Employee against and in respect of any and all claims, actions, or demands, in accordance with all applicable laws.
2.11 Reimbursement . Employer also agrees to reimburse Employee in accordance with Employers reimbursement policies for travel and entertainment expenses, as well as other business-related expenses, incurred in the performance of her duties hereunder.
2.12 Changes to Benefit Plans . Employer reserves the right to modify, suspend, or discontinue any and all of its health and welfare benefit plans, practices, policies, and programs at any time without recourse by Employee so long as such action is taken generally with respect to all other similarly-situated peer executives and does not single out Employee.
Section 3. Provisions Relating to Termination of Employment .
3.1 Employment Is At-Will . Employees employment with Employer is at will and is terminable by Employer or by Employee at any time and for any reason or no reason, subject to the notice requirements set forth below.
3.2 Termination for Material Cause . Employer may terminate Employees employment for Material Cause (as defined below) upon at least thirty (30) days advance written notice specifying in detail the cause for the termination and the intended termination date. Upon termination for Material Cause, Employee shall (i) be entitled to receive the Base Salary and benefits as set forth in Section 2.1 and Section 2.2 , respectively, through the effective date of such termination and (ii) not be entitled to receive any other compensation, benefits, or payments of any kind, except as otherwise required by law or by the terms of any benefit or retirement plan or other arrangement that would, by its terms, apply.
3.3 Other Termination . Employer may terminate the employment of Employee for any reason or for no reason at any time upon at least thirty (30) days advance written notice. If Employer terminates the employment of Employee for reasons other than for Material Cause or Disability, if Employee resigns pursuant to written notice given during the thirty (30) days following the closing of the acquisition of Gambro Healthcare, Inc. by the Company, or if Employee resigns pursuant to written notice given during the sixty (60) days following Constructive Discharge or a Good Cause Event (as those terms are defined below), Employee shall (i) be entitled to receive the Base Salary and benefits as set forth in Section 2.1 and Section 2.2 , respectively, through the effective date of such termination or resignation, (ii) be entitled to receive her salary for the two-year period following the termination of her employment, (iii) be entitled to continue to receive during the one-year period following the effective date of such termination (the Severance Period) the employee health insurance benefits set forth in Section 2.2 ; and (iv) not be entitled to receive any other
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compensation, benefits, or payments of any kind, except as otherwise required by law or by the terms of any benefit or retirement plan or other arrangement that would, by its terms, apply. The foregoing notwithstanding, in the event Employee accepts employment (as an employee or as an independent contractor) with another employer during the Severance Period, (x) Employee shall immediately notify Employer of such employment and (y) Employers obligation to continue to provide certain health insurance benefits pursuant to clause (iii) of the immediately preceding sentence shall terminate once Employee becomes eligible to participate in her new employers health benefit plan. With respect to Employees right to continue receiving health insurance, to the extent Employee can continue to receive such benefits under Employers health insurance policies and programs in effect at the effective time of such termination through the exercise of her rights under COBRA, Employee shall elect to receive COBRA benefits, and Employer shall pay Employees insurance premiums for COBRA coverage during this one-year period; provided , however , to the extent such benefits cannot be provided under such policies and programs, Employer shall purchase for Employee reasonably equivalent health insurance benefits during the one-year period subject to the limitation set forth below and subject to the limitation set forth in Section 2.12 . In addition, to the extent that Employee is receiving COBRA coverage, the Employer shall continue to pay for this COBRA insurance coverage beyond the end of the one-year period by using any savings that the Employer may gain as a result of Employees delay in participating in its health care plan to pay for this COBRA coverage.
During the Severance Period, Employee agrees to make herself available to answer questions and to cooperate in the transition of her duties. In addition, Employee agrees to cooperate with Employer in the prosecution and/or defense of any claim, including making herself available for any interviews, appearing at depositions, and producing requested documents.
3.4. Voluntary Resignation . Employee may resign from Employer at any time upon at least ninety (90) days advance written notice, or, in the case of a written notice given during the thirty (30) days following the closing of the acquisition of Gambro Healthcare, Inc. by the Company, upon at least thirty (30) days advance written notice. If Employee resigns from Employer other than by reason of a Constructive Discharge, a Good Cause Event, a Change in Management, as those terms are defined below, or a resignation pursuant to notice given during the thirty (30) days following the closing of the acquisition of Gambro Healthcare, Inc. by the Company, Employee shall (i) be entitled to receive the Base Salary and benefits as set forth in Section 2.1 and Section 2.2 , respectively, through the effective date of such termination and (ii) not be entitled to receive any other compensation, benefits, or payments of any kind, except as otherwise required by law or by the terms of any benefit or retirement plan or other arrangement that would, by its terms, apply. In the event Employee resigns from Employer at any time, Employer shall have the right to make such resignation effective as of any date before the expiration of the required notice period.
3.5 Disability . Upon thirty (30) days advance notice (which notice may be given before the completion of the periods described herein), Employer may terminate Employees employment for Disability (as defined below), provided that either (i) immediately upon the effective date of such termination, Employee shall be eligible to receive full disability benefits under the disability insurance, if any, provided to Employee by Employer or (ii) Employer shall continue to pay the Base Salary to Employee until the first to occur of (A) full disability benefits are received or (B) one (1) year from the effective date of such termination.
3.6 Definitions . For the purposes of this Agreement, the following terms shall have the meanings indicated:
(a) Change of Control shall mean (i) any transaction or series of transactions in which any person or group (within the meaning of Rule 13d-5 under the Exchange Act and Sections 13(d) and 14(d) of the Exchange Act) becomes the direct or indirect beneficial owner (as defined in Rule 13d-3 under the Exchange Act), by way of a stock issuance, tender offer, merger, consolidation, other business combination or otherwise, of greater than 40% of the total voting power (on a fully diluted basis as if all convertible securities had been converted and all warrants and options had been exercised) entitled to vote in the election of directors of Employer (including any transaction in which Employer becomes a wholly-owned or majority-owned subsidiary of another corporation), (ii) any merger or consolidation or reorganization in which Employer does not survive, (iii) any merger or consolidation in which Employer survives, but the shares of Employers Common Stock outstanding immediately prior to such merger or consolidation represent 40% or less of the voting power of Employer after such merger or
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consolidation, and (iv) any transaction in which more than 40% of Employers assets are sold. However , despite the occurrence of any of the above-described events, a Change of Control will not have occurred if Kent Thiry remains the Chief Executive Officer of Employer for at least one (1) year after the Change of Control or becomes the Chief Executive Officer of the surviving company with which Employer merged or consolidated and remains in that position for at least one (1) year after the Change of Control.
(b) Constructive Discharge shall mean the occurrence of any of the following events after the date of a Change of Control without Employees express written consent: (i) the scope of Employees authority, duties and responsibilities are materially diminished or are not (A) in the same general level of seniority, (B) in the same corporate and reporting capacity (and standing in the same relationship to the ultimate parent entity, e.g., reporting to the Chief Executive Officer of a subsidiary will not be deemed to constitute the same corporate and reporting capacity as reporting to the Chief Executive Officer of the ultimate parent company), or (C) of the same general nature as Employees authority, duties, and responsibilities with Employer immediately before such Change of Control; (ii) the failure by Employer to provide Employee with office accommodations and assistance substantially equivalent to the accommodations and assistance provided to Employee immediately before such Change of Control; (iii) the principal office to which Employee is required to report is changed to a location that is more than twenty (20) miles from the principal office to which Employee is required to report immediately before such Change of Control; or (iv) a reduction by Employer in Employees Base Salary, bonus arrangement, or other material benefits as in effect on the date of such Change of Control.
(c) Disability shall mean the inability, for a period of six (6) months, to adequately perform Employees regular duties, with or without reasonable accommodation, due to a physical or mental illness, condition, or disability.
(d) Material Cause shall mean any of the following: (i) conviction of a felony; (ii) the adjudication by a court of competent jurisdiction that Employee has committed any act of fraud or dishonesty resulting or intended to result directly or indirectly in personal enrichment at the expense of Employer; (iii) repeated failure or refusal by Employee to follow policies or directives reasonably established by the Chief Executive Officer of Employer or her designee that goes uncorrected for a period of thirty (30) consecutive days after written notice has been provided to Employee; (iv) a material breach of this Agreement that goes uncorrected for a period of thirty (30) consecutive days after written notice has been provided to Employee; (v) an act of unlawful discrimination, including sexual harassment; (vi) a violation of the duty of loyalty or of any fiduciary duty; or (vii) exclusion or notice of exclusion of Employee from participating in any federal health care program. Before the Employer may discharge Employee for an act of unlawful discrimination, including sexual harassment, or a violation of the duty of loyalty or of any fiduciary duty, Employee shall have a right to make a presentation before the Board of Directors to present her reasons why she should not be discharged for Material Cause.
(e) Good Cause Event shall mean the occurrence of any of the following events without Employees express written consent: (i) Employer materially diminishes the scope of Employees authority, duties and responsibilities and her duties and responsibilities are not (A) in the same general level of seniority or (B) of the same general nature; (ii) Employer ceases to provide Employee with appropriate office accommodations and assistance (i.e., office accommodations and assistance substantially similar to what other similar-level executives receive); (iii) Employer relocates the principal office to which Employee is required to report to a location that is more than twenty (20) miles from the principal office to which Employee was required to report; or (iv) Employer reduces Employees Base Salary, bonus arrangement, or other material benefits (unless the change in benefit plans is taken generally with respect to all other similarly-situated peer executives and does not single out Employee).
3.7 Notice of Termination . Any purported termination of Employees employment by Employer or by Employee shall be communicated by a written Notice of Termination to the other party hereto in accordance with Section 7 hereof. A Notice of Termination shall mean a written notice that indicates the specific termination provision in this Agreement relied upon and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employees employment.
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3.8 Effect of Termination . Upon termination, this Agreement shall be of no further force and effect and neither party shall have any further right or obligation hereunder; provided, however, that no termination shall modify or affect the rights and obligations of the parties that have accrued prior to termination; and provided further , that the rights and obligations of the parties under Section 3 , Section 4 , Section 5 , Section 6 , and Section 7 shall survive termination of this Agreement.
Section 4. Change in Management
4.1 Material Change in Responsibilities . If, during the first two years of Employees employment, Kent Thiry is no longer the Chief Executive Officer and Employee has resigned within sixty (60) days of a Constructive Discharge or Good Cause Event, the vesting schedule of her stock option grant shall be accelerated by one (1) year. This shall be in addition to any benefits that Employee may be entitled to pursuant to Section 2.9 and Section 3.3 of this Agreement.
4.2 No Material Change in Responsibilities . If, during the first two years of Employees employment, Kent Thiry is no longer the Chief Executive Officer, but there has not been a Constructive Discharge or Good Cause Event, Employee may still resign within 60 days from the occurrence of this event. If Employee does resign, Employer shall continue to pay Employee her Base Salary for the one-year period following her resignation.
Section 5. Certain Covenants of Executive .
5.1 Confidential Information .
(a) Employee acknowledges and agrees that: (i) in the course of her employment by Employer, it will or may be necessary for Employee to create, use, or have access to (A) technical, business, or customer information, materials, or data relating to Employers present or planned business that has not been released to the public with Employers authorization, including, but not limited to, confidential information, materials, or proprietary data belonging to Employer or relating to Employers affairs (collectively, Confidential Information) and (B) information and materials that concern Employers business that come into Employers possession by reason of employment with Employer (collectively, Business Related Information); (ii) all Confidential Information and Business Related Information are the property of Employer; (iii) the use, misappropriation, or disclosure of any Confidential Information or Business Related Information would constitute a breach of trust and could cause serious and irreparable injury to Employer; and (iv) it is essential to the protection of Employers goodwill and maintenance of Employers competitive position that all Confidential Information and Business Related Information be kept confidential and that Employee not disclose any Confidential Information or Business Related Information to others or use Confidential Information or Business Related Information to Employees own advantage or the advantage of others.
(b) In recognition of the acknowledgment contained in Section 5.1(a) above, Employee agrees that, during the term of this Agreement and thereafter until the Confidential Information and/or Business Related Information becomes publicly available (other than through a breach by Employee), Employee shall: (i) hold and safeguard all Confidential Information and Business Related Information in trust for Employer, its successors, and assigns; (ii) not appropriate or disclose or make available to anyone for use outside of Employers organization at any time, either during employment with Employer or subsequent to the termination of employment with Employer for any reason, any Confidential Information and Business Related Information, whether or not developed by Employee, except as required in the performance of Employees duties to Employer; (iii) keep in strictest confidence any Confidential Information or Business Related Information; and (iv) not disclose or divulge, or allow to be disclosed or divulged by any person within Employees control, to any person, firm, or corporation, or use directly or indirectly, for Employees own benefit or the benefit of others, any Confidential Information or Business Related Information.
(c) Employee agrees that all lists, materials, records, books, data, plans, files, reports, correspondence, and other documents (Employer material) used or prepared by, or made available to, Employee shall be and remain property of Employer. Upon termination of employment, Employee shall
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immediately return all Employer material to Employer, and Employee shall not make or retain any copies or extracts thereof. Employee, however, shall not be required to return to Employer her personal Rolodex, materials from her work on the Board of Directors of other for-profit companies, and one copy of her calendar so long as Employee protects any Confidential Information and/or Business Related Information contained therein.
5.2. Competition . Employee agrees that during the term of this Agreement and for a period of two (2) years after the termination of her employment with Employer for any reason, she shall not: (i) be an officer, director, consultant, partner, owner, stockholder, employee, creditor, agent, trustee, independent contractor, or advisor on a paid or unpaid basis of any individual, partnership, limited liability company, corporation, independent practice association, management services organization, or any other entity (collectively, Person) that either is in the business of or, directly or indirectly, derives any economic benefit from providing, arranging, offering, managing, or subcontracting dialysis services or renal care services; or (ii) directly or indirectly, own, manage, control, operate, invest in, acquire an interest in, or otherwise engage in, act for, or act on behalf of any Person (other than Employer and its subsidiaries and affiliates) engaged in any activity in the United States or in those countries outside the United States in which Employer or any of its subsidiaries or affiliates had conducted any business during Employees employment hereunder, where such activity is similar to or competitive with the activities carried on by Employer or any of its subsidiaries or affiliates. As used herein, the term dialysis services or renal care services includes, but shall not be limited to, all dialysis services and nephrology-related services provided by Employer at any time during the period of Employees employment, including, but not limited to, hemodialysis, acute dialysis, apheresis services, peritoneal dialysis of any type, staff-assisted hemodialysis, home hemodialysis, dialysis-related laboratory and pharmacy services, access-related services, Method II dialysis supplies and services, nephrology practice management, vascular access services, disease management services, pre-dialysis education, ckd services, or renal physician/center network management, and any other services or treatment for persons diagnosed as having end stage renal disease (ESRD) or pre-end stage renal disease, including any dialysis services provided in an acute hospital. The term ESRD shall have the same meaning as set forth in Title 42, Code of Federal Regulations 405.2101 et seq. or any successor thereto. Employee acknowledges that the nature of Employers activities is such that competitive activities could be conducted effectively regardless of the geographic distance between Employers place of business and the place of any competitive business. Notwithstanding anything herein to the contrary, such activities shall not include the ownership of 1% or less of the issued and outstanding stock, which is purchased in the open market, of a public company that conducts business that is similar to or competitive with the business carried on by the Employer or any of its subsidiaries or affiliates.
Notwithstanding anything set forth herein, Employee shall not be prohibited from being employed (as an employee or independent contractor) by any Person that provides dialysis services and/or renal care services, as those terms as defined above, so long as such services constitutes no more than 5% of that Persons total business operations and so long as Employee has no authority over, responsibility for, oversight of, connection with, or involvement in anyway in the dialysis services and/or renal care services provided by that Person.
Employee acknowledges and agrees that the geographical limitations and duration of this covenant not to compete is reasonable. In particular, Employee agrees that her position is national in scope and that she will have an impact on every location where Employer currently conducts and will conduct business. Therefore, Employee acknowledges and agrees that, like her position, this covenant cannot be limited to any particular geographic region.
5.3 Solicitation of Employees . Employee promises and agrees that she will not, for a period of two (2) years after the termination of her employment, directly or indirectly, solicit any of Employers employees to work for any business, individual, partnership, firm, corporation, or other entity that is then in competition with Employers business or any subsidiary or affiliate of Employer. Employee also agrees that during her employment and for a period of two (2) years after the termination of her employment, directly or indirectly, that she will not hire any of Employers employees to work (as an employee or an independent contractor) for any business, individual, partnership, firm, corporation, or other entity that is then in competition with Employers business or any subsidiary or affiliate of Employer. In addition, Employee agrees that during her employment and for a period of two (2) years after the termination of her employment, directly or indirectly,
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that she will not take any action that may reasonably result in any of Employers employees going to work (as an employee or an independent contractor) for any business, individual, partnership, firm, corporation, or other entity that is then in competition with Employers business or any subsidiary or affiliate of Employer.
5.4 Other solicitation . Employee promises and agrees that during the term of this Agreement and for a period of two (2) years after the termination of her employment for any reason, she shall not, directly or indirectly: (i) induce any patient or customer of Employer, either individually or collectively, to patronize any competing dialysis facility; (ii) request or advise any patient, customer, or supplier of Employer to withdraw, curtail, or cancel such persons business with Employer; (iii) enter into any contract the purpose or result of which would benefit Employee if any patient or customer of Employer were to withdraw, curtail, or cancel such persons business with Employer; (iv) solicit, induce, or encourage any physician (or former physician) affiliated with Employer or induce or encourage any other person under contract with Employer to curtail or terminated such persons affiliation or contractual relationship with Employer; (v) disclose to any Person the names or addresses of any patient or customer of Employer or of any physician (or former physician) affiliated with Employer; or (vi) disparage Employer or any of its agents, employees, or affiliated physicians in any fashion.
5.5 Enforcement . In the event that any part of this Section 5 shall be held unenforceable or invalid, the remaining parts hereof shall nevertheless continue to be valid and enforceable as though the invalid portions had not been a part hereof. In the event that the area, period of restriction, activity, or subject established in accordance with this Section 5 shall be deemed to exceed the maximum area, period of restriction, activity, or subject that a court of competent jurisdiction deems enforceable, such area, period of restriction, activity, or subject shall, for the purpose of Section 5 , be reduced to the extent necessary to render them enforceable.
5.6 Equitable Relief . Employee agrees that any violation by Employee of any covenant in Section 5 will or would cause Employer to suffer irreparable injury, the exact amount of which will be difficult to ascertain. For that reason, Employee agrees that Employer shall be entitled, as a matter of right, to a temporary, preliminary, and/or permanent injunction and/or other injunctive relief, ex parte or otherwise, from any court of competent jurisdiction, restraining any further violations by Employee. Such injunctive relief shall be in addition to and in no way limit any and all other remedies Employer shall have in law and equity for the enforcement of such covenants and provisions. Employee consents and stipulates to the entry of such injunctive relief in such a court prohibiting her from any further violation of the covenants and provisions of Section 5 .
Section 6. Excess Parachute Payment . In the event that any payment or benefit received or to be received by Employee in connection with a Change of Control, whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement by Employer, any predecessor or successor to Employer or any corporation affiliated (within the meaning of Section 1504 of the Internal Revenue Code of 1986, as amended (the Code)) with Employer or which becomes so affiliated pursuant to the transactions resulting in a Change of Control (collectively all such payments are hereinafter referred to as the Total Payments), is deemed to be an Excess Parachute Payment (in whole or in part) to Employee within the meaning of Section 280G of the Code, as in effect at such time, no change shall be made to the Total Payments to be made in connection with the Change of Control, except that, in addition to all other amounts to be paid to Employee by Employer, Employer shall, within thirty (30) days of the date on which any Excess Parachute Payment is made, pay to Employee, in addition to any other payment, coverage or benefit due and owing, an amount determined by (i) multiplying the rate of excise tax then imposed by Code Section 4999 by the amount of the Excess Parachute Payment received by Employee (determined without regard to any payments made to Employee pursuant to this Section 6 ) and (ii) dividing the product so obtained by the amount obtained by subtracting (A) the aggregate local, state and Federal income and employment tax rates (including the value of the loss of itemized deductions under Section 68 of the Internal Revenue Code and the phase-out of the personal exemption) applicable to the receipt by Employee of the Excess Parachute Payment (taking into account the deductibility for Federal income tax purposes of the payment of state and local income taxes thereon) from (B) the amount obtained by subtracting from 1.00 the rate of excise tax then imposed by Section 4999 of the Code. It is Employers intention that Employees net after-tax position be identical to that which would have obtained had Sections 280G and 4999 not been part of the Code. For purposes of implementing this Section 6 , (i) no portion, if any, of the Total Payments, the receipt or enjoyment of which Employee shall have effectively waived in
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writing prior to the date of payment of the Total Payments, shall be taken into account, and (ii) the value of any non-cash benefit or any deferred cash payment included in the Total Payments shall be determined by Employers independent auditors in accordance with the principles of Sections 280G of the Code.
The calculation of the excess parachute payment is as follows: X = Y / (1 - (A + B + C)), where X is the total dollar amount of the Tax Gross-Up Payment, Y is the total Excise Tax imposed with respect to such Change in Control Benefit, A is the Excise Tax rate in effect at the time, B is the highest combined marginal federal income and applicable state income tax rate in effect, after taking into account the deductibility of state income taxes against federal income taxes to the extent allowable, for the calendar year in which the Tax Gross-Up Payment is made, and C is the combined federal and state employment tax rate in effect for the calendar year in which the Tax Gross-Up Payment is made.
Subject to the provisions of this Section 6 , all determinations required to be made under this Section 6 , including (i) whether and when a Tax Gross-Up Payment is required, (ii) the amount of such Tax Gross-Up Payment, and (iii) the assumptions to be utilized in arriving at such determination, shall be made by independent auditors of Employer (the Accounting Firm). The Accounting Firm shall provide detailed supporting calculations both to Employer and Employee within 15 business days of the receipt of notice from Employee that there has been an Excess Parachute Payment, or such earlier time as is requested by Employer. All fees and expenses of the Accounting Firm shall be borne solely by Employer.
Any Tax Gross-Up Payment, as determined pursuant to this Section 6 , shall be paid by Employer to Employee within thirty (30) days of the receipt of the Accounting Firms determination. If the Accounting Firm determines that no Excise Tax is payable by Employee, it shall furnish Employee with a written opinion that failure to report the Excise Tax on Employees applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon Employer and Employee.
In the event that a Tax Gross-Up Payment was not made but should have been made (Underpayment), and Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment (including, without limitation, penalties and interest), and Employer shall promptly pay the Underpayment to or for the benefit of Employee.
In the event that a Tax Gross-Up Payment was made but should not have been made (Overpayment), the Accounting Firm shall determine the amount of the Overpayment and Employee shall promptly pay the Overpayment to Employer.
Employee shall notify Employer in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Employer of the Tax Gross-Up Payment (Gross-Up Notice). Employee shall give Employer the Gross-Up Notice as soon as practicable, but no later than 10 business days after Employee is informed in writing of such claim and shall apprise Employer of the nature of such claim and the date on which such claim is requested to be paid. Employee shall not pay such claim prior to the expiration of the 30-day period following the date of the Gross-Up Notice (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Employer notifies Employee in writing prior to the expiration of such period that it desires to contest such claim, Employee shall:
(i) | give Employer any information reasonably requested by Employer relating to such claim, |
(ii) | take such action in connection with contesting such claim as Employer shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by Employer, |
(iii) | cooperate with Employer in good faith in order effectively to contest such claim, and |
(iv) | permit Employer to participate in any proceedings relating to such claim. |
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Employer shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed on Employee as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 6 , Employer shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner. In the event that Employer elects to contest the tax, Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Employer shall determine. If Employer directs Employee to pay such claim and sue for a refund, Employer shall advance the amount of such payment to Employee, on an interestfree basis, for any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance. In the event that the Internal Revenue Service requests an extension of the statute of limitations relating to payment of taxes for the taxable year of Employee with respect to which such contested amount is claimed to be due, such an extension may, at the election of Employee, be limited solely to such contested amount. Furthermore, Employers control of the contest shall be limited to issues with respect to which a Tax Gross-Up Payment would be payable hereunder, and Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
If, after the receipt by Employee of an amount advanced by Employer pursuant to Section 6 , Employee becomes entitled to receive any refund with respect to such claim, Employee shall promptly pay Employer the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Employee of an amount advanced by Employer pursuant to this Section 6 , a determination is made that Employee shall not be entitled to any refund with respect to such claim and Employer does not notify Employee in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Tax Gross-Up Payment to be paid.
Notwithstanding anything to the contrary in this Section 6, in the event that a Tax Gross-Up Payment is made before the date on which Employee actually owes the Excise Tax, then the amount of the payment shall be discounted using the applicable interest rate, i.e., the prime rate, used to compute the present value of an amount at the same time in the future for purposes of computing the Excise Tax.
Section 7. Miscellaneous .
7.1 Entire Agreement; Amendment . This Agreement and the separate Stock Option Agreement represents the entire understanding of the parties hereto with respect to the employment of Employee and supersedes all prior agreements with respect thereto. This Agreement may not be altered or amended except in writing executed by both parties hereto.
7.2 Assignment; Benefit . This Agreement is personal and may not be assigned by Employee. This Agreement may be assigned by Employer and shall inure to the benefit of and be binding upon the successors and assigns of Employer.
7.3 Applicable Law . This Agreement shall be governed by the laws of the State of California, without regard to the principles of conflicts of laws.
7.4 Notice . Notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to Employer at its principal office and to Employee at Employees principal residence as shown in Employers personnel records, provided that all notices to Employer shall be directed to the attention of the Chief Executive Officer with a copy to the General Counsel of Employer, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
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7.5 Construction . Each party has cooperated in the drafting and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against any party on the basis that the party was the drafter. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.
7.6 Execution . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Photographic or facsimile copies of such signed counterparts may be used in lieu of the originals for any purpose.
7.7 Legal Counsel . Employee and Employer recognize that this is a legally binding contract and acknowledge and agree that they have had the opportunity to consult with legal counsel of their choice.
7.8 Waiver . The waiver by any party of a breach of any provision of this Agreement by the other shall not operate or be construed as a waiver of any other or subsequent breach of such or any provision.
7.9 Invalidity of Provision . In the event that any provision of this Agreement is determined to be illegal, invalid, or void for any reason, the remaining provisions hereof shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated Employment Agreement effective as of February 28, 2005.
DAVITA INC. |
EMPLOYEE |
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By |
/s/ Kent J. Thiry |
/s/ Denise Fletcher |
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Kent J. Thiry |
Denise Fletcher |
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Chief Executive Officer and Chairman of the Board |
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Exhibit 10.11
EMPLOYMENT AGREEMENT
This Employment Agreement (this Agreement) is entered into effective November 18, 2004 (the Effective Date), by and between DaVita Inc. (Employer) and Joseph Schohl (Employee).
In consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the parties hereto, intending to be legally bound hereby, agree as follows:
Section 1. Employment and Duties . Employer hereby employs Employee to serve as Vice President, General Counsel and Secretary. Employee accepts such employment on the terms and conditions set forth in this Agreement. Employee shall perform the duties of Vice President, General Counsel and Secretary and shall perform such other duties as may be assigned from time to time by the Chief Executive Officer. Employee shall work out of Employers El Segundo corporate office. Employee agrees to devote substantially all of his time, energy, and ability to the business of Employer on a full-time basis and shall not engage in any other business activities during the term of this Agreement, provided however , Employee may pursue normal charitable activities so long as such activities do not require a substantial amount of time and do not interfere with his ability to perform his duties. Employee shall at all times observe and abide by the Employers policies and procedures as in effect from time to time.
Section 2. Compensation . In consideration of the services to be performed by Employee hereunder, Employee shall receive the following compensation and benefits:
2.1 Base Salary . Employer shall pay Employee a base salary of $240,000 per annum, less standard withholdings and authorized deductions. Employee shall be paid consistent with Employers payroll schedule. The Base Salary will be reviewed each year during Employers annual review. Employer, in its sole discretion, may increase the Base Salary as a result of any such review.
2.2 Benefits . Employee and/or his family, as the case may be, shall be eligible for participation in and shall receive all benefits under Employers health and welfare benefit plans (including, without limitation, medical, prescription, dental, disability, and life insurance) under the same terms and conditions applicable to most executives at similar levels of compensation and responsibility.
2.3 Performance Bonus .
(a) Employee shall be eligible to receive a discretionary performance bonus (the Bonus) between zero and $120,000, payable in a manner consistent with Employers practices and procedures. The amount of the Bonus, if any, will be decided by the Chief Executive Officer and/or the Board of Directors or the Compensation Committee of the Board in his/its sole discretion.
(b) Employee must be employed by Employer (or an affiliate) on the date any Bonus is paid to be eligible to receive such Bonus and, if Employee is not employed by Employer (or an affiliate) on the date any Bonus is paid for any reason whatsoever, Employee shall not be entitled to receive such Bonus.
2.4 Vacation . Employee shall have vacation, subject to the approval of the Chief Executive Officer.
2.5 Stock Options . Employee shall receive options to purchase 60,000 shares of Employer stock. Such options shall have a five-year term and vest 25% on the first anniversary date of the grant, 8.33% on the 20 th month of the grant, and 8.33% every 4 months thereafter. The exercise price shall be the closing price as reported on the New York Stock Exchange on the start date of this Agreement. The options will be reflected in a separate Stock Option Agreement.
2.6 Restricted Stock Options . On the Effective Date, Employee will receive an additional 6,250 shares of Employers restricted stock units, entitling Employee to the same number of full shares of DaVita common stock, subject to the following vesting conditions: such restricted stock units shall vest over a five-year period, one-third vesting on the third, fourth, and fifth anniversary date of Employees date of hire. The terms of the restricted stock units will be reflected in a separate Restricted Stock Units Agreement.
2.7 Signing Bonus . Employer will pay either Employee or Employees former employer, on behalf of Employee, the following: less all standard withholdings and authorized deductions.
(a) Employer shall pay Employee a sign-on bonus of $41,428.00, less standard withholdings and authorized deductions;
(b) Employer shall pay to Employee or to Employees former employer up to 100% of the amount that Employee is required to reimburse his former employer for providing relocation expenses, if any. If Employer pays Employee directly, Employer shall reduce the amount paid by standard deductions and authorized withholdings. Employee shall exercise his best efforts to negotiate a reduction in the amount he may be required to reimburse his former employer and in no event shall such amount exceed $43,500.
(c) Employer shall pay to Employer or to Employees former employer up to 80% of the amount that Employee is required to reimburse his former employer for tuition expenses, if any. If Employer pays Employee directly, Employer shall reduce the amount paid by standard deductions and authorized withholdings. Employee shall exercise his best efforts to negotiate a reduction in the amount he may be required to pay his former employer and in no event shall such amount exceed $15,175.
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2.8 Acceleration of Vesting . Upon a Change of Control, as that term is defined below, Employees entire award of stock options shall vest immediately.
2.9 Indemnification . Employer agrees to indemnify Employee against and in respect of any and all claims, actions, or demands, in accordance with all applicable laws.
2.10 Reimbursement . Employer also agrees to reimburse Employee in accordance with Employers reimbursement policies for travel and entertainment expenses, as well as other business-related expenses, incurred in the performance of his duties hereunder.
2.11 Changes to Benefit Plans . Employer reserves the right to modify, suspend, or discontinue any and all of its health and welfare benefit plans, practices, policies, and programs at any time without recourse by Employee so long as such action is taken generally with respect to all other similarly-situated peer executives and does not single out Employee.
Section 3. Provisions Relating to Termination of Employment .
3.1 Employment Is At-Will . Employees employment with Employer is at will and is terminable by Employer or by Employee at any time and for any reason or no reason, subject to the notice requirements set forth below.
3.2 Termination for Material Cause . Employer may terminate Employees employment for Material Cause (as defined below) upon at least thirty (30) days advance written notice specifying in detail the cause for the termination and the intended termination date. Upon termination for Material Cause, Employee shall (i) be entitled to receive the Base Salary and benefits as set forth in Section 2.1 and Section 2.2 , respectively, through the effective date of such termination and (ii) not be entitled to receive any other compensation, benefits, or payments of any kind, except as otherwise required by law or by the terms of any benefit or retirement plan or other arrangement that would, by its terms, apply.
3.3 Other Termination . Employer may terminate the employment of Employee for any reason or for no reason at any time upon at least thirty (30) days advance written notice. If Employer terminates the employment of Employee for reasons other than for Material Cause or Disability, or if Employee resigns within sixty (60) days following Constructive Discharge or a Good Cause Event (as those terms are defined below), Employee shall (i) be entitled to receive the Base Salary and benefits as set forth in Section 2.1 and Section 2.2 , respectively, through the effective date of such termination or resignation, (ii) be entitled to receive his salary for the two-year period following the termination of his employment, (iii) be entitled to continue to receive during the one-year period following the effective date of such termination (the Severance Period) the employee health insurance benefits set forth in Section 2.2 at the same cost to him as he paid prior to his termination; and (iv) not be entitled to receive any other compensation, benefits, or payments of any kind, except as otherwise required by law or by the terms of any benefit or retirement plan or other arrangement that would, by its terms, apply. The foregoing notwithstanding, in the event Employee accepts employment (as an employee or as an independent contractor) with another employer during the Severance Period,
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(x) Employee shall immediately notify Employer of such employment and (y) Employers obligation to continue to provide certain health insurance benefits pursuant to clause (iii) of the immediately preceding sentence shall terminate once Employee becomes eligible to participate in his new employers health benefit plan. In addition, once Employee accepts employment (as an employee or as an independent contractor), Employer may reduce its obligation under clause (ii) herein dollar-for-dollar for every dollar Employee earns in base salary or other compensation during the Severance Period from his new employer. Employee agrees to use reasonable efforts to find employment after the first year of the Severance Period and that if he fails to use reasonable efforts, the Companys obligations under clause (ii) herein may be terminated by Employer in its sole discretion.
With respect to Employees right to continue receiving health insurance, to the extent Employee can continue to receive such benefits under Employers health insurance policies and programs in effect at the effective time of such termination through the exercise of his rights under COBRA, Employee shall elect to receive COBRA benefits, and Employer shall pay Employees insurance premiums for COBRA coverage during this one-year period; provided , however , to the extent such benefits cannot be provided under such policies and programs, Employer shall purchase for Employee reasonably equivalent health insurance benefits during the one-year period subject to the limitation set forth below and subject to the limitation set forth in Section 2.11 .
During the Severance Period, Employee agrees to make himself available to answer questions and to cooperate in the transition of his duties. In addition, Employee agrees to cooperate with Employer in the prosecution and/or defense of any claim, including making himself available for any interviews, appearing at depositions, and producing requested documents.
3.4. Voluntary Resignation . Employee may resign from Employer at any time upon at least ninety (90) days advance written notice. If Employee resigns from Employer for any reason other than a Constructive Discharge or a Good Cause Event, as those terms are defined below, Employee shall (i) be entitled to receive the Base Salary and benefits as set forth in Section 2.1 and Section 2.2 , respectively, through the effective date of such termination and (ii) not be entitled to receive any other compensation, benefits, or payments of any kind, except as otherwise required by law or by the terms of any benefit or retirement plan or other arrangement that would, by its terms, apply. In the event Employee resigns from Employer at any time, Employer shall have the right to make such resignation effective as of any date before the expiration of the required notice period.
