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Segment reporting
 12 Months Ended
Dec. 31, 2016
Segment Reporting [Abstract]  
Segment reporting

25.

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 ancillary services and strategic initiatives, including its international 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 healthcare 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 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 kidney care and other health operations in the European and Middle Eastern, Latin American, and Asian 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 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. These corporate administrative support costs are reduced by internal management fees received from the Company’s ancillary lines of business and were increased by the reduction of a tax asset associated with the DMG acquisition escrow provisions.

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

 

 

 

Year ended December 31,

 

 

 

2016

 

 

2015

 

 

2014

 

Segment revenues:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dialysis and related lab services

 

 

 

 

 

 

 

 

 

 

 

 

Patient service revenues:

 

 

 

 

 

 

 

 

 

 

 

 

External sources

 

$

9,482,648

 

 

$

8,980,515

 

 

$

8,513,089

 

Intersegment revenues

 

 

68,774

 

 

 

53,476

 

 

 

37,112

 

Total dialysis and related lab services revenues

 

 

9,551,422

 

 

 

9,033,991

 

 

 

8,550,201

 

Less: Provision for uncollectible accounts

 

 

(429,882

)

 

 

(406,530

)

 

 

(353,028

)

Net dialysis and related lab services patient service revenues

 

 

9,121,540

 

 

 

8,627,461

 

 

 

8,197,173

 

Other revenues(1)

 

 

16,649

 

 

 

13,971

 

 

 

13,498

 

Total net dialysis and related lab services revenues

 

 

9,138,189

 

 

 

8,641,432

 

 

 

8,210,671

 

DMG

 

 

 

 

 

 

 

 

 

 

 

 

DMG revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Capitated revenues

 

$

3,430,576

 

 

$

3,436,705

 

 

$

3,190,903

 

Net patient service revenues

 

 

621,583

 

 

 

317,950

 

 

 

219,306

 

Other revenues(2)

 

 

61,040

 

 

 

82,470

 

 

 

91,374

 

Intersegment capitated and other revenues

 

 

215

 

 

 

136

 

 

 

716

 

Total revenues

 

$

4,113,414

 

 

$

3,837,261

 

 

$

3,502,299

 

Other - Ancillary services and strategic initiatives

 

 

 

 

 

 

 

 

 

 

 

 

Net patient service revenues

 

$

228,459

 

 

$

160,484

 

 

$

122,087

 

Capitated revenues

 

 

88,103

 

 

 

72,390

 

 

 

70,385

 

Other external sources

 

 

1,245,929

 

 

 

1,123,882

 

 

 

927,492

 

Intersegment revenues

 

 

58,881

 

 

 

25,674

 

 

 

19,535

 

Total ancillary services and strategic initiatives revenues

 

 

1,621,372

 

 

 

1,382,430

 

 

 

1,139,499

 

Total net segment revenues

 

 

14,872,975

 

 

 

13,861,123

 

 

 

12,852,469

 

Elimination of intersegment revenues

 

 

(127,870

)

 

 

(79,286

)

 

 

(57,363

)

Consolidated net revenues

 

$

14,745,105

 

 

$

13,781,837

 

 

$

12,795,106

 

Segment operating margin (loss):

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dialysis and related lab services

 

$

1,777,014

 

 

$

1,259,632

 

 

$

1,637,626

 

DMG

 

 

(104,233

)

 

 

33,929

 

 

 

214,983

 

Other—Ancillary services and strategic initiatives

 

 

266,323

 

 

 

(103,901

)

 

 

(24,456

)

Total segment margin

 

 

1,939,104

 

 

 

1,189,660

 

 

 

1,828,153

 

Reconciliation of segment operating margin to consolidated income from continuing operations before income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate administrative support(3)

 

 

(44,561

)

 

 

(18,965

)

 

 

(13,012

)

Consolidated operating income

 

 

1,894,543

 

 

 

1,170,695

 

 

 

1,815,141

 

Debt expense

 

 

(414,382

)

 

 

(408,380

)

 

 

(410,294

)

Debt refinancing and redemption charges

 

 

—

 

 

 

(48,072

)

 

 

(97,548

)

Other income

 

 

8,734

 

 

 

8,893

 

 

 

2,374

 

Consolidated income from continuing operations before income taxes

 

$

1,488,895

 

 

$

723,136

 

 

$

1,309,673

 

 

 

(1)

Includes management fees for providing management and administrative services to dialysis centers in which the Company owns a noncontrolling interest or which are wholly-owned by third parties.

 

(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 in 2016 also include $30,934 of an adjustment to reduce a tax asset associated with the DMG acquisition escrow provisions.

Depreciation and amortization expense by segment is as follows:

 

 

 

December 31,

 

 

 

2016

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dialysis and related lab services

 

$

482,768

 

 

$

438,238

 

 

$

402,767

 

DMG

 

 

210,755

 

 

 

174,118

 

 

 

169,485

 

Other - Ancillary services and strategic initiatives

 

 

26,729

 

 

 

25,668

 

 

 

18,683

 

 

 

$

720,252

 

 

$

638,024

 

 

$

590,935

 

 

Summary of assets by segment is as follows:

 

 

 

December 31,

 

 

 

2016

 

 

2015

 

Segment assets

 

 

 

 

 

 

 

 

U.S. dialysis and related lab services (including equity investments of $66,924 and $29,801, respectively)

 

$

11,438,100

 

 

$

11,591,507

 

DMG (including equity investments of $10,350 and $22,714, respectively)

 

 

6,213,091

 

 

 

6,150,666

 

Other - Ancillary services and strategic initiatives(1) (including equity investments of $425,115 and $20,853, respectively)

 

 

1,090,066

 

 

 

772,702

 

Consolidated assets

 

$

18,741,257

 

 

$

18,514,875

 

 

 

(1)

Includes approximately $96,396 and $ 69,519 in 2016 and 2015, respectively, of net property and equipment related to the Company’s international operations.

Expenditures for property and equipment by segment is as follows:

 

 

 

December 31,

 

 

 

2016

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dialysis and related lab services

 

$

675,994

 

 

$

584,513

 

 

$

560,610

 

DMG

 

 

84,399

 

 

 

66,800

 

 

 

27,885

 

Other - Ancillary services and strategic initiatives

 

 

68,702

 

 

 

56,685

 

 

 

52,835

 

 

 

$

829,095

 

 

$

707,998

 

 

$

641,330