Item 16. Form 10-K Summary.

| --- | --- |

None.

DAVITA INC.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is 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 U.S. generally accepted accounting principles and which includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. 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 (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s 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 Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s internal control over financial reporting. This evaluation was completed based on the criteria established in the report titled “Internal Control—Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based upon our evaluation under the COSO framework, we have concluded that the Company’s internal control over financial reporting was effective as of December 31, 2016.

The Company’s independent registered public accounting firm, KPMG LLP, has issued an attestation report on the Company’s internal control over financial reporting, which report is included in this Annual Report.

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

DaVita Inc.:

We have audited the accompanying consolidated balance sheets of DaVita Inc. and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the three‑year period ended December 31, 2016. These consolidated financial statements are the responsibility of the Company’s 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, 2016 and 2015, and the results of their operations and their cash flows for each of the years in the three‑year period ended December 31, 2016, 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), DaVita Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 24, 2017 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

Seattle, Washington

February 24, 2017

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

DaVita Inc.:

We have audited DaVita Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control – Integrated Framework (2013) 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, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s 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, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s 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 company’s 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 company’s 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, DaVita Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (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, 2016 and 2015, and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2016, and our report dated February 24, 2017 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Seattle, Washington

February 24, 2017

F-3

DAVITA INC.

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)

		Year ended December 31,
		2016				2015				2014
Patient service revenues		$	10,354,161			$	9,480,279			$	8,868,338
Less: Provision for uncollectible accounts			(451,353	)			(427,860	)			(366,884	)
Net patient service revenues			9,902,808				9,052,419				8,501,454
Capitated revenues			3,518,679				3,509,095				3,261,288
Other revenues			1,323,618				1,220,323				1,032,364
Total net revenues			14,745,105				13,781,837				12,795,106
Operating expenses and charges:
Patient care costs and other costs			10,646,736				9,824,834				9,119,305
General and administrative			1,592,698				1,452,135				1,261,506
Depreciation and amortization			720,252				638,024				590,935
Provision for uncollectible accounts			11,677				9,240				14,453
Equity investment income			(13,044	)			(18,325	)			(23,234	)
Goodwill and other asset impairment charges			296,408				210,234			—
Gain on changes in ownership interests, net			(404,165	)		—				—
Settlement charge and loss contingency accrual		—					495,000				17,000
Total operating expenses and charges			12,850,562				12,611,142				10,979,965
Operating income			1,894,543				1,170,695				1,815,141
Debt expense			(414,382	)			(408,380	)			(410,294	)
Debt redemption and refinancing charges			—				(48,072	)			(97,548	)
Other income, net			8,734				8,893				2,374
Income before income taxes			1,488,895				723,136				1,309,673
Income tax expense			455,813				295,726				446,343
Net income			1,033,082				427,410				863,330
Less: Net income attributable to noncontrolling interests			(153,208	)			(157,678	)			(140,216	)
Net income attributable to DaVita Inc.		$	879,874			$	269,732			$	723,114
Earnings per share:
Basic net income per share attributable to DaVita Inc.		$	4.36			$	1.27			$	3.41
Diluted net income per share attributable to DaVita Inc.		$	4.29			$	1.25			$	3.33
Weighted average shares for earnings per share:
Basic			201,641,173				211,867,714				212,301,827
Diluted			204,904,656				216,251,807				216,927,681

See notes to consolidated financial statements.

F-4

DAVITA INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in thousands)

		Year ended December 31,
		2016				2015				2014
Net income		$	1,033,082			$	427,410			$	863,330
Other comprehensive income (losses), net of tax:
Unrealized losses on interest rate swap and cap agreements:
Unrealized losses on interest rate swap and cap agreements			(3,670	)			(12,241	)			(10,059	)
Reclassifications of net swap and cap agreements realized losses into net income			2,566				3,111				10,608
Unrealized gains (losses) on investments:
Unrealized gains (losses) on investments			1,427				(1,413	)			238
Reclassification of net investment realized gains into net income			(423	)			(377	)			(207	)
Foreign currency translation adjustments
Foreign currency translation adjustments			(39,614	)			(23,889	)			(22,952	)
Reclassification of foreign currency translation into net income			10,087				—				—
Other comprehensive loss			(29,627	)			(34,809	)			(22,372	)
Total comprehensive income			1,003,455				392,601				840,958
Less: Comprehensive income attributable to noncontrolling interests			(153,398	)			(157,678	)			(140,216	)
Comprehensive income attributable to DaVita Inc.		$	850,057			$	234,923			$	700,742

See notes to consolidated financial statements.

F-5

DAVITA INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

		December 31, 2016				December 31, 2015
ASSETS
Cash and cash equivalents		$	913,187			$	1,499,116
Short-term investments			310,198				408,084
Accounts receivable, less allowance of $252,056 and $264,144			1,917,302				1,724,228
Inventories			164,858				185,575
Other receivables			453,483				435,885
Other current assets			210,604				190,322
Income tax receivable			10,596				60,070
Total current assets			3,980,228				4,503,280
Property and equipment, net			3,175,367				2,788,740
Intangible assets, net			1,527,767				1,687,326
Equity investments			502,389				78,368
Long-term investments			103,679				89,122
Other long-term assets			44,510				73,560
Goodwill			9,407,317				9,294,479
		$	18,741,257			$	18,514,875
LIABILITIES AND EQUITY
Accounts payable		$	522,415			$	513,950
Other liabilities			856,847				682,123
Accrued compensation and benefits			815,761				741,926
Medical payables			336,381				332,102
Current portion of long-term debt			165,041				129,037
Total current liabilities			2,696,445				2,399,138
Long-term debt			8,947,327				9,001,308
Other long-term liabilities			465,358				439,229
Deferred income taxes			809,128				726,962
Total liabilities			12,918,258				12,566,637
Commitments and contingencies
Noncontrolling interests subject to put provisions			973,258				864,066
Equity:
Preferred stock ($0.001 par value, 5,000,000 shares authorized; none issued)
Common stock ($0.001 par value, 450,000,000 shares authorized; 194,554,491 and 217,120,346 shares issued and 194,554,491 and 209,754,247 shares outstanding, respectively)			195				217
Additional paid-in capital			1,027,182				1,118,326
Retained earnings			3,710,313				4,356,835
Treasury stock (7,366,099 shares at December 31, 2015)			—				(544,772	)
Accumulated other comprehensive loss			(89,643	)			(59,826	)
Total DaVita Inc. shareholders' equity			4,648,047				4,870,780
Noncontrolling interests not subject to put provisions			201,694				213,392
Total equity			4,849,741				5,084,172
		$	18,741,257			$	18,514,875

See notes to consolidated financial statements.

F-6

DAVITA INC.

CONSOLIDATED STATEMENTS OF CASH FLOW

(dollars in thousands)

		Year ended December 31,
		2016				2015				2014
Cash flows from operating activities:
Net income		$	1,033,082			$	427,410			$	863,330
Adjustments to reconcile net income to net cash provided by operating activities:
Settlement charge and loss contingency accrual			—				495,000				17,000
Depreciation and amortization			720,252				638,024				590,935
Goodwill and other asset impairment charges			296,408				210,234				—
Debt redemption and refinancing charges			—				48,072				97,548
Stock-based compensation expense			38,338				56,664				56,743
Tax benefits from stock award exercises			28,397				45,749				59,119
Excess tax benefits from stock award exercises			(13,251	)			(28,157	)			(45,271	)
Deferred income taxes			52,010				61,744				210,955
Equity investment income, net			17,766				9,293				10,125
Gain on sales of business interests, net			(404,165	)			—				—
Other non-cash charges, net			(7,338	)			44,691				39,274
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
Accounts receivable			(152,240	)			(202,867	)			(40,676	)
Inventories			22,920				(48,313	)			(46,398	)
Other receivables and other current assets			(54,038	)			32,761				(61,674	)
Other long-term assets			35,893				3,723				2,916
Accounts payable			11,897				30,998				(2,956	)
Accrued compensation and benefits			68,272				54,950				97,261
Other current liabilities			176,494				113,470				83,590
Settlement payments			—				(493,775	)			(410,356	)
Income taxes			62,230				24,175				(60,475	)
Other long-term liabilities			30,517				33,354				(1,583	)
Net cash provided by operating activities			1,963,444				1,557,200				1,459,407
Cash flows from investing activities:
Additions of property and equipment			(829,095	)			(707,998	)			(641,330	)
Acquisitions			(563,856	)			(96,469	)			(272,094	)
Proceeds from asset and business sales			64,725				19,715				8,791
Purchase of investments available-for-sale			(13,539	)			(8,783	)			(8,440	)
Purchase of investments held-to-maturity			(1,133,192	)			(1,709,883	)			(472,628	)
Proceeds from sale of investments available-for-sale			18,963				2,058				2,475
Proceeds from investments held-to-maturity			1,240,502				1,637,358				141,072
Purchase of intangible assets			—				—				(1,018	)
Purchase of equity investments			(27,096	)			(17,911	)			(35,382	)
Proceeds from sale of equity investments			40,920				—				—
Distributions received on equity investments			—				129				825
Net cash used in investing activities			(1,201,668	)			(881,784	)			(1,277,729	)
Cash flows from financing activities:
Borrowings			51,991,490				54,541,988				60,038,508
Payments on long-term debt and other financing costs			(52,115,932	)			(53,922,290	)			(60,046,487	)
Deferred financing and debt redemption and refinancing costs			(188	)			(76,672	)			(122,988	)
Purchase of treasury stock			(1,097,822	)			(549,935	)			—
Distributions to noncontrolling interests			(192,401	)			(174,635	)			(149,339	)
Stock award exercises and other share issuances, net			23,543				26,155				19,500
Excess tax benefits from stock award exercises			13,251				28,157				45,271
Contributions from noncontrolling interests			47,590				54,644				64,655
Proceeds from sales of additional noncontrolling interests			—				—				3,777
Purchases of noncontrolling interests			(21,512	)			(66,382	)			(17,876	)
Net cash used in financing activities			(1,351,981	)			(138,970	)			(164,979	)
Effect of exchange rate changes on cash and cash equivalents			4,276				(2,571	)			2,293
Net (decrease) increase in cash and cash equivalents			(585,929	)			533,875				18,992
Cash and cash equivalents at beginning of the year			1,499,116				965,241				946,249
Cash and cash equivalents at end of the year		$	913,187			$	1,499,116			$	965,241

See notes to consolidated financial statements.

F-7

DAVITA INC.

CONSOLIDATED STATEMENTS OF EQUITY

(dollars and shares in thousands)

							DaVita Inc. Shareholders' Equity																																Non-
		Non-					Common stock																Treasury stock																controlling
		controlling interests subject to put provisions					Shares				Amount				Additional paid-in capital				Retained earnings				Shares				Amount				Accumulated other comprehensive income (loss)				Total				interests not subject to put provisions
Balance at December 31, 2013		$	697,300					213,163			$	213			$	1,070,922			$	3,363,989			$	—			$	—			$	(2,645	)		$	4,432,479			$	173,062
Comprehensive income:
Net income			88,425																	723,114																723,114				51,791
Other comprehensive loss																																(22,372	)			(22,372	)
Stock purchase shares issued								298				—				19,010																				19,010
Stock unit shares issued								304				1				(28	)																			(27	)
Stock-settled SAR shares issued								1,876				2				(2	)																			—
Stock-settled stock-based compensation expense																54,969																				54,969
Excess tax benefits from stock awards exercised																45,271																				45,271
Distributions to noncontrolling interests			(93,884	)																																				(55,455	)
Contributions from noncontrolling interests			41,876																																					22,779
Sales and assumptions of additional noncontrolling interests			25,220													355																				355				4,165
Purchases from noncontrolling interests			(6,111	)												(5,357	)																			(5,357	)			(6,544	)
Other reclassification																210																				210
Changes in fair value of noncontrolling interests			77,139													(77,139	)																			(77,139	)
Balance at December 31, 2014		$	829,965					215,641			$	216			$	1,108,211			$	4,087,103			$	—			$	—			$	(25,017	)		$	5,170,513			$	189,798
Comprehensive income:
Net income			96,510																	269,732																269,732				61,168
Other comprehensive loss																																(34,809	)			(34,809	)
Stock purchase shares issued								—				—				(6,079	)							414				30,608								24,529
Stock unit shares issued								348				—				—																				—
Stock-settled SAR shares issued								1,131				1				(1	)																			—
Stock-settled stock-based compensation expense																56,899																				56,899
Excess tax benefits from stock awards exercised																28,157																				28,157
Distributions to noncontrolling interests			(103,355	)																																				(71,280	)
Contributions from noncontrolling interests			25,795																																					28,849
Sales and assumptions of additional noncontrolling interests			10,654																																					6,875
Purchases from noncontrolling interests			(8,538	)												(55,826	)																			(55,826	)			(2,018	)
Changes in fair value of noncontrolling interests			13,035													(13,035	)																			(13,035	)
Purchase of treasury stock																								(7,780	)			(575,380	)							(575,380	)
Balance at December 31, 2015		$	864,066					217,120			$	217			$	1,118,326			$	4,356,835				(7,366	)		$	(544,772	)		$	(59,826	)		$	4,870,780			$	213,392

F-8

DAVITA INC.

CONSOLIDATED STATEMENTS OF EQUITY — (continued)

(dollars and shares in thousands)

							DaVita Inc. Shareholders' Equity																																Non-
		Non-					Common stock																Treasury stock																controlling
		controlling interests subject to put provisions					Shares				Amount				Additional paid-in capital				Retained earnings				Shares				Amount				Accumulated other comprehensive income (loss)				Total				interests not subject to put provisions
Comprehensive income:
Net income			99,834																	879,874																879,874				53,374
Other comprehensive loss																																(29,817	)			(29,817	)			190
Stock purchase shares issued								438				1				23,902								—				—								23,903
Stock unit shares issued								4				—				(19,815	)							276				19,815								—
Stock-settled SAR shares issued								218				—				(36,685	)							513				36,685								—
Stock-settled stock-based compensation expense																37,970																				37,970
Excess tax benefits from stock awards exercised																13,251																				13,251
Distributions to noncontrolling interests			(111,092	)																																				(81,309	)
Contributions from noncontrolling interests			33,517																																					14,073
Sales and assumptions of additional noncontrolling interests			28,874													3,423																				3,423				2,585
Purchases from noncontrolling interests			(6,660	)												(13,105	)																			(13,105	)			(1,747	)
Changes in fair value of noncontrolling interests			65,855													(65,855	)																			(65,855	)
Reclassifications and expirations of noncontrolling interests subject to puts			(1,136	)																																				1,136
Purchase of treasury stock																								(16,649	)			(1,072,377	)							(1,072,377	)
Retirement of treasury stock								(23,226	)			(23	)			(34,230	)			(1,526,396	)			23,226				1,560,649								—
Balance at December 31, 2016		$	973,258					194,554			$	195			$	1,027,182			$	3,710,313				—			$	—			$	(89,643	)		$	4,648,047			$	201,694

See notes to consolidated financial statements.