3.5 Disability . Upon thirty (30) days advance notice (which notice may be given before the completion of the periods described herein), Employer may terminate Employees employment for Disability (as defined below), provided that either (i) immediately upon the effective date of such termination, Employee shall be eligible to receive full disability benefits under the disability insurance, if any, provided to Employee by Employer or (ii) Employer shall continue to pay the Base Salary to Employee until the first to occur of (A) full disability benefits are received or (B) one (1) year from the effective date of such termination.
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3.6 Definitions . For the purposes of this Agreement, the following terms shall have the meanings indicated:
(a) Change of Control shall mean (i) any transaction or series of transactions in which any person or group (within the meaning of Rule 13d-5 under the Exchange Act and Sections 13(d) and 14(d) of the Exchange Act) becomes the direct or indirect beneficial owner (as defined in Rule 13d-3 under the Exchange Act), by way of a stock issuance, tender offer, merger, consolidation, other business combination or otherwise, of greater than 40% of the total voting power (on a fully diluted basis as if all convertible securities had been converted and all warrants and options had been exercised) entitled to vote in the election of directors of Employer (including any transaction in which Employer becomes a wholly-owned or majority-owned subsidiary of another corporation), (ii) any merger or consolidation or reorganization in which Employer does not survive, (iii) any merger or consolidation in which Employer survives, but the shares of Employers Common Stock outstanding immediately prior to such merger or consolidation represent 40% or less of the voting power of Employer after such merger or consolidation, and (iv) any transaction in which more than 40% of Employers assets are sold. However , despite the occurrence of any of the above-described events, a Change of Control will not have occurred if Kent Thiry remains the Chief Executive Officer or Executive Chair of Employer for at least one (1) year after the Change of Control or becomes the Chief Executive Officer or Executive Chair of the surviving company with which Employer merged or consolidated and remains in that position for at least one (1) year after the Change of Control.
(b) Constructive Discharge shall mean the occurrence of any of the following events after the date of a Change of Control without Employees express written consent: (i) the scope of Employees authority, duties and responsibilities are materially diminished or are not (A) in the same general level of seniority, (B) in the same corporate and reporting capacity (and standing in the same relationship to the ultimate parent entity, e.g., reporting the Chief Executive Officer of a subsidiary will not be deemed to constitute the same corporate and reporting capacity as reporting to the Chief Executive Officer of the ultimate parent company), or (C) of the same general nature as Employees authority, duties, and responsibilities with Employer immediately before such Change of Control; (ii) the failure by Employer to provide Employee with office accommodations and assistance substantially equivalent to the accommodations and assistance provided to Employee immediately before such Change of Control; (iii) the principal office to which Employee is required to report is changed to a location that is more than twenty (20) miles from the principal office to which Employee is required to report immediately before such Change of Control; or (iv) a reduction by Employer in Employees Base Salary, bonus arrangement, or other material benefits as in effect on the date of such Change of Control.
(c) Disability shall mean the inability, for a period of six (6) months, to adequately perform Employees regular duties, with or without reasonable accommodation, due to a physical or mental illness, condition, or disability.
(d) Material Cause shall mean any of the following: (i) conviction of a felony; (ii) the adjudication by a court of competent jurisdiction that Employee has committed
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any act of fraud or dishonesty resulting or intended to result directly or indirectly in personal enrichment at the expense of Employer; (iii) repeated failure or refusal by Employee to follow policies or directives reasonably established by the Chief Executive Officer of Employer or his designee that goes uncorrected for a period of thirty (30) consecutive days after written notice has been provided to Employee; (iv) a material breach of this Agreement that goes uncorrected for a period of thirty (30) consecutive days after written notice has been provided to Employee; (v) an act of unlawful discrimination, including sexual harassment; (vi) a violation of the duty of loyalty or of any fiduciary duty; or (vii) exclusion or notice of exclusion of Employee from participating in any federal health care program.
(e) Good Cause Event shall mean the occurrence of any of the following events without Employees express written consent: (i) Employer materially diminishes the scope of Employees authority, duties and responsibilities and his duties and responsibilities are not (A) in the same general level of seniority or (B) of the same general nature; (ii) Employer ceases to provide Employee with appropriate office accommodations and assistance (i.e., office accommodations and assistance substantially similar to what other similar-level executives receive); (iii) Employers relocates the principal office to which Employee is required to report is changed to a location that is more than twenty (20) miles from the principal office to which Employee was required to report; or (iv) Employer reduces Employees Base Salary, bonus arrangement, or other material benefits (unless the change in benefit plans is taken generally with respect to all similarly-situated peer executives and does not single out Employee).
3.7 Notice of Termination . Any purported termination of Employees employment by Employer or by Employee shall be communicated by a written Notice of Termination to the other party hereto in accordance with Section 6 hereof. A Notice of Termination shall mean a written notice that indicates the specific termination provision in this Agreement relied upon and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employees employment.
3.8 Effect of Termination . Upon termination, this Agreement shall be of no further force and effect and neither party shall have any further right or obligation hereunder; provided, however, that no termination shall modify or affect the rights and obligations of the parties that have accrued prior to termination; and provided further , that the rights and obligations of the parties under Section 3 , Section 4 , Section 5 , and Section 6 shall survive termination of this Agreement.
Section 4: Certain Covenants of Executive .
4.1 Confidential Information .
(a) Employee acknowledges and agrees that: (i) in the course of his employment by Employer, it will or may be necessary for Employee to create, use, or have access to (A) technical, business, or customer information, materials, or data relating to Employers present or planned business that has not been released to the public with Employers
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authorization, including, but not limited to, confidential information, materials, or proprietary data belonging to Employer or relating to Employers affairs (collectively, Confidential Information) and (B) information and materials that concern Employers business that come into Employers possession by reason of employment with Employer (collectively, Business Related Information); (ii) all Confidential Information and Business Related Information are the property of Employer; (iii) the use, misappropriation, or disclosure of any Confidential Information or Business Related Information would constitute a breach of trust and could cause serious and irreparable injury to Employer; and (iv) it is essential to the protection of Employers goodwill and maintenance of Employers competitive position that all Confidential Information and Business Related Information be kept confidential and that Employee not disclose any Confidential Information or Business Related Information to others or use Confidential Information or Business Related Information to Employees own advantage or the advantage of others.
(b) In recognition of the acknowledgment contained in Section 4.1(a) above, Employee agrees that, during the term of this Agreement and thereafter until the Confidential Information and/or Business Related Information becomes publicly available (other than through a breach by Employee), Employee shall: (i) hold and safeguard all Confidential Information and Business Related Information in trust for Employer, its successors, and assigns; (ii) not appropriate or disclose or make available to anyone for use outside of Employers organization at any time, either during employment with Employer or subsequent to the termination of employment with Employer for any reason, any Confidential Information and Business Related Information, whether or not developed by Employee, except as required in the performance of Employees duties to Employer; (iii) keep in strictest confidence any Confidential Information or Business Related Information; and (iv) not disclose or divulge, or allow to be disclosed or divulged by any person within Employees control, to any person, firm, or corporation, or use directly or indirectly, for Employees own benefit or the benefit of others, any Confidential Information or Business Related Information.
(c) Employee agrees that all lists, materials, records, books, data, plans, files, reports, correspondence, and other documents (Employer material) used or prepared by, or made available to, Employee shall be and remain property of Employer. Upon termination of employment, Employee shall immediately return all Employer material to Employer, and Employee shall not make or retain any copies or extracts thereof.
4.2. Competition . Employee agrees that during the term of this Agreement and for a period of two (2) years after the termination of his employment with Employer for any reason, he shall not: (i) be an officer, director, consultant, partner, owner, stockholder, employee, creditor, agent, trustee, independent contractor, or advisor on a paid or unpaid basis of any individual, partnership, limited liability company, corporation, independent practice association, management services organization, or any other entity (collectively, Person) that either is in the business of or, directly or indirectly, derives any economic benefit from providing, arranging, offering, managing, or subcontracting dialysis services or renal care services; or (ii) directly or indirectly, own, manage, control, operate, invest in, acquire an interest in, or otherwise engage in, act for, or act on behalf of any Person (other than Employer and its subsidiaries and affiliates)
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engaged in any activity in the United States or in those countries outside the United States in which Employer or any of its subsidiaries or affiliates had conducted any business during Employees employment hereunder, where such activity is similar to or competitive with the activities carried on by Employer or any of its subsidiaries or affiliates. As used herein, the term dialysis services or renal care services includes, but shall not be limited to, all dialysis services and nephrology-related services provided by Employer at any time during the period of Employees employment, including, but not limited to, hemodialysis, acute dialysis, apheresis services, peritoneal dialysis of any type, staff-assisted hemodialysis, home hemodialysis, dialysis-related laboratory and pharmacy services, access-related services, Method II dialysis supplies and services, nephrology practice management, vascular access services, disease management services, pre-dialysis education, ckd services, or renal physician/center network management, and any other services or treatment for persons diagnosed as having end stage renal disease (ESRD) or pre-end stage renal disease, including any dialysis services provided in an acute hospital. The term ESRD shall have the same meaning as set forth in Title 42, Code of Federal Regulations 405.2101 et seq. or any successor thereto. Employee acknowledges that the nature of Employers activities is such that competitive activities could be conducted effectively regardless of the geographic distance between Employers place of business and the place of any competitive business. Notwithstanding anything herein to the contrary, such activities shall not include the ownership of 1% or less of the issued and outstanding stock, which is purchased in the open market, of a public company that conducts business that is similar to or competitive with the business carried on by the Employer or any of its subsidiaries or affiliates.
Notwithstanding anything set forth herein, Employee shall not be prohibited from being employed (as an employee or independent contractor) by any Person that provides dialysis services and/or renal care services, as those terms as defined above, so long as such services constitutes no more than 5% of that Persons total business operations and so long as Employee has no authority over, responsibility for, oversight of, connection with, or involvement in anyway in the dialysis services and/or renal care services provided by that Person.
Employee acknowledges and agrees that the geographical limitations and duration of this covenant not to compete is reasonable. In particular, Employee agrees that his position is national in scope and that he will have an impact on every location where Employer currently conducts and will conduct business. Therefore, Employee acknowledges and agrees that, like his position, this covenant cannot be limited to any particular geographic region.
4.3 Solicitation of Employees . Employee promises and agrees that he will not, for a period of two (2) years after the termination of his employment, directly or indirectly, solicit any of Employers employees to work for any business, individual, partnership, firm, corporation, or other entity that is then in competition with Employers business or any subsidiary or affiliate of Employer. Employee also agrees that during his employment and for a period of two (2) years after the termination of his employment, directly or indirectly, that he will not hire any of Employers employees to work (as an employee or an independent contractor) for any business, individual, partnership, firm, corporation, or other entity that is then in competition with Employers business or any subsidiary or affiliate of Employer. In addition, Employee agrees that during his employment and for a period of two (2) years after the
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termination of his employment, directly or indirectly, that he will not take any action that may reasonably result in any of Employers employees going to work (as an employee or an independent contractor) for any business, individual, partnership, firm, corporation, or other entity that is then in competition with Employers business or any subsidiary or affiliate of Employer.
4.4 Other solicitation . Employee promises and agrees that during the term of this Agreement and for a period of two (2) years after the termination of his employment for any reason, he shall not, directly or indirectly: (i) induce any patient or customer of Employer, either individually or collectively, to patronize any competing dialysis facility; (ii) request or advise any patient, customer, or supplier of Employer to withdraw, curtail, or cancel such persons business with Employer; (iii) enter into any contract the purpose or result of which would benefit Employee if any patient or customer of Employer were to withdraw, curtail, or cancel such persons business with Employer; (iv) solicit, induce, or encourage any physician (or former physician) affiliated with Employer or induce or encourage any other person under contract with Employer to curtail or terminated such persons affiliation or contractual relationship with Employer; (v) disclose to any Person the names or addresses of any patient or customer of Employer or of any physician (or former physician) affiliated with Employer; or (vi) disparage Employer or any of its agents, employees, or affiliated physicians in any fashion.
4.5 Enforcement . In the event that any part of this Section 4 shall be held unenforceable or invalid, the remaining parts hereof shall nevertheless continue to be valid and enforceable as though the invalid portions had not been a part hereof. In the event that the area, period of restriction, activity, or subject established in accordance with this Section 4 shall be deemed to exceed the maximum area, period of restriction, activity, or subject that a court of competent jurisdiction deems enforceable, such area, period of restriction, activity, or subject shall, for the purpose of Section 4 , be reduced to the extent necessary to render them enforceable.
4.6 Equitable Relief . Employee agrees that any violation by Employee of any covenant in Section 4 will or would cause Employer to suffer irreparable injury, the exact amount of which will be difficult to ascertain. For that reason, Employee agrees that Employer shall be entitled, as a matter of right, to a temporary, preliminary, and/or permanent injunction and/or other injunctive relief, ex parte or otherwise, from any court of competent jurisdiction, restraining any further violations by Employee. Such injunctive relief shall be in addition to and in no way limit any and all other remedies Employer shall have in law and equity for the enforcement of such covenants and provisions. Employee consents and stipulates to the entry of such injunctive relief in such a court prohibiting him from any further violation of the covenants and provisions of Section 4 .
Section 5. Excess Parachute Payment . In the event that any payment or benefit received or to be received by Employee in connection with a Change of Control, whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement by Employer, any predecessor or successor to Employer or any corporation affiliated (within the meaning of Section 1504 of the Internal Revenue Code of 1986, as amended (the Code)) with Employer or which becomes so affiliated pursuant to the transactions resulting in a Change of
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Control (collectively all such payments are hereinafter referred to as the Total Payments), is deemed to be an Excess Parachute Payment (in whole or in part) to Employee within the meaning of Section 280G of the Code, as in effect at such time, no change shall be made to the Total Payments to be made in connection with the Change of Control, except that, in addition to all other amounts to be paid to Employee by Employer, Employer shall, within thirty (30) days of the date on which any Excess Parachute Payment is made, pay to Employee, in addition to any other payment, coverage or benefit due and owing, an amount determined by (i) multiplying the rate of excise tax then imposed by Code Section 4999 by the amount of the Excess Parachute Payment received by Employee (determined without regard to any payments made to Employee pursuant to this Section 5 ) and (ii) dividing the product so obtained by the amount obtained by subtracting (A) the aggregate local, state and Federal income and employment tax rates (including the value of the loss of itemized deductions under Section 68 of the Internal Revenue Code and the phase-out of the personal exemption) applicable to the receipt by Employee of the Excess Parachute Payment (taking into account the deductibility for Federal income tax purposes of the payment of state and local income taxes thereon) from (B) the amount obtained by subtracting from 1.00 the rate of excise tax then imposed by Section 4999 of the Code. It is Employers intention that Employees net after-tax position be identical to that which would have obtained had Sections 280G and 4999 not been part of the Code. For purposes of implementing this Section 5 , (i) no portion, if any, of the Total Payments, the receipt or enjoyment of which Employee shall have effectively waived in writing prior to the date of payment of the Total Payments, shall be taken into account, and (ii) the value of any non-cash benefit or any deferred cash payment included in the Total Payments shall be determined by Employers independent auditors in accordance with the principles of Sections 280G of the Code.
The calculation of the excess parachute payment is as follows: X = Y / (1 - (A + B + C)), where X is the total dollar amount of the Tax Gross-Up Payment, Y is the total Excise Tax imposed with respect to such Change in Control Benefit, A is the Excise Tax rate in effect at the time, B is the highest combined marginal federal income and applicable state income tax rate in effect, after taking into account the deductibility of state income taxes against federal income taxes to the extent allowable, for the calendar year in which the Tax Gross-Up Payment is made, and C is the combined federal and state employment tax rate in effect for the calendar year in which the Tax Gross-Up Payment is made.
Subject to the provisions of this Section 5 , all determinations required to be made under this Section 5 , including (i) whether and when a Tax Gross-Up Payment is required, (ii) the amount of such Tax Gross-Up Payment, and (iii) the assumptions to be utilized in arriving at such determination, shall be made by independent auditors of Employer (the Accounting Firm). The Accounting Firm shall provide detailed supporting calculations both to Employer and Employee within 15 business days of the receipt of notice from Employee that there has been an Excess Parachute Payment, or such earlier time as is requested by Employer. All fees and expenses of the Accounting Firm shall be borne solely by Employer.
Any Tax Gross-Up Payment, as determined pursuant to this Section 5 , shall be paid by Employer to Employee within thirty (30) days of the receipt of the Accounting Firms determination. If the Accounting Firm determines that no Excise Tax is payable by Employee, it
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shall furnish Employee with a written opinion that failure to report the Excise Tax on Employees applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon Employer and Employee.
In the event that a Tax Gross-Up Payment was not made but should have been made (Underpayment), and Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment (including, without limitation, penalties and interest), and Employer shall promptly pay the Underpayment to or for the benefit of Employee.
In the event that a Tax Gross-Up Payment was made but should not have been made (Overpayment), the Accounting Firm shall determine the amount of the Overpayment and Employee shall promptly pay the Overpayment to Employer.
Employee shall notify Employer in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Employer of the Tax Gross-Up Payment (Gross-Up Notice). Employee shall give Employer the Gross-Up Notice as soon as practicable, but no later than 10 business days after Employee is informed in writing of such claim and shall apprise Employer of the nature of such claim and the date on which such claim is requested to be paid. Employee shall not pay such claim prior to the expiration of the 30-day period following the date of the Gross-Up Notice (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Employer notifies Employee in writing prior to the expiration of such period that it desires to contest such claim, Employee shall:
(i) | give Employer any information reasonably requested by Employer relating to such claim, |
(ii) | take such action in connection with contesting such claim as Employer shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by Employer, |
(iii) | cooperate with Employer in good faith in order effectively to contest such claim, and |
(iv) | permit Employer to participate in any proceedings relating to such claim. |
Employer shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed on Employee as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 5 , Employer shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Employee to pay the tax claimed and sue for a refund or contest the claim in any
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permissible manner. In the event that Employer elects to contest the tax, Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Employer shall determine. If Employer directs Employee to pay such claim and sue for a refund, Employer shall advance the amount of such payment to Employee, on an interestfree basis, for any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance. In the event that the Internal Revenue Service requests an extension of the statute of limitations relating to payment of taxes for the taxable year of Employee with respect to which such contested amount is claimed to be due, such an extension may, at the election of Employee, be limited solely to such contested amount. Furthermore, Employers control of the contest shall be limited to issues with respect to which a Tax Gross-Up Payment would be payable hereunder, and Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
If, after the receipt by Employee of an amount advanced by Employer pursuant to Section 5 , Employee becomes entitled to receive any refund with respect to such claim, Employee shall promptly pay Employer the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Employee of an amount advanced by Employer pursuant to this Section 5 , a determination is made that Employee shall not be entitled to any refund with respect to such claim and Employer does not notify Employee in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Tax Gross-Up Payment to be paid.
Notwithstanding anything to the contrary in this Section 5, in the event that a Tax Gross-Up Payment is made before the date on which Employee actually owes the Excise Tax, then the amount of the payment shall be discounted using the applicable interest rate, i.e., the prime rate, used to compute the present value of an amount at the same time in the future for purposes of computing the Excise Tax.
Section 6. Miscellaneous .
6.1 Entire Agreement; Amendment . This Agreement and the separate Stock Option Agreement represents the entire understanding of the parties hereto with respect to the employment of Employee and supersedes all prior agreements with respect thereto. This Agreement may not be altered or amended except in writing executed by both parties hereto.
6.2 Assignment; Benefit . This Agreement is personal and may not be assigned by Employee. This Agreement may be assigned by Employer and shall inure to the benefit of and be binding upon the successors and assigns of Employer.
6.3 Applicable Law . This Agreement shall be governed by the laws of the State of California, without regard to the principles of conflicts of laws.
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6.4 Notice . Notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to Employer at its principal office and to Employee at Employees principal residence as shown in Employers personnel records, provided that all notices to Employer shall be directed to the attention of the Chief Executive Officer, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
6.5 Construction . Each party has cooperated in the drafting and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against any party on the basis that the party was the drafter. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.
6.6 Execution . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Photographic or facsimile copies of such signed counterparts may be used in lieu of the originals for any purpose.
6.7 Legal Counsel . Employee and Employer recognize that this is a legally binding contract and acknowledge and agree that they have had the opportunity to consult with legal counsel of their choice.
6.8 Waiver . The waiver by any party of a breach of any provision of this Agreement by the other shall not operate or be construed as a waiver of any other or subsequent breach of such or any provision.
6.9 Invalidity of Provision . In the event that any provision of this Agreement is determined to be illegal, invalid, or void for any reason, the remaining provisions hereof shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date and year first written above.
DAVITA INC. | EMPLOYEE | |||||
By |
/s/ K ENT J. T HIRY |
By |
/s/ J OSEPH S CHOHL |
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Kent J. Thiry | Joseph Schohl | |||||
Chief Executive Officer and | ||||||
Chairman of the Board |
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Exhibit 10.27 |
AMENDMENT NO. 2 FREESTANDING DIALYSIS CENTER AGREEMENT NO. 200308360
The undersigned hereby agree to amend Freestanding Dialysis Center Agreement No. 200308360 between Amgen USA Inc. (Amgen), a wholly-owned subsidiary of Amgen Inc., and DaVita, Inc., including the freestanding dialysis center affiliate(s) listed on Appendix B, (collectively, Dialysis Center) including any prior amendments thereto (the Agreement), as stated below.
WHEREAS , Amgen and Dialysis Center entered into Freestanding Dialysis Center Agreement No. 200308360 effective January 1, 2004, and subsequent thereto entered into Amendment No. 1 to Freestanding Dialysis Center Agreement, Agreement No. 200308360 (Amendment No. 1);
WHEREAS, the Agreement sets forth the terms and conditions for the purchase of EPOGEN ® (Epoetin alfa) and Aranesp ® (darbepoetin alfa) (collectively, Products) by Dialysis Center, exclusively for the treatment of dialysis patients;
WHEREAS, the parties wish to amend this Agreement to modify the Term of the Agreement [DELETED] for the period [DELETED], modify rebate programs for the period [DELETED] through [DELETED], and offer new rebates for the period [DELETED] through [DELETED], and clarify certain terms of the Agreement, all as more fully set forth herein.
NOW, THEREFORE , in consideration of the premises and the mutual promises and undertakings herein contained, the parties hereto agree as follows:
SECTION 1. Amendment and Restatement of the General Terms and Conditions The General Terms and Conditions of the Agreement shall be amended and restated in their entirety effective as follows on December 1, 2004 provided Dialysis Center executes this amended Agreement on or before December 1, 2004 (Amended Date). If Dialysis Center executes this amended Agreement after December 1, 2004, the Amended Date shall be the date on which the party last to execute this amended Agreement has executed this amended Agreement.
1. | Term of Agreement. The Term of this Agreement shall be defined as January 1, 2004 (Commencement Date) through December 31, 2005 (Termination Date). |
2. | Dialysis Center Affiliates. Only those Dialysis Center affiliates (Affiliates) listed on Appendix B which is incorporated by reference hereto and made a part of this Agreement will be eligible to participate under this Agreement. Affiliates eligible to participate under this Agreement shall be facilities owned in whole or in part by Dialysis Center or for which Dialysis Center provides management or administrative services including such services as the purchasing and billing of EPOGEN ® (Epoetin alfa) and Aranesp ® (darbepoetin alfa) (collectively, Products). Additions to the Affiliates listed on Appendix B may be made pursuant to the request of Dialysis Centers corporate headquarters and are subject to approval and acknowledgment by Amgen in writing, and such approval and acknowledgment shall not be unreasonably withheld, conditioned or delayed. Dialysis Center may delete Affiliates from participation in this Agreement at any time, in its sole discretion. Amgen requires reasonable notice before the effective date of change (the Administrative Effective Date) for any addition or deletion of Affiliates. Notwithstanding the immediately preceding sentence, Amgen agrees to coordinate with Dialysis Centers Authorized Wholesalers (as defined in Section 4 of the Agreement) [DELETED] any and all purchases made by Dialysis Center [DELETED] |
[DELETED] = Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission.
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Amendment No. 2 Agreement No. 200308360 (Continued)
pursuant to which Dialysis Center is legally authorized to purchase Products for such added Affiliate [DELETED]; all such purchases by Dialysis Center during such period shall constitute Qualified Purchases under this Agreement and shall be included for purposes of eligibility and calculation of each and every discount and incentive provided hereunder and in Appendix A which is incorporated by reference hereto and made a part of this Agreement, including but not limited to the [DELETED] set forth in Section 1 of Appendix A for Aranesp ® purchases and including but not limited to the [DELETED] set forth in Section 2 of Appendix A for EPOGEN ® purchases, so long as Amgen is not obligated to pay the same discount or incentive attributable to the same purchases to any person or entity other than Dialysis Center. Amgen reserves the right in its reasonable discretion to terminate any Affiliates with regard to participation in this Agreement. Termination of any Affiliate by Amgen shall be effective (a) immediately in instances in which Amgen determines, in its sole discretion, that such immediate termination is required by law or order of any court or regulatory agency or as a result of negligence or willful misconduct in the use or administration of Products by such Affiliate; or (b) upon thirty (30) days prior written notice to Dialysis Center in all other instances; provided, that such termination shall be effective before the expiration of such thirty (30) days where Dialysis Center requests or consents to such earlier termination. |
3. | Own Use. Dialysis Center hereby certifies that Products purchased hereunder shall be for Dialysis Centers own use for the exclusive treatment of dialysis patients. |
4. | Authorized Wholesalers. Attached hereto as Appendix C is a complete list, as of the date of execution of this Agreement, of the wholesalers from which Dialysis Center intends to purchase Products. All of the wholesalers so designated by Dialysis Center are hereby approved by Amgen to participate in this program and are deemed Authorized Wholesalers. Notification of proposed changes to the list of Authorized Wholesalers must be provided to Amgen in writing at least thirty (30) days before the effective date of the proposed change; provided, however, that Amgen will use its best efforts to accept a change on fewer than thirty (30) days notice. Amgen reserves the right, in its reasonable discretion, to reject or terminate, with reasonable notice, any wholesaler with regard to participation in this Agreement, so long as (a) Amgen rejects or terminates such wholesaler with respect to providing Products to any and all purchasers of Products, or (b) such wholesaler independently requests Amgen to remove it as an Authorized Wholesaler for Dialysis Center. Amgen also reserves the right, in its reasonable discretion, to accept wholesalers with regards to participation in this Agreement, but Amgen agrees that it shall accept any wholesaler designated by Dialysis Center which provides Products to other purchasers approved by Amgen. Dialysis Center agrees to request all Authorized Wholesalers to submit product sales information to a third-party sales reporting organization designated by Amgen. In the event Amgen terminates any Authorized Wholesaler from which Dialysis Center is purchasing Products, Amgen will work with Dialysis Center to identify other possible Authorized Wholesalers from which Dialysis Center may purchase Products and/or, in the case of an emergency and subject to credit qualification as well as receipt and approval of an Application for Direct Ship Account, use reasonable efforts in attempting to establish a temporary direct purchase relationship between Dialysis Center and Amgen until such time as an alternative Authorized Wholesaler can be secured, which in no event shall exceed sixty (60) days. If Dialysis Center purchases directly from Amgen as contemplated immediately above, all purchases made from Amgen shall be deemed Qualified Purchases (as defined below) and all such purchases shall be accounted for in the calculation of the discounts and incentives provided for in this Agreement and in Appendix A. |
5. | Qualified Purchases. Only Products purchased under this Agreement by Dialysis Center through Authorized Wholesalers (or directly from Amgen as provided in Section 4 above), as confirmed by Amgen based on sales tracking data, will be deemed Qualified Purchases. |
6. |
Commitment to Purchase. Subject to the terms of Section 20 below, Dialysis Center agrees to exclusively purchase Products for all of its dialysis use requirements for erythropoietic agents. Notwithstanding the |
2
Amendment No. 2 Agreement No. 200308360 (Continued)
foregoing, Amgen expressly acknowledges and agrees that Dialysis Center may participate in clinical trials involving the administration of other products for the management of anemia in dialysis patients. Dialysis Center may purchase another brand of recombinant human erythropoietin for its dialysis use requirements only for the time, and only to the extent, that Amgen has notified Dialysis Centers corporate headquarters in writing that Amgen cannot supply EPOGEN ® or Aranesp ® within and for the time period reasonably required by Dialysis Center. Any such notification shall be given by Amgen at least thirty (30) days prior to the date on which Amgen will cease supplying EPOGEN ® or Aranesp ® to Dialysis Center, unless an act or event described in Section 21 of the Agreement, or an order of a regulatory agency or other action arising out of patient safety concerns, requires the giving of shorter notice. In the event that Amgen fails to supply Dialysis Center with EPOGEN ® or Aranesp ® as ordered (including as a result of force majeure event as described in Section 21), Dialysis Center shall be entitled, at a minimum, to have the same proportion of its purchase orders fulfilled at all times as other purchasers of EPOGEN ® or Aranesp ® and, upon request, Amgen shall provide written assurances of same to Dialysis Center. |
7. | Confidentiality. By the nature, terms and performance of this Agreement, Amgen and Dialysis Center acknowledge and agree that the parties will exchange confidential and proprietary information (including business and clinical practices and protocols and patient information, Confidential Information.) Confidential Information includes not only written information but also information transferred orally, visually, electronically, in a machine readable format or by any other means and includes all notes, analyses, compilations, studies and summaries thereof containing or based on, in whole or in part, any Confidential Information. Confidential Information does not include any information which the receiving party can show was publicly available prior to the receipt of such information by the receiving party, or thereafter became publicly available other than by any breach of this Agreement by the receiving party. Information shall be deemed publicly available if it is a matter of public knowledge or is contained in materials available to the public. Accordingly, the parties agree (a) to hold all such Confidential Information (including but not limited to this the terms of this Agreement) received from the other in confidence and to use such Confidential Information solely for the purposes set forth in this Agreement; and (b) to not disclose any such Confidential Information received from the other, or the terms of this Agreement, to any third party (including Amgen Inc. or any other affiliate of Amgen), or otherwise make such information public without prior written authorization of the other party, except where such disclosure is contemplated hereunder or required by law or pursuant to subpoena or court or administrative order, and then only upon prior written notification to the other party (giving such party an adequate opportunity to take whatever steps it deems necessary to prevent, limit the scope of or contest the disclosure). Any party which seeks to prevent disclosure or to contest or limit the scope of any such disclosure by the other party shall pay all of the costs and expenses incurred by the other party directly related thereto, and such other party shall not unreasonably object to or interfere with the objecting partys actions it deems necessary to undertake. For purposes of the foregoing, any Confidential Information received by any employee, partner, agent, affiliate, consultant, advisor, data collection vendor or other representative (in any case, a representative) of a party to this Agreement pursuant to the terms of this Agreement shall be deemed received by such party to this Agreement, and any breach by any such representative of the foregoing confidentiality provisions shall be deemed a breach by the respective party to this Agreement. |
8. |
Discounts. Dialysis Center shall qualify for discounts and incentives subject to material compliance with the terms and conditions of this Agreement as well as the schedules and terms set forth in Appendix A. Discounts in arrears will be paid in the form of a wire transfer to Dialysis Centers corporate headquarters, and Amgen Inc. hereby guarantees Amgens obligation to pay all discounts earned by Dialysis Center hereunder. Discounts in arrears will be calculated in accordance with Amgens discount calculation policies based on Qualified Purchases using Amgens standard [DELETED] as the calculation price, except as otherwise provided hereunder or as set forth in Appendix A. Payment amounts, as calculated by Amgen, must equal or exceed $500.00 for the applicable period to qualify, and are subject to audit and final |
3
Amendment No. 2 Agreement No. 200308360 (Continued)
determination by arbitration, as provided in Appendix A hereto. Subject to Section 11, in the event that Amgen is notified in writing that Dialysis Center, and/or any Affiliate(s) (the Acquired Party) is acquired by another entity or a change of control otherwise occurs with respect to any Acquired Party, any discounts which may have been earned hereunder for all periods preceding such acquisition or change of control shall be paid in the form of a wire transfer to Dialysis Centers corporate headquarters, subject to the conditions and requirements described herein. For purposes of all of the discounts paid in arrears contained herein, including, without limitation, those discounts and incentives provided in Appendix A, if any Affiliates are added to or deleted from this Agreement during any [DELETED] of the Term of this Agreement, Amgen shall appropriately adjust Dialysis Centers purchases for the relevant periods (x) for deleted Affiliates, by excluding purchases by such Affiliates effective from the effective date of their deletion and during the relevant [DELETED] used for comparison, or (y) for added Affiliates, by including any purchases made by such acquired Affiliates effective from the date they are added to the list of Affiliates on Appendix B and during the relevant [DELETED] used for comparison, and by including any purchases made by any de novo Affiliates commencing in the [DELETED] in which they commence operations. Amgen and Dialysis Center agree that, for purposes of determining eligibility for and calculation of all discounts and all incentives provided in this Agreement (including, without limitation, all discounts and incentives as are set forth in Appendix A), a Qualified Purchase of EPOGEN ® or Aranesp ® shall be deemed made on the date of invoice to Dialysis Center from an Authorized Wholesaler. Upon any termination of this Agreement, Amgen shall pay to Dialysis Center all discounts and incentives earned by Dialysis Center through the date of termination. Failure of Dialysis Center to qualify for or receive any particular discount or incentive hereunder shall not automatically affect its qualification for or receipt of any other discount or incentive provided under this Agreement. |
9. | Treatment of Discounts. (a) Dialysis Center agrees that it will properly disclose and account for any discount or other reduction in price earned hereunder, in whatever form (i.e., pricing, discount, or incentive), in a way that complies with all applicable federal, state, and local laws and regulations, including without limitation, Section 1128B(b) of the Social Security Act and its implementing regulations. Section 1128B(b) requires that a provider of services properly disclose and appropriately reflect the value of any discount or other reduction in price earned in the costs claimed or charges made by the provider under a federal health care program, as that term is defined in Section 1128B(f). Dialysis Center also agrees that, if required by such statutes or regulations, it will (i) claim the benefit of such discount received, in whatever form, in the fiscal year in which such discount was earned or the year after, (ii) fully and accurately report the value of such discount in any cost reports filed under Title XVIII or Title XIX of the Social Security Act, or a state health care program, and (iii) provide, upon request by the U.S. Department of Health and Human Services or a state agency or any other federally funded state health care program, the information furnished to Dialysis Center by Amgen concerning the amount or value of such discount. Dialysis Centers corporate headquarters agrees that it will advise all Affiliates, in writing, of any discount received by Dialysis Centers corporate headquarters hereunder with respect to purchases made by such Affiliates and that said Affiliates will account for any such discount in accordance with the above stated requirements. |
(b) In order to assist Dialysis Centers compliance with its obligations as set forth in Section 9(a) immediately above, Amgen agrees that it will fully and accurately report all discounts on the invoices or statements submitted to Dialysis Center and use reasonable efforts to inform Dialysis Center of its obligations to report such discounts; or where the value of a discount is not known at the time of sale, Amgen shall fully and accurately report the existence of the discount program on the invoices or statements submitted to Dialysis Center, use reasonable efforts to inform Dialysis Center of its obligations to report such discounts and when the value of the discount becomes known, provide Dialysis Center with documentation of the calculation of the discount identifying the specific goods or services purchased to which the discount will be applied, broken down by Affiliate. In particular, Amgen shall provide to Dialysis Center a statement on a [DELETED] basis stating the incentives and discounts earned by Dialysis Center in |
4
Amendment No. 2 Agreement No. 200308360 (Continued)
a particular [DELETED] with the itemization of Product purchases made in a particular [DELETED], broken down by Affiliates; and any other information that Dialysis Center may request that is reasonably available to Amgen and necessary for Dialysis Center to obtain in order to comply with its obligation as set forth in Section 9(a). |
10. | Data Collection. Dialysis Center agrees that it will at all times comply with all federal, state, or local laws or regulations relating to patient privacy of health information and medical records, and that all data to be provided to Amgen pursuant to this Agreement, shall either be pursuant to that certain Data Use Agreement to be entered into by the parties simultaneously herewith (DUA) or in a form that meets the requirements for de-identification as set forth in the Health Insurance Portability and Accountability Act of 1996 (HIPAA) codified at 45 C.F.R. parts 160 and 164 (the Privacy Rule). Dialysis Center acknowledges that the data to be supplied to Amgen pursuant to this Agreement shall be used to support verification of the discounts and incentives referenced herein, as well as in support of Amgens obligations as set forth in this Agreement (a) with respect to Amgens public health activities (as set forth in 45 C.F. R. 164.512(b)(1)(iii)), and (b) in support of Dialysis Centers Health Care Operations (as defined in the Privacy Rule). Dialysis Center shall consistently use a unique alpha-numeric code (which shall not be the same as part or all of the patients social security number) as a case identifier to track the care rendered to each individual patient over time, and such case identifier shall be included in the data provided to Amgen. The key or list matching patient identities to their unique case identifiers shall not be provided to Amgen personnel. Amgen and Amgen Inc. agree that they will maintain data supplied under this Agreement in confidence, they will not use such data to identify or contact any patient, and they will at all times comply with all federal, state, or local laws or regulations relating to patient records and privacy of health information. [DELETED]. Amgen shall not sell or resell any data obtained pursuant to this Agreement. Additionally, any use or disclosure by Amgen or Amgen Inc. of any data supplied under this Agreement, which use or disclosure shall be specifically provided for in this Agreement, shall be in a format which does not identify Dialysis Center as the source of such data, unless otherwise permitted in writing by Dialysis Center. Furthermore, no reports by Amgen or Amgen Inc. concerning analyses of the data shall disclose the identity of any patient. Nothing in this Agreement shall limit Dialysis Centers use of its own patient case data, including, without limitation, any and all data to be supplied to Amgen hereunder. |
11. | Termination. In addition to any other legal or equitable remedies which may be available to either party upon breach by the other party, such party may terminate this Agreement for a material breach upon thirty (30) days advance written notice specifying the breach, provided that such breach remains uncured at the end of the thirty (30) day period, [DELETED]. In addition, in the event that Dialysis Center materially breaches any provision of this Agreement, and such breach remains uncured for thirty (30) days following notice by Amgen specifying the breach, [DELETED], Amgen shall have no obligation to continue to offer the terms described herein or pay any further discounts or incentives to Dialysis Center, except those discounts and/or incentives earned by Dialysis Center up to the time of a breach which results in termination. |
12. | Governing Law. This Agreement shall be governed by the laws of the State of California and, except as set forth in Appendix A, the parties submit to the jurisdiction of the California courts, both state and federal. |
13. |
Warranties. Each party represents and warrants to the other that this Agreement (a) has been duly authorized, executed, and delivered by it, (b) constitutes a valid, legal, and binding agreement enforceable against it in accordance with the terms contained herein, and (c) does not conflict with or violate any of its other contractual obligations, expressed or implied, to which it is a party or by which it may be bound. The party executing this Agreement on behalf of Dialysis Center specifically warrants and represents to Amgen that it is authorized to execute this Agreement on behalf of and has the power to bind Dialysis Center and the Affiliates to the terms set forth in this Agreement. The parties executing this Agreement on behalf of |
5
Amendment No. 2 Agreement No. 200308360 (Continued)
Amgen and Amgen Inc specifically warrant and represent to Dialysis Center that they are authorized to execute this Agreement on behalf of and have the power to bind Amgen and Amgen Inc. to the terms set forth in this Agreement. Amgen covenants and agrees that no Product is or will be adulterated or misbranded within the meaning of the Federal Food, Drug and Cosmetic Act, as amended, or within the meaning of any applicable state or municipal law, or is or will be a product which may not be introduced into interstate commerce. Amgen warrants that the Products purchased pursuant to this Agreement (a) are manufactured, and up to the time of their receipt by Authorized Wholesalers are handled, stored and transported in accordance with all applicable federal, state and local laws and regulations pertaining to the manufacturing of the Products including without limitation, the Federal Food, Drug, and Cosmetic Act and implementing regulations, and meet all specifications for effectiveness and reliability as required by the United States Food and Drug Administration, and (b) when used in accordance with the directions on the labeling, are fit for the purposes and indications described in the labeling. Amgen warrants that use of the Products by Dialysis Center shall not infringe upon any ownership rights of any other person or upon any patent, copyright, trademark, or other intellectual property or proprietary right or trade secret of any third party. Amgen agrees that it will promptly notify Dialysis Center once it determines that there has been any material defect in any of the Products delivered to Dialysis Center. |
14. | Notices. Any notice or other communication required or permitted hereunder (excluding purchase orders) shall be in writing and shall be deemed given or made three (3) days after deposit in the United States mail with proper postage for first-class registered or certified mail prepaid, return receipt requested, or when delivered personally or by facsimile (receipt verified and confirmed by overnight mail), or one (1) day following traceable delivery to a nationally recognized overnight delivery service with instructions for overnight delivery, in each case addressed to the parties as follows (or at such other addresses as the parties may notify each other of in writing): |
If to Dialysis Center:
DaVita, Inc.
