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Segment reporting
 9 Months Ended
Sep. 30, 2016
Segment Reporting [Abstract]  
Segment reporting

18.

Segment reporting

The Company operates two major divisions, DaVita Kidney Care (Kidney Care) and DaVita Medical Group (DMG). The Kidney Care division is comprised of the Company’s U.S. dialysis and related lab services business, various other ancillary services and strategic initiatives, including its international dialysis operations, and the Company’s corporate administrative support. The Company’s U.S. dialysis and related lab services business is its largest line of business, and is a leading provider of kidney dialysis services in the U.S. for patients suffering from chronic kidney failure, also known as ESRD. The Company’s DMG division is a patient- and physician-focused integrated health care delivery and management company with over two decades of providing coordinated outcomes-based medical care in a cost-effective manner.

The Company’s ancillary services and strategic initiatives consist primarily of pharmacy services, disease management services, vascular access services, clinical research programs, physician services, direct primary care and the Company’s international dialysis operations.

The Company’s operating segments have been defined based on the separate financial information that is regularly produced and reviewed by the Company’s chief operating decision maker in making decisions about allocating resources to and assessing the financial performance of the Company’s various operating lines of business. The chief operating decision maker for the Company is its Chief Executive Officer.

The Company’s separate operating segments include its U.S. dialysis and related lab services business, its DMG operations in each region, each of its ancillary services and strategic initiatives, and its consolidated international operations in the European and Middle Eastern, Latin America, and Asia Pacific markets, and under the Saudi Ministry of Health charter. The U.S. dialysis and related lab services business and the DMG business each qualify as separately reportable segments, and all of the other ancillary services and strategic initiatives operating segments, including the international operating segments, have been combined and disclosed in the other segments category.

The Company’s operating segment financial information included in this report is prepared on the internal management reporting basis that the chief operating decision maker uses to allocate resources and assess the financial performance of the operating segments. For internal management reporting, segment operations include direct segment operating expenses but exclude corporate administrative support costs, which consist primarily of indirect labor, benefits and long-term incentive based compensation of certain departments which provide support to all of the Company’s various operating lines of business. Corporate administrative support costs are reduced by internal management fees received from the Company’s ancillary lines of businesses.

The following is a summary of segment net revenues, segment operating margin (loss), and a reconciliation of segment operating margin to consolidated income before income taxes:

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Segment net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dialysis and related lab services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Patient service revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External sources

 

$

2,412,818

 

 

$

2,287,329

 

 

$

7,079,054

 

 

$

6,679,251

 

Intersegment revenues

 

 

16,040

 

 

 

13,630

 

 

 

44,819

 

 

 

39,078

 

Total dialysis and related lab services revenues

 

 

2,428,858

 

 

 

2,300,959

 

 

 

7,123,873

 

 

 

6,718,329

 

Less: Provision for uncollectible accounts

 

 

(109,299

)

 

 

(103,543

)

 

 

(320,565

)

 

 

(302,324

)

Net dialysis and related lab services patient

   service revenues

 

 

2,319,559

 

 

 

2,197,416

 

 

 

6,803,308

 

 

 

6,416,005

 

Other revenues(1)

 

 

3,912

 

 

 

3,490

 

 

 

12,134

 

 

 

10,214

 

Total net dialysis and related lab services

   revenues

 

 

2,323,471

 

 

 

2,200,906

 

 

 

6,815,442

 

 

 

6,426,219

 

DMG

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DMG revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capitated revenues

 

 

846,245

 

 

 

906,478

 

 

 

2,586,383

 

 

 

2,587,545

 

Net patient service revenues

 

 

153,089

 

 

 

78,938

 

 

 

417,634

 

 

 

241,385

 

Other revenues(2)

 

 

28,728

 

 

 

15,536

 

 

 

72,354

 

 

 

66,124

 

Intersegment capitated and other revenues

 

 

75

 

 

 

84

 

 

 

189

 

 

 

96

 

Total net DMG revenues

 

 

1,028,137

 

 

 

1,001,036

 

 

 

3,076,560

 

 

 

2,895,150

 

Other—Ancillary services and strategic initiatives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net patient service revenues

 

 

57,498

 

 

 

41,858

 

 

 

165,742

 

 

 

116,535

 

Capitated revenues

 

 

23,045

 

 

 

20,369

 

 

 

67,780

 

 

 

56,007

 

Other external sources

 

 

314,540

 

