Dialysis provider DaVita swings to loss on impairment charge

(Reuters) - DaVita Inc DVA.N, the biggest U.S. dialysis services provider, swung to a third-quarter loss due to an impairment charge it took for the continued underperformance of its Medical Group healthcare delivery and management unit.

The company said it took a $601 million goodwill impairment charge related to the unit, which manages patient groups and affiliated physician networks, mainly due to reimbursement pressures and a continued rise in medical costs.

“We recognize that the DaVita Medical Group business is not achieving our capital return expectation,” Chief Financial Officer Joel Ackerman said in a post-earnings conference call.

The company said it had also cut jobs in the Medical Group business, which accounted for about 30 percent of revenue in the quarter, and that resulted in an additional $10 million charge.

DaVita also adjusted its expectation of full-year adjusted operating income from its core kidney care business to between $1.57 billion and $1.60 billion, from a forecast of $1.565 billion to $1.625 billion.

The company’s shares fell 7.3 percent to $54.65 after the bell on Tuesday.

The results come amid an ongoing controversy over a U.S. rule aimed at preventing dialysis providers from using premium assistance from charities to steer patients into Obamacare individual insurance plans, instead of Medicare or Medicaid, to get higher payments for services.

In January, DaVita and its German rival Fresenius Medical Care FMEG.DE said they received subpoenas from U.S. federal prosecutors investigating the companies' ties to a charity, American Kidney Fund, that helps patients pay for dialysis.

The net loss attributable to DaVita was $214.5 million in the quarter ended Sept. 30, compared with a profit of $571.3 million a year earlier. It also posted a profit in the previous quarter.

Its operating expenses rose about 41 percent to $4.12 billion in the latest quarter, including due to the impairment charge.

Excluding items, DaVita earned 81 cents per share in the quarter, missing analysts average estimate of 94 cents, according to Thomson Reuters I/B/E/S.

Still, demand was strong for DaVita’s kidney care services, which accounts for about 70 percent of its revenue. The company said the volume of dialysis treatments increased 4.3 percent in the United States.

Total net revenue rose 5.2 percent to $3.92 billion, just above analysts’ expectations of $3.90 billion.

Reporting by Anuron Kumar Mitra and Divya Grover in Bengaluru; Editing by Savio D’Souza and Shounak Dasgupta