601 Hawaii Street
El Segundo, CA 90245
Attn: Corporate Finance
Fax No.: (866) 309-3552
with a copy to:
DaVita, Inc.
601 Hawaii Street
El Segundo, CA 90245
Attn: General Counsel
Fax No.: (310) 536-2679
If to Amgen:
Amgen USA Inc.
One Amgen Center Drive, M/S 37-2-B
Thousand Oaks, CA 91320-1789
Attn: Allison Wright, Sr. Contract and Pricing Analyst
Fax No.: (805) 499-6933
6
Amendment No. 2 Agreement No. 200308360 (Continued)
with a copy to:
Amgen Inc.
One Amgen Center Drive, M/S 27-4-A
Thousand Oaks, CA 91320-1789
Attn: General Counsel:
Fax No.: (805) 447-1000
If to Amgen Inc.:
Amgen Inc.
One Amgen Center Drive, M/S 37-2-B
Thousand Oaks, CA 91320-1789
Attn: Allison Wright, Sr. Contract and Pricing Analyst
Fax No.: (805) 499-6933
with a copy to:
Amgen Inc.
One Amgen Center Drive, M/S 27-4-A
Thousand Oaks, CA 91320-1789
Attn: General Counsel:
Fax No.: (805) 447-1000
15. | Compliance with Health Care Pricing and Patient Privacy Legislation and Statutes; Data Use Agreement. (a) Notwithstanding anything contained herein to the contrary, in order to assure compliance, as determined by either party, in its sole discretion, with any existing federal, state or local statute, regulation or ordinance, or at any time following the enactment of any federal, state, or local law, regulation, policy, program memorandum or other interpretation, modification or utilization guideline by any payer that in any manner reforms, modifies, alters, restricts, or otherwise affects the pricing of or reimbursement available for any of the Products, including but not limited to the enactment of any reimbursement rule, guideline, final program memorandum, coverage decision, pricing decision, instruction or the like by the Centers for Medicare and Medicaid Services (CMS) or one of its contractors (Carriers or Fiscal Intermediaries), or any change in reimbursement systems that in any manner reforms, modifies, alters, restricts or otherwise affects the reimbursement available to Dialysis Center for any of the Products, upon thirty (30) days notice, (i) [DELETED] may terminate this Agreement, (ii) Amgen may, in its sole discretion, modify any pricing or discount terms contained herein, or (iii) Amgen may, in its sole discretion, exclude any Affiliates from participating in this Agreement. Without limiting the foregoing, any change, modification or further clarification to the Medicare Modernization Act or any rules or regulations promulgated thereunder, or the Hematocrit Measurement Audit Program Memorandum that occurs subsequent to the Amended Date would specifically trigger the right to the termination or modification referenced herein. Additionally, to assure compliance with any existing federal, state or local statute, regulation or ordinance, Amgen reserves the right, in its sole discretion, to exclude any Affiliates from the pricing and discount provisions of this Agreement and/or to reasonably modify any pricing or discount terms contained herein. In the event there is a future change in Medicare, Medicaid, or other federal or state statute(s) or regulation(s) or in the interpretation thereof, which renders any of the material terms of this Agreement unlawful or unenforceable, this Agreement shall continue only if amended by the parties as a result of good faith negotiations as necessary to bring the Agreement into compliance with such statute or regulation. In the event Amgen chooses to invoke the provisions contained in this Section 15(a), [DELETED]. |
7
Amendment No. 2 Agreement No. 200308360 (Continued)
(b) Notwithstanding anything contained herein to the contrary, in order to assure compliance, as determined by either party in its sole discretion, with any existing federal, state or local statute, regulation or ordinance relating to patient privacy of medical records, or at any time following the enactment of any federal, state, or local law or regulation relating to patient privacy of medical records that in any manner reforms, modifies, alters, restricts, or otherwise affects any of the data received or to be received in connection with any of the incentives contemplated under this Agreement, either party may, in its discretion, upon thirty (30) days notice, seek to modify this Agreement. Dialysis Center and Amgen shall meet and in good faith seek to mutually agree to modify this Agreement to accommodate any such change in law or regulation, with the intent to, if possible, retain the essential terms of the affected incentive and pricing structure. If the parties, after reasonable time, are unable to agree upon a modification, Amgen or Dialysis Center shall be entitled to terminate the affected incentive upon thirty (30) days notice or upon such date that the law or regulation requires, whichever is earlier.
(c) Both parties agree that all uses and disclosures of the information received pursuant to the DUA will be in strict compliance with the HIPAA Privacy Rule. Notwithstanding anything contained herein to the contrary, this Agreement is effective only as of the date the parties hereto execute a mutually agreeable Data Use Agreement (DUA) pursuant to which Dialysis Center may disclose certain patient information to Amgen which meets the requirements of a Limited Data Set (as specified in the DUA and which shall include, at a minimum, the data fields to be received by Amgen in connection with this Agreement) for purposes of Amgens public health activities (as set forth in 45 C.F.R. 164.512(b)(1)(iii))and Amgens obligations as set forth in this Agreement in support of Dialysis Centers Health Care Operations (as defined in the Privacy Rule). Unless otherwise specifically defined in this Agreement, each term used in this Section 15(c) shall have the meaning assigned to such term by HIPAA and the Privacy Rule. The parties acknowledge and agree that they have entered into a DUA in connection with the disclosure to Amgen of certain patient information, as described in Section 10 of this Agreement. If any party terminates the DUA for any reason, the other shall be entitled to terminate this Agreement immediately. Without limitation of the foregoing, the parties agree to negotiate in good faith to further amend this Agreement and/or enter into such additional agreements to the extent deemed necessary or appropriate by Dialysis Center or Amgen in connection with any disclosure by Dialysis Center or receipt by Amgen of any additional patient information (including any individually identifiable health information) and/or to comply with the Dialysis Centers [DELETED], the Privacy Rule or other or federal or state related regulations or statutes related to privacy of health information. Simultaneously upon execution of this Agreement, Dialysis Center has delivered to Amgen a copy of all applicable [DELETED] in effect on the date hereof, and Amgen acknowledges receipt of same and agrees to be bound by the requirements set forth therein. During the Term of this Agreement, Dialysis Center shall provide Amgen, from time to time, with additional [DELETED] as they become effective, and with [DELETED], at least thirty (30) days prior to the effective date of each [DELETED].
16. | [DELETED] |
(b) | [DELETED] |
17. | [DELETED] |
18. |
Good Pharmaceutical Practice Support Services for the Products . Without limitation of the provisions of Section 19 Access, and in order to advance the common clinical objectives of the parties under this Agreement, Amgen agrees to provide to Dialysis Center those good pharmaceutical practice standard support services (the Services), at no additional cost or charge, but only to the extent that the delivering of such Services can be accomplished without using any individually identifiable heath information (as defined |
8
Amendment No. 2 Agreement No. 200308360 (Continued)
in the Privacy Rule). Any such Services shall be limited to those Services agreed to in writing from time to time (in each case, a Services Agreement) between Amgen and Dialysis Center. |
Amgen agrees to furnish such Services only in cooperation with Dialysis Centers facilities, in a manner consistent with Dialysis Centers policies and procedures and in accordance with the terms otherwise set forth in the Services Agreement and this Agreement, including without limitation Section 19 Access hereof. Further, Amgen and Dialysis Center agree to provide their respective staff members with appropriate training regarding patient privacy and confidentiality, including with respect to such partys obligations under this Agreement and the Services Agreement.
19. | Access. Amgen acknowledges, agrees and understands that absent an applicable Services Agreement (as defined in Section 18 above), none of its agents, representatives or employees shall be permitted access at any time to any Affiliate or Dialysis Center for any reason whatsoever. In each situation in which a Services Agreement is executed and delivered, Amgen may be granted access solely for the purposes described in such Services Agreement(s). Without limitation of the foregoing, Amgen agrees that it and its agents, representatives and employees shall at all times comply with all applicable laws and regulations, and with Dialysis Centers [DELETED] (which applicable [DELETED] shall be identified to Amgen from time to time by Dialysis Center as more fully described in Section 15(c) above), and that Amgens discussion of the Products shall be in compliance with all such [DELETED] and all applicable laws and regulations. Furthermore, Amgen acknowledges, agrees and understands that it must obtain Dialysis Centers prior written approval of all proposed educational, marketing and promotional materials and of all proposed presentations relating to anemia management, any of the Products, any other Amgen product or otherwise, whether directed toward Dialysis Center employees or any patient of Dialysis Center. Such approval may be given only by Dialysis Centers Vice President, Clinical Operations or his authorized representative. Dialysis Centers Vice President, Clinical Operations or his authorized representative agree to notify Amgens National Account Manager of his decision within ten (10) business days after receipt of such program, material or presentation request, otherwise such request will be deemed denied. |
20. | Right of First Offer. Dialysis Center shall promptly notify Amgen in the event it receives a competing offer from any third party for the sale of any products in the same therapeutic class as any of the Products. Amgen shall have the right in such event to have sixty (60) days to respond to Dialysis Center with its own pricing terms relating to products. Dialysis Center shall consider but have no obligation to accept the terms of Amgens new offer, if any. |
21. | Force Majeure. Neither party will be liable for delays in performance or nonperformance of this Agreement or any covenant contained herein if such delay or nonperformance is a result of Acts of God, civil or military authority, civil disobedience, epidemics, war, failure of carriers to furnish transportation, strike, lockout or other labor disturbances, inability to obtain material or equipment, or any other cause of like or different nature beyond the control of such party. In the event that there is a disruption or shortage in supply of any Product, Amgen will use reasonable efforts to notify Authorized Wholesalers as far in advance of such disruption as is commercially reasonable and in accordance with all regulatory guidelines. In addition, Dialysis Centers eligibility to receive rebates and incentives as set forth on Appendix A as determined by the [DELETED] under Section 3(b) of Appendix A shall not be affected. |
22. |
Miscellaneous. No modification of this Agreement will be effective unless made in writing and executed by a duly authorized representative of each party, except as otherwise provided hereunder. Neither party may assign this Agreement to a third party without the prior written consent of the other party, which consent may not be unreasonably withheld, conditioned, or delayed. Notwithstanding the foregoing, Amgen may assign this Agreement to any of its subsidiaries or affiliates. This Agreement may be executed in one or more counterparts, each of which is deemed to be an original but all of which taken together constitutes one |
9
Amendment No. 2 Agreement No. 200308360 (Continued)
and the same agreement. Whenever a party is permitted by this Agreement to act in its discretion, that party shall be required to exercise its discretion in good faith and in a reasonable manner. To the extent that any provisions of Amgens or Amgen Inc.s general or customary policies and procedures or any terms of any purchase order conflict with or are in addition to the terms of this Agreement or any Appendix attached hereto, the terms of this Agreement and Appendices shall govern. The parties acknowledge and understand that each has [DELETED]. Notwithstanding anything contained to the contrary in this Agreement, in the event that [DELETED] as set forth in [DELETED], Amgen and Dialysis Center will agree [DELETED], as the case may be. Notwithstanding anything contained to the contrary in this Agreement, in the event of [DELETED] for the calculation of any of the incentives set forth in Appendix A, the parties shall [DELETED]. [DELETED] available to Dialysis Center [DELETED]. Upon expiration or early termination of this Agreement, the rights and obligations set forth in sections 7, 8, 10, 13, 16, 17 and 23 shall survive. Amgen reserves the right to rescind this offer if the parties fail to execute this Agreement within thirty (30) days from the date of its offering. |
(a) Beginning [DELETED], Dialysis Centers aggregate Qualified Purchases of Products by all Affiliates listed on Appendix B on the Amended Date of this Agreement during any [DELETED] of this Agreement shall not exceed [DELETED] of the aggregate Qualified Purchases of Products by those same Affiliates for the [DELETED]. Dialysis Center shall not be eligible to receive any rebates detailed in Appendix A of this Agreement for any Qualified Purchases of Products in the aggregate made during any [DELETED] of this Agreement that exceed [DELETED] of the aggregate Qualified Purchases of Products by those same Affiliates in the [DELETED]. Any of Dialysis Centers aggregate Qualified Purchases of Products above [DELETED] of the aggregate Qualified Purchases of Products by those same Affiliates in the [DELETED] may be approved and eligible to receive rebates detailed in Appendix A if Amgen, in its sole discretion, determines that [DELETED]. Amgen shall make such determination based upon a review of all relevant reports including, but not limited to: [DELETED] finance reports. Such determination must be approved by Amgens [DELETED] Senior Management. For purposes of determining the foregoing, during the period [DELETED] through [DELETED], Products base sales during each [DELETED] shall be derived using the [DELETED].
23. | Open Records. To the extent required by §1861(v)(1)(I) of the Social Security Act, as amended, the parties will allow the U.S. Department of Health and Human Services, the U.S. Comptroller General and their duly authorized representatives, access to this Agreement and all books, documents and records necessary to certify the nature and extent of costs incurred pursuant to it during the Term and for four (4) years following the last date Products or services are furnished under it. If Amgen carries out the duties of this Agreement through a subcontract worth $10,000 or more over a 12-month period with a related organization, the subcontract shall also contain an access clause to permit access by the U.S. Department of Health and Human Services, the U.S. Comptroller General, and their duly authorized representatives to the related organizations books and records. |
24. | Entire Agreement. The Agreement together with the DUA, any Services Agreement(s) and all of the Appendices attached hereto and thereto, constitutes the entire understanding between the parties and supersedes all prior or oral written proposals, agreements or commitments pertaining to the subject matter herein and therein. |
10
Amendment No. 2 Agreement No. 200308360 (Continued)
Please retain one fully executed original for your records and return the other fully executed original to Amgen. |
The parties executed this amendment and restatement of the Agreement as of the dates set forth below.
Amgen USA Inc. |
DaVita, Inc. | |||||||
Signature: |
/s/ F RED M ANAK |
Signature: |
/s/ H.W. G UY S EAY |
|||||
Print Name: |
Fred Manak |
Print Name: |
H.W. Guy Seay |
|||||
Print Title: |
Director, US Corporate Pricing |
Print Title: |
Vice President |
|||||
Date: |
December 2, 2004 |
Date: |
December 2, 2004 |
Amgen Inc. agrees to be bound by certain provisions of this amendment and restatement of the Agreement as set forth herein
Amgen USA Inc. |
||||||||
Signature: |
/s/ H ELEN T ORLEY |
|||||||
Print Name: |
Helen Torley |
|||||||
Print Title: |
VP General Manager |
|||||||
Date: |
December 2, 2004 |
11
Amendment No. 2 Agreement No. 200308360 (Continued)
SECTION 2. Amendment and Restatement of Appendix A: Discount Pricing, Schedule and Terms . Appendix A: Discount Pricing, Schedule and Terms shall be amended and restated in its entirety [DELETED] for the period [DELETED], modify the rebate programs for the period [DELETED] through [DELETED] for the period [DELETED] through [DELETED] for the period [DELETED] through [DELETED], and incorporate into such restatement the agreement previously reached by the parties as set forth in Amendment No. 1 and make certain clarifying changes thereto, effective on the Amended Date as follows.
Appendix A: Discount Pricing, Schedule, and Terms
1. | Pricing Aranesp ® . Throughout the Term of this Agreement, Dialysis Center and Affiliates may purchase Aranesp ® through Authorized Wholesalers at [DELETED] which shall be equal to the [DELETED]. Amgen reserves the right to change the [DELETED] at any time. Resulting prices do not include any wholesaler markup, service fees, or other charges. |
2. | Pricing EPOGEN ® . Throughout the Term of this Agreement, Dialysis Center and Affiliates may purchase EPOGEN ® directly from Amgen or through Authorized Wholesalers at [DELETED] which shall be equal to the [DELETED]. Amgen reserves the right to change the [DELETED] at any time. Notwithstanding any such change(s), the [DELETED] that is applicable to Dialysis Center throughout the Term shall be the [DELETED]. Resulting prices do not include any wholesaler markup, service fees, or other charges. All discounts earned in arrears hereunder (also known as rebates), through the Term of the Agreement, shall be calculated based upon the [DELETED], such that any [DELETED] contained in any of the discounts or incentives set forth in this Appendix A shall [DELETED] in the [DELETED]. |
3. | Rebate/Incentive Qualification Requirements. |
(a) [DELETED]: In order for Dialysis Center to be eligible to receive any rebates or incentives described in [DELETED] of this Appendix A, Dialysis Center must satisfy the following qualification requirement. No more than [DELETED] of Dialysis Centers [DELETED] taken on an overall basis (and not separately for each Affiliate) may have [DELETED] (as that term is defined below) [DELETED] during the applicable [DELETED] of the Term of this Agreement [DELETED]. If this criteria is not met during any given [DELETED] of the Term of the Agreement, Dialysis Center will not qualify for any rebates described in [DELETED] below in this Appendix A during that [DELETED]. Failure of Dialysis Center to qualify under this provision during a particular [DELETED] shall not affect Dialysis Centers eligibility to qualify during any other [DELETED] of the Term, nor shall Dialysis Centers qualification during a particular [DELETED] automatically result in qualification during any other [DELETED]. The [DELETED] for each dialysis patient will be based upon the average of all [DELETED] for each patient during the applicable [DELETED]. Dialysis Center and Affiliates must provide the following information for each dialysis patient to Amgen or to a data collection vendor specified and paid for by Amgen, on a [DELETED] basis, and no later than [DELETED] days after the end of each [DELETED]. In those cases in which Amgen directs Dialysis Center to submit the following information to a data collection vendor, Dialysis Center shall be deemed to have timely submitted the information to such data collection vendor so long as it does so on a [DELETED] basis and no later than [DELETED] days after the end of each [DELETED], regardless of the date on which such vendor, in turn, submits such information to Amgen: all [DELETED] for each dialysis patient, the date of each test, and a consistent, unique, alpha-numeric identifier (sufficient consistently to track an individual patient without in any way violating the de-identification provisions of HIPAA at 45 CFR 164.514), along with the name, address and phone number of the particular Affiliate at which each patient received treatment; provided, however, that Dialysis Center shall be required to submit such test results only for those dialysis patients whose test results are actually determined by laboratories owned and operated by Dialysis Center. For any period that is not equivalent to a complete [DELETED], the
12
Amendment No. 2 Agreement No. 200308360 (Continued)
calculation of [DELETED] will be based on an average of all data for each dialysis patient that is available for that period. To the extent permitted by applicable law, Amgen may utilize the data it receives from Dialysis Center or any Affiliate, pursuant to and as detailed in this provision or elsewhere in this Agreement, to support verification of the discounts and incentives referenced in this Agreement, as well as for any purpose in support of Amgens obligations as set forth in this Agreement with respect to Amgens public health activities (as set forth in 45 CFR 164.512 (b)(1)(iii)), and (ii) in support of Dialysis Centers Health Care Operations (as defined in the Privacy Rule). In furtherance of the foregoing, Amgen reserves the right to audit all such data, provided that any audit shall not permit access to information disclosing the identity of any patient. Under no circumstances should such data include any patient identifiable information including, without limitation, name, all or part of social security number, address, telephone, electronic mail address, birth date, medical record number, prescription number or any other unique identifying number, characteristic or code. The identity of the Affiliate and of the account submitting the data and any association with the data will remain confidential by Amgen. The [DELETED] must be derived from [DELETED] taken immediately before dialysis treatment using any [DELETED] testing method [DELETED], must be reported to the [DELETED], and must be submitted [DELETED] in a format acceptable to Amgen. Handwritten reports are not acceptable; only electronic submission of the data will be accepted; and
(b) [DELETED]: In order for Dialysis Center to be eligible to receive any rebates or incentives described in [DELETED] of this Appendix A, Dialysis Center must satisfy the following qualification requirement. Dialysis Centers aggregate Qualified Purchases of EPOGEN ® and Aranesp ® during [DELETED] and during [DELETED] by all Affiliates listed on Appendix B on the Commencement Date of this Agreement and all new approved Affiliates (whether by acquisition, to the extent that either Amgen or Dialysis Center can provide adequate data concerning such Affiliates purchases for the same time period from [DELETED] for [DELETED] and from [DELETED] for [DELETED], or de novo) must equal or exceed [DELETED] (for [DELETED]) and [DELETED] (for [DELETED]) respectively [DELETED], of the aggregate Qualified Purchases of EPOGEN ® and Aranesp ® by those same Affiliates for the time period from [DELETED], for [DELETED], and from [DELETED] for [DELETED]. For deleted Affiliates, Amgen shall exclude Qualified Purchases by such Affiliates effective from the effective date of their deletion and also during the relevant [DELETED] used for comparison. For purposes of calculating the [DELETED], EPOGEN ® and Aranesp ® base sales during each applicable time period shall be derived using the [DELETED]. All estimated payments for discounts in arrears that contain [DELETED] will be measured by using a [DELETED] that measures [DELETED]. If Dialysis Center has not satisfied the [DELETED] for any [DELETED], then at the end of the [DELETED], Amgen will determine if Dialysis Center has satisfied, in the aggregate, on a [DELETED], the [DELETED]. If the [DELETED] has been met for that given [DELETED], then Amgen will perform a [DELETED] calculations for [DELETED]. However, if [DELETED] the [DELETED] has not been met for that [DELETED], Amgen will perform a [DELETED], which may [DELETED]. The [DELETED] payments and any other discount or incentive earned in arrears corresponding to the [DELETED], respectively if any, shall not be due and owing until, and shall be subject to, such [DELETED]. [DELETED] will be made [DELETED], within [DELETED] days after the [DELETED] and receipt by Amgen of all the required data detailed in this Agreement. The determination as to Dialysis Centers attainment or failure to attain the [DELETED] shall be based upon the [DELETED].
13
Amendment No. 2 Agreement No. 200308360 (Continued)
4. | [DELETED]. Dialysis Center may qualify for the [DELETED] during each [DELETED] Measurement Period (as defined in the schedule below) as described in this Section 4 of Appendix A. |
[DELETED] Measurement Periods |
[DELETED] |
(a) Requirement: In order to qualify for the [DELETED] Dialysis Center must meet the [DELETED] contained in [DELETED] of this Appendix A. If this criteria is not met during any [DELETED] during the period [DELETED], Dialysis Center will not qualify for [DELETED] described below in this Section 4 during that [DELETED]. Failure of Dialysis Center to qualify under this provision during a particular [DELETED] shall not affect Dialysis Centers eligibility to qualify during any other [DELETED] during the period [DELETED], nor shall Dialysis Centers qualification during a particular [DELETED] automatically result in qualification during any other [DELETED].
(b) Calculation: Dialysis Centers [DELETED] will be calculated in accordance with the following formula and the [DELETED] Schedule listed below. [DELETED] will be calculated on a [DELETED] basis.
[DELETED] = A x B
where:
A | = [DELETED] of EPOGEN ® during the period [DELETED] by all Affiliates in the [DELETED] in which the requirements under [DELETED] of this Appendix A are met. |
B | = A percent in accordance with the [DELETED] Schedule listed below. |
C | = [DELETED]. |
D | = [DELETED]: |
Measurement Period | [DELETED] Schedule | |
[DELETED] | ||
(c) [DELETED] Schedule. The [DELETED] schedule is as follows:
[DELETED] | ||
(d) Payment. Estimated payments will be made [DELETED] within [DELETED] days using the [DELETED] Schedule above in this Section 4(c), and the [DELETED] will be reconciled [DELETED] days after receipt by Amgen of all actual [DELETED] data for [DELETED] Measurement Period [DELETED].
14
Amendment No. 2 Agreement No. 200308360 (Continued)
(e) Vesting. Dialysis Centers [DELETED] will vest [DELETED] Measurement Period [DELETED]. In the event the [DELETED] paid to Dialysis Center [DELETED] exceed Dialysis Centers [DELETED] the difference between the [DELETED] and the [DELETED] within [DELETED] days of Dialysis Centers receipt of [DELETED]. In the event Dialysis Centers [DELETED] exceeds the [DELETED] that have been paid to Dialysis Center, [DELETED] difference between the [DELETED] and the [DELETED], within [DELETED] days after the [DELETED] of the [DELETED].
[DELETED]
5. | [DELETED]. Throughout the Term of the Agreement Dialysis Center shall be eligible to receive a [DELETED] provided that Dialysis Center provides certain data elements that are transmitted to Amgen electronically. The [DELETED] will be calculated as a percentage of the Qualified Purchases of EPOGEN ® attributable to Dialysis Center during the applicable [DELETED]. Failure of Dialysis Center to qualify during a particular [DELETED] shall not affect Dialysis Centers eligibility to qualify during any other [DELETED], nor shall Dialysis Centers qualification during a particular [DELETED] automatically result in qualification during any other [DELETED]. To qualify for the [DELETED], the following [DELETED] must be submitted to Amgen by Dialysis Center and all Affiliates pursuant to Section 15(c) of the Agreement in a machine readable format acceptable to Amgen (Excel; Lotus 123.wk1; or text file that is tab delimited, comma delimited, colon delimited or space delimited), provided, however, that Dialysis Center shall be required to submit such test results only for those dialysis facilities whose test results are actually determined by laboratories owned and operated by Dialysis Center: |
Facility ID;
Patient ID (sufficient to consistently track an individual patient without in any way disclosing the identity of the patient);
[DELETED];
[DELETED];
Modality; Hemodialysis (HD) ID or peritoneal dialysis (PD) ID (a PD patient shall be defined as a patient who receives at least one (1) peritoneal dialysis treatment during a given month) [DELETED];
[DELETED] with date [DELETED] and [DELETED];
All [DELETED] and [DELETED] with their corresponding draw dates for each patient by Patient ID;
[DELETED] delivered for each patient per treatment with date (but only for patients of Affiliates using the CRIS or Snappy systems);
[DELETED];
[DELETED];
[DELETED];
[DELETED];
[DELETED];
[DELETED];
[DELETED];
[DELETED];
[DELETED]; and
[DELETED]
15
Amendment No. 2 Agreement No. 200308360 (Continued)
(a) | For the period [DELETED] through [DELETED], the following [DELETED] shall be added as requirements of the [DELETED]: |
[DELETED]; |
[DELETED]; |
[DELETED]; |
[DELETED] | delivered for each patient per treatment with date (but only for patients of Affiliates using the CRIS or Snappy systems) |
(b) | For the period [DELETED] through [DELETED], the following [DELETED] shall be removed as requirements of the [DELETED]: |
[DELETED] | with their corresponding draw dates for each patient by Patient ID; |
[DELETED]; |
[DELETED] | with date [DELETED] and [DELETED]; |
[DELETED]. |
Such patient data must be submitted, on a [DELETED] basis, and no later than [DELETED] days after the end of each [DELETED]. Each [DELETED], only the most recent test results will be submitted for each patient, and all or some of those test results may be from that [DELETED] or from [DELETED]. If such patient data is received more than [DELETED] days after the last day of any [DELETED] within a given [DELETED], the total Qualified Purchases of EPOGEN ® attributable to Dialysis Center during such [DELETED] will be excluded from the calculation of the [DELETED] for that [DELETED]. Notwithstanding the foregoing, if Amgen receives all required data from a minimum of [DELETED] of all Affiliates within the definition of Dialysis Center within the time frame referenced above for any [DELETED] within a given [DELETED], the total Qualified Purchases of EPOGEN ® attributable to Dialysis Center and all Affiliates during such [DELETED], will be included in the calculation of the [DELETED] for that [DELETED]. If Amgen receives all required data from less than [DELETED] of all Affiliates within the definition of Dialysis Center for any [DELETED] within a given [DELETED], no Qualified Purchases of Dialysis Center during such [DELETED] will be included in the calculation of the [DELETED] for that [DELETED]. However, if Amgen determines that any Affiliate is consistently not submitting the required data, Amgen and Dialysis Center will work collaboratively in resolving such inconsistencies. Amgen will use its best efforts to notify Dialysis Center in writing, no later than [DELETED] after the receipt and acceptance by Amgen of the data, of the identity of all those Affiliates, if any, which have failed to meet the data submission requirements for that [DELETED]. Amgen reserves the right, in its sole discretion, to exclude any consistently non-reporting Affiliates Qualified Purchases of EPOGEN ® from the calculation of the [DELETED] for any relevant [DELETED].
The [DELETED] will vest on the [DELETED] of the [DELETED], and be paid [DELETED] within [DELETED] days after the receipt of complete and machine readable data, in accordance with the terms and conditions described above. Dialysis Center shall have the right, at its own cost and expense, at all times to audit all data and all calculations relevant to the determination of eligibility for and the amount of the [DELETED] to be paid to Dialysis Center hereunder. Notwithstanding the foregoing, payment for any period that is not equivalent to a [DELETED] will be made based on the data that is available for that period.