F-9

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

1.	Organization and summary of significant accounting policies

Organization

DaVita Inc. operates two major divisions, DaVita Kidney Care (Kidney Care) and DaVita Medical Group (DMG, formerly known as HealthCare Partners or HCP). Kidney Care is comprised of the Company’s U.S. dialysis and related lab services, its ancillary services and strategic initiatives, including its international operations, and its corporate administrative support. The Company’s largest line of business is its U.S. dialysis and related lab services business, which operates kidney dialysis centers in the U.S. for patients suffering from chronic kidney failure also known as end stage renal disease (ESRD). As of December 31, 2016, the Company operated or provided administrative services through a network of 2,350 U.S. outpatient dialysis centers in 46 states and the District of Columbia, serving approximately 187,700 patients. The Company’s DMG division is a patient- and physician-focused integrated healthcare delivery and management company that provides medical services to members primarily through capitation contracts with some of the nation’s leading health plans.

In addition, as of December 31, 2016, the Company operated or provided administrative services to 154 outpatient dialysis centers serving approximately 15,100 patients located in 11 countries outside of the U.S.

The Company’s U.S. dialysis and related lab services business and DMG qualify as separately reportable segments and the Company’s other ancillary services and strategic initiatives, including its international operations, have been combined and disclosed in the other segments category.

Basis of presentation

These consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (U.S. GAAP). The financial statements include DaVita Inc. and its subsidiaries, partnerships and other entities in which it maintains a majority voting interest or other controlling financial interest (collectively, the Company). All significant intercompany transactions and balances have been eliminated. Non-marketable equity investments are recorded under the equity or cost method of accounting based upon whether the Company has significant influence over the investee. For the Company’s international subsidiaries, local currencies are considered their functional currencies. Translation adjustments result from translating the Company’s international subsidiaries’ financial statements from their functional currencies into the Company’s reporting currency (USD). Prior year balances and amounts have been reclassified to conform to the current year presentation.

The Company has evaluated subsequent events through the date these consolidated financial statements were issued and has included all necessary adjustments and disclosures.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities, contingencies and noncontrolling interests subject to put provisions. Although actual results in subsequent periods will differ from these estimates, such estimates are developed based on the best information available to management and management’s best judgments at the time. All significant assumptions and estimates underlying the amounts reported in the financial statements and accompanying notes are regularly reviewed and updated when necessary. 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 accounts receivable, contingencies, impairments of long-lived assets and goodwill, valuation adjustments, accounting for income taxes, quarterly, annual and long-term variable compensation accruals, consolidation of variable interest entities, purchase accounting valuation estimates, other fair value estimates, stock-based compensation and medical liability claims. Specific estimating risks and contingencies are further addressed within these notes to the consolidated financial statements.

F-10

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Patient service net revenues and accounts receivable

U.S. dialysis and related lab services

Patient service net revenues are recognized in the period services are provided. Revenues consist primarily of payments from Medicare, Medicaid and commercial health plans for dialysis and ancillary services provided to patients. A usual and customary fee schedule is maintained for the Company’s dialysis treatments and other patient services; however, actual collectible revenue is normally recognized at a discount from the fee schedule.

Revenues associated with Medicare and Medicaid programs are recognized based on: (a) the payment rates that are established by statute or regulation for the portion of payment rates paid by the government payor (e.g., 80% for Medicare patients) and (b) for the portion not paid by the primary government payor, estimates of the amounts ultimately collectible from other government programs paying secondary coverage (e.g., Medicaid secondary coverage), the patient’s commercial health plan secondary coverage, or the patient. The Company’s reimbursements from Medicare are subject to certain variations under Medicare’s single bundled payment rate system, whereby reimbursements can be adjusted for certain patient characteristics and other factors. The Company’s revenue recognition will depend upon its ability to effectively capture, document and bill for Medicare’s base payment rate as well as these other variable factors.

Revenues associated with commercial health plans are estimated based on contractual terms for the patients under healthcare plans with which the Company has formal agreements, non-contracted health plan coverage terms if known, estimated secondary collections, historical collection experience, historical trends of refunds and payor payment adjustments (retractions), inefficiencies in the Company’s billing and collection processes that can result in denied claims for payments, and regulatory compliance matters.

Commercial revenue recognition also involves significant estimating risks. With many larger, commercial insurers the Company has several different contracts and payment arrangements, and these contracts often include only a subset of the Company’s centers. It is often not possible to determine which contract, if any, should be applied prior to billing. In addition, for services provided by non-contracted centers, final collection may require specific negotiation of a payment amount, typically at a significant discount from the Company’s usual and customary rates.

Under Medicare’s bundled payment rate system, services covered by Medicare are subject to estimating risk, whereby reimbursements from Medicare can vary significantly depending upon certain patient characteristics and other variable factors. Even with the bundled payment rate system, Medicare payments for bad debt claims as established by cost reports require evidence of collection efforts. As a result, billing and collection of Medicare bad debt claims can be delayed significantly and final payment is subject to audit.

Medicaid payments, when Medicaid coverage is secondary, can also be difficult to estimate. For many states, Medicaid payment terms and methods differ from Medicare, and may prevent accurate estimation of individual payment amounts prior to billing.

The Company’s range of revenue estimating risk for the dialysis and related lab services segment is generally expected to be within 1% of its revenue. Changes in revenue estimates for prior periods are not material.

Other patient service revenues

Patient service revenues earned by DMG are recognized in the period services are provided, net of an estimated contractual allowance and are mainly attributable to primary care physician services and certain other specialty care services provided to patients.

Capitated revenue

DMG capitated revenue

The Company’s associated medical groups are licensed to contract with health maintenance organizations (HMOs), to provide physician services in California under capitation contracts, and to provide both hospital and physician services under global risk capitation contracts in Florida and Nevada. DMG’s revenues consist primarily of fees for medical services provided by these medical group entities’ payments from capitated contracts with various HMOs and revenues under risk-sharing programs. Capitation revenue under HMO contracts is prepaid monthly based on the number of enrollees electing physicians affiliated with one of the medical group entities as their healthcare provider, regardless of the level of actual medical services utilized. Capitation revenue is reported as revenue in the month in which enrollees are entitled to receive healthcare. A portion of the capitation revenue pertaining to Medicare enrollees is subject to possible retroactive premium risk adjustments based on their individual acuity. Due to lack of sufficient data to

F-11

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

project the amount of such retroactive adjustments, the Company records any corresponding retroactive revenues in the year of receipt.

Depending on the applicable state regulation regarding global risk capitation, revenues may be received by the Company or by an independent hospital with which the Company contracts under various managed care-related administrative services agreements. In the Florida and Nevada service markets, the global capitation revenue is recorded by the Company with the corresponding cost of medical care reported by the Company as patient care costs. In California, the Company receives professional capitation and either the health plan retains the capitated revenues in a shared risk pool or the independent hospitals receive the institutional capitation revenues. The revenues are used to pay medical claims for the related enrollees. The Company is entitled to any residual amounts and bears the risk of any deficits. In all cases, an estimate is made for the cost of medical services that have been incurred and where no medical claim has been received (IBNR). DMG enters into contracts with health plans allowing it to recognize revenue under global capitation arrangements for both professional and institutional services. DMG has converted three separate contracts to global risk in California and is in the approval and implementation process to convert more.

Under risk-sharing programs, the medical groups share in the risk for hospitalization services and earn additional incentive revenues or incur penalties based on the utilization of hospital services. Estimated shared-risk receivables from the HMOs are recorded based upon hospital utilization and associated costs incurred by assigned HMO enrollees, including an estimate of IBNR compared to budgeted funding. Differences between actual contract settlements and estimated receivables or payables are recorded in the year of final settlement. The medical groups also receive other incentive payments from health plans based on specified performance and quality criteria. These amounts are accrued when earned and the amounts can be reasonably estimated, and are included in DMG’s capitated revenues.

Other capitated revenues

One of the Company’s subsidiaries operates Medicare Advantage ESRD Special Needs Plans in partnerships with payors that work with CMS to provide full service healthcare to ESRD patients. The Company is at risk for all medical costs of the program in excess of the capitation payments.

Other revenues

Other revenues consist of the non-patient service revenues associated with the ancillary services and strategic initiatives, management and administrative support services that are provided to outpatient dialysis centers that the Company does not own or in which the Company owns a noncontrolling interest, retail pharmacies and medical consulting services. The Company also provides administrative and management support services to certain other non-dialysis joint ventures in which the Company owns a noncontrolling interest. 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 revenues when earned and represent less than 1% of total consolidated operating revenues. Revenues related to medical consulting services are recognized in the period services are provided.

Allowance for uncollectible accounts

Net revenue recognition and allowances for uncollectible billings require the use of estimates of the amounts that will ultimately be realized considering, among other items, retroactive adjustments that may be associated with regulatory reviews, audits, billing reviews and other matters. The Company’s policy is to write off any uncollectible accounts receivable balance only after all collection efforts have been exhausted or when write off is mandated by federal or state policies or required by certain payor contracts. It is also the Company’s policy to write off any accounts receivable balance associated with any payors or patients when the Company receives notification of a bankruptcy filing.

Other income

Other income includes interest income on cash investments, gains (losses) on foreign currency translation adjustments and other non-operating gains from investment transactions, as well as realized foreign currency transaction gains and losses.

Cash and cash equivalents

Cash equivalents are short-term highly liquid investments with maturities of three months or less at date of purchase.

F-12

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market and consist principally of pharmaceuticals and dialysis-related supplies. Rebates related to inventory purchases are recorded when earned and are based on certain qualification requirements which are dependent on a variety of factors including future pricing levels by the manufacturer and data submission.

Funds on deposit with a third party

The Company’s DMG business has established a risk sharing arrangement with a California hospital, wherein the Company shares in any surplus or deficit. One of the terms of this agreement is the establishment of a segregated investment fund to ensure adequate cash to pay IBNR. The Company and the hospital monitor the reserve balance to maintain the adequacy of funds on deposit. The Company has $75,877 in such funds as of December 31, 2016, included in other current assets on the consolidated balance sheet.

Property and equipment

Property and equipment is stated at cost less accumulated depreciation and amortization and is further 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 economic useful life or the expected lease term; and equipment and information systems, principally three to eight years. Disposition gains and losses are included in current operating expenses.

Amortizable intangibles

Amortizable intangible assets and liabilities include customer relationships, trade names, provider networks, supply agreements, practice management tools, non-competition and similar agreements, lease agreements and hospital acute services contracts, each of which have finite useful lives. Amortization expense is computed using the straight-line method over the useful lives of the assets estimated as follows: customer relationships, principally ten to twenty years; provider networks and practice management tools, two to fifteen years; trade names, principally four years; non-competition and similar agreements, two to ten years; and lease agreements and hospital acute service contracts, over the term of the lease or contract period, respectively.

Equity investments

Equity investments that do not have readily determinable fair values are carried on the cost or equity method, as applicable. The Company classifies its cost and equity method investments as “Equity investments” on its balance sheet. See Note 8 to these consolidated financial statements for further details.

Investments in debt and equity securities

The Company classifies certain debt securities as held-to-maturity and records them at amortized cost based on the Company’s intentions and strategies concerning those investments. Equity securities that have readily determinable fair values, and certain other financial instruments that have readily determinable fair values or redemption values, are classified as available for sale and recorded at estimated fair value.

Goodwill

Goodwill represents the difference between the fair value of businesses acquired and the fair value of the identifiable tangible and intangible net assets acquired. Goodwill is not amortized, but is assessed at the reporting unit for impairment as circumstances warrant and at least annually. An impairment charge is recorded to the extent the carrying amount of goodwill exceeds its implied fair value. The Company operates several reporting units for goodwill impairment assessments. See Note 10 to these consolidated financial statements for further details.

Impairment of long-lived assets

Long-lived assets, including property and equipment, equity investments in non-consolidated businesses, and amortizable intangible assets are reviewed for possible impairment whenever significant events or changes in circumstances indicate that an impairment may have occurred, including changes in the Company’s business strategy and plans, changes in the quality or structure of its relationships with its partners or deteriorating operating performance of individual outpatient dialysis centers or other operations. An impairment is indicated when the sum of the expected future undiscounted net cash flows identifiable to an asset group is less than

F-13

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

its carrying amount. Impairment losses are measured based upon the difference between the actual or estimated fair values, which are based on market values, net realizable values or projections of discounted net cash flows, as appropriate, and the carrying amount of the asset group. Impairment charges are included in operating expenses. Indefinite-lived intangible assets are reviewed for possible impairment at least annually or whenever significant events or changes in circumstances indicate that an impairment may have occurred.

Self insurance

The Company’s Kidney Care division records insurance liabilities for professional and general liability and workers’ compensation in excess of certain individual and or aggregate amounts not covered by third-party carriers. The Company’s Kidney Care division estimates the self-insured retention portion of professional and general liability and workers’ compensation risks using third-party actuarial calculations that are based upon historical claims experience and expectations for future claims. In addition, DMG has purchased external primary professional and general liability insurance from California Medical Group Insurance (CMGI) in which the Company owns an equity interest of 67%.