 

 

275,210

 

 

 

948,847

 

 

 

793,511

 

Intersegment revenues

 

 

16,642

 

 

 

7,385

 

 

 

43,189

 

 

 

18,079

 

Total ancillary services and strategic

   initiatives revenues

 

 

411,725

 

 

 

344,822

 

 

 

1,225,558

 

 

 

984,132

 

Total net segment revenues

 

 

3,763,333

 

 

 

3,546,764

 

 

 

11,117,560

 

 

 

10,305,501

 

Elimination of intersegment revenues

 

 

(32,757

)

 

 

(21,099

)

 

 

(88,197

)

 

 

(57,253

)

Consolidated net revenues

 

$

3,730,576

 

 

$

3,525,665

 

 

$

11,029,363

 

 

$

10,248,248

 

Segment operating margin (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dialysis and related lab services

 

$

452,187

 

 

$

461,899

 

 

$

1,341,432

 

 

$

795,255

 

DMG

 

 

33,094

 

 

 

82,562

 

 

 

(126,110

)

 

 

215,192

 

Other—Ancillary services and strategic initiatives

 

 

361,903

 

 

 

(30,118

)

 

 

338,159

 

 

 

(70,153

)

Total segment operating margin

 

 

847,184

 

 

 

514,343

 

 

 

1,553,481

 

 

 

940,294

 

Reconciliation of segment operating margin to

   consolidated income before income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate administrative support(3)

 

 

(28,028

)

 

 

(4,975

)

 

 

(40,366

)

 

 

(14,534

)

Consolidated operating income

 

 

819,156

 

 

 

509,368

 

 

 

1,513,115

 

 

 

925,760

 

Debt expense

 

 

(104,581

)

 

 

(103,481

)

 

 

(310,359

)

 

 

(305,121

)

Debt redemption and refinancing charges

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(48,072

)

Other income, net

 

 

1,876

 

 

 

2,484

 

 

 

8,067

 

 

 

4,262

 

Consolidated income before income taxes

 

$

716,451

 

 

$

408,371

 

 

$

1,210,823

 

 

$

576,829

 

 

(1)

Includes management fees for providing management and administrative services to dialysis centers that are wholly-owned by third parties and legal entities in which the Company owns a noncontrolling equity investment.

(2)

Includes medical consulting service fees and management fees for providing management and administrative services to unconsolidated joint ventures, as well as revenue related to the maintenance of existing physician networks.

(3)

Corporate administrative support costs also include $27,040 of an adjustment to reduce a receivable associated with the DMG acquisition escrow provision relating to an income tax item.

 

Depreciation and amortization expense by reportable segment is as follows:

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

U.S. dialysis and related lab services

 

$

122,540

 

 

$

111,828

 

 

$

358,427

 

 

$

326,281

 

DMG

 

 

52,595

 

 

 

43,523

 

 

 

153,068

 

 

 

129,890

 

Ancillary services and strategic initiatives

 

 

6,604

 

 

 

6,711

 

 

 

19,980

 

 

 

18,523

 

 

 

$

181,739

 

 

$

162,062

 

 

$

531,475

 

 

$

474,694

 

 

Summary of assets by reportable segment is as follows:

 

 

 

September 30,

 

 

December 31,

 

 

 

2016

 

 

2015

 

Segment assets

 

 

 

 

 

 

 

 

U.S. dialysis and related lab services (including equity

   investments of $41,624 and $34,801, respectively)

 

$

11,460,732

 

 

$

11,591,507

 

DMG (including equity investments of $11,293 and $22,714,

   respectively)

 

 

6,218,912

 

 

 

6,150,666

 

Other—Ancillary services and strategic initiatives (including

   equity investments of $463,466 and $20,853, respectively)

 

 

1,246,009

 

 

 

772,702

 

Consolidated assets

 

$

18,925,653

 

 

$

18,514,875

 

 

Expenditures for property and equipment by reportable segment is as follows:

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

U.S. dialysis and related lab services

 

$

182,741

 

 

$

138,683

 

 

$

467,121

 

 

$

385,734

 

DMG

 

 

17,396

 

 

 

18,885

 

 

 

55,639

 

 

 

36,870

 

Ancillary services and strategic initiatives

 

 

16,479

 

 

 

13,772

 

 

 

52,483

 

 

 

39,609

 

 

 

$

216,616

 

 

$

171,340

 

 

$

575,243

 

 

$

462,213