[DELETED]
6. |
[DELETED]. The purpose of the [DELETED] is to [DELETED] from Dialysis Center and its Affiliates and received by Amgen, such that the [DELETED] used by both companies are [DELETED]. For the period |
16
Amendment No. 2 Agreement No. 200308360 (Continued)
[DELETED] Dialysis Center shall be eligible to receive a [DELETED] provided the following requirements below are met. The [DELETED] will be calculated as a percentage of the Qualified Purchases of EPOGEN ® attributable to Dialysis Center during each [DELETED]. |
(a) To qualify for the [DELETED] for the period [DELETED], the following requirements must be met:
i) | Dialysis Center must submit, each [DELETED], in a machine readable format acceptable to Amgen (Excel; Lotus 123.wk1; or text file that is tab delimited, comma delimited, colon delimited or space delimited), all identifying information for a facility (e.g. Dialysis Centers account hierarchy for each facility submitted) (the Facility Reference File). The Amgen ACIS # must be included in the Facility Reference File for any [DELETED] submissions made on or after [DELETED]; |
ii) | Dialysis Center must notify Amgen no later than [DELETED] days prior to implementing any [DELETED] in the [DELETED] made by Dialysis Center and its Affiliates to Amgen under this Agreement and Amgen may reasonably request modifications to such [DELETED] to ensure [DELETED] of the such [DELETED]. |
(b) To qualify for the [DELETED] for the period [DELETED], the following additional requirements must be met:
i) | Dialysis Center must develop, in conjunction with Amgen, and deliver on or prior to [DELETED], a mutually agreeable [DELETED] following an [DELETED] by Dialysis Center and/or a [DELETED] of Dialysis Center [DELETED]; |
ii) | Dialysis Center and Amgen must mutually agree upon in detail a [DELETED] intended to develop and improve the [DELETED] Dialysis Center and Amgen (the [DELETED]). The [DELETED] must be detailed, set forth in writing and attached as an addendum to the contract on or before [DELETED]. The [DELETED] must include detailed [DELETED] on a specific timeline for the period [DELETED]. These [DELETED] and timeline [DELETED] will be used to determine the [DELETED] requirements for earning the [DELETED] for the period [DELETED]. The [DELETED] should include the following as well as other mutually agreed upon [DELETED]: |
| [DELETED] to discuss the [DELETED] of each project, with additional [DELETED] as required; |
| Develop and deliver a [DELETED] for [DELETED] to include [DELETED]; |
| Define [DELETED]; |
| Develop and deliver a [DELETED]; |
| Develop and deliver a [DELETED]; |
| Develop and deliver a [DELETED]. |
(c) To qualify for the [DELETED] for the period [DELETED], Dialysis Center must additionally achieve the [DELETED] goals as set forth in the [DELETED].
The Facility Reference File referenced in this Section 6(a)(i) must be submitted, on a [DELETED] basis, and no later than [DELETED] days after the end of each [DELETED]. If such Facility Reference File is received more than [DELETED] days after the last day of any [DELETED] within a given [DELETED], the total Qualified Purchases of EPOGEN ® attributable to Dialysis Center during such [DELETED] will be excluded from the calculation of the [DELETED] for that [DELETED].
The [DELETED] will vest on the [DELETED] of the [DELETED], and be paid [DELETED] within [DELETED] days after the receipt of complete and machine readable data, in accordance with the terms and
17
Amendment No. 2 Agreement No. 200308360 (Continued)
conditions described above. Dialysis Center shall have the right, at its own cost and expense, at all times to audit all data and all calculations relevant to the determination of eligibility for and the amount of the [DELETED] to be paid to Dialysis Center hereunder. Notwithstanding the foregoing, payment for any period that is not equivalent to a [DELETED] will be made based on the data that is available for that period.
[DELETED]
7 . | [DELETED]. Throughout the Term of the Agreement, Dialysis Center may qualify for the [DELETED] provided it meets the criteria described below in this Section 7. The [DELETED] is designed to improve patient outcomes by encouraging [DELETED]. If the [DELETED] change, then Amgen and Dialysis Center will meet and in good faith seek to mutually agree to modify this Agreement to accommodate any such change, with the intent to [DELETED] of the [DELETED]. |
(a) Requirements: In order to qualify for the [DELETED], Dialysis Center must [DELETED] of this Appendix A, and Dialysis Center and its Affiliates must provide Amgen the following data items, on a [DELETED] basis, and no later than [DELETED] days after the end of each [DELETED], in a machine readable format acceptable to Amgen (Excel; Lotus 123.wk1; or text file that is tab delimited, comma delimited, colon delimited or space delimited) in accordance with the data submission requirements contained in Section 5 of this Appendix A for the [DELETED] and pursuant to Section 15(c) of the Agreement; provided, however, that Dialysis Center shall be required to submit such test results only for those dialysis facilities whose test results are actually determined by laboratories owned and operated by Dialysis Center: [DELETED] and date, AND [DELETED] with date for each patient by Dialysis Center and its Affiliates. In the event [DELETED] is submitted, instead of [DELETED], Amgen will convert such [DELETED] values to [DELETED] values by [DELETED]. Amgen will convert all lab values taken of [DELETED] for each patient by Dialysis Center and its Affiliates, AND all the lab values taken of [DELETED] for each patient by Dialysis Center and its Affiliates into the [DELETED] for each patient by Dialysis Center and its Affiliates, AND the [DELETED] for each patient by Dialysis Center and its Affiliates for each of the [DELETED] Measurement Periods (as defined in the schedule immediately below). Each [DELETED], only the most recent test results will be submitted for each patient, and all or some of those test results may be from that [DELETED] or from a [DELETED]. Dialysis Center hereby certifies that the data submitted for each eligible Affiliate includes the required results from all dialysis patients of such Affiliate, and does not include results from non-patients. Dialysis Center also represents and warrants that it (i) has no reason to believe that the submitted data is incorrect, and (ii) is authorized to make this certification on behalf of all eligible Affiliates submitting data.
[DELETED] Measurement Periods |
[DELETED] |
(b) Calculation: Assuming Dialysis Center and Affiliates have fulfilled all requirements as described in Section 7(a) above, to qualify for the [DELETED], Dialysis Center must achieve [DELETED] in the [DELETED], as that term is defined below, from the [DELETED], as that term is defined below, during each [DELETED] Measurement Period, and such [DELETED] shall be defined as [DELETED].
18
Amendment No. 2 Agreement No. 200308360 (Continued)
For purposes of this Section 7, [DELETED] shall mean the [DELETED] for each patient by Dialysis Center and its Affiliates AND the [DELETED] for each patient by Dialysis Center and its Affiliates during the period [DELETED]; and [DELETED] shall mean the [DELETED] for each patient by Dialysis Center and its Affiliates AND the [DELETED] for each patient by Dialysis Center and its Affiliates for each of the above referenced [DELETED] Measurement Periods.
Using the [DELETED] described above, the [DELETED] will be calculated as the percentage of patients within the [DELETED], by [DELETED], as shown below:
[DELETED]
Using the [DELETED] described above, which shall be calculated on a [DELETED] basis the [DELETED] for each [DELETED] Measurement Period will be calculated as the [DELETED], by [DELETED], as shown below:
[DELETED]
The [DELETED] shall then be calculated by [DELETED], as shown below:
[DELETED]
The [DELETED] Rebate will be calculated on a [DELETED] in accordance with Amgens discount calculation policies. Following determination of the [DELETED], Amgen shall then calculate Dialysis Centers [DELETED] Rebate in accordance with the following formula and the rebate table listed below.
[DELETED] Rebate = A X B
Where:
A = [DELETED] of EPOGEN ® during the relevant [DELETED] Measurement Period.
B = A percent determined from [DELETED] in accordance with the schedule below.
C = [DELETED]
D = [DELETED]
[DELETED] Measurement Rebate Table
Measurement Period |
[DELETED] (C) |
Rebate Percent (B) |
||
[DELETED] | ||||
* Notwithstanding anything contained herein to the contrary, the maximum rebate percent payable for [DELETED] Measurement Period 4 shall not exceed [DELETED] and for [DELETED] Measurement Period 5, 6, 7, and 8 shall not exceed [DELETED] under this [DELETED] program.
19
Amendment No. 2 Agreement No. 200308360 (Continued)
(c) Payment : The [DELETED] will be calculated and paid to Dialysis Center on a [DELETED] basis. Failure of Dialysis Center to qualify during a particular [DELETED] shall not affect Dialysis Centers eligibility to qualify during any other [DELETED], nor shall Dialysis Centers qualification during a particular [DELETED] automatically result in qualification during any other [DELETED]. Payment is contingent upon receipt by Amgen of all required Data for the corresponding [DELETED] (including the [DELETED]). Such data must be submitted, on a [DELETED] basis, and no later than [DELETED] days after the end of each [DELETED]. If such data is received more than [DELETED] days after the [DELETED] within a given [DELETED], the total Qualified Purchases of EPOGEN ® attributable to Dialysis Center during such [DELETED] will be excluded from the calculation of the [DELETED] for that [DELETED]. Notwithstanding the foregoing, if Amgen receives all required data from a minimum of [DELETED] of all Affiliates within the definition of Dialysis Center within the time frame referenced above for any [DELETED] within a given [DELETED], the total Qualified Purchases of EPOGEN ® attributable to Dialysis Center and all Affiliates during such [DELETED], will be included in the calculation of the [DELETED] for that [DELETED]. If Amgen receives all required complete and machine readable data from less than [DELETED] of all Affiliates within the definition of Dialysis Center for any [DELETED] within a given [DELETED], no Qualified Purchases of Dialysis Center during such [DELETED] will be included in the calculation of the [DELETED] for that [DELETED]. However, if Amgen determines that any Affiliate is consistently not submitting the required data, Amgen and Dialysis Center will work collaboratively in resolving such inconsistencies. Amgen will use its best efforts to notify Dialysis Center in writing, no later than [DELETED] after the receipt and acceptance by Amgen of the data, of the identity of all those Affiliates, if any, which have failed to meet the data submission requirements for that [DELETED]. Amgen reserves the right, in its sole discretion, to exclude any consistently non-reporting Affiliates Qualified Purchases of EPOGEN ® from the calculation of the [DELETED] for any relevant [DELETED]. Notwithstanding the forgoing, payment for any period that is not equivalent to a complete [DELETED] will be based on the data that is available for that period.
The [DELETED] discount will vest on the [DELETED] of the [DELETED], and be paid [DELETED] within [DELETED] days after the receipt of data, in accordance with the terms and conditions described above. Dialysis Center shall have the right, at its own cost and expense, at all times to audit all data and all calculations relevant to the determination of eligibility for and the amount of the [DELETED] to be paid to Dialysis Center hereunder.
[DELETED]
8. | [DELETED]. Throughout the Term of the Agreement, Dialysis Center may qualify for the [DELETED] provided it meets the criteria described below in this Section 8. The [DELETED] is designed to improve patient outcomes. If Dialysis Center [DELETED] or otherwise [DELETED], the parties shall [DELETED]. |
i) | Requirements: In order to qualify for the [DELETED], Dialysis Center must [DELETED] of this Appendix A, and Dialysis Center [DELETED], as that term is defined below, of [DELETED]. Dialysis Center must provide Amgen the [DELETED], on a [DELETED] basis, and no later than [DELETED] days after the end of [DELETED], in a format acceptable to Amgen. |
ii) |
Calculation: Assuming Dialysis Center has fulfilled all requirements as described in Section 8(a) above, to qualify for the [DELETED], Dialysis Center must achieve, on a [DELETED] basis an [DELETED]. The [DELETED] shall be based upon [DELETED]. For purpose of calculating the [DELETED] for each applicable [DELETED], Dialysis Center shall use [DELETED] for each patient, [DELETED] in accordance with the [DELETED], and, in all other material respects, consistent with the [DELETED] currently employed by Dialysis Center. For each [DELETED] |
20
Amendment No. 2 Agreement No. 200308360 (Continued)
will be [DELETED] depending on the [DELETED], in accordance with the [DELETED]. The [DELETED] is a [DELETED] of the [DELETED]. The [DELETED] will be calculated as the [DELETED] based on [DELETED] for all patients treated at Dialysis Center and its Affiliates during each applicable [DELETED], in accordance with the [DELETED] listed below: |
[DELETED] Schedule
[DELETED] | ||||
* | All [DELETED] shall be counted [DELETED]. |
** | [DELETED]. |
2 | [DELETED] |
3 | [DELETED]. |
The [DELETED] will be calculated on a [DELETED] basis in accordance with Amgens discount calculation schedules. Following the submission of the [DELETED] by Dialysis Center, Amgen shall then calculate Dialysis Centers [DELETED] in accordance with the following formula and the incentive table listed below:
[DELETED] = A X B
Where:
A = [DELETED] of EPOGEN ® during the relevant [DELETED].
B = A percent in accordance with the [DELETED].
C = [DELETED]
D = [DELETED]
[DELETED] Rebate Schedule
[DELETED] | ||
*Notwithstanding anything contained herein to the contrary, the maximum rebate percent payable for [DELETED] shall not exceed [DELETED] and the maximum rebate percent payable for any [DELETED] shall not exceed [DELETED] under this [DELETED] program.
iii) |
Payment: The [DELETED] will be calculated and paid to Dialysis Center on a [DELETED] basis. Payment for each applicable [DELETED] is contingent upon receipt and verification by Amgen of the [DELETED] for the applicable [DELETED]. The [DELETED] must be submitted, on a [DELETED] basis, and no later than [DELETED] days after the end of each [DELETED]. If the [DELETED] is received more than [DELETED] days after the [DELETED] of any given [DELETED], the total Qualified Purchases of EPOGEN ® attributable to Dialysis Center during such [DELETED] will be |
21
Amendment No. 2 Agreement No. 200308360 (Continued)
excluded from the calculation of the [DELETED] for that [DELETED]. Failure of Dialysis Center to qualify during a particular [DELETED] shall not affect Dialysis Centers eligibility to qualify during any other [DELETED], nor shall Dialysis Centers qualification during a particular [DELETED] automatically result in qualification during any other [DELETED]. Notwithstanding the foregoing, payment for any period that is not equivalent to a complete [DELETED] will be made based on the data that is available for that period. |
The [DELETED] discount will vest on the last day of the corresponding [DELETED], and be paid [DELETED] within [DELETED] days after the receipt of complete and machine readable data, in accordance with the terms and conditions described above. Dialysis Center shall have the right, at its own cost and expense, at all times to audit all data and all calculations relevant to the determination of eligibility for and the amount of the [DELETED] to be paid to Dialysis Center hereunder.
[DELETED]
9. | [DELETED]. Dialysis Center may [DELETED] for the [DELETED] as described below. |
(a) Amgen has elected to [DELETED] to be [DELETED] by Dialysis Center throughout the Term of this Agreement [DELETED]. Dialysis Center may, from time to time and in its sole discretion, establish or alter the [DELETED]. In consideration for the [DELETED], and to receive all of the [DELETED] generally accorded by Dialysis Center to all [DELETED], Amgen will provide to Dialysis Center [DELETED] to Dialysis Center during the period [DELETED]. Dialysis Center or its Authorized Wholesalers shall provide to Amgen, within [DELETED] days following the [DELETED], documentation regarding [DELETED] to Dialysis Center during the [DELETED]. [DELETED] to Dialysis Center in the [DELETED] within [DELETED] days following the end of the [DELETED]. Such [DELETED] immediately upon the conclusion of the [DELETED].
(b) | Amgen may elect to [DELETED] that may be [DELETED] from time to time by Dialysis Center during the Term of the Agreement, in addition to the [DELETED], on such additional terms and conditions as shall generally apply to [DELETED]. [DELETED] Amgen of a [DELETED] under this Section shall not entitle Amgen to [DELETED] in any such [DELETED]. |
(c) | [DELETED] |
(d) | Amgen hereby acknowledges receipt of a copy of Dialysis Centers current [DELETED] and [DELETED], and agrees to be bound by the terms thereof. Dialysis Center agrees that, except as provided in the [DELETED], none of its agents, representatives or employees (Agents) shall otherwise [DELETED] Amgen for any other [DELETED], for Dialysis Center or any of its agents or facilities, whether [DELETED], at any [DELETED] or pursuant to any other [DELETED]. Amgen acknowledges and agrees that, except as provided in the [DELETED], it shall not [DELETED] any such other [DELETED] to Dialysis Center, its Agents, or its facilities. |
10. | [DELETED]. For the period [DELETED], Dialysis Center may qualify for an [DELETED] as outlined below. |
(a) | Calculation : |
[DELETED] = A x B
where
A = [DELETED] of EPOGEN ® for the [DELETED].
B = [DELETED]
(b) | Payment and Vesting : The [DELETED] will vest on the [DELETED] day of the [DELETED] and will be paid within [DELETED] days after the [DELETED] day of the [DELETED]. |
22
Amendment No. 2 Agreement No. 200308360 (Continued)
Appendix B: List of Dialysis Center Affiliates
Please refer to attached list of affiliates.
23
Amendment No. 2 Agreement No. 200308360 (Continued)
Appendix C: List of Authorized Wholesalers
To ensure Dialysis Center receives the appropriate discount, it is important Amgen
receives Dialysis Centers current list of Authorized Wholesalers. The following list represents the Wholesalers Amgen currently has associated with Dialysis Centers contract. Please update the list by adding or deleting Wholesalers as
AMERICAN MEDICAL DISTRIBUTORS, INC.
SUBSIDIARY OF BELLCO DRUG CORPORATION
100 NEW HIGHWAY
AMITYVILLE, NY 11701
AMERISOURCE CORPORATION
100 FRIARS LANE
THOROFARE, NJ 08086
ASD SPECIALTY HEALTHCARE
SUBSIDIARY OF BERGEN BRUNSWIG DRUG CO.
4006 BELTLINE ROAD, SUITE 200, LB-21
ADDISION, TX 75001
BERGEN BRUNSWIG DRUG COMPANY
4000 METROPOLITAN DRIVE
ORANGE, CA 92868
HENRY SCHEIN INCORPORATED
135 DURYEA ROAD
MELVILLE, NY 11747
METRO MEDICAL SUPPLY, INC.
1911 CHURCH STREET
NASHVILLE, TN 37023
PRIORITY HEALTHCARE CORPORATION
CHARISE CHARLES DIVISION
250 TECHNOLOGY PARK, SUITE 124
LAKE MARY, FL 32746
24
Center Name |
Address |
City |
ST
|
Zip
|
||||
ACUTE DIALYSIS |
UNITED HOSPITAL 333 N SMITH AVE | MINNEAPOLIS | MN | 55404 | ||||
ALHAMBRA DIALYSIS |
1315 ALHAMBRA BLVD STE 100 | SACRAMENTO | CA | 95816 | ||||
ALTUS DIALYSIS CENTER |
205 S PARK LN STE 130 | ALTUS | OK | 73521 | ||||
ANTELOPE DIALYSIS CENTER |
6406 TUPELO DR STE A | CITRUS HEIGHTS | CA | 95621 | ||||
ANTIOCH DIALYSIS CENTER |
3100 DELTA FAIR BLVD | ANTIOCH | CA | 94509 | ||||
APHERISIS ACUTE |
825 S EIGHTH ST STE 400 | MINNEAPOLIS | MN | 55404 | ||||
APPOMATTOX DIALYSIS |
15 WEST OLD ST | PETERSBURG | VA | 23803 | ||||
ARCADIA DIALYSIS CENTER |
1341 E OAK ST | ARCADIA | FL | 34266 | ||||
ARDEN HILLS DIALYSIS UNIT |
3900 NORTHWOODS DR STE 110 | ARDEN HILLS | MN | 55112 | ||||
ARVADA DIALYSIS CENTER |
9950 W 80TH AVE STE 25 | ARVADA | CO | 80005 | ||||
ASHEVILLE ACUTE |
10 MCDOWELL ST | ASHEVILLE | NC | 28801 | ||||
ASHEVILLE KIDNEY CENTER |
10 MCDOWELL ST | ASHEVILLE | NC | 28801 | ||||
ATLANTIC ARTIFICIAL KIDNEY CENTER |
6 INDUSTRIAL WAY W STE B | EATONTOWN | NJ | 7724 | ||||
ATLANTIC CITY DIALYSIS CENTER |
2720 ATLANTIC AVE | ATLANTIC CITY | NJ | 8401 | ||||
ATLANTIC DIALYSIS |
1500 EAST 10TH STREET | ATLANTIC | IA | 50022 | ||||
AURORA DIALYSIS CENTER |
1411 S POTOMAC AMC II STE 100 | AURORA | CO | 80012 | ||||
AUSTIN ACUTES |
2800 INTERSTATE HWY 35 STE 120 | AUSTIN | TX | 78704 | ||||
BAKER PLACE DIALYSIS |
5084 AMES AVENUE | OMAHA | NE | 68104 | ||||
BAKERS FERRY DIALYSIS |
3645 BAKERS FERRY RD | ATLANTA | GA | 30331 | ||||
BALTIMORE COUNTY DIALYSIS CENTER |
9635-A LIBERTY RD STE 100 | RANDALLSTOWN | MD | 21133 | ||||
BARDSTOWN DIALYSIS CENTER |
210 WEST JOHN FITCH AVE | BARDSTOWN | KY | 40004 | ||||
BATTLE CREEK ACUTE PROGRAM |
300 NORTH AVENUE ROOM 2211 | BATTLE CREEK | MI | 49017 | ||||
BATTLE CREEK DIALYSIS |
220 GOODALE AVENUE | BATTLE CREEK | MI | 49015 | ||||
BAY AREA DIALYSIS CENTER |
1101 9TH ST N | ST PETERSBURG | FL | 33701 | ||||
BAY BREEZE DIALYSIS |
11465 ULMERTON RD | LARGO | FL | 33778 | ||||
BAYONET POINT HUDSON KIDNEY CENTER |
14144 NEPHRON LN | HUDSON | FL | 34667 | ||||
BELCARO DIALYSIS CENTER |
755 COLORADO BOULEVARD | DENVER | CO | 80246 | ||||
BELLEVUE COMMUNITY DIALYSIS CENTER |
3535 FACTORIA BLVD SE SUITE 150 | BELLEVUE | WA | 98006 | ||||
BERLIN DIALYSIS CENTER |
314 FRANKLIN AVE STE 306 | BERLIN | MD | 21811 | ||||
BERTHA SIRK DIALYSIS CENTER |
5820 YORK ROAD STE 10 | BALTIMORE | MD | 21212 | ||||
BEVERLY HILLS DIALYSIS CENTER |
8762 W PICO BLVD | LOS ANGELES | CA | 90035 | ||||
BLOOMINGTON DIALYSIS UNIT OF TRC |
8591 LYNDALE AVE S | BLOOMINGTON | MN | 55420 | ||||
BLUFF CITY DIALYSIS CENTER |
2400 LUCY LEE PARKWAY STE E | POPLAR BLUFF | MO | 63901 | ||||
BOCA RATON ARTIFICIAL KIDNEY CENTER |
998 NW 9TH COURT | BOCA RATON | FL | 33486 | ||||
BOGALUSA ACUTE DIALYSIS |
2108 SOUTH AVENUE F | BOGALUSA | LA | 70427 | ||||
BOGALUSA KIDNEY CARE |
2108 SOUTH AVE F | BOGALUSA | LA | 70427 | ||||
BOSTON POST ROAD DIALYSIS CENTER |
4026 BOSTON POST RD | BRONX | NY | 10466 | ||||
BOULDER DIALYSIS CENTER |
2880 FOLSOM DR STE 110 | BOULDER | CO | 80304 | ||||
BREA DIALYSIS CENTER |
595 TAMARACK AVE STE A | BREA | CA | 92821 | ||||
BRICKTOWN DIALYSIS CENTER |
525 JACK MARTIN BLVD 2ND FL | BRICKTOWN | NJ | 8724 | ||||
BRIDGEWATER DIALYSIS CENTER |
2121 ROUTE 22 W | BOUND BROOK | NJ | 8805 | ||||
BRIGHTON |
4700 EAST BROMLEY LANE SUITE 103 | BRIGHTON | CO | 80601 | ||||
BRIGHTON DIALYSIS |
7960 WEST GRAND RIVER STE 210 | BRIGHTON | MI | 48114 | ||||
BROKEN ARROW DIALYSIS CENTER |
601 S ASPEN | BROKEN ARROW | OK | 74012 | ||||
BRONX DIALYSIS CENTER |
1615 EASTCHESTER RD | BRONX | NY | 10461 | ||||
BROOKHOLLOW DIALYSIS |
4918 W 34TH ST | HOUSTON | TX | 77092 | ||||
BUENA VISTA DIALYSIS |
347 HWY 41 N PO BOX 679 | BUENA VISTA | GA | 31803 | ||||
BURLINGTON DIALYSIS |
873 HEATHER RD | BURLINGTON | NC | 27215 | ||||
BURNSVILLE DIALYSIS UNIT |
303 E NICOLLET BLVD STE 363 | BURNSVILLE | MN | 55337 | ||||
CAMBRIDGE |
300 BYRN STREET | CAMBRIDGE | MD | 21613 | ||||
CAMELBACK DIALYSIS CENTER |
7321 E OSBORN DR | SCOTTSDALE | AZ | 85251 | ||||
CAMP HILL DIALYSIS CENTER |
425 N 21ST ST PLAZA 21 BLDG 1ST FL | CAMP HILL | PA | 17011 | ||||
CAPITAL CITY DIALYSIS |
307 NORTH 46TH STREET | LINCOLN | NE | 68503 | ||||
CARROLL COUNTY DIALYSIS FACILITY |
412 MALCOLM DR STE 310 | WESTMINSTER | MD | 21157 | ||||
CASS LAKE DIALYSIS FACILITY |
602 GRANT UTLEY PO BOX 757 | CASS LAKE | MN | 56633 | ||||
CATSKILL ACUTE |
68 BUSHVILLE ROAD | HARRIS | NY | 12760 | ||||
CATSKILL DIALYSIS CENTER |
139 FORESTBURGH RD | MONTICELLO | NY | 12701 |
25
Center Name |
Address |
City |
ST
|
Zip
|
||||
CELEBRATION DIALYSIS |
1154 CELEBRATION BLVD | CELEBRATION | FL | 34747 | ||||
CELIA DILL DIALYSIS CENTER |
BARNS OFFICE CENTER 667 STONLEIGH AVE STE 206 | CARMEL | NY | 10512 | ||||
CENTER FOR KIDNEY DISEASE AT NORTH SHORE DIALYSIS |
1190 NW 95TH ST STE 208 | MIAMI | FL | 33150 | ||||
CENTER FOR KIDNEY DISEASE AT VENTURE |
16855 NE 2ND AVE STE 205 | N MIAMI BEACH | FL | 33162 | ||||
CENTRAL CITY DIALYSIS |
1300 MURCHISON DRIVE SUITE 320 | EL PASO | TX | 79902 | ||||
CENTRAL DES MOINES DIALYSIS |
1215 PLEASANT STREET SUITE 106 | DES MOINES | IA | 50309 | ||||
CENTRAL TULSA ACUTE |
1124 S ST LOUIS | TULSA | OK | 74120 | ||||
CENTRAL TULSA DIALYSIS CENTER |
1124 S ST LOUIS AVENUE | TULSA | OK | 74120 | ||||
CENTRAL TULSA PD |
1124 S ST LOUIS | TULSA | OK | 74120 | ||||
CHADBOURN DIALYSIS CENTER |
210 E STRAWBERRY BLVD | CHADBOURN | NC | 28431 | ||||
CHEROKEE DIALYSIS CENTER |
53 ECHOTA CHURCH RD | CHEROKEE | NC | 28719 | ||||
CHESAPEAKE DIALYSIS CENTER |
1400 CROSSWAYS BLVD CROSSWAYS II STE 106 | CHESAPEAKE | VA | 23320 | ||||
CHESTERTOWN DIALYSIS CENTER |
KENT AND QUEEN ANNES HOSPITAL 100 BROWN ST | CHESTERTOWN | MD | 21620 | ||||
CHICAGO HEIGHTS DIALYSIS |
177 B WEST JOE ORR ROAD | CHICAGO HEIGHTS | IL | 60411 | ||||
CHICO DIALYSIS CENTER |
530 COHASSET RD | CHICO | CA | 95926 | ||||
CHINLE DIALYSIS |
US HWY 191 PO BOX 879 | CHINLE | AZ | 86503 | ||||
CHURCHVIEW DIALYSIS CENTER |
5970 CHURCHVIEW DR | ROCKFORD | IL | 61107 | ||||
CIELO VISTA DIALYSIS |
7200 GATEWAY BLVD STE B | EL PASO | TX | 79915 | ||||
CINCINNATI DIALYSIS CENTER |
815 EASTGATE DR S | CINCINNATI | OH | 45245 | ||||
CITRUS VALLEY DIALYSIS |
894 HARDT STREET | SAN BERNADINO | CA | 92408 | ||||
CKC DIALYSIS |
4350 DEWEY AVENUE 5TH FLOOR | OMAHA | NE | 68198 | ||||
CLAREMORE DIALYSIS CENTER |
202 E BLUE STARR DR | CLAREMORE | OK | 74017 | ||||
CLARKSTON DIALYSIS |
6770 DIXIE HWY STE 205 | CLARKSTON | MI | 48346 | ||||
CLEVELAND DIALYSIS CENTER |
CROLEY CENTER 600 E HOUSTON STE 630 | CLEVELAND | TX | 77327 | ||||
CLINTON DIALYSIS CENTER |
150 SOUTH 31ST ST | CLINTON | OK | 73601 | ||||
COASTAL KIDNEY CENTERS LLC |
510 N MACARTHUR AVE | PANAMA CITY | FL | 32401 | ||||
COLUMBUS ACUTE |
6228 BRADLEY PARK DR STE B | COLUMBUS | GA | 31904 | ||||
COLUMBUS DIALYSIS |
6228 BRADLEY PARK DR STE B | COLUMBUS | GA | 31904 | ||||
COMMERCE CITY DIALYSIS |
6320 HOLLY ST | COMMERCE CITY | CO | 80022 | ||||
COMMUNITY HEMO-SAN FRANCISCO |
1800 HAIGHT ST | SAN FRANCISCO | CA | 94117 | ||||
COMPLETE DIALYSIS CARE |
7850 W SAMPLE RD | CORAL SPRINGS | FL | 33065 | ||||
COMPLETE DIALYSIS CARE-SOUTH |
111 SW 23RD ST STE D | FORT LAUDERDALE | FL | 33315 | ||||
COMPREHENSIVE RENAL CARE-EAST CHICAGO |
4320 FIR ST STE 404 | EAST CHICAGO | IN | 46312 | ||||
COMPREHENSIVE RENAL CARE-GARY |
4802 BROADWAY | GARY | IN | 46408 | ||||
COMPREHENSIVE RENAL CARE-HAMMOND |
222 DOUGLAS ST | HAMMOND | IN | 46320 | ||||