Medical liability costs

The medical groups are responsible for integrated care that the associated physicians and contracted hospitals provide to assigned HMO enrollees. The Company provides integrated care to health plan enrollees through a network of contracted providers under sub-capitation and direct patient service arrangements, company-operated clinics and staff physicians. Medical costs for professional and institutional services rendered by contracted providers are recorded as patient care costs in the consolidated statements of income. Costs for operating medical clinics, including the salaries of medical and non-medical personnel and support costs, are also recorded in patient care costs.

An estimate of amounts due to contracted physicians, hospitals, and other professional providers for members under global and professional risk arrangements is included in medical payables in the accompanying consolidated balance sheets. Medical payables include claims reported as of the balance sheet date and estimates of IBNR. Such estimates are developed using actuarial methods and are based on many variables, including the utilization of healthcare services, historical payment patterns, cost trends, product mix, seasonality, changes in membership, and other factors. The estimation methods and the resulting reserves are continually reviewed and updated. Many of the medical contracts are complex in nature and may be subject to differing interpretations regarding amounts due for the provision of various services. Such differing interpretations may not come to light until a substantial period of time has passed following the contract implementation. Any adjustments to reserves are reflected in current operations.

Income taxes

Federal and state income taxes are computed at currently enacted tax rates less tax credits using the asset and liability method. Deferred taxes are adjusted both for items that do not currently 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, changes in the recognition of tax positions and any changes in the valuation allowance caused by a change in judgment about the realizability of the related deferred tax assets. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.

The Company uses a recognition threshold of more-likely-than-not and a measurement attribute on all tax positions taken or expected to be taken in a tax return in order to be recognized in the financial statements. Once the recognition threshold is met, the tax position is then measured to determine the actual amount of benefit to recognize in the financial statements.

Stock-based compensation

The Company’s stock-based compensation awards are measured at their estimated fair values on the date of grant if settled in shares or at their estimated fair values at the end of each reporting period if settled in cash. The value of stock-based awards so measured is recognized as compensation expense on a cumulative straight-line basis over the vesting terms of the awards, adjusted for expected forfeitures. Stock-based compensation to be settled in shares is recorded to the Company’s shareholders’ equity, while stock-based compensation to be settled in cash is recorded to a liability.

F-14

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Interest rate swap and cap agreements

The Company often carries a combination of interest rate caps, forward interest rate caps, or interest rate swaps on portions of its variable rate debt as a means of hedging its exposure to changes in LIBOR interest rates as part of its overall interest rate risk management strategy. These interest rate caps and swaps are not held for trading or speculative purposes and are typically designated as qualifying cash flow hedges. See Note 14 to these consolidated financial statements for further details.

Noncontrolling interests

Noncontrolling interests represent third-party equity ownership interests in entities which are consolidated by the Company for financial statement reporting purposes. As of December 31, 2016, third parties held noncontrolling equity interests in 490 consolidated legal entities.

Fair value estimates

The Company currently measures the fair value of certain assets, liabilities (including contingent earn-out consideration) and noncontrolling interests subject to put provisions (temporary equity) based upon valuation techniques that include observable or unobservable market inputs and assumptions that market participants would use in pricing these assets, liabilities and temporary equity. The Company has also classified its assets, liabilities and temporary equity into the appropriate fair value hierarchy levels as defined by the Financial Accounting Standards Board (FASB). See Note 24 to the consolidated financial statements for further details.

New accounting standards

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. In July 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date. This guidance approves a one-year deferral of the effective date of ASU 2014-09. The ASU now permits the Company to adopt this standard effective January 1, 2018. Early application is permitted as of January 1, 2017. In March, April, and May 2016, the FASB issued ASU 2016-08, ASU 2016-10, ASU 2016-11, and ASU 2016-12, Revenue from Contracts with Customers (Topic 606), each of which amends the guidance in ASU 2014-09. When they become effective, these ASUs will replace most existing revenue recognition guidance in U.S. GAAP. The Company has assembled an internal revenue task force that meets regularly to discuss and evaluate the overall impact this guidance will have on various revenue streams in the consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor determined the effect of these ASUs on its ongoing financial reporting. The Company expects to adopt these ASU’s effective January 1, 2018.

In January 2016, the FASB issued ASU No. 2016-01, Financial Statements – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this ASU revise accounting related to (i) the classification and measurement of investments in equity securities and (ii) the presentation of certain fair value changes for financial liabilities at fair value. The amendments in this ASU are effective for the Company beginning on January 1, 2018 and are to be applied through a cumulative effect adjustment to the statement of financial position. Early adoption is permitted under certain circumstances. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments in this ASU revise the accounting related to lessee accounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for substantially all leases with lease terms in excess of twelve months. The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The amendments in this ASU are effective for the Company beginning on January 1, 2019 and are to be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. The Company has assembled an internal lease task force that meets regularly to discuss and evaluate the overall impact of this guidance on its consolidated financial statements and related disclosures, as well as the expected timing of adoption. The Company believes that the new standard will have a material impact on its consolidated balance sheet but will not have a material impact on its results of operations or liquidity. The Company continues to evaluate the effect that the implementation of this ASU will have on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-07, Investments – Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting. The amendments in this ASU eliminate the requirement that when an investment

F-15

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments in this ASU are effective for the Company beginning on January 1, 2017 to be applied prospectively. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The changes required by this ASU involve several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this ASU are effective for the Company beginning January 1, 2017. The method of adoption differs for each of the topics covered by the ASU. The Company expects that the primary effect of this ASU will be the presentation of excess tax benefits or deficiencies within the Company’s consolidated statement of income as a component of income tax expense rather than within additional paid-in capital on its consolidated balance sheet. In addition, these amounts will be presented as an operating activity on the consolidated statement of cash flows rather than as a financing activity. The new standard may cause volatility in the Company’s effective tax rates and diluted earnings per share due to the tax effects related to share-based payments being recorded within the Company’s consolidated statement of income, including a potential increase in the Company’s provision for income taxes if a significant number of outstanding stock awards are exercised at recent levels of the Company’s stock price.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The amendments in this ASU clarify how certain cash receipts and cash payments should be classified on the statement of cash flows. The new standard is effective for the Company beginning January 1, 2018 and should be applied retrospectively to all periods presented. The Company has not yet determined the effect that adoption of this ASU will have on its consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. The amendments in this ASU allow entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The current guidance does not allow recognition until the asset has been sold to an outside party. The amendments in this ASU are effective for the Company beginning on January 1, 2018 and are to be applied on a modified retrospective basis. The Company has not yet determined the effect that adoption of this ASU will have on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The amendments in this ASU simplify the test for goodwill impairment by eliminating the second step in testing for goodwill impairment. The amendments in this new ASU are effective for the Company January 1, 2020 and are to be applied on a prospective basis. Early adoption is permitted after January 1, 2017. The Company is evaluating the effect that the implementation of this ASU will have on its consolidated financial statements, related disclosures and timing of implementation.

2.	Earnings per share

Basic net income per share is calculated by dividing net income attributable to the Company, adjusted for any change in noncontrolling interest redemption rights in excess of fair value, by the weighted average number of common shares and vested stock units outstanding, net of shares held in escrow that under certain circumstances may be returned to the Company.

Diluted net income per share includes the dilutive effect of outstanding stock-settled stock appreciation rights (SSARs), stock options and unvested stock units (under the treasury stock method) as well as shares held in escrow that the Company expects will remain outstanding.

F-16

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

The reconciliations of the numerators and denominators used to calculate basic and diluted net income per share are as follows:

		Year ended December 31,
		2016				2015				2014
		(shares in thousands)
Basic:
Net income attributable to DaVita Inc. for basic earnings per share calculation		$	879,874			$	269,732			$	723,114
Weighted average shares outstanding during the period			203,835				214,062				214,496
Contingently returnable shares held in escrow for the DaVita HealthCare Partners merger			(2,194	)			(2,194	)			(2,194	)
Weighted average shares for basic earnings per share calculation			201,641				211,868				212,302
Basic net income per share attributable to DaVita Inc.		$	4.36			$	1.27			$	3.41
Diluted:
Net income attributable to DaVita Inc. for diluted earnings per share calculation		$	879,874			$	269,732			$	723,114
Weighted average shares outstanding during the period			203,835				214,062				214,496
Assumed incremental shares from stock plans			1,070				2,190				2,432
Weighted average shares for diluted earnings per share calculation			204,905				216,252				216,928
Diluted net income per share attributable to DaVita Inc.		$	4.29			$	1.25			$	3.33
Anti-dilutive stock-settled awards excluded from calculation(1)			2,523				1,365				1,715

(1)	Shares associated with stock-settled stock appreciation rights excluded from the diluted denominator calculation because they are anti-dilutive under the treasury stock method.

3.	Accounts receivable

For both years ending December 31, 2016 and 2015, approximately 81% of the Company’s consolidated net accounts receivable is related to patient and other services, and approximately 19% is related to capitated health plans.

Approximately 16% and 18% of the Company’s net patient services accounts receivable balances as of December 31, 2016 and 2015, respectively, were more than six months old, and there were no significant balances over one year old. Accounts receivable are principally from Medicare and Medicaid programs and commercial insurance plans.

Accounts receivable are reduced by an allowance for doubtful accounts. In evaluating the ultimate collectability of its accounts receivable, the Company analyzes its historical cash collection experience and trends for each payor to estimate the adequacy of the allowance for doubtful accounts and the amount of the provision for uncollectible accounts. Management regularly updates its analysis based upon the most recent information available to it to determine its current provision for uncollectible accounts and the adequacy of its allowance for doubtful accounts.

For receivables associated with dialysis and related lab services covered by government payors, like Medicare, the Company receives 80% of the payment directly from Medicare as established under the government’s bundled payment system and determines an appropriate allowance for doubtful accounts and provision for uncollectible accounts on the remaining balance due depending upon the Company’s estimate of the amounts ultimately collectible from other secondary coverage sources or from the patients. For receivables associated with services to patients covered by commercial payors that are either based upon contractual terms or for non-contracted health plan coverage, the Company provides an allowance for doubtful accounts by recording a provision for uncollectible accounts based upon its historical collection experience, potential inefficiencies in its billing processes and for which collectability is determined to be unlikely.

For receivables associated with the Company’s capitated health plans, the balances remain on the balance sheet for as long as the respective plan years are open, which varies by health plan, but is generally two years in length. The majority of the Company’s capitated health plans accounts receivable is one to three months old with collections occurring on a periodic basis throughout the duration of the corresponding plan year.

F-17

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Approximately 1% of the Company’s U.S. dialysis and related lab services net accounts receivable are associated with patient pay and it is the Company’s policy to reserve 100% of the outstanding accounts receivable balances for dialysis services when those amounts due are outstanding for more than three months and to reserve 100% of the outstanding patient pay accounts receivable balances for DMG’s services when those amounts due have been outstanding for more than twelve months.

During the year ended December 31, 2016, the Company’s allowance for doubtful accounts decreased by $12,088. The decrease in 2016 was primarily due to an increase in the write-offs of patient pay billings in the Company’s U.S. dialysis business. The decrease was also due to a reduction in accounts receivable older than six months. During the year ended December 31, 2015, the Company’s allowance for doubtful accounts increased by $21,470. The increase in 2015 was primarily due to an increase in the provision for uncollectible accounts due to an increase in the write-offs of Medicare secondary billings.

4.	Other receivables

Other receivables were comprised of the following:

		December 31,
		2016				2015
Supplier rebates and non-trade receivables		$	347,123			$	316,644
Medicare bad debt claims			104,658				105,714
Operating advances under management and administrative services agreements			1,702				13,527
		$	453,483			$	435,885

Operating advances under management and administrative services agreements are generally unsecured.

5.	Other current assets

Other current assets were comprised of the following:

		December 31,
		2016				2015
Prepaid expenses		$	131,833			$	105,216
Funds on deposit with third parties			75,877				82,679
Other			2,894				2,427
		$	210,604			$	190,322

6.	Property and equipment

Property and equipment were comprised of the following:

		December 31,
		2016				2015
Land		$	59,013			$	42,080
Buildings			491,301				437,283
Leasehold improvements			2,598,471				2,289,425
Equipment and information systems, including internally developed software			2,378,303				2,080,446
New center and capital asset projects in progress			480,439				336,513
			6,007,527				5,185,747
Less accumulated depreciation			(2,832,160	)			(2,397,007	)
		$	3,175,367			$	2,788,740

Depreciation expense on property and equipment was $545,734, $475,484 and $428,309 for 2016, 2015 and 2014, 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 $12,990, $9,723 and $7,888 for 2016, 2015 and 2014, respectively.

F-18

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

7.	Intangibles

Intangible assets other than goodwill were comprised of the following:

		December 31,
		2016				2015
Customer relationships		$	1,568,161			$	1,575,865
Trade names			190,761				170,883
Provider network and practice management tools			187,318				183,724
Noncompetition and other agreements			512,505				510,521
Lease agreements			7,624				7,306
Indefinite-lived assets			1,546				9,310
Other			583				408
			2,468,498				2,458,017
Less accumulated amortization			(940,731	)			(770,691	)
		$	1,527,767			$	1,687,326

Amortization expense from amortizable intangible assets, other than lease agreements, was $174,518, $166,537 and $167,956 for 2016, 2015 and 2014, respectively. Lease agreement intangible assets and liabilities were amortized to rent expense in the amounts of $(923), $(1,613) and $(1,798) for 2016, 2015 and 2014, respectively.

During the year ended December 31, 2016, the Company did not recognize impairment charges on any intangible assets other than goodwill. During the year ended December 31, 2015, the Company recognized a $17,400 impairment charge on an indefinite-lived intangible asset of its DMG Nevada reporting unit.

Amortizable intangible liabilities were comprised of the following:

		December 31,
		2016				2015
Lease agreements (net of accumulated amortization of $8,485 and $6,936)			7,420				8,969
		$	7,420			$	8,969

There was no amortization benefit recognized from the alliance and product supply agreement in 2016 as it expired in September 2015. Amortization benefit related to this agreement was $3,997 for 2015 and $5,330 for 2014 related to this agreement. Lease agreement intangible liabilities are classified in other long-term liabilities and amortized to rent expense.