COMPREHENSIVE RENAL CARE-MICHIGAN CITY |
120 DUNES PLAZA | MICHIGAN CITY | IN | 46360 | ||||
COMPREHENSIVE RENAL CARE-MUNSTER |
8317 CALUMET AVE STE A | MUNSTER | IN | 46321 | ||||
COMPREHENSIVE RENAL CARE-VALPARAISO |
606 E LINCOLNWAY | VALPARAISO | IN | 46383 | ||||
CONCORD |
2300 STANWELL DRIVE SUITE C | CONCORD | CA | 94520 | ||||
CONEY ISLAND DIALYSIS CENTER |
26 BRIGHTON 11TH ST | BROOKLYN | NY | 11235 | ||||
CONROE DIALYSIS CENTER |
500 MEDICAL PLAZA STE 175 | CONROE | TX | 77304 | ||||
CONTINENTAL DIALYSISALEXANDRIA |
5999 STEVENSON AVE STE 100 | ALEXANDRIA | VA | 22304 | ||||
CONTINENTAL DIALYSISWOODBRIDGE |
2751 KILLARNEY DR | WOODBRIDGE | VA | 22192 | ||||
COON RAPIDS DIALYSIS UNIT |
3960 COON RAPIDS BLVD STE 314 | COON RAPIDS | MN | 55433 | ||||
COPPERFIELD DIALYSIS |
1030 VINEHAVEN DRIVE | CONCORD | NC | 28025 | ||||
CORONA DIALYSIS CENTER |
1820 FULLERTON AVE STE 180 | CORONA | CA | 92881 | ||||
CORTEZ DIALYSIS CENTER |
610 E MAIN STE C | CORTEZ | CO | 81321 | ||||
COVINA DIALYSIS |
1547 WEST GARVEY AVE | WEST COVINA | CA | 91790 | ||||
CREEKSIDE DIALYSIS CENTER |
141 PARKER ST | VACAVILLE | CA | 95688 |
26
Center Name |
Address |
City |
ST
|
Zip
|
||||
CRESCENT CITY DIALYSIS CENTER |
3909 BIENVILLE STE 1B | NEW ORLEANS | LA | 70119 | ||||
CRESCENT HEIGHTS DIALYSIS CENTER |
8151 BEVERLY BLVD | LOS ANGELES | CA | 90048 | ||||
CRESTON DIALYSIS |
1700 WEST TOWNLINE STREET | CRESTON | IA | 50801 | ||||
CRESTWOOD DIALYSIS |
9901 WATSON ROAD | ST LOUIS | MO | 63126 | ||||
CROSSROADS DIALYSIS |
3214 YORBA LINDA BLVD | FULLERTON | CA | 92831 | ||||
CRYSTAL CITY DIALYSIS CENTER |
JEFFERSON MEMORIAL HOSPITAL HWY 61 AND I-55 | CRYSTAL CITY | MO | 63019 | ||||
CRYSTAL RIVER DIALYSIS |
7435 W GULF TO LAKE HWY | CRYSTAL RIVER | FL | 34429 | ||||
CUERO KIDNEY DIALYSIS CENTER |
111 EAST ALEXANDER | CUERO | TX | 77954 | ||||
CYFAIR DIALYSIS CENTER |
9110 JONES RD STE 110 | HOUSTON | TX | 77065 | ||||
DALLAS NORTH DIALYSIS |
11886 GREENVILLE AVENUE SUITE 100B | DALLAS | TX | 75243 | ||||
DAVISON DIALYSIS |
1011 S STATE ST | DAVISON | MI | 48423 | ||||
DAVITA PRISON DIALYSIS SERVICES |
3501 COFFEE RD STE 3 | MODESTO | CA | 95355 | ||||
DECATUR DIALYSIS |
1987 CANDLER RD | DECATUR | GA | 30032 | ||||
DEERFIELD BEACH ARTIFICIAL KIDNEY CENTER |
1983 W HILLSBORO BLVD | DEERFIELD BEACH | FL | 33442 | ||||
DEKALB DIALYSIS CENTER |
8 HEALTH SERVICES DR SUITE C | DEKALB | IL | 60115 | ||||
DEL RAY ARTIFICIAL KIDNEY CENTER |
16244 S MILITARY TRAIL STE 110 | DELRAY BEACH | FL | 33484 | ||||
DELTA SIERRA DIALYSIS CENTER |
555 W BENJAMIN HOLT DR STE 200 | STOCKTON | CA | 95207 | ||||
DENISON DIALYSIS CENTER |
1220 REBA MCENTIRE LANE | DENISON | TX | 75020 | ||||
DENVER ACUTE |
3247 S LINCOLN ST | ENGLEWOOD | CO | 80110 | ||||
DENVER DIALYSIS CENTER |
1719 E 19TH AVE FIRST FLOOR BUILDING C | DENVER | CO | 80218 | ||||
DES MOINES ACUTE PROGRAM |
1215 PLEASANT STREET SUITE 100 | DES MOINES | IA | 50309 | ||||
DESERT MOUNTAIN DIALYSIS |
9220 E MOUNTAIN VIEW RD STE 105 | SCOTTSDALE | AZ | 85258 | ||||
DESERT RIDGE DIALYSIS |
8573 EAST PRINCESS DRIVE SUITE 111 | SCOTTSDALE | AZ | 85255 | ||||
DESERT VALLEY ACUTE DIALYSIS |
7321 E OSBORN DR | SCOTTSDALE | AZ | 85251 | ||||
DETROIT DIALYSIS |
2674 E JEFFERSON AVE | DETROIT | MI | 48207 | ||||
DIAL U IN N MECKLENBERG AT HOME |
9030 GLENWATER DRIVE | CHARLOTTE | NC | 28262 | ||||
DIALYSIS ASSOCIATES OF THE PALM BEACHES |
2611 POINSETTIA AVE | WEST PALM BEACH | FL | 33407 | ||||
DIALYSIS BY CONTRACT |
32930 ALVARADO NILES RD SUITE 340 | UNION CITY | CA | 94587 | ||||
DIALYSIS CARE OF ANSON COUNTY |
923 EAST CASWELL ST | WADESBORO | NC | 28170 | ||||
DIALYSIS CARE OF EDGECOMB COUNTY |
3206 WESTERN BLVD | TARBORO | NC | 27886 | ||||
DIALYSIS CARE OF FRANKLIN COUNTY |
1706 HWY 39 N | LOUISBURG | NC | 27549 | ||||
DIALYSIS CARE OF HOKE COUNTY |
403 S MAIN ST | RAEFORD | NC | 28376 | ||||
DIALYSIS CARE OF MARTIN COUNTY |
100 MEDICAL DR | WILLIAMSTON | NC | 27892 | ||||
DIALYSIS CARE OF MECKLENBERG COUNTY |
3515 LATROBE DR | CHARLOTTE | NC | 28211 | ||||
DIALYSIS CARE OF MECKLENBERG/UNIVERSITY |
9030 GLENWATER DR | CHARLOTTE | NC | 28262 | ||||
DIALYSIS CARE OF MONTGOMERY COUNTY |
318 N MAIN ST | TROY | NC | 27371 | ||||
DIALYSIS CARE OF MOORE COUNTY |
16 REGIONAL DR | PINEHURST | NC | 28374 | ||||
DIALYSIS CARE OF MOORE COUNTY AT HOME |
16 REGIONAL DRIVE | PINEHURST | NC | 28374 | ||||
DIALYSIS CARE OF RICHMOND COUNTY |
771 CHAERAW HWY | HAMLET | NC | 28345 | ||||
DIALYSIS CARE OF ROCKINGHAM COUNTY |
251 W KINGS HWY | EDEN | NC | 27288 | ||||
DIALYSIS CARE OF ROWAN COUNTY |
1406-B W INNES ST | SALISBURY | NC | 28144 | ||||
DIALYSIS CARE OF ROWAN COUNTYKANNAPOLIS |
1607 N MAIN ST | KANNAPOLIS | NC | 28081 | ||||
DIALYSIS CARE OF RUTHERFORD COUNTY |
226 COMMERCIAL DR | FOREST CITY | NC | 28043 | ||||
DIALYSIS CARE OF WAYNE COUNTY |
2403 WAYNE MEMORIAL DR | GOLDSBORO | NC | 27534 | ||||
DIALYSIS CENTER OF MIDDLE GEORGIAMACON |
747 SECOND ST | MACON | GA | 31201 | ||||
DIALYSIS CENTER OF MIDDLE GEORGIAWARNER ROBINS |
509 N HOUSTON RD | WARNER ROBINS | GA | 31093 |
27
Center Name |
Address |
City |
ST
|
Zip
|
||||
DIALYSIS CENTER OF OXFORD COURT |
930 TOWN CENTER DR STE G-100 | LANGHORNE | PA | 19047 | ||||
DIALYSIS SYSTEMS OF COVINGTON |
210 GREENBRIAR BLVD | COVINGTON | LA | 70433 | ||||
DIALYSIS SYSTEMS OF HAMMOND |
2570 SW RAILROAD AVE STE A-2 | HAMMOND | LA | 70403 | ||||
DIALYSIS TREATMENT CENTERS OF MACON |
745 PINE ST | MACON | GA | 31201 | ||||
DIAMOND VALLEY DIALYSIS |
1030 EAST FLORIDA AVE | HEMET | CA | 92543 | ||||
DIXON KIDNEY CENTER |
1131 NORTH GALENA AVENUE | DIXON | IL | 61021 | ||||
DNVO-CANTONMI |
36588 FORD ROAD | WESTLAND | MI | 48185 | ||||
DNVO-LIFELINEANN ARBOR |
3850 RESEARCH PARK DR | ANN ARBOR | MI | 48108 | ||||
DOCTORS DIALYSIS OF EAST LA |
950 SOUTH EASTER AVENUE | LOS ANGELES | CA | 90022 | ||||
DOCTORS DIALYSIS OF MONTEBELLO |
1721 W WHITTIER BLVD | MONTEBELLO | CA | 90640 | ||||
DOWN RIVER KIDNEY CENTER |
5600 ALLEN RD | ALLEN PARK | MI | 48101 | ||||
DOWNEY DIALYSIS CENTER |
8630 FLORENCE AVE STE 101 | DOWNEY | CA | 90240 | ||||
DOWNTOWN DIALYSIS CENTER |
821 N EUTAW STE 401 | BALTIMORE | MD | 21201 | ||||
DOWNTOWN HOUSTON |
2207 CRAWFORD STREET | HOUSTON | TX | 77002 | ||||
DULANEY TOWSON DIALYSIS CENTER |
113 WEST RD STE 201 | TOWSON | MD | 21204 | ||||
DUNCAN DIALYSIS CENTER |
2645 W ELK | DUNCAN | OK | 73533 | ||||
DURANT |
411 WESTSIDE DRIVE | DURANT | OK | 74701 | ||||
DYKER HEIGHTS DIALYSIS CENTER |
1435 86TH ST | BROOKLYN | NY | 11228 | ||||
EAGAN DIALYSIS |
2750 BLUE WATER RD SUITE 300 | EAGAN | MN | 55121 | ||||
EAST AURORA DIALYSIS |
482 S CHAMBERS RD | AURORA | CO | 80017 | ||||
EAST BAY PERITONEAL DIALYSIS CENTER |
13939 E 14TH ST STE 110 | SAN LEANDRO | CA | 94578 | ||||
EAST END DIALYSIS CENTER |
2201 E MAIN ST STE 100 | RICHMOND | VA | 23223 | ||||
EAST FORT LAUDERDALE DIALYSIS CENTER |
1301 SOUTH ANDREWS AVE STE 101 | FT LAUDERDALE | FL | 33315 | ||||
EAST GEORGIA DIALYSIS |
450 GEORGIA AVENUE SUITE A | STATESBORO | GA | 30458 | ||||
EAST MACON DIALYSIS CENTER |
750 BACONSFIELD DR STE 103 | MACON | GA | 31211 | ||||
EAST ST LOUIS DIALYSIS CENTER |
129 N EIGHTH ST 3RD FL | EAST ST LOUIS | IL | 62201 | ||||
EAST WICHITA DIALYSIS CENTER |
320 N HILLSIDE | WICHITA | KS | 67214 | ||||
EASTERN KENTUCKY DIALYSIS |
167 WEDDINGTON BRANCH ROAD | PIKESVILLE | KY | 41501 | ||||
EASTMONT DIALYSIS |
6955 FOOTHILL BOULEVARD | OAKLAND | CA | 94605 | ||||
EASTON DIALYSIS CENTER |
402 MARVEL CT | EASTON | MD | 21601 | ||||
EASTPOINT DIALYSIS CENTER |
2669 CHURCH ST | EAST POINT | GA | 30344 | ||||
EATON CANYON DIALYSIS |
2551 E WASHINGTON BLVD | PASADENA | CA | 91107 | ||||
ECMC DIALYSIS CENTER AT CLEVE-HILL |
1461 KENSINGTON AVE | BUFFALO | NY | 14215 | ||||
EDEN PRAIRIE |
14852 SCENIC HEIGHTS ROAD BLDG B STE 255 | EDEN PRAIRIE | MN | 55344 | ||||
EDINA DIALYSIS CENTER |
6550 YORK AVE S STE 100 | EDINA | MN | 55435 | ||||
EDMOND DIALYSIS CENTER |
50 S BAUMANN AVE | EDMOND | OK | 73034 | ||||
EL MILAGRO DIALYSIS UNIT |
2800 S INTERSTATE HWY 35 STE 120 | AUSTIN | TX | 78704 | ||||
ELBERTON DIALYSIS CENTER |
894 ELBERT STREET | ELBERTON | GA | 30635 | ||||
ELBERTON-WASHINGTON ACUTES |
4-B COLLEGE PLAZA RAIR RD | STATESBORO | GA | 30458 | ||||
ELK CITY DIALYSIS CENTER |
1710 W THIRD STE 101 | ELK CITY | OK | 73644 | ||||
ELK GROVE DIALYSIS |
9281 OFFICE PARK CIRCLE | ELK GROVE | CA | 95758 | ||||
ELK RIVER KIDNEY CENTER |
216 SOUTH BRIDGE ST | ELKTON | MD | 21921 | ||||
ELLIJAY DIALYSIS |
91 SOUTHSIDE CHURCH ST | ELLIJAY | GA | 30540 | ||||
ELMBROOK KIDNEY CENTER |
7920 ELMBROOK STE 108 | DALLAS | TX | 75247 | ||||
ENGLEWOOD DIALYSIS CENTER |
3247 S LINCOLN ST | ENGLEWOOD | CO | 80110 | ||||
EXTON DIALYSIS CENTER |
710 SPRINGDALE DR | EXTON | PA | 19341 | ||||
FAIR OAKS |
ONE PENDER BUSINESS PARK 3955 PENDER DRIVE | FAIRFAX | VA | 22030 | ||||
FAIRFIELD DIALYSIS CENTER |
604 EMPIRE ST | FAIRFIELD | CA | 94533 | ||||
FAIRVIEW ACUTE |
825 S EIGHTH ST STE 400 | MINNEAPOLIS | MN | 55404 | ||||
FARIBAULT DIALYSIS UNIT |
201 S LYNDALE AVE STE F | FARIBAULT | MN | 55021 | ||||
FEDERAL WAY COMMUNITY DIALYSIS CENTER |
1109 S 348TH ST | FEDERAL WAY | WA | 98003 | ||||
FEDERAL WAY COMMUNITY DIALYSIS CENTER PD |
1105 S 348TH STREET SUITE B104 | FEDERAL WAY | WA | 98003 | ||||
FIRST LANDING DIALYSIS |
1745 CAMELOT DR STE 100 | VIRGINIA BEACH | VA | 23454 | ||||
FLAMINGO PARK KIDNEY CENTER INC |
901 E 10TH AVE BAY 17 | HIALEAH | FL | 33010 | ||||
FLINT ACUTE DIALYSIS |
ONE HURLEY PLAZA ROOM 5A | FLINT | MI | 48503 |
28
Center Name |
Address |
City |
ST
|
Zip
|
||||
FLINT DIALYSIS AT HOME |
TWO HURLEY PLAZA STE 114 | FLINT | MI | 48503 | ||||
FLINT DIALYSIS CENTER |
TWO HURLEY PLAZA STE 115 | FLINT | MI | 48503 | ||||
FLORIN DIALYSIS CENTER |
7000 STOCKTON BLVD | SACRAMENTO | CA | 95823 | ||||
FLUSHING DIALYSIS |
3469 PIERSON PLACE STE A | FLUSHING | MI | 48433 | ||||
FOREST LAKE DIALYSIS UNIT |
FOREST LAKE PROFESSIONAL BLDG 1068 S LAKE ST STE 110 | FOREST LAKE | MN | 55025 | ||||
FOREST PARK DIALYSIS CENTER |
380 FOREST PARKWAY STE C | FOREST PARK | GA | 30297 | ||||
FORT LAUDERDALE RENAL ASSOCIATES |
6264 N FEDERAL HIGHWAY | FORT LAUDERDALE | FL | 33308 | ||||
FORT PIERCE ARTIFICIAL KIDNEY CENTER |
1801 S 23RD ST STE 1 | FORT PIERCE | FL | 34950 | ||||
FORT VALLEY DIALYSIS |
557 BLUEBIRD BOULEVARD | FORT VALLEY | GA | 31030 | ||||
FOUR CORNERS ACUTE DIALYSIS |
801 W MAPLE | FARMINGTON | NM | 87401 | ||||
FOUR CORNERS DIALYSIS CENTER |
801 W BROADWAY | FARMINGTON | NM | 87401 | ||||
FOURTH STREET DIALYSIS |
3101 B NORTH FOURTH ST | LONGVIEW | TX | 75605 | ||||
FOWLERVILLE DIALYSIS |
206 EAST GRAND RIVER AVENUE | FOWLERVILLE | MI | 48836 | ||||
FRANCONIA DIALYSIS CENTER |
5695 KING CENTER DRIVE | ALEXANDRIA | VA | 22315 | ||||
FRANKLIN DIALYSIS AT HOME |
150 SOUTH INDEPENDENCE WEST 101 PUBLIC LEDGER BLDG | PHILADELPHIA | PA | 19106 | ||||
FRANKLIN DIALYSIS CENTER |
150 SOUTH INDEPENDENCE WEST 101 PUBLIC LEDGER BLDG | PHILADELPHIA | PA | 19106 | ||||
FREEPORT DIALYSIS CENTER |
25 NORTH HARLEM AVE | FREEPORT | IL | 61032 | ||||
FREEWAY DRIVE DIALYSIS |
1449 FREEWAY DRIVE SUITE A AND B | REIDSVILLE | NC | 27320 | ||||
FREMONT DIALYSIS CENTER |
2340 NORTH CLARKSON | FREMONT | NE | 68025 | ||||
GAINESVILLE DIALYSIS |
2545 FLINTRIDGE RD STE 130 | GAINESVILLE | GA | 30501 | ||||
GARDEN CITY DIALYSIS CENTER |
1100 STEWART AVE | GARDEN CITY | NY | 11530 | ||||
GAREY DIALYSIS CENTER |
1880 N GAREY AVE | POMONA | CA | 91767 | ||||
GARFIELD HEMODIALYSIS CENTER |
118 HILLIARD AVE | MONTEREY PARK | CA | 91754 | ||||
GEORGETOWN ON THE POTOMAC DIALYSIS CENTER |
3223 K STREET NW STE 110 | WASHINGTON | DC | 20007 | ||||
GERMANTOWN DIALYSIS |
20111 CENTURY BLVD | GERMANTOWN | MD | 20874 | ||||
GETTYSBURG DIALYSIS |
26 SPRINGS AVE STE C | GETTYSBURG | PA | 17325 | ||||
GHENT DIALYSIS CENTER |
901 HAMPTON BLVD STE 200 | NORFOLK | VA | 23507 | ||||
GILMER |
519 NORTH WOOD STREET | GILMER | TX | 75644 | ||||
GONZALES DIALYSIS CENTER |
1406 N SARAH DEWITT DRIVE | GONZALES | TX | 78629 | ||||
GRAND BLANC DIALYSIS CENTER |
3625 GENESYS PARKWAY | GRAND BLANC | MI | 48439 | ||||
GRAND ISLAND DIALYSIS |
603 SOUTH WEBB ROAD | GRAND ISLAND | NE | 68803 | ||||
GRANITE CITY DIALYSIS CENTER |
9 AMERICAN VILLAGE SHOPPING CENTER | GRANITE CITY | IL | 62040 | ||||
GRANT PARK DIALYSIS |
5000 NANNIE HELEN BURROUGHS AVE NE | WASHINGTON | DC | 20019 | ||||
GREAT BRIDGE DIALYSIS CENTER |
745 N BATTLEFIELD BLVD | CHESAPEAKE | VA | 23320 | ||||
GREAT LAKES ACUTE |
3908 GUNDERSON AVE | STICKNEY | IL | 60402 | ||||
GREATER EL MONTE DIALYSIS CENTER |
1938 TYLER AVE STE J-168 | SOUTH EL MONTE | CA | 91733 | ||||
GREATER HOUSTON ACUTE DIALYSIS |
11602 BURDINE | HOUSTON | TX | 77231 | ||||
GREATER PORTSMOUTH DIALYSIS |
3516 QUEEN ST | PORTSMOUTH | VA | 23707 | ||||
GREENSPRING DIALYSIS CENTER |
4701 MT HOPE DR SUITE C | BALTIMORE | MD | 21215 | ||||
GREER KIDNEY CENTER |
211 VILLAGE DR | GREER | SC | 29651 | ||||
GRIFFIN DIALYSIS |
731 S 8TH ST | GRIFFIN | GA | 30224 | ||||
GROVEPARK DIALYSIS CENTER |
794 MCDONOUGH ROAD | JACKSON | GA | 30233 | ||||
GULF BREEZE DIALYSIS CENTER |
1121 OVERCASH DR A | DUNEDIN | FL | 34698 | ||||
GULF COAST DIALYSIS INC |
3300 TAMIAMI TRAIL STE 101A | PORT CHARLOTTE | FL | 33952 | ||||
HAINES CITY DIALYSIS |
110 PATTERSON RD | HAINES CITY | FL | 33844 | ||||
HALLWOOD DIALYSIS CENTER |
4929 CLIO RD STE B | FLINT | MI | 48504 | ||||
HAMPTON AVENUE |
1425 HAMPTON AVENUE | ST LOUIS | MO | 63139 | ||||
HARFORD ROAD DIALYSIS |
5800 HARFORD RD | BALTIMORE | MD | 21214 | ||||
HARLAN DIALYSIS |
1213 GARFIELD AVENUE | HARLAN | IA | 51537 | ||||
HARRISBURG ACUTES |
425 N 21ST ST PLAZA 21 BLDG 1ST FL | CAMP HILL | PA | 17011 | ||||
HASTINGS DIALYSIS CENTER |
1900 NORTH SAINT JOSEPH AVE | HASTINGS | NE | 68901 | ||||
HAYWARD DIALYSIS CENTER |
22477 MAPLE CRT | HAYWARD | CA | 94541 | ||||
HCMC ACUTE DIALYSIS |
901 S 6TH STREET STE B6 | MINNEAPOLIS | MN | 55404 |
29
Center Name |
Address |
City |
ST
|
Zip
|
||||
HEB DIALYSIS CENTER |
1401A BROWN TRAIL | BEDFORD | TX | 76022 | ||||
HEMET DIALYSIS CENTER |
1330 S STATE ST STE B | SAN JACINTO | CA | 92583 | ||||
HENDERSON DIALYSIS CENTER |
1002 HWY 79 N | HENDERSON | TX | 75652 | ||||
HENDERSONVILLE DIALYSIS CENTER |
500 BEVERLY HANK CTR HWY 25 N | HENDERSONVILLE | NC | 28792 | ||||
HENRY SPALDING ACUTE |
114 DUNN STREET | MCDONOUGH | GA | 30253 | ||||
HERMISTON COMMUNITY DIALYSIS CENTER |
1155 W LINDA AVE | HERMISTON | OR | 97838 | ||||
HERNANDO KIDNEY CENTER |
2985-A LANDOVER BLVD | SPRING HILL | FL | 34608 | ||||
HILL COUNTRY DIALYSIS CENTER OF SAN MARCOS |
TDC PLAZA 1820 PETER GARZA ST | SAN MARCOS | TX | 78666 | ||||
HOLLYWOOD DIALYSIS CENTER |
5108 SUNSET BLVD | LOS ANGELES | CA | 90027 | ||||
HOME DIALYSIS UNIT |
825 S EIGHTH ST STE 1202 | MINNEAPOLIS | MN | 55404 | ||||
HONESDALE DIALYSIS CENTER |
STOURBRIDGE MALL RTE 6 AND MAPLE AVE | HONESDALE | PA | 18431 | ||||
HOPE AGAIN DIALYSIS CENTER |
1207 STATE RTE VV | KENNETT | MO | 63857 | ||||
HOPE DIALYSIS CENTER |
300 MARCELLA DR | HAMPTON | VA | 23666 | ||||
HOPEWELL DIALYSIS CENTER |
301 W BROADWAY | HOPEWELL | VA | 23860 | ||||
HOPI DIALYSIS CENTER |
HWY 264 POB 964 | POLACCA | AZ | 86042 | ||||
HOUSTON ACUTES |
5610 ALMEDA RD | HOUSTON | TX | 77004 | ||||
HOUSTON KIDNEY CENTER CYPRESS STATION |
221H FM 1960 WEST | HOUSTON | TX | 77090 | ||||
HOUSTON KIDNEY CENTER SOUTHWEST |
11111 BROOKLET DR BLDG 100 STE 100 | HOUSTON | TX | 77099 | ||||
HUDSON VALLEY DIALYSIS |
155 WHITE PLAINS RD | TARRYTOWN | NY | 10591 | ||||
HYDE PARK KIDNEY CENTER |
1439 EAST 53RD ST | CHICAGO | IL | 60615 | ||||
IMPERIAL CARE DIALYSIS CENTER |
4345 EAST IMPERIAL HIGHWAY | LYNWOOD | CA | 90262 | ||||
INDEPENDENCE DIALYSIS CENTER |
801 W MYRTLE ST | INDEPENDENCE | KS | 67301 | ||||
INDEPENDENCE RENAL CENTER |
12392 HIGHWAY 40 | INDEPENDENCE | LA | 70443 | ||||
INDIO DIALYSIS CENTER |
46767 MONROE ST STE 101 | INDIO | CA | 92201 | ||||
INTERAMERICAN DIALYSIS INSTITUTE INC |
7815 CORAL WAY STE 115 | MIAMI | FL | 33155 | ||||
IRIS CITY DIALYSIS |
521 N EXPERESSWAY VILLAGE STE 1509 | GRIFFIN | GA | 30223 | ||||
IRVINE DIALYSIS CENTER |
16255 LAGUNA CANYON RD | IRVINE | CA | 92618 | ||||
JACINTO DIALYSIS CENTER |
11515 MARKET STREET | JACINTO CITY | TX | 77029 | ||||
JACKSON ACUTES |
1725 PINE STREET | MONTGOMERY | AL | 36106 | ||||
JACKSON DIALYSIS |
234 WEST LOUIS GLICK HWY | JACKSON | MI | 49201 | ||||
JENNERSVILLE DIALYSIS CENTER |
1011 W BALTIMORE PIKE STE 107 | WEST GROVE | PA | 19390 | ||||
JONESBORO DIALYSIS |
129 KING STREET | JONESBORO | GA | 30236 | ||||
KATY DIALYSIS CENTER |
22233 KATY FREEWAY | KATY | TX | 77450 | ||||
KAYENTA DIALYSIS |
US HWY 163 NORTH | KAYENTA | AZ | 86033 | ||||
KENNER REGIONAL DIALYSIS CENTER |
200 W ESPLANADE AVE STE 100 | KENNER | LA | 70065 | ||||
KENNETH HAHN PLAZA DIALYSISCENTER |
11854 S WILMINGTON AVE | WILLOWBROOK | CA | 90059 | ||||
KENT DIALYSIS CENTER |
21501 84TH AVE S | KENT | WA | 98032 | ||||
KIDNEY CARE OF LARGO |
1300 MERCANTILE LANE SUITE 194 | LARGO | MD | 20774 | ||||
KIDNEY CARE OF LAUREL |
13970 BALTIMORE BLVD | LAUREL | MD | 20707 | ||||
KIDNEY DIALYSIS CARE UNIT |
3600 E MARTIN LUTHER KING JR BLVD | LYNWOOD | CA | 90262 | ||||
KILGORE |
209 HWY 42 NORTH | KILGORE | TX | 75662 | ||||
KINGWOOD DIALYSIS CENTER |
2300 GREEN OAK DR STE 500 | KINGWOOD | TX | 77339 | ||||
KNICKERBOCKER RC INC |
1180 W SWEDESFORD RD BLDG 2 | BERWYN | PA | 19312 | ||||
LAKE COUNTY DIALYSIS SERVICES |
918 S MILWAUKEE AVE | LIBERTYVILLE | IL | 60048 | ||||
LAKE DIALYSIS |
221 NORTH 1ST ST | LEESBURG | FL | 34748 | ||||
LAKE ELSINORE DIALYSIS |
32291 MISSION TRAIL RD BLDG S | LAKE ELSINORE | CA | 92530 | ||||
LAKE WALES DIALYSIS CENTER |
1348 SR 60 E | LAKE WALES | FL | 33853 | ||||
LAKEPORT DIALYSIS CENTER |
804 11TH ST STE 2 | LAKEPORT | CA | 95453 | ||||
LAKEWOOD COMMUNITY DIALYSIS CENTER |
5919 LAKEWOOD TOWNE CENTER BLVD SW STE A | LAKEWOOD | WA | 98499 | ||||
LAKEWOOD CROSSING DIALYSIS CENTER |
1057 S WADSWORTH BLVD STE 100 | LAKEWOOD | CO | 80226 | ||||
LAKEWOOD DIALYSIS CENTER |
1750 PIERCE ST | LAKEWOOD | CO | 80214 | ||||
LAKEWOOD DIALYSIS CENTER |
4645 SILVA ST | LAKEWOOD | CA | 90712 |
30
Center Name |
Address |
City |
ST
|
Zip
|
||||
LAMPLIGHTER PLAZA |
12654 LAMPLIGHTER SQUARE | ST LOUIS | MO | 63128 | ||||
LAS VEGAS ACUTES |
7330 SMOKE RANCH ROAD SUITE A | LAS VEGAS | NV | 89128 | ||||
LAS VEGAS DIALYSIS CENTER |
3100 W CHARLESTON BLVD STE 100 | LAS VEGAS | NV | 89102 | ||||
LAWRENCEBURG DIALYSIS CENTER |
555 EADS PARKWAY STE 200 | LAWRENCEBURG | IN | 47025 | ||||
LEE STREET DIALYSIS |
5155 LEE ST NE | WASHINGTON | DC | 20019 | ||||
LEESBURG DIALYSIS CENTER |
801 E DIXIE AVE STE 108A | LEESBURG | FL | 34748 | ||||
LEJEUNE DIALYSIS |
4338 NW 7TH ST | MIAMI | FL | 33126 | ||||
LEWISTOWN DIALYSIS CENTER |
611 ELECTRIC AVE | LEWISTOWN | PA | 17044 | ||||
LIBERTY RC INC |
1180 W SWEDESFORD RD BLDG 2 | BERWYN | PA | 19312 | ||||
LIFE CARE DIALYSIS |
221 W 61ST ST | NEW YORK | NY | 10023 | ||||
LIFELINE ATLANTA |
552 PONCE DE LEON AVENUE N.E. | ATLANTA | GA | 30308 | ||||
LIFELINE BALTIMORE |
2405 YORK ROAD | TIMONIUM | MD | 21093 | ||||
LIFELINE BIRMINGHAM |
201 LONDON PARKWAY SUITE 500 | BIRMINGHAM | AL | 35211 | ||||
LIFELINE CINCINNATI |
4623 WESLEY AVENUE SUITE N | NORWOOD | OH | 45212 | ||||
LIFELINE DETROIT 1 |
10861 TEN MILE ROAD | OAK PARK | MI | 48237 | ||||
LIFELINE DETROIT 2 |
22201 MOROSS SUITE 155 | DETROIT | MI | 48236 | ||||
LIFELINE DETROIT 3 |
16507 SOUTHFIELD | ALLEN PARK | MI | 48101 | ||||
LIFELINE EL PASO |
1601 N BROWN STREET | EL PASO | TX | 79902 | ||||
LIFELINE HOUSTON |
1415 LA CONCHA LANE | HOUSTON | TX | 77054 | ||||
LIFELINE HOUSTON 2 |
1570 S DAIRY ASHFORD RD SUITE 116 | HOUSTON | TX | 77077 | ||||
LIFELINE RIVERSIDE |
4100 LATHAM STREET SUITE A | RIVERSIDE | CA | 92501 | ||||
LIFELINE SAN ANTONIO |
7114 SAN PEDRO | SAN ANTONIO | TX | 78216 | ||||
LIFELINE SAN DIEGO |
5854 EL CAJON BLVD | SAN DIEGO | CA | 92115 | ||||
LIFELINE TYLER |
807 EAST FIRST STREET | TYLER | TX | 75701 | ||||
LIFELINE WASHINGTON DC |
4155 BLADENSBURG RD E | COLMAR MANOR | MD | 20722 | ||||
LIFELINE WICHITA |
2630 NORTH WEBB ROAD BLDG 100 SUITE 200 | WICHITA | KS | 67226 | ||||
LINCOLN PARK DIALYSIS |
3157 N LINCOLN AVE | CHICAGO | IL | 60657 | ||||
LINCOLN PARK PD |
7009 W BELMONT AVE | CHICAGO | IL | 60634 | ||||
LINCOLNLAND DIALYSIS CENTER |
1112 CENTRE WEST DR | SPRINGFIELD | IL | 62704 | ||||
LITTLETON DIALYSIS CENTER |
209 W COUNTY LINE RD | LITTLETON | CO | 80129 | ||||
LIVINGSTON DIALYSIS CENTER |
203 N HOUSTON | LIVINGSTON | TX | 77351 | ||||
LODI DIALYSIS CENTER |
2415 W VINE ST STE 106 | LODI | CA | 95242 | ||||
LOGAN ACUTE DIALYSIS PROGRAM |
167 STOLLINGS AVENUE | LOGAN | WV | 25661 | ||||
LOGAN SQUARE DIALYSIS |
2659 N MILWAUKEE AVE 1ST FL | CHICAGO | IL | 60647 | ||||
LOMA VISTA DIALYSIS CENTER |
1382-A LOMALAND | EL PASO | TX | 79935 | ||||
LONE STAR DIALYSIS |
8560 MONROE RD | HOUSTON | TX | 77061 | ||||
LONETREE DIALYSIS CENTER |
9777 MOUNT PYRAMID COURT SUITE 140 | ENGLEWOOD | CO | 80112 | ||||
LONGMONT DIALYSIS CENTER |
1700 KYLIE DR STE 170 | LONGMONT | CO | 80501 | ||||
LONGVIEW DIALYSIS CENTER |
425 N FREDONIA | LONGVIEW | TX | 75601 | ||||
LOS ANGELES DIALYSIS CENTER |
2250 S WESTERN AVE STE 300 | LOS ANGELES | CA | 90018 | ||||
LOUISVILLE DIAYLSIS |
8037 DIXIE HIGHWAY | LOUISVILLE | KY | 40258 | ||||
LOWRY DIALYSIS CENTER |
7465 E 1ST AVE STE A | DENVER | CO | 80230 | ||||
LUFKIN DIALYSIS CENTER |
509 CHESTNUT VILLAGE | LUFKIN | TX | 75901 | ||||
LYNBROOK DIALYSIS CENTER |
147 SCRANTON AVE | LYNBROOK | NY | 11563 | ||||
MACOMB KIDNEY CENTER |
28295 SCHOENHERR ROAD SUITE A | WARREN | MI | 48088 | ||||
MADISON DIALYSIS CENTER |
220 CLIFTY DR VILLIAGE SQUARE UNIT K | MADISON | IN | 47250 | ||||
MADISON DIALYSIS CENTER |
302 N HIGHWAY ST | MADISON | NC | 27025 | ||||
MAINPLACE DIALYSIS CENTER |
972 TOWN AND COUNTRY RD | ORANGE | CA | 92868 | ||||
MANASSAS DIALYSIS |
10655 LOMOND DR STE 101 | MANASSAS | VA | 20109 | ||||
MANZANITA DIALYSIS CENTER |
4005 MANZANITA AVE STE 17 | CARMICHAEL | CA | 95608 | ||||
MANZANITA PERITONIAL DIALYSIS CENTER |
5120 MANZANITA AVE STE 140 | CARMICHAEL | CA | 95608 | ||||
MAPLEWOOD DIALYSIS CENTER |
2785 WHITE BEAR AVE STE 201 | MAPLEWOOD | MN | 55109 | ||||
MARIANNA DIALYSIS CENTER |
4319 LAFAYETTE | MARIANNA | FL | 32446 | ||||
MARSHALL DIALYSIS CENTER |
1301 S WASHINGTON | MARSHALL | TX | 75670 | ||||
MARSHALL DIALYSIS CENTER |
WEINER MEMORIAL MEDICAL CENTER 300 S BRUCE ST | MARSHALL | MN | 56258 |
31
Center Name |
Address |
City |
ST
|
Zip
|
||||
MARYSVILLE |
1015 8TH STREET | MARYSVILLE | CA | 95901 | ||||
MARYVILLE DIALYSIS |
2130 VADALABENE DR | MARYVILLE | IL | 62062 | ||||
MCCOOK DIALYSIS CENTER |
801 WEST C STREET | MCCOOK | NE | 69001 | ||||
MCDONOUGH DIALYSIS CENTER |
114 DUNN ST | MCDONOUGH | GA | 30253 | ||||
MEHERRIN DIALYSIS CENTER |
201-A WEAVER AVE | EMPORIA | VA | 23847 | ||||
MEMORIAL DIALYSIS CENTER |
11621 KATY FREEWAY | HOUSTON | TX | 77079 | ||||
MEMORIAL DIALYSIS CENTER |
4427 S ROBERTSON ST | NEW ORLEANS | LA | 70115 | ||||
MERRILLVILLE DIALYSIS |
9223 TAFT | MERRILLVILLE | IN | 46410 | ||||
MESA VISTA DIALYSIS |
2400 NORTH OREGON ST SUITE C | EL PASO | TX | 79902 | ||||
MGDCHILDRENS HOSPITAL DIALYSIS CENTER |
111 MICHIGAN AVE NW RM 3130 | WASHINGTON | DC | 20010 | ||||
MIAMI BEACH KIDNEY CENTER INC |
400 ARTHUR GODFREY RD STE 402 | MIAMI BEACH | FL | 33140 | ||||
MIAMI DIALYSIS CENTER |
200 2ND AVE SW | MIAMI | OK | 74354 | ||||
MIAMI LAKES ARTIFICIAL KIDNEY CENTER |
14600 NW 60TH AVE | MIAMI LAKES | FL | 33014 | ||||
MID-COLUMBIA KIDNEY CENTER |
117 S THIRD AVE | PASCO | WA | 99301 | ||||
MIDDLEBURG HTS DIALYSIS |
17800 JEFFERSON PARK STE 101 | MIDDLEBURG HEIGHTS | OH | 44130 | ||||
MIDDLETOWN DIALYSIS CENTER |
500 ROUTE 35 SOUTH UNION SQUARE PLAZA | RED BANK | NJ | 7701 | ||||
MID-OHIO DIALYSIS |
2355 S HAMILTON ROAD | COLUMBUS | OH | 43232 | ||||
MIDTOWN DIALYSIS |
121 LINDEN AVE | ATLANTA | GA | 30308 | ||||
MIDWEST CITY DIALYSIS CENTER |
7221 E RENO AVE | MIDWEST CITY | OK | 73110 | ||||
MILFORD DIALYSIS CENTER |
COUNTY COMMERCE CTR 10 BUIST RD | MILFORD | PA | 18337 | ||||
MILLEDGEVILLE DIALYSIS |
400 S WAYNE ST | MILLEDGEVILLE | GA | 31061 | ||||
MINNEAPOLIS DIALYSIS UNIT |
825 S EIGHTH ST STE SL42 | MINNEAPOLIS | MN | 55404 | ||||
MINNEAPOLIS NE DIALYSIS |
1049 10TH AVE SE | MINNEAPOLIS | MN | 55414 | ||||
MINNETONKA DIAYSIS UNIT |
17809 HUTCHINS DR | MINNETONKA | MN | 55345 | ||||
MISSION DIALYSIS CENTER OF CHULA VISTA |
1181 BROADWAY STE 5 | CHULA VISTA | CA | 91911 | ||||
MISSION DIALYSIS CENTER OF EL CAJON |
858 FLETCHER PARKWAY | EL CAJON | CA | 92020 | ||||
MISSION DIALYSIS CENTER OF OCEANSIDE |
2227-B EL CAMINO REAL | OCEANSIDE | CA | 92054 | ||||
MISSION DIALYSIS CENTER OF SAN DIEGO |
7007 MISSION GORGE RD 1ST FL | SAN DIEGO | CA | 92120 | ||||
MISSION HILLS DIALYSIS |
2700 NORTH STANTON | EL PASO | TX | 79902 | ||||
MITCHELL DIALYSIS |
QUEEN OF PEACE HOSPITAL 525 N FOSTER | MITCHELL | SD | 57301 | ||||
MOBILE DIALYSIS CENTER |
9925 PAINTER AVE STE K | SANTA FE SPRINGS | CA | 90605 | ||||
MONCRIEF DIALYSIS CENTER |
800 WEST 34TH ST STE 101 | AUSTIN | TX | 78705 | ||||
MONTCLAIR DIALYSIS CENTER |
5050 PALO VERDE ST STE 100 | MONTCLAIR | CA | 91763 | ||||
MONTCLARE DIALYSIS CENTER |
7009 W BELMONT | CHICAGO | IL | 60634 | ||||
MONTEREY PARK DIALYSIS CENTER |
2560 CORPORATE PLACE STE 100 | MONTEREY PARK | CA | 91754 | ||||
MONTEVIDEO DIALYSIS CENTER |
MONTEVIDEO HOSPITAL 824 N 11TH ST | MONTEVIDEO | MN | 56265 | ||||
MOULTRIE DIALYSIS |
2419 S MAIN ST | MOULTRIE | GA | 31768 | ||||
MOUNTAIN VISTA DIALYSIS CENTER |
401-B E HIGHLAND AVE | SAN BERNARDINO | CA | 92404 | ||||
MT ADAMS KIDNEY CENTER |
512 SECOND AVE | ZILLAH | WA | 98953 | ||||
MT DORA DIALYSIS |
2735 WEST OLD US HWY 441 | MT DORA | FL | 32757 | ||||
MT POCONO DIALYSIS |
100 COMMUNITY DR STE 106 | TOBYHANNA | PA | 18466 | ||||
MURRIETA DIALYSIS |
25100 HANCOOCK AVENUE STE 101 | MURRIETA | CA | 92562 | ||||
MUSKOGEE COMMUNITY DIALYSIS CENTER |
2913 AZALEA PARK BLVD | MUSKOGEE | OK | 74401 | ||||
NAPA DIALYSIS CENTER |
3900 BEL AIRE PLAZA | NAPA | CA | 94558 | ||||
NE WICHITA DIALYSIS CENTER |
2630 N WEBB RD BLDG 100 STE 100 | WICHITA | KS | 67226 | ||||
NEPHROLOGY CENTER OF AUGUSTA |
1238 DANTIGNAC ST | AUGUSTA | GA | 30901 | ||||
NEPHROLOGY CENTER OF AUGUSTA PD |
1218 DANTIGNAC ST | AUGUSTA | GA | 30901 | ||||
NEPHROLOGY CENTER OF LOUISVILLE |
1011 PEACHTREE RD | LOUISVILLE | GA | 30434 |
32
Center Name |
Address |
City |
ST
|
Zip
|
||||
NEPHROLOGY CENTER OF SOUTH AUGUSTA |
1631 GORDON HIGHWAY STE 1B | AUGUSTA | GA | 30906 | ||||
NEPHROLOGY CENTER OF STATESBORO |
4-B COLLEGE PLAZA FAIR RD | STATESBORO | GA | 30458 | ||||
NEPHROLOGY CENTER OF VIDALIA |
1806 EDWINA DR | VIDALIA | GA | 30474 | ||||
NEPHROLOGY CENTER OF WAYNESBORO |
163 S LIBERTY ST | WAYNESBORO | GA | 30830 | ||||