Scheduled amortization charges from amortizable intangible assets and liabilities as of December 31, 2016 were as follows:

		Customer relationships				Trade names				Provider network and practice management tools				Noncompetition and other agreements				Lease agreements				Other
2017			82,669				47,046				26,941				30,156				(1,228	)			102
2018			82,664				47,046				26,881				19,519				(892	)			102
2019			82,625				11,008				22,492				15,796				(832	)			87
2020			82,609				3,800				581				10,437				(678	)			44
2021			82,609				633				97				7,005				(606	)			—
Thereafter			821,282				—				—				21,990				(3,184	)			—

F-19

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

8.	Equity investments

Equity investments that do not have readily determinable fair values are carried on the cost or equity method, as applicable. The Company maintains equity method investments in nonconsolidated investees in both its Kidney Care and DMG lines of business, as well as minor cost method investments in private securities of certain other healthcare businesses. The Company classifies its non-marketable cost or equity method investments as equity investments on its balance sheet.

As described in Note 21, the Company deconsolidated its Asia Pacific dialysis business (APAC JV) effective as of August 1, 2016, adjusted its retained investment in the APAC JV to estimated fair value at that time, and has accounted for this retained investment on the equity method since August 1, 2016.

During the year ended December 31, 2016, the Company recorded an impairment of $14,993 related to a minority equity investment in one of its international reporting units.

Equity investments in nonconsolidated businesses were $502,389 and $78,368 at December 31, 2016 and 2015, respectively. The increase in equity investments was primarily related to the APAC JV, as discussed above. During 2016, 2015 and 2014, the Company recognized equity investment income of $13,044, $18,325 and $23,234, respectively, relating to equity investments in nonconsolidated businesses under the equity method of accounting.

9.	Investments in debt and equity securities

The Company classifies certain debt securities as held-to-maturity and records them at amortized cost based on the Company’s intentions and strategies concerning those investments. Equity securities that have readily determinable fair values, and certain other financial instruments that have readily determinable fair values or redemption values, are classified as available for sale and recorded at estimated fair value.

The Company’s investments in securities and certain other financial instruments consist of the following:

		December 31, 2016												December 31, 2015
		Held to maturity				Available for sale				Total				Held to maturity				Available for sale				Total
Certificates of deposit, commercial paper and money market funds due within one year		$	256,827			$	—			$	256,827			$	406,884			$	—			$	406,884
Investments in mutual funds and common stock			50,000				47,404				97,404				—				33,482				33,482
Cash surrender value of life insurance policies			—				59,646				59,646				—				56,840				56,840
		$	306,827			$	107,050			$	413,877			$	406,884			$	90,322			$	497,206
Short-term investments		$	306,827			$	3,371			$	310,198			$	406,884			$	1,200			$	408,084
Long-term investments			—				103,679				103,679				—				89,122				89,122
		$	306,827			$	107,050			$	413,877			$	406,884			$	90,322			$	497,206

The cost of certificates of deposit, commercial paper and money market funds at December 31, 2016 and 2015 approximate their fair value. As of December 31, 2016 and 2015, available for sale investments included $3,701 and $2,589, respectively, of gross pre-tax unrealized gains. During 2016 and 2015 the Company recorded gross pre-tax unrealized gains (losses) of $1,802 and $(1,974), respectively, in other comprehensive income associated with changes in the fair value of these investments. During 2016, the Company sold investments in mutual funds and common stock for net proceeds of $14,971, and recognized a pre-tax gain of $690, or $423 after tax, that was previously recorded in other comprehensive income. During 2015, the Company sold investments in mutual funds and common stock for net proceeds of $1,295, and recognized a pre-tax gain of $618, or $377 after tax, that was previously recorded in other comprehensive income.

Investments in mutual funds classified as available for sale are held within trusts to fund existing obligations associated with several of the Company’s non-qualified deferred compensation plans.

Investments in life insurance policies are carried at their cash surrender value, are held within trusts to fund existing obligations associated with certain of the Company’s non-qualified deferred compensation plans, and are principally classified as long-term to correspond with the long-term classification of the related plan liabilities. See Note 16 for further details.

F-20

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

10.	Goodwill

Changes in the carrying value of goodwill by reportable segments were as follows:

		U.S. dialysis and related lab services				DMG				Other ancillary services and strategic initiatives				Consolidated total
Balance at January 1, 2015		$	5,610,643			$	3,562,534			$	242,118			$	9,415,295
Acquisitions			21,910				29,910				45,273			$	97,093
Divestitures			(3,370	)			(5,411	)			—			$	(8,781	)
Goodwill impairment charges			—				(188,769	)			(4,065	)		$	(192,834	)
Foreign currency and other adjustments			—				—				(16,294	)		$	(16,294	)
Balance at December 31, 2015		$	5,629,183			$	3,398,264			$	267,032			$	9,294,479
Acquisitions			75,295				248,901				123,632			$	447,828
Divestitures			(12,891	)			(2,223	)			(29,645	)		$	(44,759	)
Goodwill impairment charges			—				(253,000	)			(28,415	)		$	(281,415	)
Foreign currency and other adjustments			—				—				(8,816	)		$	(8,816	)
Balance at December 31, 2016		$	5,691,587			$	3,391,942			$	323,788			$	9,407,317
Balance at December 31, 2016:
Goodwill		$	5,691,587			$	3,833,711			$	358,112			$	9,883,410
Accumulated impairment charges			—				(441,769	)			(34,324	)		$	(476,093	)
		$	5,691,587			$	3,391,942			$	323,788			$	9,407,317

Each of the Company’s operating segments described in Note 25 to these consolidated financial statements represents an individual reporting unit for goodwill impairment testing purposes, except that each sovereign jurisdiction within the Company’s international operating segments is considered a separate reporting unit.

Within the U.S. dialysis and related lab services operating segment, the Company considers each of its dialysis centers to constitute an individual business for which discrete financial information is available. However, since these dialysis centers have similar operating and economic characteristics, and the allocation of resources and significant investment decisions concerning these businesses are highly centralized and the benefits broadly distributed, the Company has aggregated these centers and deemed them to constitute a single reporting unit.

The Company has applied a similar aggregation to the DMG operations in each region, to the vascular access service centers in its vascular access services reporting unit, to the physician practices in its physician services and direct primary care reporting units, and to the dialysis centers within each international reporting unit. For the Company’s other operating segments, discrete business components below the operating segment level constitute individual reporting units.

During the fourth quarter of 2015, the Company recognized impairment charges of $188,769 on goodwill of certain DMG reporting units based on assessments performed after circumstances indicated it had become more likely than not that the goodwill of certain DMG reporting units had become impaired. These circumstances included under-performance of the business in recent quarters as well as changes in other market conditions, including government reimbursement cuts and the Company’s expected ability to mitigate them.

Based on continuing developments at the Company’s DMG reporting units during 2016, including the Medicare Advantage final benchmark rates for 2017 announced on April 4, 2016, further changes in expectations concerning future government reimbursement rates and the Company’s expected ability to mitigate them, as well as medical cost and utilization trends, underperformance of certain at-risk units in recent quarters and other market conditions, the Company performed additional goodwill impairment assessments for certain at-risk DMG reporting units during each of the first three quarters of 2016 and as of their November 1 annual assessment date.

In addition, during the quarter ended December 31, 2016, the Company determined that circumstances indicated it had become more likely than not that the goodwill of the Company’s vascular access reporting unit had become impaired. These circumstances included changes in future governmental reimbursement and the Company’s expected ability to mitigate them. Specifically, on November 2, 2016, CMS released the 2017 Physician Fee Schedule Final Rule and the Ambulatory Surgical Center Payment Final

F-21

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Rule which reflected significant changes in reimbursement structure for this business unit. Accordingly, the Company performed the required valuations to estimate the fair value of the net assets and implied goodwill of this reporting unit with the assistance of a third-party valuation firm.

As a result of the assessments described above, the Company has recognized the goodwill impairment charges below:

		Year ended December 31,
Reporting unit		2016				2015				2014
DMG Nevada		$	161,800			$	181,253			$	—
DMG Florida			91,200				5,800				—
DMG Arizona			—				1,716				—
Vascular access			28,415				—				—
International operations			—				4,065				1,000
Total		$	281,415			$	192,834			$	1,000

Further reductions in reimbursement rates, increases in medical cost or utilization trends, or other significant adverse changes in expected future cash flows or valuation assumptions could result in goodwill impairment charges in the future for the following reporting units, which remain at risk of goodwill impairment:

		Goodwill balance				Carrying				Sensitivities
Reporting unit		as of December 31, 2016				amount coverage(1)				Operating income(2)				Discount rate(3)
DMG Nevada		$	261,204				11.4%				-2.2%				-3.9%
DMG Florida		$	442,835				7.1%				-1.7%				-3.2%
DMG New Mexico		$	70,926				2.6%				-1.5%				-2.2%
DMG Washington		$	244,502				3.7%				-1.8%				-3.4%
Vascular access		$	34,696				4.3%				-2.7%				-5.3%

	(1)	Excess of estimated fair value of the reporting unit over carrying amount as of the latest assessment date.

	(2)	Potential impact on estimated fair value of a sustained, long-term reduction of 3% in operating income as of the latest assessment date.

	(3)	Potential impact on estimated fair value of an increase in discount rates of 100 basis points as of the latest assessment date.

There were no major changes in the business, prospects, or expected future results of these reporting units from their latest assessment date.

Except as described above, none of the Company’s various other reporting units were considered at risk of goodwill impairment as of December 31, 2016. Since the dates of the Company’s last annual goodwill impairment tests, there have been certain developments, events, changes in operating performance and other changes in key circumstances that have affected the Company’s businesses. However, except as further described above, these did not cause management to believe it is more likely than not that the fair value of any of the Company’s other reporting units would be less than their respective carrying amount.

11.	Other liabilities

Other liabilities were comprised of the following:

		December 31,
		2016				2015
Payor refunds and retractions		$	277,482			$	153,104
Contingent earn-out consideration			7,217				29,050
Insurance and self-insurance accruals			80,437				80,355
Accrued interest			82,234				81,585
Other medical payables			36,645				53,687
Accrued non-income tax liabilities			27,759				29,291
Other			345,073				255,051
		$	856,847			$	682,123

F-22

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

12.	Medical payables

The healthcare costs shown in the following table include estimates for the cost of professional medical services provided by non-employed physicians and other providers, as well as inpatient and other ancillary costs for all markets, other than California, where state regulation allows for the assumption of global risk. Healthcare costs payable are included in medical payables.

The following table shows the components of changes in the healthcare costs payable for the year ended December 31, 2016 and 2015:

		December 31,
		2016				2015
Healthcare costs payable, beginning of the year		$	212,641			$	214,405
Add: Components of incurred healthcare costs
Current year			1,673,742				1,587,036
Prior years			(141	)			1,523
Total incurred healthcare costs			1,673,601				1,588,559
Less: Claims paid
Current year			1,473,723				1,397,378
Prior years			198,244				192,945
Total claims paid			1,671,967				1,590,323
Healthcare costs payable, end of the year		$	214,275			$	212,641

The Company’s prior year estimates of healthcare costs payable resulted in medical claims being settled for different amounts than originally estimated. When significant increases (decreases) in prior-year healthcare cost estimates occur that the Company believes significantly impacts its current year operating results, the Company discloses that amount as unfavorable (favorable) development of prior-year’s healthcare cost estimates. Actual claim payments for prior year services have not been materially different from the Company’s year-end estimates.

13.	Income taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

Income before income taxes consisted of the following:

		Year ended December 31,
		2016				2015				2014
Domestic		$	1,144,544			$	764,998			$	1,341,208
International			344,351				(41,862	)			(31,535	)
		$	1,488,895			$	723,136			$	1,309,673

F-23

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Income tax expense (benefit) consisted of the following:

		Year ended December 31,
		2016				2015				2014
Current:
Federal		$	337,178			$	183,263			$	188,302
State			48,771				30,766				30,789
International			1,928				856				1,687
Total current income tax		$	387,877			$	214,885			$	220,778
Deferred:
Federal			93,214				88,718				192,267
State			(27,764	)			(8,307	)			32,360
International			2,486				430				938
Total deferred income tax		$	67,936			$	80,841			$	225,565
		$	455,813			$	295,726			$	446,343

The reconciliation between the U.S. federal income tax rate and the Company’s effective tax rate is as follows:

		Year ended December 31,
		2016				2015				2014
Federal income tax rate			35.0	%			35.0	%			35.0	%
State income taxes, net of federal benefit			1.2				2.5				3.5
International rate differential			0.2				(1.1	)			(0.2	)
Gain on APAC JV ownership changes			(9.8	)			—				—
Goodwill impairments			6.7				11.7				—
Changes in deferred tax valuation allowances			0.6				2.6				0.6
Other			0.2				1.5				(0.8	)
Impact of noncontrolling interests primarily attributable to non-tax paying entities			(3.5	)			(11.3	)			(4.0	)
Effective tax rate			30.6	%			40.9	%			34.1	%

The Company has indefinitely reinvested $381,523 of undistributed earnings of its foreign operations outside of the United States as of December 31, 2016. Included in this undistributed earnings amount is a non-taxable gain on the APAC JV ownership changes in the amount of $374,374. No deferred tax liability has been recognized for the remittance of such earnings to the U.S. since it is the Company’s intention to utilize these earnings in its foreign operations. The determination of the amount of deferred taxes on these earnings is not practicable since the computation would depend on a number of factors that cannot be known unless a decision is made to repatriate the earnings.

F-24

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Deferred tax assets and liabilities arising from temporary differences were as follows:

		December 31,
		2016				2015
Receivables		$	19,283			$	43,393
Accrued liabilities			318,596				272,080
Net operating loss carryforwards			130,456				130,977
Other			147,487				114,805
Deferred tax assets			615,822				561,255
Valuation allowance			(56,016	)			(57,811	)
Net deferred tax assets			559,806				503,444
Intangible assets			(1,025,488	)			(927,761	)
Property and equipment			(230,870	)			(205,071	)
Investments in partnerships			(95,936	)			(83,584	)
Other			(16,640	)			(13,990	)
Deferred tax liabilities			(1,368,934	)			(1,230,406	)
Net deferred tax liabilities		$	(809,128	)		$	(726,962	)

At December 31, 2016, the Company had federal net operating loss carryforwards of approximately $155,790 that expire through 2035, although a substantial amount expire by 2028. The Company also had state net operating loss carryforwards of $836,774 that expire through 2036 and international net operating loss carryforwards of $97,281, some of which have an indefinite life. The utilization of a portion of these losses may be limited in future years based on the profitability of certain entities. The valuation allowance net decrease of $1,795 is primarily due to an increase related to the realizability of losses in certain foreign and state jurisdictions of $8,339 and a decrease relating to the APAC JV ownership changes of $10,134.