NEPTUNE DIALYSIS CENTER |
2180 BRADLEY AVE | NEPTUNE | NJ | 7753 | ||||
NEW CENTER DIALYSIS |
3011 W GRAND BLVD STE 650 | DETROIT | MI | 48202 | ||||
NEW PORT RICHEY KIDNEY CENTER |
4807 GRAND BLVD | NEW PORT RICHEY | FL | 34652 | ||||
NEW YORK UNITED DIALYSIS CENTER |
406 BOSTON POST RD | PORT CHESTER | NY | 10573 | ||||
NEWNAN DIALYSIS |
1565 EAST HIGHWAY 34 STE 130 | NEWNAN | GA | 30265 | ||||
NEWPORT DIALYSIS |
605 WEST NEWPORT PIKE | NEWPORT | DE | 19804 | ||||
NEWPORT NEWS DIALYSIS CENTER |
700 NEWMARKET STE 100 | NEWPORT NEWS | VA | 23605 | ||||
NEWTON DIALYSIS |
204 NORTH 4TH STREET | NEWTON | IA | 50208 | ||||
NORFOLK DIALYSIS CENTER |
962 NORFOLK SQUARE | NORFOLK | VA | 23502 | ||||
NORMAN DIALYSIS CENTER |
1818 W LINDSEY ST BLDG B STE 104 | NORMAN | OK | 73069 | ||||
NORTH GEORGIA DIALYSIS PD |
11685 ALPHARETTA HWY STE 100 | ROSWELL | GA | 30076 | ||||
NORTH HIGHLANDS DIALYSIS CENTER |
4986 WATT AVE STE F | NORTH HIGHLANDS | CA | 95660 | ||||
NORTH HOUSTON DIALYSIS CENTER |
129 LITTLE YORK | HOUSTON | TX | 77076 | ||||
NORTH LAS VEGAS DIALYSIS CENTER |
2300 MCDANIEL ST | NORTH LAS VEGAS | NV | 89030 | ||||
NORTH OAKLAND DIALYSIS |
450 N TELEGRAPH STE 600 | PONTIAC | MI | 48341 | ||||
NORTH OAKLAND DIALYSIS ACUTES |
450 N TELEGRAPH STE 600 | PONTIAC | MI | 48341 | ||||
NORTH PALM BEACH DIALYSIS CENTER |
3375 BURNS RD STE 101 | PALM BEACH GARDENS | FL | 33410 | ||||
NORTHEAST PHILADELPHIA DIALYSIS CENTER |
518 KNORR ST | PHILADELPHIA | PA | 19111 | ||||
NORTHLAKE DIALYSIS |
1350 MONTREAL ROAD STE 200 | TUCKER | GA | 30084 | ||||
NORTHSHORE ACUTES |
106 MEDICAL CENTER DRIVE SUITE 101 | SLIDELL | LA | 70461 | ||||
NORTHSHORE KIDNEY CENTER |
106 MEDICAL CENTER DRIVE | SIDELL | LA | 70461 | ||||
NORTHSHORE/COVINGTON ACUTES |
106 MEDICAL CENTER DRIVE SUITE 101 | SLIDELL | LA | 70461 | ||||
NORTHSTAR DIALYSIS CENTER |
380 W LITTLE YORK | HOUSTON | TX | 77076 | ||||
NORTHWEST BETHANY DIALYSIS CENTER |
7800 NW 23RD ST STE A | BETHANY | OK | 73008 | ||||
NORTHWEST HOUSTON KIDNEY CENTER |
11029 NW FREEWAY | HOUSTON | TX | 77092 | ||||
NORTHWEST INDIANA ACUTES |
5521 W LINCOLN HWY SUITE 105 | CROWN POINT | IN | 46307 | ||||
NORTHWEST SAN ANTONIO DIALYSIS CENTER |
8132 FREDERICKSBURG RD | SAN ANTONIO | TX | 78229 | ||||
NORWALK DIALYSIS CENTER |
12375 E IMPERIAL HWY STE D3 | NORWALK | CA | 90650 | ||||
NOVI DIALYSIS |
47250 W TEN MILE | NOVI | MI | 48374 | ||||
OAK CLIFF |
2000 SOUTH LLEWELLYN AVE | DALLAS | TX | 75224 | ||||
OAK PARK DIALYSIS |
13481 TEN MILE RD | OAK PARK | MI | 48237 | ||||
OAKLAND PERITONEAL DIALYSIS CENTER |
2633 TELEGRAPH AVE STE 115 | OAKLAND | CA | 94612 | ||||
OCALA REGIONAL KIDNEY CENTER-EAST |
2870 SE 1ST AVE | OCALA | FL | 34471 | ||||
OCALA REGIONAL KIDNEY CENTER-NORTH |
2620 W HWY 316 | CITRA | FL | 32113 | ||||
OCALA REGIONAL KIDNEY CENTER-SOUTH |
13940 US HWY 441 BLDG 400 | LADY LAKE | FL | 32159 | ||||
OCALA REGIONAL KIDNEY CENTER-WEST |
9401 SW HWY 200 BLDG 600 | OCALA | FL | 34481 | ||||
OCEAN GARDEN DIALYSIS |
1738 OCEAN AVE | SAN FRANCISCO | CA | 94112 | ||||
OKLAHOMA ACUTES |
7806 NW 23RD STREET | BETHANY | OK | 73008 | ||||
OKLAHOMA CITY DIALYSIS CENTER |
4140 W MEMORIAL RD STE 107 | OKLAHOMA CITY | OK | 73120 | ||||
OKMULGEE DIALYSIS CENTER |
1101 S BELMONT STE 204 | OKMULGEE | OK | 74447 | ||||
OLYMPIA FIELDS DIALYSIS CENTER |
4557B LINCOLN HWY STE B | MATTESON | IL | 60443 | ||||
OLYMPIC VIEW DIALYSIS CENTER |
125 16TH AVE E CSB 5TH FL | SEATTLE | WA | 98112 | ||||
OMAHA ACUTE PROGRAM |
4350 DEWEY AVENUE | OMAHA | NE | 68105 | ||||
OMNI DIALYSIS CENTER |
9350 KIRBY DR STE 110 | HOUSTON | TX | 77054 | ||||
ORANGE COUNTY ACUTE |
16255 LAGUNA CANYON ROAD | IRVINE | CA | 92618 |
33
Center Name |
Address |
City |
ST
|
Zip
|
||||
ORANGEVALE DIALYSIS CENTER |
9267 GREENBACK LN STE A-2 | ORANGEVALE | CA | 95662 | ||||
ORLANDO DIALYSIS |
14050 TOWN LOOP BLVD STE 104 | ORLANDO | FL | 32837 | ||||
ORLEANS METROPOLITAN DIALYSIS |
3839 ULLOA STREET | NEW ORLEANS | LA | 70119 | ||||
OWENSBORO DIALYSIS |
1930 EAST PARRISH AVENUE | OWENSBORO | KY | 42303 | ||||
OWINGS MILLS ACUTES |
10 CROSSROADS DR STE 110 | OWINGS MILLS | MD | 21117 | ||||
OWINGS MILLS DIALYSIS CENTER |
10 CROSSROADS DR STE 110 | OWINGS MILLS | MD | 21117 | ||||
PACIFIC COAST DIALYSIS CENTER |
1416 CENTINELA AVE | INGLEWOOD | CA | 90302 | ||||
PAHRUMP DIALYSIS CENTER |
1460 E CALVADA BLVD | PAHRUMP | NV | 89048 | ||||
PAINTSVILLE DIALYSIS |
4750 KENTUCKY ROUTE 321 SOUTH | HAGER HILL | KY | 41222 | ||||
PALM BROOK DIALYSIS CENTER |
14664 NORTH DEL WEBB BLVD | SUN CITY | AZ | 85351 | ||||
PALM DESERT DIALYSIS CENTER |
41-501 CORPORATE WAY | PALM DESERT | CA | 92260 | ||||
PALMER DIALYSIS CENTER |
30 COMMUNITY DR | EASTON | PA | 18045 | ||||
PALMERTON DIALYSIS CENTER |
185C DELAWARE AVE | PALMERTON | PA | 18071 | ||||
PANAMA CITY DIALYSIS CENTER |
615 HIGHWAY 231 | PANAMA CITY | FL | 32405 | ||||
PAPAGO DIALYSIS |
1401 N 24 ST STE 2 | PHOENIX | AZ | 85008 | ||||
PARAMOUNT DIALYSIS CENTER |
8319 ALONDRA BLVD | PARAMOUNT | CA | 90723 | ||||
PARK PLAZA DIALYSIS |
G-1075 N BALLENGER HWY | FLINT | MI | 48504 | ||||
PARMA DIALYSIS CENTER |
6735 AMES DRIVE | PARMA | OH | 44129 | ||||
PDI CADIEUX |
6150 CADIEUX ROAD | DETROIT | MI | 48224 | ||||
PDI CAMC WEST VIRGINIA ACUTE |
501 MORRIS STREET | CHARLESTON | WV | 25301 | ||||
PDI DOWNTOWN HOUSTON |
1301 FANNIN STREET STE 170 | HOUSTON | TX | 77002 | ||||
PDI EAST MONTGOMERY |
6890 WINTON BLOUNT BLVD | MONTGOMERY | AL | 36117 | ||||
PDI EBENSBURG |
236 JAMESWAY ROAD | EBENSBURG | PA | 15931 | ||||
PDI ELMORE |
515 HOSPITAL DRIVE | WETUMPKA | AL | 36092 | ||||
PDI EPHRATA |
67 WEST CHURCH STREET | STEVENS | PA | 17578 | ||||
PDI FITCHBURG |
551 ELECTRIC AVENUE | FITCHBURG | MA | 1420 | ||||
PDI FORD ROAD |
3905 FORD ROAD | PHILADELPHIA | PA | 19131 | ||||
PDI GRAND HAVEN |
16964 ROBBINS RD | GRAND HAVEN | MI | 49417 | ||||
PDI GRAND RAPIDS |
801 CHERRY ST SE | GRAND RAPIDS | MI | 49506 | ||||
PDI GRAND RAPIDS EAST |
1230 EKHART ST NE | GRAND RAPIDS | MI | 49503 | ||||
PDI HIGHLAND PARK |
64 VICTOR ST | HIGHLAND PARK | MI | 48203 | ||||
PDI JOHNSTOWN |
344 BUDFIELD STREET | JOHNSTOWN | PA | 15904 | ||||
PDI LANCASTER |
1412 EAST KING STREET | LANCASTER | PA | 17602 | ||||
PDI LANCASTER ACUTES |
250 COLLEGE AVENUE ROOM 423 | LANCASTER | PA | 17603 | ||||
PDI MIDDLESEX |
100 RIVERVIEW CENTER STE 11 | MIDDLETOWN | CT | 6457 | ||||
PDI MONTGOMERY |
1001 FOREST AVENUE | MONTGOMERY | AL | 36106 | ||||
PDI NEWARK |
571 CENTRAL AVENUE | NEWARK | NJ | 7107 | ||||
PDI NORTH HOUSTON |
7115 NORTH LOOP EAST | HOUSTON | TX | 77028 | ||||
PDI PRATTVILLE |
1815 GLYNWOOD DRIVE | PRATTVILLE | AL | 36066 | ||||
PDI ROCKY HILL |
30 WATERCHASE DRIVE | ROCKY HILL | CT | 6067 | ||||
PDI ROOSEVELT PARK |
1080 WEST NORTON AVENUE | MUSKEGON | MI | 49441 | ||||
PDI SELMA |
201 LINCOLN LANE | SELMA | AL | 36701 | ||||
PDI SOUTH HOUSTON |
5989 SOUTH LOOP EAST | HOUSTON | TX | 77033 | ||||
PDI WALNUT TOWER |
834 WALNUT STREET | PHILADELPHIA | PA | 19107 | ||||
PDI WORCESTER |
19 GLENNIE STREET | WORCESTER | MA | 1605 | ||||
PEARLAND DIALYSIS |
6516 BROADWAY STE 122 | PEARLAND | TX | 77581 | ||||
PEEKSKILL CORTLANDT DIALYSIS CENTER |
2050 EAST MAIN STREET SUITE 15 | CORTLANDT MANOR | NY | 10657 | ||||
PELHAM PARKWAY DIALYSIS CENTER |
JACOBI MEDICAL CTR BLDG #5 1400 PELHAM PARKWAY SOUTH A-1 | BRONX | NY | 10461 | ||||
PENDLETON DIALYSIS |
7703 HIGHWAY 76 | PENDLETON | SC | 29670 | ||||
PENINSULA DIALYSIS |
2 BERNARDINE DRIVE | NEWPORT NEWS | VA | 23602 | ||||
PERALTA RENAL CENTER |
450 30TH ST STE 306 | OAKLAND | CA | 94609 | ||||
PERRY DIALYSIS CENTER |
1027 KEITH DR | PERRY | GA | 31069 | ||||
PHENIX CITY DIALYSIS CENTER |
1900 OPELIKA RD | PHENIX CITY | AL | 36867 | ||||
PHILADELPHIA ACUTES |
111 SOUTH 11TH ST 4290 GIBBON BUILDING | PHILADELPHIA | PA | 19107 | ||||
PIEDMONT DIALYSIS |
1575 NORTHSIDE DRIVE NW STE 365 | ATLANTA | GA | 30318 | ||||
PIEDMONT DIALYSIS |
2710 TELEGRAPH AVE STE 200 | OAKLAND | CA | 94612 | ||||
PIKES PEAK DIALYSIS CENTER |
2002 LELARAY ST STE 130 | COLORADO SPRINGS | CO | 80909 |
34
Center Name |
Address |
City |
ST
|
Zip
|
||||
PIKESVILLE |
1496 REISTERSTOWN ROAD | PIKESVILLE | MD | 21208 | ||||
PIN OAK DIALYSIS |
1302 PIN OAK RD | KATY | TX | 77494 | ||||
PINE ISLAND KIDNEY CENTER |
1871 N PINE ISLAND RD | PLANTATION | FL | 33322 | ||||
PINECREST DIALYSIS |
913 PINECREST DR | MARSHALL | TX | 75670 | ||||
PIPESTONE DIALYSIS |
PIPESTONE CITY HOSPITAL 911 FIFTH AVE SW | PIPESTONE | MN | 56164 | ||||
PLACERVILLE DIALYSIS CENTER |
3964 MISSOURI FLAT RD STE J | PLACERVILLE | CA | 95667 | ||||
PLEASANTON DIALYSIS CENTER |
5720 STONERIDGE MALL RD SUITE 160 | PLEASANTON | CA | 94588 | ||||
POCONO DIALYSIS CENTER |
447 OFFICE PLAZA 100 PLAZA CT STE B | EAST STROUDSBURG | PA | 18301 | ||||
POMPANO BEACH ARTIFICIAL KIDNEY CENTER |
1311 E ATLANTIC BLVD | POMPANO BEACH | FL | 33060 | ||||
PORT CHARLOTTE ARTIFICIAL KIDNEY CENTER |
4300 KINGS HWY STE 406 BOX D17 | PORT CHARLOTTE | FL | 33980 | ||||
PORT CHESTER DIALYSIS AND RENAL CENTER |
38 BULKLEY AVE | PORT CHESTER | NY | 10573 | ||||
PORT WASHINGTON DIALYSIS CENTER |
50 SEAVIEW BLVD | PORT WASHINGTON | NY | 11050 | ||||
PORTSMOUTH DIALYSIS |
2000 HIGH ST | PORTSMOUTH | VA | 23704 | ||||
POTRERO HILL DIALYSIS CENTER |
1750 CESAR CHAVEZ ST STE A | SAN FRANCISCO | CA | 94124 | ||||
PRATT DIALYSIS CENTER |
203 WATSON STE 110 | PRATT | KS | 67124 | ||||
PREMIER DIALYSIS CENTER |
7612 ATLANTIC AVE | CUDAHY | CA | 90201 | ||||
PRINTERS PLACE DIALYSIS CENTER |
2802 INTERNATIONAL CIRCLE | COLORADO SPRINGS | CO | 80910 | ||||
P-SUNCOAST ACUTES |
8143 STATE ROAD 54 | NEW PORT RICHEY | FL | 34655 | ||||
PURCELLVILLE DIALYSIS CENTER |
280 HATCHER AVE | PURCELLVILLE | VA | 20132 | ||||
PUYALLUP DIALYSIS |
716C SOUTH HILL PARK DR | PUYALLUP | WA | 98373 | ||||
QUEENS DIALYSIS AT SOUTH FLUSHING |
71-12 PARK AVE | FLUSHING | NY | 11365 | ||||
QUEENS DIALYSIS CENTER |
118-01 GUY BREWER BLVD | JAMAICA | NY | 11434 | ||||
QUEENS VILLAGE DIALYSIS CENTER |
222-02 HEMPSTEAD AVE STE 170 | QUEENS | NY | 11429 | ||||
READING DIALYSIS CENTER |
2201 DENGLER ST | READING | PA | 19606 | ||||
RED WING DIALYSIS UNIT |
FAIRVIEW RED WING HOSPITAL 1407 W FOURTH ST | RED WING | MN | 55066 | ||||
REDDING DIALYSIS CENTER |
1876 PARK MARINA DR | REDDING | CA | 96001 | ||||
REDWOOD FALLS DIALYSIS CENTER |
100 FALLWOOD RD | REDWOOD FALLS | MN | 56283 | ||||
REIDSVILLE |
1307 FREEWAY DRIVE | REIDSVILLE | NC | 27320 | ||||
RENAL CARE OF BOWIE |
4861 TELSA DRIVE STES G-H | BOWIE | MD | 20715 | ||||
RENAL CARE OF BUFFALO |
550 ORCHARD PARK RD | WEST SENECA | NY | 14224 | ||||
RENAL CARE OF LANHAM |
8855 ANNAPOLIS RD STE 200 | LANHAM | MD | 20706 | ||||
RENAL CARE OF SEAT PLEASANT |
6274 CENTRAL AVE | SEAT PLEASANT | MD | 20743 | ||||
RENAL CARE OF TAKOMA PARK |
831 UNIVERSITY BLVD E STE 11 | SILVER SPRINGS | MD | 20903 | ||||
RENAL TREATMENT CENTERS-BATESVILLE |
232 STATE ROAD 129 SOUTH | BATESVILLE | IN | 47006 | ||||
RENAL TREATMENT CENTERS-DERBY |
250 W RED POWELL RD | DERBY | KS | 67037 | ||||
RENAL TREATMENT CENTERS-GARDEN CITY |
310 WALNUT E LOWER LEVEL 2 | GARDEN CITY | KS | 67846 | ||||
RENAL TREATMENT CENTERS-NEW ORLEANS |
4528 FRERET ST | NEW ORLEANS | LA | 70115 | ||||
RENAL TREATMENT CENTERS-NEWTON |
1223 WASHINGTON RD | NEWTON | KS | 67114 | ||||
RENAL TREATMENT CENTERS-PARSONS |
1902 S HWY 59 BLDG B | PARSONS | KS | 67357 | ||||
RENAL TREATMENT CENTERS-WINFIELD |
1315 E 4TH AVE | WINFIELD | KS | 67156 | ||||
RESTON DIALYSIS |
1875 CAMPUS COMMONS DRIVE SUITE #110 | RESTON | VA | 20191 | ||||
RIALTO DIALYSIS CENTER |
1850 N RIVERSIDE AVE STE 150 | RIALTO | CA | 92376 | ||||
RICHMOND ACUTE PROGRAM |
1366 VICTORY BLVD | STATEN ISLAND | NY | 10301 | ||||
RICHMOND ACUTES-CT |
384 RAYMOND ST | ROCKVILLE CENTER | NY | 11570 | ||||
RICHMOND ACUTES-NJ |
1366 VICTORY BLVD | STATEN ISLAND | NY | 10301 | ||||
RICHMOND KIDNEY CENTER |
1366 VICTORY BLVD | STATEN ISLAND | NY | 10301 |
35
Center Name |
Address |
City |
ST
|
Zip
|
||||
RIVER CITY DIALYSIS |
1970 NORTHWESTERN AVE | STILLWATER | MN | 55082 | ||||
RIVERDALE DIALYSIS CENTER |
170 W 233RD ST | BRONX | NY | 10463 | ||||
RIVERPARK DIALYSIS |
2010 SOUTH LOOP 336 WEST SUITE 200 | CONROE | TX | 77304 | ||||
RIVERPOINT DIALYSIS |
501 SW 7TH STREET SUITE B | DES MOINES | IA | 50309 | ||||
RIVERSIDE ACUTE |
4361 LATHAM ST STE 100 | RIVERSIDE | CA | 92501 | ||||
RIVERSIDE DIALYSIS CENTER |
4361 LATHAM ST. SUITE 100 | RIVERSIDE | CA | 92501 | ||||
RIVERTOWNE DIALYSIS |
6192 OXON HILL RD 1ST FL | OXON HILL | MD | 20745 | ||||
RMS DISEASE MANAGEMENT |
3 HAWTHORNE PARKWAY SUITE 410 | VERNON HILLS | IL | 60061 | ||||
ROCK RIVER ACUTES |
5970 CHURCHVIEW DR | ROCKFORD | IL | 61107 | ||||
ROCKFORD DIALYSIS |
2400 NORTH ROCKTON AVENUE STE D-1 | ROCKFORD | IL | 61103 | ||||
ROCKINGHAM ACUTE |
251 WEST KINGS HWY | EDEN | NC | 27288 | ||||
ROCKVILLE DIALYSIS CENTER |
14915 BROSCHART RD STE 100 | ROCKVILLE | MD | 20850 | ||||
ROCKY RIVER DIALYSIS |
20220 CENTER RIDGE RD STE 050 | ROCKY RIVER | OH | 44116 | ||||
ROSEBUD DIALYSIS |
1 SOLDIER CREEK RD | ROSEBUD | SD | 57570 | ||||
ROSEMEAD SPRINGS DIALYSIS CENTER |
3212 ROSEMEAD BLVD | EL MONTE | CA | 91731 | ||||
SACRAMENTO MOBILE SERVICES |
300 UNIVERSITY AVE STE 201 | SACRAMENTO | CA | 95825 | ||||
SAGINAW DIALYSIS |
1527 E GENESEE ST | SAGINAW | MI | 48601 | ||||
SALINAS VALLEY DIALYSIS CENTER |
955 BLANCO CIR STE C | SALINAS | CA | 93901 | ||||
SALT LAKE ACUTES |
1600 BIRCH WAY | FRANCIS | UT | 84036 | ||||
SAN ANTONIO DIALYSIS CENTER |
1211 E COMMERCE | SAN ANTONIO | TX | 78205 | ||||
SAN LEANDRO DIALYSIS CENTER |
198 E 14TH ST | SAN LEANDRO | CA | 94577 | ||||
SAN MATEO DIALYSIS CENTER |
2000 SOUTH EL CAMINO REAL | SAN MATEO | CA | 94403 | ||||
SANTA ANA DIALYSIS CENTER |
1820 E DEERE AVE | SANTA ANA | CA | 92705 | ||||
SAPULPA DIALYSIS |
9647 RIDGEVIEW ST | TULSA | OK | 74131 | ||||
SATELLITE DIALYSIS CENTER-ACUTE |
345 CONVENTION WY | REDWOOD CITY | CA | 94063 | ||||
SATELLITE DIALYSIS CENTER-BUSINESS DEVELOPMENT |
345 CONVENTION WAY STE B | REDWOOD CITY | CA | 94063 | ||||
SATELLITE DIALYSIS CENTER-CLINICAL RESEARCH |
345 CONVENTION WY STE B | REDWOOD CITY | CA | 94063 | ||||
SATELLITE DIALYSIS CENTER-EAST SAN JOSE |
SATELLITE DIALYSIS CENTERS INC 2121 ALEXIAN DR STE 118-A | SAN JOSE | CA | 95116 | ||||
SATELLITE DIALYSIS CENTER-EMANUEL MED CENTER ACUTE |
784 SATELLITE TRC EMANUEL HOSPITAL 825 DELBON AVE | TURLOCK | CA | 95380 | ||||
SATELLITE DIALYSIS CENTER-GOOD SAMARITAN |
345 CONVENTION WY STE B | REDWOOD CITY | CA | 94063 | ||||
SATELLITE DIALYSIS CENTER-HEADQUARTERS |
345 CONVENTION WAY | REDWOOD CITY | CA | 94063 | ||||
SATELLITE DIALYSIS CENTER-KAISER SANTA ROSA ACUTE |
1255 N DUTTON AVE STE 2 | SANTA ROSA | CA | 95401 | ||||
SATELLITE DIALYSIS CENTER-LARKSPUR |
565 SIR FRANCIS DRAKE BLVD | GREENBRAE | CA | 94904 | ||||
SATELLITE DIALYSIS CENTER-LARKSPUR |
565 SIR FRANCIS DRAKE BLVD | GREENBRAE | CA | 94904 | ||||
SATELLITE DIALYSIS CENTER-MODESTO |
1208 FLOYD AVE STE B-8 | MODESTO | CA | 95350 | ||||
SATELLITE DIALYSIS CENTER-MODESTO |
1329 SPANOS COURT BLDG D | MODESTO | CA | 95355 | ||||
SATELLITE DIALYSIS CENTER-REDWOOD CITY |
1410 MARSHALL ST | REDWOOD CITY | CA | 94063 | ||||
SATELLITE DIALYSIS CENTER-SANTA ROSA |
1255 NORTH DUTTON AVE STE 2 | SANTA ROSA | CA | 95401 | ||||
SATELLITE DIALYSIS CENTER-SANTA ROSA |
1255 NORTH DUTTON AVE STE 2 | SANTA ROSA | CA | 95401 | ||||
SATELLITE DIALYSIS CENTER-SEQUOIA ACUTE |
345 CONVENTION WY | REDWOOD CITY | CA | 94063 | ||||
SATELLITE DIALYSIS CENTER-SONORA |
136 E COLUMBIA WAY | SONORA | CA | 95370 | ||||
SATELLITE DIALYSIS CENTER-SONORA |
136 EAST COLUMBIA WAY | SONORA | CA | 95370 | ||||
SATELLITE DIALYSIS CENTER-SOUTH COUNTY |
7800 ARROYO CIRCLE | GILROY | CA | 95020 | ||||
SATELLITE DIALYSIS CENTER-SOUTH COUNTY |
7800 ARROYO CIRCLE STE 100 | GILROY | CA | 95020 | ||||
SATELLITE DIALYSIS CENTER-SOUTH SAN JOSE |
393 BLOSSOM HILL RD SUITE 110 | SAN JOSE | CA | 95123 |
36
Center Name |
Address |
City |
ST
|
Zip
|
||||
SATELLITE DIALYSIS CENTER-SUNNYVALE |
155 NORTH WOLFE RD | SUNNYVALE | CA | 94086 | ||||
SATELLITE DIALYSIS CENTER-SUNNYVALE (USE 1525) |
155 N WOLFE RD | SUNNYVALE | CA | 94086 | ||||
SATELLITE DIALYSIS CENTER-TURLOCK |
1729 NORTH OLIVE AVE STE 9 | TURLOCK | CA | 95382 | ||||
SATELLITE DIALYSIS CENTER-WATSONVILLE |
40 PENNY LANE | WATSONVILLE | CA | 95076 | ||||
SATELLITE DIALYSIS CENTER-WATSONVILLE |
40 PENNY LN | WATSONVILLE | CA | 95076 | ||||
SATELLITE DIALYSIS CENTER-WEST SAN JOSE |
1175 SARATOGA AVE STE 14 | SAN JOSE | CA | 95129 | ||||
SATELLITE DIALYSIS-WINDSOR |
911 MEDICAL CENTER PLAZA STE 16 | WINDSOR | CA | 95492 | ||||
SAVANNAH ACUTE DIALYSIS |
1020 DRAYTON STREET | SAVANNAH | GA | 31401 | ||||
SAVANNAH DIALYSIS |
1020 DRAYTON STREET | SAVANNAH | GA | 31401 | ||||
SCOTTSBLUFF DIALYSIS CENTER |
3812 AVE B | SCOTTSBLUFF | NE | 69361 | ||||
SCOTTSDALE DIALYSIS CENTER |
4725 N SCOTTSDALE RD SUITE 100 | SCOTTSDALE | AZ | 85251 | ||||
SENECA COUNTY DIALYSIS |
65 ST FRANCIS ST | TIFFIN | OH | 44883 | ||||
SHAWNEE DIALYSIS CENTER |
2508 N HARRISON | SHAWNEE | OK | 74804 | ||||
SHENANDOAH DIALYSIS |
300 PERSHING AVENUE | SHENANDOAH | IA | 51601 | ||||
SHERMAN DIALYSIS CENTER |
205 W LAMBERTH RD | SHERMAN | TX | 75092 | ||||
SHERWOOD |
21035 SOUTH WEST PACIFIC HWY | SHERWOOD | OR | 97140 | ||||
SHINING STAR DIALYSIS |
99 CANAL CENTER PLAZA STE G14 | ALEXANDRIA | VA | 22304 | ||||
SHIPROCK DIALYSIS CENTER |
US HWY 491 N | SHIPROCK | NM | 87420 | ||||
SIERRA ACUTE |
1300 MURCHISON STE 115 | EL PASO | TX | 79902 | ||||
SIERRA ROSE DIALYSIS CENTER |
685 SIERRA ROSE DR | RENO | NV | 89509 | ||||
SIOUX FALLS ACUTES |
825 S 8TH ST STE 400 | MINNEAPOLIS | MN | 55404 | ||||
SIOUX FALLS COMMUNITY DIALYSIS UNIT |
MCKENNAN HOSPITAL 800 E 21ST ST STE 4600 | SIOUX FALLS | SD | 57105 | ||||
SKY RIDGE ACUTES |
3247 SOUTH LINCOLN | ENGLEWOOD | CO | 80110 | ||||
SLIDELL III-TRINITY |
1400 LINDBERG DR SUITE 101 | SLIDELL | LA | 70458 | ||||
SLIDELL KIDNEY CARE |
1150 ROBERT BLVD STE 240 | SLIDELL | LA | 70458 | ||||
SOLEDAD DIALYSIS |
901 LOS COCHES DR | SOLEDAD | CA | 93960 | ||||
SOMERSET DIALYSIS CENTER |
240 CHURCHILL AVE | SOMERSET | NJ | 8873 | ||||
SOUNDVIEW DIALYSIS CENTER |
1622-24 BRUCKNER BLVD | BRONX | NY | 10473 | ||||
SOUTH BRONX DIALYSIS CENTER |
1940 WEBSTER AVE | BRONX | NY | 10457 | ||||
SOUTH BROOKLYN NEPHROLOGY CENTER |
3915 AVENUE V STE 104 | BROOKLYN | NY | 11234 | ||||
SOUTH BROWARD ARTIFICIAL KIDNEY CENTER |
4401 HOLLYWOOD BLVD | HOLLYWOOD | FL | 33021 | ||||
SOUTH CHICO |
2345 FOREST AVENUE | CHICO | CA | 95928 | ||||
SOUTH COLUMBUS |
1216 STARK AVENUE | COLUMBUS | GA | 31906 | ||||
SOUTH COUNTY DIALYSIS |
4145 UNION RD | ST LOUIS | MO | 63129 | ||||
SOUTH DENVER DIALYSIS CENTER |
990 E HARVARD AVE | DENVER | CO | 80210 | ||||
SOUTH HAYWARD DIALYSIS |
254 JACKSON ST | HAYWARD | CA | 94544 | ||||
SOUTH ILLINOIS/MISSOURI ACUTE PROGRAM |
9700 MACKENZIE RD SUITE 225 | ST LOUIS | MO | 63123 | ||||
SOUTH LAS VEGAS DIALYSIS CENTER |
4711 INDUSTRIAL RD | LAS VEGAS | NV | 89103 | ||||
SOUTH PHILADELPHIA DIALYSIS CENTER |
109 DICKINSON ST | PHILADELPHIA | PA | 19147 | ||||
SOUTH SACRAMENTO DIALYSIS CENTER |
7000 FRANKLIN BLVD STE 880 | SACRAMENTO | CA | 95823 | ||||
SOUTH SAN ANTONIO DIALYSIS |
MISSION TERRACE OFFICE PARK 1313 SE MILITARY DR STE 111 | SAN ANTONIO | TX | 78214 | ||||
SOUTH SAN FRANCISCO DIALYSIS CENTER |
205 KENWOOD WAY | SOUTH SAN FRANCISCO | CA | 94080 | ||||
SOUTHEASTERN DIALYSIS CENTERBURGAW |
704 S DICKERSON ST PO BOX 1391 | BURGAW | NC | 28425 | ||||
SOUTHEASTERN DIALYSIS CENTERELIZABETHTOWN |
101 DIALYSIS DR | ELIZABETHTOWN | NC | 28337 | ||||
SOUTHEASTERN DIALYSIS CENTERJACKSONVILLE |
14 OFFICE PARK DR | JACKSONVILLE | NC | 28546 | ||||
SOUTHEASTERN DIALYSIS CENTERKENANSVILLE |
305 BEASLEY ST | KENANSVILLE | NC | 28349 |
37
Center Name |
Address |
City |
ST
|
Zip
|
||||
SOUTHEASTERN DIALYSIS CENTERSHALLOTTE |
4740 SHALLOTTE AVE | SHALLOTTE | NC | 28470 | ||||
SOUTHEASTERN DIALYSIS CENTERWHITEVILLE |
608 PECAN LN | WHITEVILLE | NC | 28472 | ||||
SOUTHEASTERN DIALYSIS CENTERWILMINGTON |
2215 YAUPON DR | WILMINGTON | NC | 28401 | ||||
SOUTHERN HILLS DIALYSIS CENTER |
9280 W SUNSET RD SUITE 110 | LAS VEGAS | NV | 89148 | ||||
SOUTHERN PINES |
209 WINDSTAR PLACE | SOUTHERN PINES | NC | 28387 | ||||
SOUTHFIELD DIALYSIS AT HOME |
23077 GREENFIELD STE 104 | SOUTHFIELD | MI | 48075 | ||||
SOUTHFIELD DIALYSIS CENTER |
23077 GREENFIELD STE 104 | SOUTHFIELD | MI | 48075 | ||||
SOUTHFIELD WEST DIALYSIS |
SOUTHFIELD TECHNECENTER 21900 MELROSE BLDG 2 | SOUTHFIELD | MI | 48075 | ||||
SOUTHSHORE ACUTES |
4427 S ROBERTSON STREET SUITE 101 | NEW ORLEANS | LA | 70115 | ||||
SOUTHWEST ATLANTA DIALYSIS CENTER |
3620 MARTIN LUTHER KING DR | ATLANTA | GA | 30331 | ||||
SOUTHWEST OHIO DIALYSIS |
215 SOUTH ALLISON AVENUE | XENIA | OH | 45385 | ||||
SOUTHWEST SAN ANTONIO DIALYSIS CENTER |
7515 BARLITE BLVD | SAN ANTONIO | TX | 78224 | ||||
SPARKS DIALYSIS CENTER |
2345 E PRATER WAY STE 100 | SPARKS | NV | 89434 | ||||
SPRING BRANCH DIALYSIS |
1425 BLALOCK ROOM 100 | HOUSTON | TX | 77055 | ||||
SPRINGFIELD DIALYSIS |
8350 A TRAFORD LN | SPRINGFIELD | VA | 22152 | ||||
ST CHARLES DIALYSIS CENTER |
3600 PRYTANIA ST STE 83 | NEW ORLEANS | LA | 70115 | ||||
ST CROIX FALLS DIALYSIS |
744 LOUISIANA ST E | ST CROIX FALLS | WI | 54024 | ||||
ST LOUIS DIALYSIS CENTER |
2610 CLARK AVE | ST LOUIS | MO | 63103 | ||||
ST LOUIS PARK DIALYSIS CENTER |
3505 LOUISIANA AVE SOUTH | ST LOUIS PARK | MN | 55426 | ||||
ST MARY MEDICAL FACILITY |
1205 LANGHORNE-NEWTON RD | LANGEHORNE | PA | 19047 | ||||
ST PAUL CAPITOL DIALYSIS |
555 PARK ST STE 230 | ST PAUL | MN | 55103 | ||||
ST PAUL DIALYSIS |
555 PARK ST STE 180 | ST PAUL | MN | 55103 | ||||
ST PAUL-RAMSEY ACUTE |
825 S EIGHTH ST STE 400 | MINNEAPOLIS | MN | 55404 | ||||
STERLING ACUTE |
8501 ARLINGTON BLVD | FAIRFAX | VA | 22031 | ||||
STERLING DIALYSIS |
46396 BENEDICT DR STE 100 | STERLING | VA | 20164 | ||||
STILLWATER DIALYSIS CENTER |
406 EAST HALL OF FAME AVE STE 300 | STILLWATER | OK | 74075 | ||||
STILWELL DIALYSIS CENTER |
319 N 2ND ST | STILWELL | OK | 74960 | ||||
SUMMERLIN DIALYSIS CENTER |
653 TOWN CENTER BLDG 2 STE 70 | LAS VEGAS | NV | 89144 | ||||
SUNRISE COMMUNITY DIALYSIS CLINIC |
2951 SUNRISE BLVD STE 145 | RANCHO CORDOVA | CA | 95742 | ||||
SUNRISE DIALYSIS CENTER |
13039 HAWTHORNE BLVD | HAWTHORNE | CA | 90250 | ||||
SWANNANOA DIALYSIS CENTER |
2305 US HIGHWAY 70 | SWANNANOA | NC | 28778 | ||||
SYLVA DIALYSIS CENTER |
655 ASHEVILLE HWY | SYLVA | NC | 28779 | ||||
TAHLEQUAH DIALYSIS CENTER |
228 N BLISS AVE | TAHLEQUAH | OK | 74464 | ||||
TAMARAC ARTIFICIAL KIDNEY CENTER |
7140 WEST MCNAB RD | TAMARAC | FL | 33321 | ||||
TAYLOR COUNTY DIALYSIS CENTER |
101 KINGWOOD DR | CAMPBELLSVILLE | KY | 42718 | ||||
TELL CITY DIALYSIS |
1602 MAIN STREET | TELL CITY | IN | 47586 | ||||
TEMECULA DIALYSIS CENTER |
40945 COUNTY CENTER DR STE G | TEMECULA | CA | 92591 | ||||
TEXOMA ACUTE |
1220 REBA MCENTIRE LANE | DENISON | TX | 75020 | ||||
THORNTON DIALYSIS CENTER |
8800 FOX DR | THORNTON | CO | 80260 | ||||
TIMPANOGOS DIALYSIS CENTER |
852 N 500 WEST STE 200 | PROVO | UT | 84604 | ||||
TOKAY DIALYSIS CENTER |
312 S FAIRMONT AVE STE A | LODI | CA | 95240 | ||||
TOMBALL DIALYSIS CENTER |
27720-A TOMBALL PARKWAY | TOMBALL | TX | 77375 | ||||
TOTAL RENAL ACUTE SERVICES |
7850 W SAMPLE ROAD | CORAL SPRINGS | FL | 33065 | ||||
TOTAL RENAL CARE AT RICHMOND COMMUNITY |
1510 N 28TH ST STE 100 | RICHMOND | VA | 23223 | ||||
TRANSMOUNTAIN DIALYSIS |
5255 TRANSMOUNTAIN DRIVE SUITE B 18 | EL PASO | TX | 79924 | ||||
TRANSPLANT CLINIC |
HENNEPIN COUNTY MEDICAL CTR 914 S 8TH ST D-4 | MINNEAPOLIS | MN | 55404 | ||||
TRC CHILDRENS DIALYSIS CENTER |
2611 N HALSTED | CHICAGO | IL | 60614 | ||||
TRC FAIRFAX DIALYSIS CENTER |
8501 ARLINGTON BLVD STE 100 | FAIRFAX | VA | 22031 | ||||
TRC GLENDORA DIALYSIS CENTER |
120 W FOOTHILL BLVD | GLENDORA | CA | 91741 | ||||
TRC MED-CENTER DIALYSIS |
5610 ALMEDA DR | HOUSTON | TX | 77004 |
38
Center Name |
Address |
City |
ST
|
Zip
|
||||
TRC/USC KIDNEY CENTER |
2310 ALCAZAR ST | LOS ANGELES | CA | 90033 | ||||
TRC-PINE CITY |
LAKESIDE MEDICAL CENTER 129 E 6TH AVE | PINE CITY | MN | 55063 | ||||
TRI PARISH CHRONIC RENAL CENTER |
2345 ST CLAUDE AVE | NEW ORLEANS | LA | 70117 | ||||
TUBA CITY DIALYSIS |
500 EDGEWATER DR | TUBA CITY | AZ | 86045 | ||||
TULSA DIALYSIS CENTER |
4436 S HARVARD | TULSA | OK | 74135 | ||||
TUSTIN DIALYSIS |
2090 N TUSTIN AVE STE 100 | SANTA ANA | CA | 92705 | ||||
UCLA ACUTE DIALYSIS |
10833 LE CONTE AVE CHS ROOM 54-180 | LOS ANGELES | CA | 90095 | ||||
UCLA DIALYSIS CENTER |
200 UCLA MEDICAL PLAZA STE 565 | LOS ANGELES | CA | 90095 | ||||
UCLA HARBOR DIALYSIS |
21602 S VERMONT AVE | TORRANCE | CA | 90502 | ||||
UNION CITY DIALYSIS |
32930 ALVARADO NILES RD STE 300 | UNION CITY | CA | 94587 | ||||
UNION GAP DIALYSIS |
1236 AHTANUM RIDGE DR AHTANUM RIDGE BUSINESS PARK | UNION GAP | WA | 98903 | ||||
UNION PLAZA DIALYSIS CENTER |
810 FIRST STREET NE STE 100 | WASHINGTON | DC | 20002 | ||||
UNITED DIALYSIS CENTER |
3111 LONG BEACH BLVD | LONG BEACH | CA | 90807 | ||||
UNIVERSITY CAPD |
300 UNIVERSITY AVE STE 122 | SACRAMENTO | CA | 95825 | ||||
UNIVERSITY DIALYSIS CENTER |
300 UNIVERSITY AVE STE 103 | SACRAMENTO | CA | 95825 | ||||
UNIVERSITY DIALYSIS UNIT RIVERSIDE |
606 24TH AVE S STE 701 | MINNEAPOLIS | MN | 55454 | ||||
UNIVERSITY PARK DIALYSIS CENTER |
3986 S FIGUEROA ST | LOS ANGELES | CA | 90037 | ||||
UPLAND DIALYSIS |
ONE MED CTR BLVD STE 120 | UPLAND | PA | 19013 | ||||
UPSTATE DIALYSIS CENTER |
308 MILLS AVE | GREENVILLE | SC | 29605 | ||||
UTAH VALLEY DIALYSIS CENTER |
1134 N 500 WEST STE 104 | PROVO | UT | 84604 | ||||
VACAVILLE DIALYSIS CENTER |
1241 ALAMO DR STE 7 | VACAVILLE | CA | 95687 | ||||
VALLEY DIALYSIS |
16149 HART ST | VAN NUYS | CA | 91406 | ||||
VALLEY VIEW DIALYSIS CENTER |
26900 CACTUS AVE | MORENO VALLEY | CA | 92555 | ||||
VENICE DIALYSIS CENTER |
816 PINEBROOK RD | VENICE | FL | 34292 | ||||
VICTORIA DIALYSIS CENTER |
1405 VICTORIA STATION | VICTORIA | TX | 77901 | ||||
VIRGINIA BEACH DIALYSIS CENTER |
740 INDEPENDENCE CIRCLE | VIRGINIA BEACH | VA | 23455 | ||||
WACONIA DIALYSIS FACILITY |
490 MAPLE ST STE 110 | WACONIA | MN | 55387 | ||||
WALNUT CREEK DIALYSIS CENTER |
108 LA CASA VIA STE 106 | WALNUT CREEK | CA | 94598 | ||||
WARSAW DIALYSIS CENTER |
213 W COLLEGE ST | WARSAW | NC | 28398 | ||||
WASATCH ACUTES |
852 N 500 WEST STE 200 | PROVO | UT | 84604 | ||||
WASHINGTON ACUTES |
2615 SW TRENTON ST | SEATTLE | WA | 98126 | ||||
WASHINGTON DIALYSIS CENTER |
154 WASHINGTON PLAZA | WASHINGTON | GA | 30673 | ||||
WASHINGTON PARISH DIALYSIS |
724 WASHINGTON ST | FRANKLINTON | LA | 70438 | ||||
WASHINGTON PLAZA DIALYSIS CENTER |
516-522 E WASHINGTON BLVD | LOS ANGELES | CA | 90015 | ||||
WATERLOO DIALYSIS CENTER |
4200 N LAMAR STE 100 | AUSTIN | TX | 78756 | ||||