Unrecognized tax benefits

A reconciliation of the beginning and ending liability for unrecognized tax benefits that do not meet the more-likely-than-not threshold were as follows:

		Year ended December 31,
			2016				2015
Beginning balance		$	39,011			$	31,877
Additions for tax positions related to current year			9,714				6,131
Additions for tax positions related to prior years			—				2,999
Reductions related to lapse of applicable statute			(1,277	)			(1,996	)
Reductions related to settlements with taxing authorities			(23,382	)			—
Ending balance		$	24,066			$	39,011

As of December 31, 2016, the Company’s total liability for unrecognized tax benefits relating to tax positions that do not meet the more-likely-than-not threshold is $24,066, all of which would impact the Company’s effective tax rate if recognized. This balance represents a decrease of $14,945 from the December 31, 2015 balance of $39,011, primarily due to the positive settlement of an IRS and state audit.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in its income tax expense. At December 31, 2016 and 2015, the Company had approximately $2,595 and $9,918, respectively, accrued for interest and penalties related to unrecognized tax benefits, net of federal tax benefit.

The Company and its subsidiaries file U.S. federal and state income tax returns and various international income tax returns. The Company is no longer subject to U.S. federal and state examinations by tax authorities for years before 2013 and 2008, respectively.

F-25

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

14.	Long-term debt

Long-term debt was comprised of the following:

		December 31,
		2016				2015
Senior Secured Credit Facilities:
Term Loan A		$	862,500			$	925,000
Term Loan B			3,412,500				3,447,500
Senior notes			4,500,000				4,500,000
Acquisition obligations and other notes payable			117,547				70,645
Capital lease obligations			299,682				283,185
Total debt principal outstanding			9,192,229				9,226,330
Discount and deferred financing costs			(79,861	)			(95,985	)
			9,112,368				9,130,345
Less current portion			(165,041	)			(129,037	)
		$	8,947,327			$	9,001,308

Scheduled maturities of long-term debt at December 31, 2016 were as follows:

2017			165,041
2018			167,684
2019			747,871
2020			69,508
2021			3,300,437
Thereafter			4,741,688

Term Loans

Total outstanding borrowings under Term Loan A and Term Loan B can consist of various individual tranches that can range in maturity from one month to twelve months (currently all tranches are one month in duration). For Term Loan A and Term Loan B, each tranche bears interest at a London Interbank Offered Rate (LIBOR) rate that is determined by the duration of such tranche plus an interest rate margin. The LIBOR variable component of the interest rate for each tranche is reset as such tranche matures and a new tranche is established. At December 31, 2016, the overall weighted average interest rate for Term Loan A was determined based upon the LIBOR interest rates in effect for all of the individual tranches plus the interest rate margin of 1.75%. At December 31, 2016, Term Loan B bears interest at LIBOR (floor of 0.75%) plus a margin of 2.75%. The Company is subject to LIBOR-based interest rate volatility on Term Loan B as the LIBOR-based component of the interest rate exceeded the floor of 0.75% as of December 31, 2016. The overall weighted average interest rate for Term Loan B was determined based upon the LIBOR interest rates in effect for all individual tranches plus the interest rate margin. The Company has several interest rate cap agreements that have the economic effect of capping the LIBOR variable component of the Company’s interest rate at a maximum of 3.50% on $3,500,000 of outstanding principal debt. The remaining $775,000 outstanding principal balance of Term Loan A would still be subject to LIBOR-based interest rate volatility. In addition, the Company maintains several forward interest rate cap agreements with notional amounts totaling $3,500,000, which will be effective June 29, 2018. The cap agreements will have the economic effect of capping the LIBOR variable component of the Company’s interest rate at a maximum of 3.50% on an equivalent amount of the Company’s debt. See below for further details. The Company is restricted from paying dividends under the terms of its senior secured credit facilities.

During the year ended December 31, 2016, the Company made mandatory principal payments under its then existing senior secured credit facilities totaling $62,500 on Term Loan A and $35,000 on Term Loan B.

Revolving lines of credit

The Company has an undrawn revolving line under the senior secured credit facilities totaling $1,000,000, of which approximately $95,629 was committed for outstanding letters of credit. In addition, the Company has approximately $1,286 of committed outstanding letters of credit related to DMG, which is backed by a certificate of deposit.

F-26

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Senior Notes

The Company’s senior notes as of December 31, 2016 consisted of $1,500,000 of 5.0% Senior Notes due 2025, $1,750,000 5 1/8% senior notes due 2024 and $1,250,000 of 5 3/4% senior notes due 2022 (collectively Senior Notes).

The Senior Notes are unsecured obligations, rank equally in right of payment with the Company’s existing and future unsecured senior indebtedness, and are guaranteed by substantially all of the Company’s direct and indirect wholly-owned domestic subsidiaries and require semi-annual interest payments. The Company may redeem some or all of the Senior Notes at any time on or after certain specific dates and at certain specific redemption prices as outlined in each senior note agreement. The Company is restricted from paying dividends under the indentures governing its Senior Notes.

In April 2015, the Company issued $1,500,000 5.0% Senior Notes due 2025 (5.0% Senior Notes). The 5.0% Senior Notes pay interest on May 1 and November 1 of each year beginning November 1, 2015. The 5.0% Senior Notes are unsecured senior obligations, rank equally in right of payment with the Company’s existing and future unsecured senior indebtedness, and are guaranteed by certain of the Company’s domestic subsidiaries. The Company may redeem up to 35% of the 5.0% Senior Notes at any time prior to May 1, 2018 at a certain specified price from the proceeds of one or more equity offerings. In addition, the Company may redeem some or all of the 5.0% Senior Notes at any time prior to May 1, 2020 at make-whole redemption rates and on or after such date at certain specified redemption prices. The net proceeds from the 5.0% Senior Notes offering were used to repurchase all of the $775,000 aggregate outstanding principal balances of the 6 ⅝% Senior Notes due 2020 (6 ⅝% Senior Notes) through a combination of a tender offer and a redemption process and to pay fees and expenses. The remaining net offering proceeds were used for general corporate purposes, acquisitions and share repurchases. As a result of these transactions, the Company incurred $48,072 in debt redemption charges consisting of tender and redemption premiums as well as the write-off of deferred financing costs associated with the repurchase of the 6 ⅝% Senior Notes.

Interest rate swaps and cap agreements

During the year ended December 31, 2016 the Company had several interest rate swap agreements as a means of hedging its exposure to and volatility from variable-based interest rate changes as part of its overall interest rate risk management strategy. These agreements were not held for trading or speculative purposes and had the economic effect of converting the LIBOR variable component of the Company’s Term Loan A interest rate to a fixed rate. These swap agreements were designated as cash flow hedges, and as a result, hedge-effective gains or losses resulting from changes in the fair values of these swaps were reported in other comprehensive income until such time as the hedged forecasted cash flows occurred, at which time the amounts were reclassified into net income. Net amounts paid or received for each specific swap tranche that had settled were reflected as adjustments to debt expense. In addition, the Company has entered into several interest rate cap agreements and several forward interest rate cap agreements that have the economic effect of capping the Company’s maximum exposure to LIBOR variable interest rate changes on specific portions of the Company’s floating rate debt, as described below. These cap agreements are also designated as cash flow hedges and, as a result, changes in the fair values of these cap agreements are reported in other comprehensive income. The amortization of the original cap premium is recognized as a component of debt expense on a straight-line basis over the term of the cap agreements. The swap and cap agreements do not contain credit-risk contingent features.

As of December 31, 2016, the Company maintains interest rate cap agreements that were entered into in November 2014 with notional amounts totaling $3,500,000. These previously forward cap agreements became effective September 30, 2016 and have the economic effect of capping the LIBOR variable component of the Company’s interest rate at a maximum of 3.50% on an equivalent amount of the Company’s debt. These cap agreements expire on June 30, 2018. As of December 31, 2016, the total fair value of these cap agreements was an asset of approximately $116. During the year ended December 31, 2016, the Company recognized debt expense of $2,070 from these caps. During the year ended December 31, 2016, the Company recorded a loss of $1,196 in other comprehensive income due to a decrease in the unrealized fair value of these cap agreements.

As of December 31, 2016, the Company maintains several forward interest rate cap agreements that were entered into in October 2015 with notional amounts totaling $3,500,000. These forward cap agreements will become effective June 29, 2018 and will have the economic effect of capping the LIBOR variable component of the Company’s interest rate at a maximum of 3.50% on an equivalent amount of its debt. These cap agreements expire on June 30, 2020. As of December 31, 2016, the total fair value of these cap agreements was an asset of approximately $9,813. During the year ended December 31, 2016, the Company recorded a loss of $4,002 in other comprehensive income due to a decrease in the unrealized fair value of these cap agreements.

Previously, the Company maintained several interest rate cap agreements with notional amounts totaling $2,735,000 on the Company’s Term Loan B debt. These agreements had the economic effect of capping the LIBOR variable component of the Company’s interest rate at a maximum of 2.50% on an equivalent amount of the Company’s Term Loan B. During the year ended

F-27

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

December 31, 2016, the Company recognized debt expense of $1,829 from these caps. The cap agreements expired on September 30, 2016.

The Company also previously maintained several interest rate swap agreements. These agreements had the economic effect of modifying the LIBOR variable component of the Company’s interest rate on an equivalent amount of the Company’s Term Loan A to fixed rates ranging from 0.49% to 0.52%. These interest rate swap agreements required monthly interest payments and expired on September 30, 2016. During the year ended December 31, 2016, the Company recognized debt expense of $299 from these swaps, and recorded a loss of $815 in other comprehensive income due to a decrease in the unrealized fair value of these swap agreements.

The following table summarizes the Company’s derivative instruments as of December 31, 2016 and 2015:

		Interest rate swap and cap agreements (liabilities and assets)
		December 31, 2016						December 31, 2015
Derivatives designated as hedging instruments		Balance sheet location		Fair value				Balance sheet location		Fair value
Interest rate swap agreements				$	—			Other short- term assets		$	516
Interest rate cap agreements		Other long- term assets		$	9,929			Other long- term assets		$	15,127

The following table summarizes the effects of the Company’s interest rate swap and cap agreements for the years ended December 31, 2016, 2015 and 2014:

		Amount of losses recognized in OCI on interest rate swap and cap agreements												Location of (losses) gains reclassified from		Amount of gains reclassified from accumulated OCI into income
		Years ended December 31,												accumulated		Years ended December 31,
Derivatives designated as cash flow hedges		2016				2015				2014				OCI into income		2016				2015				2014
Interest rate swap agreements		$	(815	)		$	(3,971	)		$	(8,390	)		Debt expense		$	299			$	2,664			$	12,279
Interest rate cap agreements			(5,198	)			(16,114	)			(8,119	)		Debt expense			3,899				2,439				5,130
Tax benefit (expense)			2,343				7,844				6,450						(1,632	)			(1,992	)			(6,801	)
Total		$	(3,670	)		$	(12,241	)		$	(10,059	)				$	2,566			$	3,111			$	10,608

As of December 31, 2016, the interest rate on the Company’s Term Loan B debt bears interest at LIBOR plus an interest rate margin of 2.75%. Term Loan B is subject to an interest rate cap if LIBOR should rise above 3.50%. Term Loan A bears interest at LIBOR plus an interest rate margin of 1.75%. The capped portion of Term Loan A is $87.5 million. In addition, the uncapped portion of Term Loan A, which is subject to the variability of LIBOR, is $775 million. See above for further details. Interest rates on the Company’s Senior Notes are fixed by their terms.

The Company’s overall weighted average effective interest rate on the senior secured credit facilities was 3.68%, based upon the current margins in effect of 1.75% for Term Loan A and 2.75% for Term Loan B, as of December 31, 2016.

The Company’s overall weighted average effective interest rate for the year ended December 31, 2016 was 4.43% and as of December 31, 2016 was 4.52%.

Debt expense

Debt expense consisted of interest expense of $394,279, $389,755 and $385,750 and the amortization and accretion of debt discounts and premiums, amortization of deferred financing costs and the amortization of interest rate cap agreements of $20,103, $18,625 and $24,544 for 2016, 2015 and 2014, respectively. The interest expense amounts are net of capitalized interest.

15.	Leases

The majority of the Company’s facilities are leased under non-cancelable operating leases ranging in terms from five to fifteen years and which contain renewal options of five to ten years at the fair rental value at the time of renewal. The Company’s leases are

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DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

generally subject to periodic consumer price index increases or contain fixed escalation clauses. The Company also leases certain facilities and equipment under capital leases.

Future minimum lease payments under non-cancelable operating and capital leases are as follows:

		Operating leases				Capital leases
2017		$	473,302			$	37,758
2018			442,959				34,442
2019			401,242				35,292
2020			354,559				35,575
2021			310,704				31,133
Thereafter			1,244,309				232,191
		$	3,227,075				406,391
Less portion representing interest							(106,709	)
Total capital lease obligations, including current portion						$	299,682

Rent expense under all operating leases for 2016, 2015, and 2014 was $563,204, $514,287 and $460,093, respectively. Rent expense is recorded on a straight-line basis over the term of the lease for leases that contain fixed escalation clauses or include abatement provisions. Leasehold improvement incentives are deferred and amortized to rent expense over the term of the lease. The net book value of property and equipment under capital leases was $263,995 and $261,960 at December 31, 2016 and 2015, respectively. Capital lease obligations are included in long-term debt. See Note 14 to these consolidated financial statements.

16.	Employee benefit plans

The Company has a savings plan for substantially all of its non-DMG employees which has been established pursuant to the provisions of Section 401(k) of the Internal Revenue Code (IRC). The plan allows 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 for its non-DMG employees.

The Company also has various savings plans covering substantially all of its DMG employees which have been established pursuant to the provisions of Section 401(k) of the IRC. These plans provide for multiple employer matching contributions up to 4% of employee contributions. The Company made matching contributions in 2016, 2015 and 2014 totaling approximately $11,266, $8,324 and $7,400, respectively.

The Company also maintains a voluntary compensation deferral plan, the DaVita Voluntary Deferral Plan. This plan is non-qualified and permits certain employees whose annualized base salary equals or exceeds a minimum annual threshold amount as set by the Company to elect to defer all or a portion of their annual bonus payment and up to 50% of their base salary into a deferral account maintained by the Company. Total contributions to this plan in 2016, 2015 and 2014 were $5,344, $4,234 and $3,772, respectively. Deferred amounts are generally paid out in cash at the participant’s election either in the first or second year following retirement or in a specified future period at least three to four years after the deferral election was effective. During 2016, 2015 and 2014 the Company distributed $916, $1,270 and $1,111, respectively, to participants in this plan. Participants are credited with their proportional amount of annual earnings from the plan. The assets of this plan are held in a rabbi trust and as such are subject to the claims of the Company’s general creditors in the event of its bankruptcy. As of December 31, 2016 and 2015, the total fair value of assets held in this plan’s trust were $30,191 and $23,800, respectively.

The Company also maintains two separate non-qualified voluntary compensation deferral plans for its DMG business, the HealthCare Partners, LLC Deferred Compensation Plan and the HealthCare Partners Medical Group, Inc. Deferred Compensation Plan 2. As of December 31, 2016 and 2015, the total fair value of the assets held in these plans’ trusts were $14,036 and $8,578, respectively.

The Company also maintains an Executive Retirement Plan for certain members of management. This plan is non-qualified and contributions to the plan were made at the discretion of DVA Renal Healthcare based upon a pre-determined percentage of a participant’s base salary. Effective November 2005, all contributions to this plan were discontinued and the balance of the plan assets will be paid out upon termination or retirement of each individual participant. During 2016 and 2015 the Company distributed $149

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DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

and $25, respectively, to participants in this plan. During 2014 the Company did not make any distributions to participants under this plan. As of December 31, 2016 and 2015, the total fair value of assets held under this plan’s trust was $1,005 and $1,104, respectively.

The Company also maintains a frozen non-qualified trust-owned life insurance deferred compensation plan, the HealthCare Partners Medical Group, Inc. Deferred Compensation Plan, for certain key employees of DMG. The total cash surrender value of all of the life insurance policies totaled approximately $59,646 and $56,840 at December 31, 2016 and 2015, respectively, and is included in long-term investments. In addition, the total deferred compensation liabilities owed to the participants totaled approximately $54,486 and $52,128 at December 31, 2016 and 2015, respectively, and are included in other long-term liabilities. During 2016, 2015 and 2014, the Company did not make any contributions on behalf of its participants.

The fair value of all of the assets held in plan trusts as of December 31, 2016, and 2015 totaled $45,233 and $33,482, respectively. The assets of these plans are available for sale and as such are recorded at fair market value with changes in the fair market values being recorded in other comprehensive income. Any fair market value changes to the corresponding liability balance are recorded as compensation expense. See Note 9 to these consolidated financial statements.

Most of the Company’s outstanding employee stock plan awards include a provision accelerating the vesting of the award in the event of a change of control. The Company also maintains a change of control protection program for its employees who do not have a significant number of stock awards, which has been in place since 2001, and which provides for cash bonuses to employees in the event of a change of control. Based on the market price of the Company’s common stock and shares outstanding on December 31, 2016, these cash bonuses would total approximately $492,645 if a change of control transaction occurred at that price and the Company’s Board of Directors did not modify the program. This amount has not been accrued at December 31, 2016, and would only be accrued upon a change of control. These change of control provisions may affect the price an acquirer would be willing to pay for the Company.

17.	Contingencies

The majority of the Company’s revenues are from government programs and may be subject to adjustment as a result of: (i) examination by government agencies or contractors, for which the resolution of any matters raised may take extended periods of time to finalize; (ii) differing interpretations of government regulations by different Medicare contractors or regulatory authorities; (iii) differing opinions regarding a patient’s medical diagnosis or the medical necessity of services provided; and (iv) retroactive applications or interpretations of governmental requirements. In addition, the Company’s revenues from commercial payors may be subject to adjustment as a result of potential claims for refunds, as a result of government actions or as a result of other claims by commercial payors.

The Company operates in a highly regulated industry and is a party to various lawsuits, claims, governmental investigations and audits (including investigations resulting from its obligation to self-report suspected violations of law) and other legal proceedings. The Company records accruals for certain legal proceedings and regulatory matters to the extent that the Company determines an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. While these accruals reflect the Company’s best estimate of the probable loss for those matters as the dates of those accruals, the recorded amounts may differ materially from the actual amount of the losses for those matters. Additionally, in some cases, no estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal proceedings and regulatory matters, which may be exacerbated by various factors, including that they may involve indeterminate claims for monetary damages or may involve fines, penalties or non-monetary remedies; present novel legal theories or legal uncertainties; involve disputed facts; represent a shift in regulatory policy; are in the early stages of the proceedings; or result in a change of business practices. Further, there may be various levels of judicial review available to the Company in connection with any such proceeding.

The following is a description of certain lawsuits, claims, governmental investigations and audits and other legal proceedings to which the Company is subject.

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DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Inquiries by the Federal Government and Certain Related Civil Proceedings

Vainer Private Civil Suit: As previously disclosed, the Company received a subpoena for documents from the Office of Inspector General (OIG) for the U.S. Department of Health and Human Services (HHS) relating to the pharmaceutical products Zemplar, Hectorol, Venofer, Ferrlecit and erythropoietin (EPO), as well as other related matters, covering the period from January 2003 to December 2008. The Company subsequently learned that the allegations underlying this inquiry were made as part of a civil complaint filed by relators, Daniel Barbir and Dr. Alon Vainer, pursuant to the qui tam provisions of the federal False Claims Act (FCA). The relators also alleged that the Company’s drug administration practices for the Company’s dialysis operations for Vitamin D and iron agents from 2003 through 2010 fraudulently created unnecessary waste, which was billed to and paid for by the government. In June 2015, the Company finalized the terms of the settlement with plaintiffs, including a settlement amount of $450,000 and attorney fees and other costs of $45,000 which was paid in 2015.

2011 U.S. Attorney Medicaid Investigation: In October 2011, the Company announced that it would be receiving a request for documents, which could include an administrative subpoena from the OIG. Subsequent to the Company’s announcement of this 2011 U.S. Attorney Medicaid Investigation, the Company received a request for documents in connection with the inquiry by the U.S. Attorney’s Office for the Eastern District of New York. The request related to payments for infusion drugs covered by Medicaid composite payments for dialysis. It is the Company’s understanding that this inquiry is civil in nature. The Company understands further that certain other providers that operate dialysis clinics in New York may have received a similar request for documents. The Company cooperated with the government and produced the requested documents. In April 2014, the Company reached an agreement in principle with the government. In March 2016, the Company finalized and executed settlement agreements with the State of New York and the U.S. Department of Justice (DOJ), including a settlement payment of an immaterial amount.

Swoben Private Civil Suit: In April 2013, HealthCare Partners (HCP), now known as the Company’s DaVita Medical Group (DMG) subsidiary, was one of several defendants served with a civil complaint filed by a former employee of SCAN Health Plan (SCAN), an HMO. On July 13, 2009, pursuant to the qui tam provisions of the federal False Claims Act (FCA) and the California False Claims Act, James M. Swoben, as relator, filed his initial qui tam action in the United States District Court for the Central District of California purportedly on behalf of the United States of America and the State of California against SCAN, and certain other defendants whose identities were under seal. The allegations in the complaint relate to alleged overpayments received from government healthcare programs. In 2009 and 2010, the relator twice amended his complaint and added additional defendants, and in November 2011, he filed his Third Amended Complaint under seal alleging violations of the federal FCA and the California False Claims Act, and added additional defendants, including HCP and certain health insurance companies (the defendant HMOs). The allegations in the complaint against HCP relate to patient diagnosis coding to determine reimbursement in the Medicare Advantage program, referred to as HCC and RAF scores. The complaint sought monetary damages and civil penalties as well as costs and expenses. The DOJ reviewed these allegations and in January 2013 declined to intervene in the case. HCP and the other defendants filed motions to dismiss the Third Amended Complaint, and the court dismissed with prejudice the claims and judgment was entered in September 2013. Upon the plaintiff’s appeal, a panel of the Ninth Circuit overturned the trial court’s ruling and vacated the dismissal of the case. The Company, with certain defendants, petitioned the Ninth Circuit for a rehearing, but in December 2016, the Ninth Circuit rejected the petition and determined the relator should be given an opportunity to amend the complaint, and remanded the case back to district court.

2015 U.S. Attorney Transportation Investigation: In February 2015, the Company announced that it received six administrative subpoenas from the OIG for medical records from six different dialysis centers in southern California operated by the Company. Specifically, each subpoena sought the medical records of a single patient of each respective dialysis center. In February 2016, the Company received four additional subpoenas for four additional dialysis centers in southern California. The subpoenas were similarly limited in scope to the subpoenas received in 2015. On February 8, 2017, the Company was served with a qui tam complaint in the U.S. District Court for the Central District of California. The Company has been advised by an attorney with the United States Attorney’s Office for the Central District of California that the qui tam is related to the investigation concerning the medical necessity of patient transportation, which was the basis for the subpoenas. The relator alleges that an ambulance company submitted false claims for patient transportation. Although the Company does not provide transportation nor does it bill for the transport of its dialysis patients, the relator alleges that two of its purported clinical staff caused the submission of a small number of those claims through improper certifications of medical necessity. The Company is investigating these allegations and intends to defend accordingly. The DOJ has declined to intervene.

2015 U.S. Office of Inspector General (OIG) Medicare Advantage Civil Investigation: In March 2015, JSA HealthCare Corporation (JSA), a subsidiary of DMG, received a subpoena from the OIG. The Company has been advised by an attorney with the Civil Division of the DOJ in Washington, D.C. that the subpoena relates to an ongoing civil investigation concerning Medicare Advantage service providers’ risk adjustment practices and data, including identification and verification of patient diagnoses and

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DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

factors used in making the diagnoses. The subpoena requests documents and information for the period from January 1, 2008 through December 31, 2013, for certain Medicare Advantage plans for which JSA provided services. It also requests information regarding JSA’s communications about patient diagnoses as they relate to certain Medicare Advantage plans generally, and more specifically as related to two Florida physicians with whom JSA previously contracted. The Company is producing the requested information and is cooperating with the government’s investigation.

In addition to the subpoena described above, in June 2015, the Company received a subpoena from the OIG. This civil subpoena covers the period from January 1, 2008 through the present and seeks production of a wide range of documents relating to the Company’s and its subsidiaries’ (including DMG’s and its subsidiary JSA’s) provision of services to Medicare Advantage plans and related patient diagnosis coding and risk adjustment submissions and payments. The Company believes that the request is part of a broader industry investigation into Medicare Advantage patient diagnosis coding and risk adjustment practices and potential overpayments by the government. The information requested includes information relating to patient diagnosis coding practices for a number of conditions, including potentially improper historical DMG coding for a particular condition. With respect to that condition, the guidance related to that coding issue was discontinued following the Company’s November 1, 2012 acquisition of DMG, and the Company notified CMS in April 2015 of the coding practice and potential overpayments. In that regard, the Company has identified certain additional coding practices which may have been problematic and is in discussions with the DOJ about the scope and nature of a review of claims relating to those practices. The Company is cooperating with the government and is producing the requested information. In addition, the Company is continuing to review other DMG coding practices to determine whether there were any improper coding issues. In connection with the DMG merger, the Company has certain indemnification rights against the sellers and an escrow was established as security for the indemnification. The Company has submitted an indemnification claim against the sellers secured by the escrow for any and all liabilities incurred relating to these matters and intends to pursue recovery from the escrow. However, the Company can make no assurances that the indemnification and escrow will cover the full amount of the Company’s potential losses related to these matters.

2015 U.S. Department of Justice Vascular Access Investigation and Related Qui Tam Litigation: In November 2015, the Company announced that RMS Lifeline, Inc., a wholly-owned subsidiary of the Company that operates under the name Lifeline Vascular Access (Lifeline), received a Civil Investigative Demand (CID) from the DOJ. The CID relates to two vascular access centers in Florida that are part of Lifeline’s vascular access business. The CID covers the period from January 1, 2008 through the present. The Company acquired these two centers in December 2012. Based on the language of the CID, the DOJ appeared to be looking at whether angiograms performed at the two centers were medically unnecessary and therefore whether related claims filed with federal healthcare programs possibly violated the FCA. Lifeline does not perform dialysis services but instead provides vascular access management services for dialysis patients. The Company cooperated with the government and produced the requested information. The DOJ investigation was initiated pursuant to a complaint brought under the qui tam provisions of the FCA (the Complaint). The Complaint was originally filed under seal in August 2014 in the U.S. District Court, Middle District of Florida, United States ex. rel James Spafford v. DaVita HealthCare Partners, Inc., et al., Case Number 6:14-cv-1251-Orl-41DAB, naming several doctors along with the Company as defendants. In December 2015, a First Amended Complaint was filed under seal. In May 2016, the First Amended Complaint was unsealed. The First Amended Complaint alleges violations of the FCA due to the submission of claims to the government for allegedly medically unnecessary angiograms and angiography procedures at the two vascular access centers as well as employment-related claims. The Complaint covers alleged conduct dating from July 2008, prior to the Company’s acquisition of the centers, to the present. The DOJ declined to intervene. In the third quarter of 2016 the Company recorded an accrual of a non-material amount for potential damages and liabilities. In January 2017, the Company finalized and executed a settlement agreement with the relator and the government for an immaterial amount.