WAYNE COUNTY ACUTE PROGRAM |
2403 WAYNE MEMORIAL DRIVE | GOLDSBORO | NC | 27530 | ||||
WAYNESVILLE DIALYSIS CENTER |
11 PARK TERRACE DR | CLYDE | NC | 28721 | ||||
WEAVERVILLE DIALYSIS |
329 MERRIMON AVE | WEAVERVILLE | NC | 28787 | ||||
WEST BOUNTIFUL DIALYSIS |
724 WEST 500 S STE 300 | WEST BOUNTIFUL | UT | 84087 | ||||
WEST BOUNTIFUL DIALYSIS AT HOME |
724 WEST 500 S STE 300 | WEST BOUNTIFUL | UT | 84087 | ||||
WEST DES MOINES DIALYSIS |
6800 LAKE DRIVE SUITE 185 | DES MOINES | IA | 50266 | ||||
WEST DETROIT DIALYSIS |
12950 W CHICAGO | DETROIT | MI | 48228 | ||||
WEST ST PAUL DIALYSIS UNIT |
1555 LIVINGSTON AVE | WEST ST PAUL | MN | 55118 | ||||
WEST TEXAS DIALYSIS |
1250 E CLIFF BLDG B | EL PASO | TX | 79902 | ||||
WEST VIRGINIA DIALYSIS |
167 STOLLINGS AVENUE | LOGAN | WV | 25601 | ||||
WESTBANK CHRONIC RENAL CENTER |
4422 GENERAL MEYER AVE STE 103 | NEW ORLEANS | LA | 70131 | ||||
WESTERN HOME DIALYSIS |
1750 PIERCE ST STE A | LAKEWOOD | CO | 80214 | ||||
WESTMINSTER DIALYSIS CENTER |
9053 HARLAN ST STE 90 | WESTMINSTER | CO | 80031 | ||||
WESTON DIALYSIS CENTER |
2685 EXECUTIVE PARK DR SUITE 1 | WESTON | FL | 33331 | ||||
WESTWOOD DIALYSIS CENTER |
2615 SW TRENTON ST | SEATTLE | WA | 98126 | ||||
WHEATON DIALYSIS CENTER |
WHEATON PARK SHOPPING CTR 11941 GEORGIA AVE | WHEATON | MD | 20902 | ||||
WHITE PLAINS DIALYSIS CENTER |
200 HAMILTON AVE STE 13B | WHITE PLAINS | NY | 10601 | ||||
WHITESIDE |
2600 NORTH LOCUST SUITE DDIALYSIS UNIT | STERLING | IL | 61081 | ||||
WHITTIER DIALYSIS |
10055 WHITTWOOD DRIVE | WHITTIER | CA | 90603 | ||||
WICHITA ACUTES |
909 N TOPEKA | WICHITA | KS | 67214 | ||||
WICHITA DIALYSIS CENTER |
909 N TOPEKA | WICHITA | KS | 67214 |
39
Center Name |
Address |
City |
ST
|
Zip
|
||||
WICHITA PD PROGRAM |
909 N TOPEKA | WICHITA | KS | 67214 | ||||
WILMINGTON DIALYSIS CENTER |
RIVERSIDE MEDICAL ARTS COMPLEX 700 LEA BLVD G-2 | WILMINGTON | DE | 19802 | ||||
WILSHIRE DIALYSIS |
1212 WILSHIRE BLVD | LOS ANGELES | CA | 90017 | ||||
WINTER HAVEN DIALYSIS CENTER |
400 SECURITY SQUARE | WINTER HAVEN | FL | 33880 | ||||
WOODBURY DIALYSIS UNIT |
1850-3 WEIR DR | WOODBURY | MN | 55125 | ||||
WOODLAND DIALYSIS CENTER |
912 WOODLAND DR STE B | ELIZABETHTOWN | KY | 42701 | ||||
WOODLAND KENTUCKY ACUTE PROGRAM |
912 WOODLAND DR STE B | ELIZABETHTOWN | KY | 42701 | ||||
WOODSTOCK DIALYSIS |
2001 PROFESSIONAL PARKWAY STE 100 | WOODSTOCK | GA | 30188 | ||||
XTREME TEAM EAST (MA) RGN 21PDI |
19 GLENNIE ST SUITE A | WORCESTER | MA | 1605 | ||||
YAKIMA DIALYSIS CENTER |
1221 NORTH 16TH AVE | YAKIMA | WA | 98902 | ||||
YONKERS DIALYSIS CENTER |
575 YONKERS AVE | YONKERS | NY | 10704 | ||||
YPSILANTI DIALYSIS |
WASHTENAW FOUNTAIN PLAZA 2766 WASHTENAW RD | YPSILANTI | MI | 48197 | ||||
YUBA CITY DIALYSIS CENTER |
1007 LIVE OAK BLVD STE B-4 | YUBA CITY | CA | 95991 |
40
Exhibit 10.28
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this Agreement) dated as of (INSERT DATE) is made by and between DaVita Inc., a Delaware corporation formerly known as Total Renal Care Holdings, Inc., (the Company), and (INSERT NAME) (the Indemnitee).
R E C I T A L S :
A. The Company recognizes that competent and experienced persons are increasingly reluctant to serve as directors and officers of corporations unless they are protected by comprehensive liability insurance or indemnification, or both, due to increased exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no reasonable relationship to the compensation of such directors.
B. The statutes and judicial decisions regarding the duties of directors and officers are often difficult to apply, ambiguous, or conflicting, and therefore fail to provide such directors with adequate, reliable knowledge of legal risks to which they are exposed or information regarding the proper course of action to take.
C. The Company and the Indemnitee recognize that plaintiffs often seek damages in such large amounts and the costs of litigation may be so substantial (whether or not the case is meritorious), that the defense and/or settlement of such litigation is often beyond the personal resources of directors and officers.
D. The Company believes that it is unfair for its directors and officers to assume the risk of substantial judgments and other expenses which may occur in cases in which the director and/or officer, as the case may be, received no personal profit and in cases where such person acted in good faith.
E. Section 145 of the General Corporation Law of Delaware (Section 145), under which the Company is organized, empowers the Company to indemnify its directors and officers by agreement and to indemnify persons who serve, at the request of the Company, as the directors and officers of other corporations or enterprises, and expressly provides that the indemnification provided by Section 145 is not exclusive.
F. The Board of Directors of the Company has determined that contractual indemnification as set forth herein is not only reasonable and prudent but necessary to promote the best interests of the Company and its stockholders.
G. The Company desires and has requested the Indemnitee to serve or continue to serve as a director and/or officer of the Company.
H. The Indemnitee only is willing to serve, or to continue to serve, as a director and/or officer of the Company if the Indemnitee is furnished the indemnity provided for herein by the Company.
1
A G R E E M E N T :
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth below, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions .
(a) Agent . For purposes of this Agreement, agent of the Company means any person who: (i) is or was a director and/or officer of the Company or a subsidiary of the Company; or (ii) is or was serving at the request of, for the convenience of, or to represent the interest of the Company or a subsidiary of the Company as a director and/or officer of another foreign or domestic corporation, partnership or joint venture.
(b) Expenses . For purposes of this Agreement, expenses includes all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys fees and related disbursements, other out-of-pocket costs and reasonable compensation for time spent by the Indemnitee for which he is not otherwise compensated by the Company or any third party, provided that the rate of compensation and estimated time involved is approved in advance by the Board of Directors of the Company), actually and reasonably incurred by the Indemnitee in connection with either the investigation, defense or appeal of a proceeding or establishing or enforcing a right to indemnification under this Agreement, Section 145 or otherwise, and amounts paid in settlement by or on behalf of the Indemnitee, but shall not include any judgments, fines or penalties actually levied against the Indemnitee.
(c) Proceedings . For the purposes of this Agreement, proceeding means any threatened, pending, or completed action, suit, arbitration, hearing or other proceeding, whether civil, criminal, administrative, investigative or any other type whatsoever.
(d) Subsidiary . For purposes of this Agreement, subsidiary means any corporation of which more than 50% of the outstanding voting securities are owned directly or indirectly by the Company, by the Company and one or more other subsidiaries, or by one or more other subsidiaries.
2. Agreement to Serve . The Indemnitee agrees to serve and/or continue to serve as an agent of the Company, at the will of such corporation (or under separate agreement, if such agreement exists), in the capacity the Indemnitee currently serves as an agent of such corporation, so long as the Indemnitee is duly appointed or elected and qualified in accordance with the applicable provisions of the Bylaws of such corporation or of any subsidiary thereof, or until such time as the Indemnitee tenders his resignation in writing; provided, however, that nothing contained in this Agreement is intended to create any right to continued employment of the Indemnitee in any capacity.
2
3. Indemnification .
(a) Indemnification in Third Party Proceedings . Subject to Section 10 below, the Company shall indemnify the Indemnitee if the Indemnitee is a party to or threatened to be made a party to or otherwise involved in any proceeding (other than a proceeding by or in the name of the Company to procure a judgment in its favor) by reason of the fact that the Indemnitee is or was an agent of the Company, or by reason of any act or inaction by him in any such capacity (including, but not limited to, any written statement of the Indemnitee that (i) is required to be, and is, filed with the Securities and Exchange Commission (the SEC) regarding the adequacy of the Companys internal controls or the accuracy of reports or statements filed by the Company with the SEC pursuant to federal laws and/or administrative regulations (each, a Required Statement) or (ii) is made to another officer or employee of the Company to support a Required Statement), against any and all expenses and liabilities of any type whatsoever (including, but not limited to, judgments, fines and penalties)), actually and reasonably incurred by him in connection with the investigation, defense, settlement or appeal of such proceeding, but only if the Indemnitee acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe Indemnitees conduct was unlawful, pursuant to the presumption set forth in subsection (c) below, as applicable. The termination of any proceeding by judgment, order of court, settlement, conviction or on plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that the Indemnitee did not act in good faith in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Company, and with respect to any criminal proceedings, that such person had reasonable cause to believe that his conduct was unlawful.
(b) Indemnification in Derivative Actions . Subject to Section 10 below, the Company shall indemnify the Indemnitee if the Indemnitee is a party to or threatened to be made a party to or otherwise involved in any proceeding by or in the name of the Company to procure a judgment in its favor by reason of the fact that the Indemnitee is or was an agent of the Company, or by reason of any act or inaction by him in any such capacity (including, but not limited to, any written statement of the Indemnitee that (i) is a Required Statement or (ii) is made to another officer or employee of the Company to support a Required Statement), against all expenses actually and reasonably incurred by the Indemnitee in connection with the investigation, defense, settlement, or appeal of such proceedings, but only if the Indemnitee acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Company, pursuant to the presumption set forth in subsection (c) below; provided, however, that no indemnification under this subsection (b) shall be made in respect of any claim, issue or matter as to which the Indemnitee shall have been finally adjudged to be liable to the Company by a court of competent jurisdiction due to willful misconduct of a culpable nature in the performance of the Indemnitees duty to the Company, unless and only to the extent that any court in which such proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as such court shall deem proper.
(c) Conclusive Presumption Regarding Indemnitee Conduct . With respect to Sections 3(a) and 3(b) above, the Indemnitee shall be conclusively presumed to have acted in good
3
faith and in a manner Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company, and, with respect to any criminal action or proceeding, to have had no reasonable cause to believe Indemnitees conduct was unlawful, unless a determination is made that the Indemnitee has not acted in accordance with the standards set forth above (i) by the Board of Directors by a majority vote of a quorum thereof consisting of directors who were not parties to the proceeding due to which a claim is made under this Agreement, (ii) by the stockholders of the Company by a majority vote of stockholders who were not parties to such a proceeding, or (iii) in a written opinion of independent legal counsel, selection of whom has been approved by the Indemnitee in writing or by a panel of arbitrators, one of whom is selected by the Company, another of whom is selected by the Indemnitee and the last of whom is selected by the first two arbitrators so selected.
4. Indemnification of Expenses of Successful Party . Notwithstanding any other provisions of this Agreement, to the extent that the Indemnitee has been successful on the merits or otherwise in defense of any proceeding or in defense of any claim, issue or matter therein, including the dismissal of any action without prejudice, the Company shall indemnify the Indemnitee against all expenses actually and reasonably incurred in connection with the investigation, defense or appeal of such proceeding.
5. Partial Indemnification . If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines or penalties) actually and reasonably incurred by him in the investigation, defense, settlement or appeal of a proceeding but is not entitled, however, to indemnification for the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion thereof to which the Indemnitee is entitled.
6. Advancement of Expenses . Subject to Section 10(b) below, the Company shall advance all expenses incurred by the Indemnitee in connection with the investigation, defense, settlement or appeal of any proceeding to which the Indemnitee is a party or is threatened to be made a party by reason of the fact that the Indemnitee is or was an agent of the Company. The Indemnitee hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the Company as authorized by this Agreement. The advances to be made hereunder shall be paid by the Company to or on behalf of the Indemnitee within 30 days following delivery of a written request therefor by the Indemnitee to the Company.
7. Notice and Other Indemnification Procedures .
(a) Notification of Proceeding . Promptly after receipt by the Indemnitee of notice of the commencement of or the threat of commencement of any proceeding, the Indemnitee shall, if the Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company of the commencement or threat of commencement thereof.
4
(b) Request for Indemnification . Any indemnification requested by the Indemnitee under Section 3 hereof shall be made no later than 10 days after receipt of the written request of the Indemnitee, unless a good faith determination is made within said 10-day period in accordance with one of the methods set forth in Section 3(c) above that the Indemnitee is not or (subject to final judgment or other final adjudication as provided in Section 10(a) below) ultimately will not be entitled to indemnification hereunder.
(c) Application for Enforcement . Notwithstanding a determination under Section 7(b) above that the Indemnitee is not entitled to indemnification with respect to any specific proceeding, the Indemnitee shall have the right to apply to any court of competent jurisdiction for the purpose of enforcing the Indemnitees right to indemnification pursuant to this Agreement. In such an enforcement hearing or proceeding, the burden of proving by clear and convincing evidence that indemnification or advances are not appropriate shall be on the Company. Neither the failure of the Company (including its Board of Directors, stockholders, independent legal counsel or the panel of arbitrators) to have made a determination prior to the commencement of such action that the Indemnitee is entitled to indemnification hereunder, nor an actual determination by the Company (including its Board of Directors or independent legal counsel or the panel of arbitrators) that the Indemnitee is not entitled to indemnification hereunder, shall be a defense to the action or create any presumption that the Indemnitee is not entitled to indemnification hereunder.
(d) Indemnification of Certain Expenses . The Company shall indemnify the Indemnitee against all expenses incurred in connection with any hearing or proceeding under this Section 7 unless the Company prevails by clear and convincing evidence in such hearing or proceeding.
8. Assumption of Defense . In the event the Company shall be obligated to pay the expenses of any proceeding against the Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel reasonably acceptable to the Indemnitee, upon the delivery to the Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by the Indemnitee and the retention of such counsel by the Company, the Company shall not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by the Indemnitee with respect to the same proceeding, provided that (a) the Indemnitee shall have the right to employ his counsel in such proceeding at the Indemnitees expense; and (b) if (i) the employment of counsel by the Indemnitee has been previously authorized in writing by the Company, (ii) the Indemnitees counsel delivers a written notice to the Company stating that such counsel has reasonably concluded that there may be a conflict of interest between the Company and the Indemnitee in the conduct of any such defense or (iii) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding within a reasonable time, then in any such event the fees and expenses of the Indemnitees counsel shall be at the expense of the Company.
9. Insurance . The Company may, but is not obligated to, obtain directors and officers liability insurance (D&O Insurance) as may be or become available with respect to which the Indemnitee is named as an insured. Notwithstanding any other provision of this Agreement, the Company shall not be obligated to indemnify the Indemnitee for expenses, judgments, fines or
5
penalties which have been paid directly to the Indemnitee by D&O Insurance. If the Company has D&O Insurance in effect at the time the Company receives from the Indemnitee any notice of the commencement of a proceeding, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the policy. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policy.
10. Exceptions .
(a) Certain Matters . Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify the Indemnitee on account of any proceeding with respect to (i) remuneration paid to the Indemnitee if it is determined by final judgment or other final adjudication that such remuneration was in violation of law; (ii) which final judgment is rendered against the Indemnitee for an accounting of profits made from the purchase or sale by the Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of any federal, state or local statute; or (iii) which (but only to the extent that) it is determined by final judgment or other final adjudication that the Indemnitees conduct was in bad faith, knowingly fraudulent or deliberately dishonest. For purposes of the foregoing sentence, a final judgment or other adjudication may be reached in either the underlying proceeding or action in connection with which indemnification is sought or a separate proceeding or action to establish rights and liabilities under this Agreement.
(b) Claims Initiated by the Indemnitee . Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify or advance expenses to the Indemnitee with respect to proceedings or claims initiated or brought voluntarily by the Indemnitee and not by way of defense, except with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Section 145, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors of the Company finds it to be appropriate.
(c) Action for Indemnification . Any provision herein to the contrary notwithstanding, the Company shall be obligated pursuant to the terms of this Agreement to indemnify the Indemnitee for any expenses incurred by the Indemnitee with respect to any proceeding instituted by the Indemnitee to enforce or interpret this Agreement unless the Company prevails in such proceeding by clear and convincing evidence.
(d) Unauthorized Settlements . Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify the Indemnitee under this Agreement for any amounts paid in settlement of a proceeding effected without the Companys written consent. Neither the Company nor the Indemnitee shall unreasonably withhold consent to any proposed settlement; provided, however, that the Company may in any event decline to consent to (or to otherwise admit or agree to any liability for
6
indemnification hereunder in respect of) any proposed settlement if the Company determines in good faith (pursuant to Section 7(b) above) that the Indemnitee is not or ultimately will not be entitled to indemnification hereunder.
(e) Securities Act Liabilities . Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify the Indemnitee or otherwise act in violation of any undertaking appearing in and required by the rules and regulations promulgated under the Securities Act of 1933, as amended (the Act) in any registration statement filed with the SEC under the Act. The Indemnitee acknowledges that paragraph (h) of Item 512 of Regulation S-K currently generally requires the Company to undertake in connection with any registration statement filed under the Act to submit the issue of the enforceability of the Indemnitees rights under this Agreement in connection with any liability under the Act on public policy grounds to a court of appropriate jurisdiction and to be governed by any final adjudication of such issue. The Indemnitee specifically agrees that any such undertaking shall supersede the provisions of this Agreement and to be bound by any such undertaking.
11. Nonexclusivity . The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed exclusive of any other rights which the Indemnitee may have under any provision of law, the Companys Certificate of Incorporation or Bylaws, in any court in which a proceeding is brought, the vote of the Companys stockholders or disinterested directors, other agreements or otherwise, both as to action in the Indemnitees official capacity and to action in another capacity while occupying his position as an agent of the Company, and the Indemnitees rights hereunder shall continue after the Indemnitee has ceased acting as an agent of the Company and shall inure to the benefit of the heirs, executors and administrators of the Indemnitee. Any provision herein to the contrary notwithstanding, the Company may provide, in specific cases, the Indemnitee with full or partial indemnification if the Board of Directors of the Company determines that such indemnification is appropriate.
12. Subrogation . In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who, at the request and expense of the Company, shall execute all papers required and shall do everything that may be reasonably necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.
13. Interpretation of Agreement . It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification to the Indemnitee to the fullest extent now or hereafter permitted by law.
14. Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of the Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such
7
provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to Section 13 hereof.
15. Modification and Waiver . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. The indemnification rights afforded to the Indemnitee hereby are contract rights and may not be diminished, eliminated or otherwise affected by amendments to the Certificate of Incorporation or Bylaws of the Company or by other agreements.
16. Successors and Assigns . The terms of this Agreement shall bind, and shall inure to the benefit of, the successors and assigns of the parties hereto.
17. Notice . Except as otherwise provided herein, any notice or demand which, by the provisions hereof, is required or which may be given to or served upon the parties hereto shall be in writing and, if by telegram, telecopy or telex, shall be deemed to have been validly served, given or delivered when sent, if by personal delivery, shall be deemed to have been validly served, given or delivered upon actual delivery and, if mailed, shall be deemed to have been validly served, given or delivered three business days after deposit in the United States mails, as registered or certified mail, with proper postage prepaid and addressed to the party or parties to be notified at the addresses set forth on the signature page of this Agreement (or such other address(es) as a party may designate for itself by like notice).
18. Governing Law . This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware.
19. Entire Agreement . This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings and negotiations, written and oral, between the parties with respect to the subject matter of this Agreement.
8
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement effective as of the date first above written.
9
Exhibit 10.30
DaVita Inc.
Post-Retirement Deferred Compensation Arrangement
Article I
Establishment, Purpose, and Effective Date
This Post-Retirement Deferred Compensation Arrangement (Plan) is established by DaVita Inc. (Company) for the purpose of providing unfunded deferred compensation for a select group of management or highly compensated employees of DaVita Inc. and its subsidiaries (collectively referred to as the Company). It is intended that the Plan be exempt from Parts 2, 3, and 4 of the Employee Retirement Income Security Act of 1974 (ERISA) by reason of Sections 201(2), 301(a)(3), and 401(a)(l) of ERISA.
Article II
Definitions
2.1 Board of Directors . Board of Directors shall mean the Board of Directors of the Company (or its delegates).
2.2 Change of Control . Change of Control shall mean:
(a) any transaction or series of transactions in which any person or group within the meaning of Rule 13d-5 under the Securities Exchange Act of 1934 (Exchange Act) and Sections 13(d) and 14(d) of the Exchange Act becomes the direct or indirect beneficial owner (as defined in Rule 13d-3 under the Exchange Act), by way of a stock issuance, tender offer, merger, consolidation, other business combination or otherwise, of greater than fifty percent (50%) of the total voting power (on a fully diluted basis as if all convertible securities had been converted and all warrants and options had been exercised) entitled to vote in the election of directors of Company (including any transaction in which Company becomes a wholly-owned or majority-owned subsidiary of another corporation);
(b) any merger or consolidation or reorganization in which Company does not survive;
(c) any merger or consolidation in which Company survives, but the shares of Companys Common Stock outstanding immediately prior to such merger or consolidation represent 50% or less of the voting power of Company after such merger or consolidation, and
(d) any transaction in which more than 50% of Companys assets are sold.