2016 U.S. Attorney Prescription Drug Investigation: In early February 2016, the Company announced that its pharmacy services’ wholly-owned subsidiary, DaVita Rx, received a CID from the U.S. Attorney’s Office for the Northern District of Texas. It appears the government is conducting an FCA investigation concerning allegations that DaVita Rx presented or caused to be presented false claims for payment to the government for prescription medications, as well as into the Company’s relationship with pharmaceutical manufacturers. The CID covers the period from January 1, 2006 through the present. In the spring of 2015, the Company initiated an internal compliance review of DaVita Rx during which it identified potential billing and operational issues. The Company notified the government in September 2015 that it was conducting this review of DaVita Rx and began providing regular updates of its review. As of December 31, 2016, the Company recorded estimated accruals totaling $38,330 for potential damages and liabilities associated with write-offs and discounts of patient co-payment obligations, and credits to payors for returns of prescriptions drugs, related to DaVita Rx that were identified during the course of this internal compliance review. Upon completion of its review, the Company filed a self-disclosure with the OIG in early February 2016 and has been working to address and update the practices it identified in the self-disclosure, some of which overlap with information requested by the U.S. Attorney’s Office. The Company may accrue additional reserves for refunds and related damages and potential liabilities arising out of this review. The Company does not

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DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

know if the U.S. Attorney’s Office, which is part of the DOJ, knew when it served the CID on the Company that it was already in the process of developing a self-disclosure to the OIG. The OIG informed the Company in February 2016 that its submission was not accepted. They indicated that the OIG is not expressing an opinion regarding the conduct disclosed or the Company’s legal positions. The Company is cooperating with the government and is producing the requested information.

Solari Post-Acquisition Matter: In 2016, HCP Nevada disclosed to the OIG for the Department of Health and Human Services (HHS) that proper procedures for clinical and eligibility determinations may not have been followed by Las Vegas Solari Hospice (Solari), which was acquired in March 2013 and sold in September 2016 by HCP Nevada. In June 2016, the Company was notified by the OIG that the disclosure submission had been accepted into the OIG’s Self Disclosure Protocol. The Company recorded an estimated accrual of $16,000 for potential damages and liabilities associated with this matter. HCP Nevada had previously made a disclosure and repayment of overpayments to National Government Services (NGS), the Medicare Administrative Contractor for HCP Nevada, for claims submitted by Solari to the federal government prior to DMG’s acquisition of Solari and claims made to the government post-acquisition for which the sellers had certain responsibilities pursuant to a management services agreement. The Company may accrue additional reserves for potential damages and liabilities related to this matter. The Company is cooperating with the government in this matter.

2017 U.S. Attorney American Kidney Fund Investigation. On January 4, 2017, the Company was served with an administrative subpoena for records by the United States Attorney’s Office, District of Massachusetts, relating to an investigation into possible federal health care offenses. The subpoena covers the period from January 1, 2007 through the present, and seeks documents relevant to charitable patient assistance organizations, particularly the American Kidney Fund, including documents related to efforts to provide patients with information concerning the availability of charitable assistance. The Company intends to cooperate with the government in this investigation.

Although the Company cannot predict whether or when proceedings might be initiated or when these matters may be resolved (other than as described above), it is not unusual for inquiries such as these to continue for a considerable period of time through the various phases of document and witness requests and on-going discussions with regulators. In addition to the inquiries and proceedings specifically identified above, the Company is frequently subject to other inquiries by state or federal government agencies and/or private civil qui tam complaints filed by relators. Negative findings or terms and conditions that the Company might agree to accept as part of a negotiated resolution of pending or future government inquiries or relator proceedings could result in, among other things, substantial financial penalties or awards against the Company, substantial payments made by the Company, harm to the Company’s reputation, required changes to the Company’s business practices, exclusion from future participation in the Medicare, Medicaid and other federal health care programs and, if criminal proceedings were initiated against the Company, possible criminal penalties, any of which could have a material adverse effect on the Company.

Shareholder Claims

Peace Officers’ Annuity and Benefit of Georgia Securities Laws Class Action Civil Suit: On February 1, 2017, the Peace Officers’ Annuity and Benefit Fund of Georgia filed a putative federal securities class action complaint in the U.S. District Court for the District of Colorado against the Company and certain executives. The complaint covers the time period of August 2015 to October 2016 and alleges, generally, that the Company and its executives violated federal securities laws concerning the Company’s financial results and revenue derived from patients who received charitable premium assistance from an industry-funded non-profit organization. The complaint further alleges that the process by which patients obtained commercial insurance and received charitable premium assistance was improper and “created a false impression of DaVita’s business and operational status and future growth prospects.” The Company disputes these allegations and intends to defend this action accordingly.

Blackburn Shareholder Derivative Civil Suit: On February 10, 2017, Charles Blackburn filed a derivative shareholder lawsuit in the U.S. District Court for the District of Delaware against the Company, as nominal defendant, the Board of Directors and certain executives. The complaint covers the time period from 2015 to present and alleges, generally, breach of fiduciary duty, unjust enrichment and misrepresentations and/or failures to disclose certain information in violation of the federal securities laws in the Company’s 2016 proxy statement in connection with an alleged practice to direct patients with government-subsidized health insurance into private health insurance plans to maximize the Company’s profits. The Company disputes these allegations and intends to defend this action accordingly.

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DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Other Proceedings

In addition to the foregoing, from time to time the Company is subject to other lawsuits, claims, governmental investigations and audits and legal proceedings that arise due to the nature of its business, including contractual disputes, such as with payors, suppliers and others, employee-related matters and professional and general liability claims.

From time to time, the Company initiates litigation or other legal proceedings as a plaintiff arising out of contracts or other matters. In that regard, the Company had a pending lawsuit in the U.S. Court of Federal Claims against the federal government which was originally filed in May 2011. The lawsuit related to the U.S. Department of Veterans Affairs (VA) underpayment of dialysis services the Company provided from 2005 through 2011 to veterans pursuant to VA regulations. In January 2017, the Company reached a resolution of its claims with the government for $538,000, which the Company expects to recognize in its first quarter 2017 financial statements.

---

Other than as described above, the Company cannot predict the ultimate outcomes of the various legal proceedings and regulatory matters to which the Company is or may be subject from time to time, including those described in this Note 17, or the timing of their resolution or the ultimate losses or impact of developments in those matters, which could have a material adverse effect on the Company’s revenues, earnings and cash flows. Further, any legal proceedings or regulatory matters involving the Company, whether meritorious or not, are time consuming, and often require management’s attention and result in significant legal expense, and may result in the diversion of significant operational resources, or otherwise harm the Company’s business or reputation.

18.	Noncontrolling interests subject to put provisions and other commitments

Noncontrolling interests subject to put provisions

The Company has potential obligations to purchase the equity interests held by third parties in several of its majority-owned joint ventures and other nonconsolidated entities. These obligations are in the form of put provisions and are exercisable at the third-party owners’ discretion within specified periods as outlined in each specific put provision. If these put provisions were exercised, the Company would be required to purchase the third-party owners’ equity interests at either the appraised fair market value or a predetermined multiple of earnings or cash flow attributable to the equity interests put to the Company, which is intended to approximate fair value. The methodology the Company uses to estimate the fair values of noncontrolling interests subject to put provisions assumes the higher of either a liquidation value of net assets or an average multiple of earnings, based on historical earnings, patient mix and other performance indicators that can affect future results, as well as other factors. The estimated fair values of the noncontrolling interests subject to put provisions is a critical accounting estimate that involves significant judgments and assumptions and may not be indicative of the actual values at which the noncontrolling interests may ultimately be settled, which could vary significantly from the Company’s current estimates. The estimated fair values of noncontrolling interests subject to put provisions can fluctuate and the implicit multiple of earnings at which these noncontrolling interests obligations may be settled will vary significantly depending upon market conditions including potential purchasers’ access to the capital markets, which can impact the level of competition for dialysis and non-dialysis related businesses, the economic performance of these businesses and the restricted marketability of the third-party owners’ equity interests. The amount of noncontrolling interests subject to put provisions that employ a contractually predetermined multiple of earnings rather than fair value are immaterial.

Additionally, the Company has certain other potential commitments to provide operating capital to several dialysis centers that are wholly-owned by third parties or centers in which the Company owns a noncontrolling equity interest as well as to physician-owned vascular access clinics or medical practices that the Company operates under management and administrative service agreements of approximately $1,500.

Certain consolidated joint ventures are originally contractually scheduled to dissolve after terms ranging from 10 to 50 years. Accordingly, the noncontrolling interests in these joint ventures are considered mandatorily redeemable instruments, for which the classification and measurement requirements have been indefinitely deferred. Future distributions upon dissolution of these entities would be valued below the related noncontrolling interest carrying balances in the consolidated balance sheet.

Other commitments

In January 2017, the Company entered into a six year Sourcing and Supply Agreement with Amgen USA Inc. (Amgen) that expires on December 31, 2022, replacing the Company’s prior agreement that was to expire in 2018. Under terms of the agreement,

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DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

the Company will purchase EPO in amounts necessary to meet no less than 90% of its requirements for ESAs from Amgen. The actual amount of EPO that the Company will purchase will depend upon the amount of EPO administered during dialysis as prescribed by physicians and the overall number of patients that the Company serves.

In 2010, the Company entered into an agreement with Fresenius Medical Care (FMC) which committed the Company to purchase a certain amount of dialysis equipment, parts and supplies from FMC through 2013. This agreement has been subsequently extended through December 31, 2017. During 2016, 2015 and 2014, the Company purchased $164,766, $154,566 and $154,266, respectively, of certain equipment, parts and supplies from FMC.

In 2014, the Company entered into an agreement with Baxter Healthcare (Baxter) which committed the Company to purchase a certain amount of its hemodialysis non-equipment product supplies, such as dialyzers, at fixed prices through 2018. During 2016, 2015 and 2014, the Company purchased $162,109, $112,931 and $112,645 of hemodialysis product supplies from Baxter under this agreement.

Certain DMG entities are required to maintain minimum cash balances in order to comply with regulatory requirements in conjunction with medical claim reserves. As of December 31, 2016, this minimum cash balance was approximately $60,796.

Other than operating leases disclosed in Note 15 to the consolidated financial statements, the letters of credit disclosed in Note 14 to the consolidated financial statements, and the arrangements as described above, the Company has no off balance sheet financing arrangements as of December 31, 2016.

19.	Long-term incentive compensation and shareholders’ equity

Long-term incentive compensation

Long-term incentive program (LTIP) compensation includes both stock-based awards (principally stock-settled stock appreciation rights, restricted stock units and performance stock units) as well as long-term performance-based cash awards. Long-term incentive compensation expense, which was primarily general and administrative in nature, was attributed to the Company’s U.S. dialysis and related lab services business, DMG business, corporate administrative support, and the ancillary services and strategic initiatives.

The Company’s stock-based compensation awards are measured at their estimated fair values on the date of grant if settled in shares or at their estimated fair values at the end of each reporting period if settled in cash. The value of stock-based awards so measured is recognized as compensation expense on a cumulative straight-line basis over the vesting terms of the awards, adjusted for expected forfeitures.

Stock-based compensation to be settled in shares is recorded to the Company’s shareholders’ equity, while stock-based compensation to be settled in cash is recorded to a liability. Shares issued upon exercise of stock awards have generally been issued from treasury shares.

Long-term incentive compensation plans

The Company’s 2011 Incentive Award Plan (the 2011 Plan) is the Company’s omnibus equity compensation plan and provides for grants of stock-based awards to employees, directors and other individuals providing services to the Company, except that incentive stock options may only be awarded to employees. The 2011 Plan authorizes the Company to award stock options, stock appreciation rights, restricted stock units, restricted stock, and other stock-based or performance-based awards, and is designed to enable the Company to grant equity and cash awards that qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code. The 2011 Plan mandates a maximum award term of five years and stipulates that stock appreciation rights and stock options be granted with prices not less than fair market value on the date of grant. The 2011 Plan also requires that full value share awards such as restricted stock units reduce shares available under the 2011 Plan at a ratio of 3.5:1. The Company’s nonqualified stock appreciation rights and stock units awarded under the 2011 Plan generally vest over 36 to 48 months from the date of grant. At December 31, 2016, there were 7,337,266 stock-settled stock appreciation rights, 785,553 stock-settled stock units, 33,000 cash-settled stock appreciation rights and 1,600 cash-settled stock units outstanding, and 30,543,883 shares available for future grants, under the 2011 Plan.

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DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

A combined summary of the status of the Company’s stock-settled awards under the 2011 Plan, including base shares for stock-settled stock appreciation rights and stock-settled stock unit awards is as follows:

		Year ended December 31, 2016
		Stock appreciation rights												Stock units
						Weighted				Weighted								Weighted
						average				average								average
						exercise				remaining								remaining
		Awards				price				contractual life				Awards				contractual life
Outstanding at beginning of year			8,533,561			$	59.05								765,060
Granted			1,280,034				73.40								328,457
Exercised			(2,031,593	)			45.35								(280,197	)
Cancelled			(444,736	)			66.50								(27,767	)
Outstanding at end of period			7,337,266			$	64.90				2.2				785,553				1.9
Exercisable at end of period			3,026,721			$	56.83				1.1				—				—
Weighted-average fair value of grants in 2016		$	13.74											$	70.99
Weighted-average fair value of grants in 2015		$	17.97											$	80.25
Weighted-average fair value of grants in 2014		$	16.41											$	72.24

		Awards				Weighted average				Awards				Weighted average
Range of SSAR base prices		outstanding				exercise price				exercisable				exercise price
$30.01–$40.00			16,000				39.89				16,000				39.89
$40.01–$50.00			267,621				44.44				267,621				44.44
$50.01–$60.00			3,489,398				57.53				2,420,035				56.84
$60.01–$70.00			1,306,049				67.46				232,816				65.04
$70.01–$80.00			1,581,487				74.76				50,806				70.44
$80.01–$90.00			676,711				83.60				39,443				81.51
Total			7,337,266			$	64.90				3,026,721			$	56.83

The Company granted 9,600 cash-settled stock-based awards during 2016. Liability-classified awards contributed $376, $(236) and $1,774 to stock-based compensation expense for the years ended December 31, 2016, 2015 and 2014, respectively. As of December 31, 2016 the Company had 34,600 liability-classified stock-based awards outstanding, 5,000 of which were vested, and a total stock-based compensation liability balance of $124.