2.3 Competitor . Competitor shall mean any individual, partnership, limited liability company, corporation, independent practice association, management services organization, or any other entity that provides dialysis services and nephrology-related services provided by Company at any time during the period of the employees employment, including, but not limited to, hemodialysis, acute dialysis, apheresis services, peritoneal dialysis of any type, staff-assisted hemodialysis, home hemodialysis, dialysis-related laboratory and pharmacy services, access-related services, Method II dialysis supplies and services, nephrology practice management, or renal physician/center network management, and any other services or treatment for persons diagnosed as having end stage renal disease (ESRD) or pre-ESRD, including any dialysis services provided in an acute hospital. The term ESRD shall have the same meaning as set forth in Title 42, Code of Federal Regulations Section 405.2101 et. seq. or any successor thereto.
2.4 Constructive Discharge . Constructive Discharge shall mean the occurrence of any of the following events after the date of a Change of Control without the employees express written consent:
(a) the scope of the employees authority, duties and responsibilities are materially diminished or are not (A) in the same area of operations, (B) in the same general level of seniority, or (C) of the same general nature as the employees authority, duties, and responsibilities with Company immediately before such Change of Control;
(b) the failure by Company to provide the employee with office accommodations and assistance substantially equivalent to the accommodations and assistance provided to the employee immediately before such Change of Control;
(c) the principal office to which the employee is required to report is changed to a location that is more than twenty (20) miles from the principal office to which the employee is required to report immediately before such Change of Control;
(d) a reduction by Company in the employees base salary, bonus arrangement, or other material benefits as in effect on the date of such Change of Control; or
(e) a failure of any successor in interest to the Company to assume in writing any obligations arising out of any agreement between the Company and the employee.
2.5 Unforeseeable Emergency . An Unforeseeable Emergency is a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent (as defined in section 152(a) of the Internal Revenue Code) of the Participant, loss of the Participants property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The circumstances that will constitute an Unforeseeable Emergency will depend upon the facts of each case, but, in any case, payment may not be made to the extent that such hardship is or may be relieved (i) through reimbursement or compensation by insurance or otherwise, or (ii) by liquidation of the Participants assets, to the extent the liquidation of such assets would not itself cause severe financial hardship. Examples of what are not considered to be unforeseeable emergencies include the need to send a Participants child to college or the desire to purchase a home.
2
Article III
Participation and Contributions
3.1 Eligibility . The Board of Directors shall select those individuals who are eligible to participate in the Plan (Participants), who must be members of a select group of management or highly compensated employees of the Company within the meaning of Sections 201(2), 301(a)(3), and 401(a)(l) of ERISA (Top-Hat Employees).
3.2 Subsequent Ineligibility . In the event it is subsequently determined that a Participant does not constitute a Top-Hat Employee, his benefit under the Plan shall be paid to him as soon as possible, so that he will no longer be a Participant. However, a decision by the Board of Directors that an individual is no longer eligible to participate in the Plan shall not automatically be deemed a determination that he no longer qualifies as a Top-Hat Employee.
3.3 Contributions . Each year, the Board of Directors will decide how much (if anything) to contribute on behalf of each Participant. The amount of this contribution may be made in one or more installments during the year, and at the times selected by the Board of Directors. The amount of this contribution will be communicated to the Participant in writing (Notice).
3.4 Vesting . Participants shall earn a vested right to the contributions on their behalf (and the earnings thereon) at the rate specified in the Notice. Notwithstanding the preceding sentence, Participants who are still employed by the Company at that time shall become fully vested upon the occurrence of any of the following events:
(a) death;
(b) attainment of age sixty-five (65);
(c) the termination of the Participants employment by the Company or the Constructive Discharge of the Participant within eighteen (18) months following a Change of Control; or
(d) becoming disabled. For this purpose, a Participant will be considered to be disabled only if he is entitled to benefits under the Companys long-term disability plan.
Article IV
Benefits Unfunded
4.1 Benefits Unfunded . The benefits under this Plan shall not be funded but shall constitute an unsecured liability payable, when due, by the Company out of its general assets.
4.2 Crediting of Amounts to Accounts . A separate, unfunded account shall be established and maintained for each Participant (Account). Each Participants Account shall be credited with the amount of the contributions on the Participants behalf. The Participants Account shall be credited with the rate of interest or earnings specified by the Committee for the period during which the amounts are held in the Account.
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Article V
Payment of Benefits
5.1 Distributions following Termination of Employment . Participants shall receive the vested portion of their benefits determined pursuant to the rules of Article III following termination of employment, regardless of the reason for termination of employment ( e.g. , death, disability, retirement, or otherwise).
5.2 In-Service Distributions . Participants may withdraw some or all of the vested amounts in their Accounts prior to termination of employment only in accordance with the terms of this Section. These elections will be made at such times and under such conditions as may be imposed by the Committee.
(a) A Participant may elect to receive some or all of the amounts in his Account upon reaching age sixty-five (65).
(b) A Participant may elect to receive some or all of the amounts in his Account upon incurring an Unforeseeable Emergency. Withdrawals of amounts because of an Unforeseeable Emergency will only be permitted to the extent reasonably needed to satisfy the emergency need.
(c) Participants may elect that their Plan Benefits become automatically payable upon a Change in Control.
5.3 Loans . Participants may not borrow funds from the Plan.
5.4 Form of Payments . Benefits under the Plan will be paid in the form of a lump sum distribution of the amount in the Participants Account.
5.5 Designation of Beneficiary . In the event of the death of a Participant prior to the date on which the Participants benefit is paid, his benefit will be paid to a beneficiary other than his surviving spouse only if the surviving spouse consents in writing to the designation. If the Participant does not have a surviving spouse or a properly designated beneficiary, the benefit will be paid to his estate.
5.6 Payees under Legal Disability . If any payee is a minor, or if the Committee reasonably believes that any payee is legally incapable of giving a valid receipt and discharge for any payment due him, the Committee may have the payment made to the person (or persons or institution) whom it reasonably believes is caring for or supporting such payee. Any such payment shall be a payment for the benefit of the payee and shall be a complete discharge of any liability under the Plan to the payee.
5.7 Payment of Benefits . All payments under the Plan shall be delivered in person or mailed to the last address of the Participant (or, in the case of the death of the Participant, to that of his surviving spouse or estate). Each Participant shall be responsible for furnishing the Committee with his current address.
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5.8 Withholding .
(a) Withholdings that are required to be made with respect to the contributions to the Plan on behalf of the Participant shall be paid from the Participants cash compensation, to the maximum extent possible.
(b) Any payments from the Plan may be subject to withholding for taxes as may be required by any applicable federal or state law.
(c) The Company shall have the right to withhold from benefit payments any amounts that the Participant owes to the Company.
5.9 Ancillary Agreements . As a condition to the payment of benefits under the Plan, Participants will be required to execute an agreement pursuant to which they agree not to provide services for a Competitor of the Company, not to solicit employees or patients, and such other agreements as may be required by the Company. If the Participant fails to execute or to comply with the terms of that agreement, the Participant will be required to forfeit or repay the amount of benefit that he received under the Plan, whichever is applicable.
Article VI
Plan Administration
6.1 Committee . Authority to administer the Plan shall be vested in the Board of Directors of DaVita Inc. or such person or persons as the Board of Directors may designate (Committee).
6.2 Administrative Powers . The Committee shall have all powers necessary to administer the Plan. In addition to any powers and authority conferred on the Committee elsewhere in the Plan or by law, the Committee shall have the following powers and authority:
(a) To designate agents to carry out responsibilities relating to the Plan;
(b) To administer, interpret, and answer all questions which may arise under this Plan;
(c) To handle claims for benefits in accordance with Department of Labor Regulation Section 2560.502-1. In the case of a contested claim for benefits, the Committee may require, as a precondition to the entitlement of any claims for benefits, that the Claimant execute an agreement releasing any claims he asserts that he has against the Company, the Plan, and the Committee (as well as all other fiduciaries of the Plan);
(d) To establish rules and procedures from time to time for the conduct of its business and for the administration of the Plan; and
(e) To perform or cause to be performed such further acts as it may deem to be necessary, appropriate, or convenient in connection with the operation of the Plan.
5
6.3 Finality of Actions . Any action taken by the Committee in the exercise of authority conferred upon it by this Plan shall be binding upon the Participant and all parties claiming through him. All discretionary powers conferred upon the Committee shall be absolute.
6.4 Indemnification . To the maximum extent permitted by law, the Company shall indemnify the Committee and any other employee of the Company with duties under the Plan who was or is a party, or is threatened to be made a party, to any threatened, pending or completed proceeding, whether civil, criminal, administrative, or investigative, against any losses reasonably incurred by him by reason of his conduct in the performance of his duties under the Plan. This indemnity will not apply if the individual acted fraudulently or in bad faith in the performance of his duties relating to the Plan, or fails to assist the Company in defending against the claim.
Article VII
Miscellaneous Matters
7.1 Amendment and Termination . The Company expects the Plan to be permanent, but because future conditions affecting the Company cannot be anticipated or foreseen, the Company reserves the right to amend or terminate the Plan at any time. Upon termination of the Plan, all benefits shall become fully vested and payable immediately.
7.2 Benefits Not Alienable . Benefits under the Plan may not be assigned or alienated, whether voluntarily or involuntarily.
7.3 No Enlargement of Employee Rights . Nothing contained in the Plan shall be deemed to give a Participant the right to be retained in the employ of the Company or to interfere with the right of the Company to discharge any Participant at any time.
7.4 Governing Law . In the case of an ambiguity, the Plan shall be construed so as to comply with the provisions of the Internal Revenue Code and ERISA.
7.5 Interpretation . Unless the context clearly indicates otherwise, the masculine gender will include the feminine, the singular will include the plural, and the plural will include the singular.
In Witness Whereof , DaVita Inc. has caused this instrument to be executed as of the date indicated below.
DaVita Inc. | ||
By: |
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Title: |
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Date: |
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6
Distribution Election Form
under the DaVita Inc. (Company)
Post-Retirement Deferred Compensation Arrangement (Plan)
Benefit Payment Dates
1. Termination of Employment . I understand that the vested portion of the contributions on my behalf to the Plan and the earnings on those amounts (if any) will become payable upon the termination of my employment because of death, disability, retirement, or any other reason.
2. In-Service Distributions . I further understand that I may elect that the vested portion of my benefit become payable prior to the termination of my employment, upon the occurrence of any of the events I designate below:
attainment of age 65 while still employed by the Company; and/or
a Change of Control of the Company (as defined in the Plan) .
An election made pursuant to this Paragraph 2 will be effective only if the election is made before the beginning of the calendar year in which the designated event or events occur. Correspondingly, a revocation of an election made pursuant to this Paragraph 2 will not become effective until the following January 1.
3. Continuing Effect . I also understand that my election will continue in effect (that is, with respect to all future contributions to the Plan) until I complete a new election and deliver it to the Committee.
Conditions to Receive Payments
I understand that my right to a payment of my benefit under the Plan and to keep the payment is conditioned upon my compliance with the following conditions:
1. Covenant Not to Compete . I agree that during the term of my employment and for a period of one (1) year after the termination of my employment with the Company for any reason, I will not:
(a) be an officer, director, consultant, partner, owner, stockholder, employee, creditor, agent, trustee, independent contractor, or advisor of any individual, partnership, limited liability company, corporation, independent practice association, management services organization, or any other entity (collectively, Person) that is a Competitor (as that term is defined in the Plan); or
(b) directly or indirectly, own, manage, control, operate, invest in, acquire an interest in, or otherwise engage in, act for, or act on behalf of any Person (other than the Company and its subsidiaries and affiliates) that is a Competitor.
I acknowledge that the nature of Companys activities is such that competitive activities could be conducted effectively regardless of the geographic distance between Companys place of business and the place of any Competitors business. Notwithstanding anything herein to the contrary, such activities shall not include the ownership of one percent (1%) or less of the issued and outstanding stock, which is purchased in the open market, of a Competitor that is a publicly traded company.
I acknowledge and agree that the geographical limitations and duration of this covenant not to compete are reasonable. In particular, I agree that my position is national in scope and that I will have an impact on every location where Company currently conducts and will conduct business. Therefore, I acknowledge and agree that, like my position, this covenant cannot be limited to any particular geographic region.
2. Non-Solicitation of Employees . I promise and agree that I will not, for a period of one (1) year after the termination of my employment, directly or indirectly, solicit any of Companys employees to work for any Competitor. I also agree that during my employment and for a period of one (1) year after the termination of my employment, directly or indirectly, that I will not hire any of Companys employees to work (as an employee or an independent contractor) for any Competitor. In addition, I agree that during my employment and for a period of one (1) year after the termination of my employment, directly or indirectly, that I will not take any action that may reasonably result in any of Companys employees going to work (as an employee or an independent contractor) for any Competitor.
3. Other Non-Solicitation . I promise and agree that during the term of this Agreement and for a period of one (1) year after the termination of my employment for any reason, I will not, directly or indirectly:
(a) induce any patient or customer of Company, either individually or collectively, to patronize any Competitor;
(b) request or advise any patient, customer, or supplier of Company to withdraw, curtail, or cancel such persons business with Company;
(c) enter into any contract for the purpose or result of which would benefit me if any patient or customer of Company were to withdraw, curtail, or cancel such persons business with Company;
(d) solicit, induce, or encourage any physician (or former physician) affiliated with Company or induce or encourage any other person under contract with Company to curtail or terminate such persons affiliation or contractual relationship with Company;
(e) disclose to any Person the names or addresses of any patient or customer of Company or of any physician (or former physician) affiliated with Company; or
(f) disparage the Company or any of its agents, employees, or affiliated physicians in any fashion.
Participant | ||
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Committee | ||
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DaVita Inc.
Post-Retirement Deferred Compensation Arrangement
Declaration under Penalty of Perjury
for Hardship Withdrawal
I, , under penalty of perjury, hereby make the following declarations with respect to my request for a distribution in the amount of $ from the Post-Retirement Deferred Compensation Arrangement maintained by DaVita Inc. (Company) on account of my Unforeseeable Emergency. I hereby make the following representations:
1. I understand that the amount that I can receive cannot exceed the lesser of the vested amount of my benefit or the amount reasonably needed to satisfy my Unforeseeable Emergency. However, this amount can include any amounts necessary to pay the taxes reasonably anticipated to result from the distribution.
2. I understand that I may not receive a payment to the extent that such hardship is or may be relieved (a) through reimbursement or compensation by insurance or otherwise, or (b) by liquidation of my assets, to the extent the liquidation of such assets would not itself cause severe financial hardship.
3. I understand that an Unforeseeable Emergency is a severe financial hardship to me resulting from (a) a sudden and unexpected illness or accident of me or of my dependent, (b) loss of my property due to casualty, or (c) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond my control. Examples of what are not considered to be unforeseeable emergencies include the need to send my child to college or the desire to purchase a home.
4. I understand that the amount of my hardship distribution is subject to tax withholdings.
I declare under penalty of perjury under the laws of the State of that the above statements are true and correct and that this declaration was executed on the day of , 200 , at , .
Signed: |
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Acknowledgement
State of
County of
On , 200 before me, , personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same, and that by his/her signature on the instrument the person executed the instrument.
WITNESS my hand and official seal.
Signature (Seal)
Beneficiary Designation
under the DaVita Inc.
Post-Retirement Deferred Compensation Arrangement (Plan)
Subject to the provisions of the Plan, I designate the individual(s) stated below to be my primary and secondary beneficiaries. The benefit shall be paid to my primary beneficiary if that person survives me, and the benefit shall be paid to my secondary beneficiary if the primary beneficiary does not survive me. If neither my primary nor my secondary beneficiary survive me, or I have failed to designate a beneficiary then my benefit will be paid to my estate. This designation supersedes any prior designations I may have made under the Plan.
I understand that a beneficiary designation will be effective only if it is received by the Committee before my death.
Participants Signature
(to be completed by all participants)
I hereby designate the individual(s) listed above as the beneficiary(ies) of my benefit under the Plan. This beneficiary designation form revokes any prior designations that I may have made.
I understand that if I am married and my spouse is not named as my primary beneficiary, this designation will not be effective unless my spouse signs the waiver set forth below, and my spouses signature is witnessed by a Notary Public. I also understand that if I subsequently (re)marry another individual, my new spouse will automatically become my primary beneficiary, unless my new spouse executes the waiver set forth below. I further understand that this form will not be given effect unless it is received by the Plan before my death.
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Participants Signature | Date |
Spousal Waiver
As the spouse of the participant signing above, I hereby waive my right to receive the benefits otherwise payable to me under the Plan upon the death of my spouse, and consent to the payment of those amounts to the individual(s) listed above. Furthermore, I hereby consent to allowing my spouse to change that beneficiary designation at any time without my consent.
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Spouses Signature | Date |
Notary Public
State of
County of
On before me, (here insert name and title of the officer), personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature (Seal)
i
Exhibit 10.31
Memorandum Relating to Bonus Structure for
Charles J. McAllister
1. | Bonus: |
a. | OIG sets drug acquisition costs that accurately reflect industry acquisition costs -$100,000 (30% displacement) |
b. | CMS implements MMA 2003 payment changes in a way that has a revenue neutral effect on DaVita$100,000 (zero displacement) |
c. | The CMS EPO coverage rules currently contemplated by CMS, and which are expected to be released in 2004, do not negatively impact clinical practices for EPO, either because: |
I. | CMS establishes an EPO NCD that is substantially consistent with current clinical protocols; or |
II. | CMS maintains current policy (either by taking no action or by delaying implementation of an EPO NCD) |
- | $200,000 (30% displacement). |
d. | Set up quality, general meeting for DaVita CEO with ($10,000, 50% displacement). |
e. | Set up quality, general meeting for DaVita CEO with ($20,000, 50% displacement). |
2. | Timing: |
a. | The bonuses associated with a goal will be paid as soon as it is clear that the particular goal is met. |
b. | Payment may be within calendar year 2004 or after. |
3. | Displacement example: A 30% displacement means that if a $100,000 touchdown bonus is paid, the normal bonus range is reduced by $30,000. This is to reflect that the area being rewarded was a part of the normal job, but it is receiving special emphasis. |
4. | The DaVita CEO has full authority to exercise reasonable discretion if the bonus has been earned. If something changes to make the task much easier or far less valuable the CEO has the right and responsibility to adjust or eliminate it. If the Executive disagrees he/she can appeal Chair of the Compensation Committee of the Board of Directors. |
Exhibit 10.32
DaVita Inc.
Director Compensation Philosophy and Plan
Philosophy
1. | To pay differentially higher compensation for higher levels of work, responsibility and performance. |
2. | Compensation amount and structure that will attract highly competent candidates for Board service. |
3. | Tie compensation to increases in long-term shareholder value (including by shifting some cash payments to stock). |
4. | Vesting continues as long as the director continues to serve on the Board, but does not require continued service as committee chair. |
Options
Each non-management board member shall be granted options to purchase 8,000 shares of Company stock per year of service on the Board, granted on, and priced as of the close of market on, the date of the Companys annual stockholder meeting, vesting 50% per year beginning on the first anniversary of the grant date, expiring five years after date of grant.
Each new member of the Board after the date hereof shall be granted options to purchase 15,000 shares of Company stock upon appointment to the Board, priced at the closing price on the grant date, vesting 25% per year beginning on the first anniversary of the grant date, expiring five years after the grant date.
Retainer
$24,000 per year paid quarterly in arrears, half in cash and half in deferred stock units that must be held for one year.
Board Meetings
$4,000 per in person meeting
$2,000 per telephonic meeting longer than 1 1 / 2 hours
Committee Meetings (Chair and Members)
$2,000 per in person meeting ($2,500 for Chairs of Clinical Performance Committee and Public Policy Committee/$1,500 for members of Clinical Performance Committee and Public Policy Committee)
$2,000 per telephonic meeting longer than 1 hour ($2,500 for Chairs of Clinical Performance Committee and Public Policy Committee/$1,500 for members of Clinical Performance Committee and Public Policy Committee)
No committee meeting fees are earned for Compensation Committee or Nominating and Governance Committee meetings held on regular Board meeting dates.
Committee meeting fees are earned for Audit Committee, Compliance Committee, Clinical Performance Committee and Public Policy Committee meetings held on regular Board meeting dates.
Additional Retainer - Lead Independent Director and primary Committee Chairs (Audit, Compensation and Compliance)
$20,000 per year paid quarterly in arrears, half in cash and half in deferred stock units that must be held for one year, for the Chair of the Audit Committee and the Chair of the Compliance Committee.
$20,000 per year paid quarterly in arrears, half in cash and half in deferred stock units that must be held for one year, for the Chair of the Compensation Committee.
$20,000 per year paid quarterly in arrears, half in cash and half in deferred stock units that must be held for one year, for the Lead Independent Director. If the Lead Independent Director also serves as the Chair of a primary Committee, the Lead Independent Director will receive a total additional retainer of $20,000, unless the Committee determines otherwise.
Additional Options - Lead Independent Director and primary Committee Chairs (Audit, Compensation and Compliance)
Each shall be granted options to purchase 4,000 shares of Company stock per year of service in these roles, granted on, and priced as of the close of market on, the date of the Companys annual stockholder meeting, vesting 33 1 / 3 % per year beginning on the first anniversary of the grant date, expiring five years after the grant date. Vesting continues so long as the Director continues to serve on the Board (that is, does not require continued service as Lead Independent Director or Committee Chair). If the Lead Independent Director also serves as the Chair of a primary Committee, the Lead Independent Director will receive a total additional option grant of 4,000 shares (not 8,000 shares), unless the Committee determines otherwise.
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Additional Deferred Stock Units - Lead Independent Director and primary Committee Chairs (Audit, Compensation and Compliance)
Each shall be granted 1,500 deferred stock units on the date of the Companys annual stockholder meeting that must be held for one year. If the Lead Independent Director also serves as the Chair of a primary Committee, the Lead Independent Director will receive a total deferred stock units grant of 1,500 shares (not 3,000 shares), unless the Committee determines otherwise.
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Exhibit 12.1
DAVITA INC.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. Earnings for this purpose is defined as pretax income from operations adjusted by adding back fixed charges expensed during the period and debt refinancing charges. Fixed charges include debt expense (interest expense and the amortization of deferred financing costs), the estimated interest component of rental expense on operating leases, and capitalized interest.
Year ended December 31,
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2004
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2003
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2001
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2000
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(dollars in thousands) | ||||||||||||||||
Earnings adjusted for fixed charges: |
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Income before income taxes, and cumulative effect of a change in accounting principle |
$ | 361,884 | $ | 288,266 | $ | 267,257 | $ | 242,567 | $ | 39,223 | ||||||
Add: |
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Debt expense |
52,412 | 66,828 | 71,636 | 72,438 | 116,637 | |||||||||||
Interest portion of rental expense |
25,772 | 22,927 | 20,336 | 18,116 | 17,140 | |||||||||||
Debt refinancing charges |
26,501 | 48,930 | (1,629 | ) | 5,712 | |||||||||||
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78,184 | 116,256 | 140,902 | 88,925 | 139,489 | ||||||||||||
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$ | 440,068 | $ | 404,522 | $ | 408,159 | $ | 331,492 | $ | 178,712 | |||||||
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Fixed charges: |
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Debt expense |
52,412 | 66,828 | 71,636 | 72,438 | 116,637 | |||||||||||
Interest portion of rental expense |
25,772 | 22,927 | 20,336 | 18,116 | 17,140 | |||||||||||
Capitalized interest |
1,078 | 1,523 | 1,888 | 751 | 1,125 | |||||||||||
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$ | 79,262 | $ | 91,278 | $ | 93,860 | $ | 91,305 | $ | 134,902 | |||||||
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Ratio of earnings to fixed charges |
5.55 | 4.43 | 4.35 | 3.63 | 1.32 | |||||||||||
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Exhibit 21.1
SUBSIDIARIES OF THE COMPANY
Name |
Structure |
Jurisdiction
|
||
Astro, Hobby, West Mt. Renal Care Limited Partnership |
Limited Partnership | DE | ||
Austin Dialysis Centers, L.P. |
Limited Partnership | DE | ||
Bay Area Dialysis Partnership |
Partnership | FL | ||
Beverly Hills Dialysis Partnership |
Partnership | CA | ||
Brighton Dialysis Center, LLC |
Limited Liability Company | DE | ||
Capital Dialysis Partnership |
Partnership | CA | ||
Carroll County Dialysis Facility, Inc. |
Corporation | MD | ||
Carroll County Dialysis Facility Limited Partnership |
Limited Partnership | MD | ||
Central Carolina Dialysis Centers, LLC |
Limited Liability Company | DE | ||
Chicago Heights Dialysis, LLC |
Limited Liability Company | DE | ||
Continental Dialysis Center, Inc. |
Corporation | VA | ||
Continental Dialysis Center of Springfield-Fairfax, Inc. |
Corporation | VA | ||
DaVita Nephrology Medical Associates of California, Inc. |
Corporation | CA | ||
DaVita Nephrology Medical Associates of Illinois, P.C. |
Corporation | IL | ||
DaVita Nephrology Medical Associates of Washington, P.C. |
Corporation | WA | ||
DaVita Nephrology Associates of Utah, L.L.C. |
Limited Liability Company | UT | ||
DaVita - Riverside, LLC |
Limited Liability Company | DE | ||
DaVita - West, LLC |
Limited Liability Company | DE | ||
DaVita Denham Springs Kidney Care, LLC |
Limited Liability Company | DE | ||
DaVita Tidewater, LLC |
Limited Liability Company | DE | ||
Dialysis of Des Moines, LLC |
Limited Liability Company | DE | ||
Dialysis of North Atlanta, LLC |
Limited Liability Company | DE | ||
Dialysis of Northern Illinois, LLC |
Limited Liability Company | DE | ||
Dialysis Specialists of Dallas, Inc. |
Corporation | TX | ||
Downriver Centers, Inc. |
Corporation | DE | ||
Downtown Houston Dialysis Center, L.P. |
Limited Partnership | DE | ||
Durango Dialysis Center, LLC |
Limited Liability Company | DE | ||
East Dearborn Dialysis, LLC |
Limited Liability Company | DE | ||
East End Dialysis Center, Inc. |
Corporation | VA | ||
East Ft. Lauderdale, LLC |
Limited Liability Company | DE | ||
East Houston Kidney Center, L.P. |
Limited Partnership | DE | ||
Eastmont Dialysis Partnership |
Partnership | CA | ||
Elberton Dialysis Facility, Inc. |
Corporation | GA | ||
Elk Grove Dialysis Center, LLC |
Limited Liability Company | DE | ||
Flamingo Park Kidney Center, Inc. |
Corporation | FL | ||
Fullerton Dialysis Center, LLC |
Limited Liability Company | DE | ||
Garey Dialysis Center Partnership |
Partnership | CA | ||
Greenwood Dialysis, LLC |
Limited Liability Company | DE | ||
Guam Renal Care Partnership |
Partnership | GU | ||
Houston Acute Dialysis, L.P. |
Limited Partnership | DE | ||
Houston Kidney Center/Total Renal Care Integrated Service Network Limited Partnership |
Limited Partnership | DE | ||
Irvine Dialysis Center, LLC |
Limited Liability Company | DE | ||
Kidney Care Services, LLC |
Limited Liability Company | DE | ||
Kidney Care Rx, Inc. |
Corporation | DE | ||
Kidney Centers of Michigan, L.L.C. |
Limited Liability Company | DE | ||
Knickerbocker RC, Inc. |
Corporation | NY | ||
Lawrenceburg Dialysis, LLC |
Limited Liability Company | DE |
Page 1 of 3
Liberty RC, Inc. | Corporation | NY | ||
Lincoln Park Dialysis Services, Inc. | Corporation | IL | ||
Los Angeles Dialysis Center | Partnership | CA | ||
Louisville Dialysis Centers, LLC | Limited Liability Company | DE | ||
Marysville Dialysis Center, LLC | Limited Liability Company | DE | ||
Mason-Dixon Dialysis Facilities, Inc. | Corporation | MD | ||
Mid-City New Orleans Dialysis Partnership, LLC | Limited Liability Company | DE | ||
Middlesex Dialysis Center, LLC | Limited Liability Company | DE | ||
Moncrief Dialysis Center/Total Renal Care Limited Partnership | Limited Partnership | DE | ||
Muskogee Dialysis, LLC | Limited Liability Company | DE | ||
Nephrology Medical Associates of California, Inc. | Professional Corporation | CA | ||
Nephrology Medical Associates of Georgia, LLC | Limited Liability Company | GA | ||
North Atlanta Dialysis Center, LLC | Limited Liability Company | DE | ||
Ontario Dialysis Center, LLC | Limited Liability Company | DE | ||
Open Access Sonography, Inc. | Corporation | FL | ||
Orange Dialysis, LLC | Limited Liability Company | CA | ||
Pacific Dialysis Partnership | Partnership | GU | ||
Pacific Coast Dialysis Center | Partnership | CA | ||
PDI Holdings, Inc. | Corporation | DE | ||
PDI Supply, Inc. | Corporation | DE | ||
Peninsula Dialysis Center, Inc. | Corporation | VA | ||
Physicians Choice Dialysis of Alabama, LLC | Limited Liability Company | DE | ||
Physicians Choice Dialysis, LLC | Limited Liability Company | DE | ||
Physicians Dialysis Acquisitions, Inc. | Corporation | DE | ||
Physicians Dialysis of Lancaster, LLC | Limited Liability Company | PA | ||
Physicians Dialysis of Newark, LLC | Limited Liability Company | NJ | ||
Physicians Dialysis Ventures, Inc. | Corporation | DE | ||
Physicians Dialysis, Inc. | Corporation | DE | ||
Physicians Management, LLC | Limited Liability Company | DE | ||
Renal Life Link, Inc. | Corporation | DE | ||
Renal Treatment Centers - California, Inc. | Corporation | DE | ||
Renal Treatment Centers - Hawaii, Inc. | Corporation | DE | ||
Renal Treatment Centers - Illinois, Inc. | Corporation | DE | ||
Renal Treatment Centers, Inc. | Corporation | DE | ||
Renal Treatment Centers - Mid-Atlantic, Inc. | Corporation | DE | ||
Renal Treatment Centers - Northeast, Inc. | Corporation | DE | ||
Renal Treatment Centers - Southeast, LP | Limited Partnership | DE | ||
Renal Treatment Centers - West, Inc. | Corporation | DE | ||
Riverside County Home PD Program, LLC | Limited Liability Company | DE | ||
RMS DM, LLC | Limited Liability Company | DE | ||
RMS Lifeline, Inc. | Corporation | DE | ||
Rocky Mountain Dialysis Services, LLC | Limited Liability Company | DE | ||
RTC Holdings, Inc. | Corporation | DE | ||
RTC-Texas Acquisition, Inc. | Corporation | TX | ||
RTC TN, Inc. | Corporation | DE | ||
San Gabriel Valley Partnership | Partnership | CA | ||
Shining Star Dialysis, Inc. | Corporation | NJ | ||
Sierra Rose Dialysis Center, LLC | Limited Liability Company | DE | ||
Soledad Dialysis Center, LLC | Limited Liability Company | DE | ||
Southcrest Dialysis, LLC | Limited Liability Company | DE | ||
Southern Hills Dialysis Center, LLC | Limited Liability Company | DE | ||
Southwest Atlanta Dialysis Centers, LLC | Limited Liability Company | DE | ||
Southeast Florida Dialysis, LLC | Limited Liability Company | DE | ||
Spokane Dialysis, LLC | Limited Liability Company | DE | ||
Summit Dialysis Center, L.P. | Limited Partnership | DE | ||
Sun City Dialysis Center, L.L.C. | Limited Liability Company | DE |
Page 2 of 3
Total Acute Kidney Care, Inc. | Corporation | FL | ||
Total Nephrology Care Network Medical Associates, P.C. | Professional Corporation | IL | ||
Total Renal Care/Eaton Canyon Dialysis Center Partnership | Partnership | CA | ||
Total Renal Care/Hollywood Partnership | Partnership | CA | ||
Total Renal Care, Inc. | Corporation | CA | ||
Total Renal Care of Colorado, Inc. | Corporation | CO | ||
Total Renal Care North Carolina, LLC | Limited Liability Company | DE | ||
Total Renal Care of Utah, L.L.C. | Limited Liability Company | DE | ||
Total Renal Care/Peralta Renal Center Partnership | Partnership | CA | ||
Total Renal Care/Piedmont Dialysis Center Partnership | Partnership | CA | ||
Total Renal Care Texas Limited Partnership | Limited Partnership | DE | ||
Total Renal Laboratories, Inc. | Corporation | FL | ||
Total Renal Research, Inc. | Corporation | DE | ||
Total Renal Support Services of North Carolina, LLC | Limited Liability Company | DE | ||
TRC-Dyker Heights, L.P. | Limited Partnership | NY | ||
TRC El Paso Limited Partnership | Limited Partnership | DE | ||
TRC - Four Corners Dialysis Clinics, L.L.C. | Limited Liability Company | NM | ||
TRC - Georgetown Regional Dialysis LLC | Limited Liability Company | DC | ||
TRC - Indiana LLC | Limited Liability Company | IN | ||
TRC - Petersburg, LLC | Limited Liability Company | DE | ||
TRC of New York, Inc. | Corporation | NY | ||
TRC West, Inc. | Corporation | DE | ||
Tri-City Dialysis Center, Inc. | Corporation | VA | ||
Tulsa Dialysis, LLC | Limited Liability Company | DE | ||
Tustin Dialysis Center, LLC | Limited Liability Company | DE | ||
Weston Dialysis Center, LLC | Limited Liability Company | DE |
Page 3 of 3
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
DaVita Inc.:
We consent to the incorporation by reference in the registration statements on Forms S-8 (No. 33-84610, No. 33-83018, No. 33-99862, No. 33-99864, No. 333-1620, No. 333 -34693, No. 333-34695, No. 333-46887, No. 333-75361, No. 333-56149, No. 333-30734, No. 333-30736, No. 333-63158, No. 333-42653, No. 333-86550 and No. 333-86556) and Form S-3 (No. 333-69227) of DaVita Inc. of our reports dated February 25, 2005, with respect to the consolidated balance sheets of DaVita Inc. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2004, and the related financial statement schedule, managements assessment of the effectiveness of internal control over financial reporting as of December 31, 2004 and the effectiveness of internal control over financial reporting as of December 31, 2004, which reports appear in the December 31, 2004 annual report on Form 10-K of DaVita Inc.
/s/ KPMG LLP
Seattle, Washington
February 25, 2005
Exhibit 31.1
SECTION 302 CERTIFICATION
I, Kent J. Thiry, certify that:
1. I have reviewed this annual report on Form 10-K of DaVita Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ K ENT J. T HIRY |
Kent J. Thiry Chief Executive Officer |
Date: February 28, 2005
Exhibit 31.2
SECTION 302 CERTIFICATION
I, Denise K. Fletcher, certify that:
1. I have reviewed this annual report on Form 10-K of DaVita Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ D ENISE K. F LETCHER |
Denise K. Fletcher Chief Financial Officer |
Date: February 28, 2005
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of DaVita Inc. (the Company) on Form 10-K for the year ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the Periodic Report), I, Kent J. Thiry, Chief Executive Officer of the Company, certify, pursuant to 18.U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1. | The Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ K ENT J. T HIRY |
Kent J. Thiry |
Chief Executive Officer |
February 28, 2005
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of DaVita Inc. (the Company) on Form 10-K for the year ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the Periodic Report), I, Denise K. Fletcher, Chief Financial Officer of the Company, certify, pursuant to 18.U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1. | The Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ D ENISE K. F LETCHER |
Denise K. Fletcher Chief Financial Officer |
February 28, 2005
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.