For the years ended December 31, 2016, 2015, and 2014, the aggregate intrinsic value of stock-based awards exercised was $73,001, $116,933 and $151,342, respectively. At December 31, 2016, the aggregate intrinsic value of stock awards outstanding was $79,717 and the aggregate intrinsic value of stock awards exercisable was $23,566.

Estimated fair value of stock-based compensation awards

The Company has estimated the grant-date fair value of stock-settled stock appreciation rights awards using the Black-Scholes-Merton valuation model and stock-settled stock unit awards at intrinsic value on the date of grant, except for portions of the Company’s performance stock unit awards for which a Monte Carlo simulation was used to estimate the grant-date fair value. The following assumptions were used in estimating these values and determining the related stock-based compensation attributable to the current period:

Expected term of the awards: The expected term of awards granted represents the period of time that they are expected to remain outstanding from the date of grant. The Company determines the expected term of its stock awards based on its historical experience with similar awards, considering the Company’s historical exercise and post-vesting termination patterns, and the terms expected by peer companies in near industries.

Expected volatility: Expected volatility represents the volatility anticipated over the expected term of the award. The Company determines the expected volatility for its awards based on the volatility of the price of its common stock over the most recent

F-36

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

retrospective period commensurate with the expected term of the award, considering the volatility expectations implied by the market price of its exchange-traded options and the volatilities expected by peer companies in near industries.

Expected dividend yield: The Company has not paid dividends on its common stock and does not currently expect to pay dividends during the term of stock awards granted.

Risk-free interest rate: The Company bases the expected risk-free interest rate on the implied yield currently available on stripped interest coupons of U.S. Treasury issues with a remaining term equivalent to the expected term of the award.

A summary of the weighted average valuation inputs described above used for estimating the grant-date fair value of stock-settled stock appreciation rights awards granted in the periods indicated is as follows:

		Year ended December 31,
		2016				2015				2014
Expected term		4.2 years				4.1 years				4.2 years
Expected volatility			21.0	%			24.6	%			25.8	%
Expected dividend yield			0.0	%			0.0	%			0.0	%
Risk-free interest rate			1.0	%			1.5	%			1.5	%

The Company estimates expected forfeitures based upon historical experience with separate groups of employees that have exhibited similar forfeiture behavior in the past. Stock-based compensation expense is recorded only for awards that are expected to vest.

Employee stock purchase plan

The Employee Stock Purchase Plan entitles qualifying employees to purchase up to $25 of the Company’s 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. This compensatory 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 and July 1, and end on December 31. Contributions used to purchase the Company’s common stock under this plan for the 2016, 2015 and 2014 participation periods were $23,902, $24,523 and $19,010, respectively. Shares purchased pursuant to the plan’s 2016, 2015 and 2014 participation periods were 438,002, 413,859 and 297,954, respectively. At December 31, 2016, there were 7,484,395 shares remaining available for future grants under this plan, which includes an additional 7,500,000 shares approved by stockholders on June 20, 2016.

The fair value of employees’ purchase rights was estimated as of the beginning dates of the purchase right periods using the Black-Scholes-Merton valuation model with the following weighted average assumptions for purchase right periods in 2016, 2015 and 2014, respectively: expected volatility of 22%, 26% and 27%; risk-free interest rate of 0.8%, 0.2% and 0.2%, and no dividends. Using these assumptions, the weighted average estimated fair value of these purchase rights was $16.73, $18.76 and $16.40 for 2016, 2015 and 2014, respectively.

Long-term incentive compensation expense and proceeds

For the years ended December 31, 2016, 2015 and 2014, the Company recognized $73,337, $130,682 and $118,970, respectively, in total long-term incentive program (LTIP) expense, of which $38,338, $56,664 and $56,743, respectively, was stock-based compensation expense for stock appreciation rights, stock units and discounted employee stock plan purchases, which are primarily included in general and administrative expenses. The estimated tax benefits recorded for stock-based compensation in 2016, 2015 and 2014 were $12,731, $19,689 and $20,351, respectively. As of December 31, 2016, there was $92,987 total estimated unrecognized compensation cost for outstanding LTIP awards, including $59,016 related to stock-based compensation arrangements under the Company’s equity compensation and stock purchase plans. The Company expects to recognize the performance-based cash component of these LTIP costs over a weighted average remaining period of 1.0 year and the stock-based component of these LTIP costs over a weighted average remaining period of 1.4 years.

For the years ended December 31, 2016, 2015 and 2014, the Company received $28,397, $45,749 and $59,119, respectively, in actual tax benefits upon the exercise of stock awards. Since the Company issues stock-settled stock appreciation rights rather than stock options, it does not receive cash proceeds from stock option exercises.

F-37

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Stock repurchases

During the years ended December 31, 2016 and 2015, the Company repurchased a total of 16,649,090 shares and 7,779,958 shares of its common stock for $1,072,377 and $575,380, or an average price of $64.41 and $73.96 per share, respectively, pursuant to previously announced authorizations by the Board of Directors. The Company has not repurchased any additional shares of its common stock from January 1, 2017 through February 24, 2017.

On July 13, 2016, the Company’s Board of Directors approved a share repurchase authorization in the amount of $1,240,748. This share repurchase authorization is in addition to the $259,252 remaining at that time under the Company’s Board of Directors’ prior share repurchase authorization announced in April 2015. As of December 31, 2016, there was $677,104 available under the current Board authorizations for additional share repurchases. Although these share repurchase authorizations have no expiration dates, the Company remains subject to share repurchase limitations under the terms of its senior secured credit facilities and the indentures governing its Senior Notes.

Charter documents & Delaware law

The Company’s charter documents include provisions that may deter hostile takeovers, delay or prevent changes of control or changes in management, or limit the ability of stockholders to approve transactions that they may otherwise determine to be in their best interests. These include provisions prohibiting stockholders from acting by written consent, requiring 90 days advance notice of stockholder proposals or nominations to the Board of Directors and granting the 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.

The Company is also subject to Section 203 of the Delaware General Corporation Law which, subject to exceptions, would prohibit the Company 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 the Company.

Changes in DaVita Inc.’s ownership interest in consolidated subsidiaries

The effects of changes in DaVita Inc.’s ownership interest on the Company’s equity are as follows:

		Year ended December 31,
		2016				2015				2014
Net income attributable to DaVita Inc.		$	879,874			$	269,732			$	723,114
Increase in paid-in capital for sales of noncontrolling interest			—				—				355
Decrease in paid-in capital for the purchase of noncontrolling interests			(13,105	)			(55,826	)			(5,357	)
Net transfer to noncontrolling interests			(13,105	)			(55,826	)			(5,002	)
Change from net income attributable to DaVita Inc. and transfers to noncontrolling interests		$	866,769			$	213,906			$	718,112

The Company acquired additional ownership interests in several existing majority-owned joint ventures for $21,512 in 2016 and $66,382 in 2015 in cash, and $17,876 in cash and deferred purchase price of $136 in 2014.

F-38

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

20.	Other comprehensive (loss) income

Charges and credits to other comprehensive (loss) income have been as follows:

		Interest rate swap and cap agreements				Investment securities				Foreign currency translation adjustments				Accumulated other comprehensive income (loss)
Balance at December 31, 2013		$	(2,344	)		$	3,120			$	(3,421	)		$	(2,645	)
Unrealized (losses) gains			(16,509	)			425				(22,952	)			(39,036	)
Related income tax			6,450				(187	)			—				6,263
			(10,059	)			238				(22,952	)			(32,773	)
Reclassification from accumulated other comprehensive losses (income) into net income			17,409				(340	)			—				17,069
Related income tax			(6,801	)			133				—				(6,668	)
			10,608				(207	)			—				10,401
Balance at December 31, 2014		$	(1,795	)		$	3,151			$	(26,373	)		$	(25,017	)
Unrealized losses			(20,085	)			(1,974	)			(23,889	)			(45,948	)
Related income tax			7,844				561				—				8,405
			(12,241	)			(1,413	)			(23,889	)			(37,543	)
Reclassification from accumulated other comprehensive losses (income) into net income			5,103				(618	)			—				4,485
Related income tax			(1,992	)			241				—				(1,751	)
			3,111				(377	)			—				2,734
Balance at December 31, 2015		$	(10,925	)		$	1,361			$	(50,262	)		$	(59,826	)
Unrealized (losses) gains			(6,013	)			1,802				(39,614	)			(43,825	)
Related income tax			2,343				(565	)			—				1,778
			(3,670	)			1,237				(39,614	)			(42,047	)
Reclassification from accumulated other comprehensive losses (income) into net income			4,198				(690	)			10,087				13,595
Related income tax			(1,632	)			267				—				(1,365	)
			2,566				(423	)			10,087				12,230
Balance at December 31, 2016		$	(12,029	)		$	2,175			$	(79,789	)		$	(89,643	)

The reclassification of net swap and cap realized losses into income are recorded as debt expense in the corresponding consolidated statements of income. See Note 14 to these consolidated financial statements for further details.

The reclassification of net investment realized gains into income are recorded in other income in the corresponding consolidated statements of income. See Note 9 to these consolidated financial statements for further details.

21.	Acquisitions and divestitures

Change in ownership interests in Asia Pacific joint venture

On August 1, 2016, the Company consummated an agreement with Khazanah Nasional Berhad (Khazanah) and Mitsui and Co., Ltd (Mitsui) whereby Khazanah and Mitsui subscribed to invest a total of $300,000 over three years in exchange for a 40% total equity interest in the Company’s APAC JV. Khazanah and Mitsui each made related initial investments of $50,000 in this business on August 1, 2016.

Based on the governance structure and voting rights put in place upon the formation of the APAC JV, certain key decisions affecting the JV’s operations are no longer at the unilateral discretion of the Company, but rather are shared with the noncontrolling investors. As a result, the Company deconsolidated its Asia Pacific dialysis business in the third quarter and recognized a non-cash non-taxable gain of $374,374 on its retained investment, net of contingent obligations. This retained interest was adjusted to the Company’s proportionate share of the estimated fair value of the business, as implied by the Khazanah and

F-39

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Mitsui investment and adjusted for certain time value of money and uncertainty discounts. Subsequent to the deconsolidation, the Company’s retained interest in the APAC JV is accounted for under the equity method.

The calculation of the Company’s non-cash gain on its retained investment in the APAC JV is based upon the best information available to management and will be finalized when certain information arranged to be obtained has been received, including issuance of the final valuation report by an independent third party and certain post-closing adjustments subject to audit of the APAC JV’s financial statements.

Sales of Tandigm Health and DMG Arizona ownership interests

Effective June 30, 2016, the Company sold a portion of DMG’s ownership interest in the Tandigm Health (Tandigm) joint venture, reducing its ownership from fifty percent to nineteen percent and resulting in a gain of $40,280. In addition, on June 1, 2016, the Company sold its DMG Arizona business, resulting in a loss of $10,489.

Acquisition of TEC

On March 1, 2016, the Company completed its acquisition of The Everett Clinic (TEC) pursuant to an agreement and plan of merger dated November 23, 2015, whereby TEC became a 100% consolidated subsidiary of DMG. TEC has 500 providers in primary and specialty care locations throughout Snohomish County, Washington who care for more than 315,000 patients. The total consideration paid at closing for all outstanding common units of TEC was approximately $393,687, net of cash acquired, plus the assumption of certain liabilities totaling approximately $7,284.

The initial purchase price allocation for the acquisition of TEC is recorded at estimated fair values based upon the best information available to management and will be finalized when certain information arranged to be obtained has been received. The fair values of property and equipment and intangible assets were valued by an independent third party and are pending issuance of the final valuation report. Certain income tax amounts are pending issuance of final tax returns.

The following table summarizes the assets acquired and liabilities assumed in this transaction and recognized at the acquisition date at their estimated fair values:

Current assets, net of cash acquired		$	91,591
Property and equipment			108,533
Covenant not-to-compete			3,200
Amortizable intangible and other long-term assets			30,850
Goodwill			244,502
Liabilities assumed			(50,940	)
Long-term deferred income taxes			(16,880	)
Noncontrolling interests			(9,885	)
		$	400,971

Amortizable intangible assets acquired in this acquisition have a weighted average estimated useful life of six years. None of the goodwill recognized in this acquisition is expected to be deductible for tax purposes.

The noncontrolling interests assumed as part of the acquisition are stated at estimated fair value based on the estimated fair value of the underlying assets and liabilities of each non-wholly-owned entity.

The operating results of TEC are included in the Company’s consolidated financial statements from March 1, 2016.

Other routine acquisitions

During 2016, the Company acquired eight dialysis centers in the U.S., 21 dialysis centers outside the U.S., and other medical businesses for a total of $170,169 in net cash, earn-outs of $1,511, and deferred purchase price and liabilities assumed of $18,373. During 2015, the Company acquired dialysis-related and other ancillary businesses consisting of six dialysis centers in the U.S., 21 dialysis centers outside the U.S., three vascular access centers, and other medical businesses for a total of $96,469 in net cash and deferred purchase price and earn-outs of $8,395. During 2014, the Company acquired dialysis-related and other ancillary businesses consisting of 18 dialysis centers in the U.S., seven dialysis centers outside the U.S. and other medical businesses for a total of $272,094 in net cash and deferred purchase price of $23,781. The assets and liabilities for all acquisitions were recorded at their

F-40

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

estimated fair values at the dates of the acquisitions and are included in the Company’s financial statements and operating results from the effective dates of the acquisitions. For several of the 2016 acquisitions, certain income tax amounts are pending final evaluation and quantification of any pre-acquisition tax contingencies. In addition, valuation of medical claims liabilities and certain other working capital items relating to several of these acquisitions are pending final quantification.

The following table summarizes the assets acquired and liabilities assumed in the above described transactions and recognized at their acquisition dates at estimated fair values, as well as the estimated fair value of the noncontrolling interests assumed in these transactions:

		Year ended December 31,
		2016				2015				2014
Current assets		$	3,996			$	3,843			$	915
Property and equipment			9,407				12,436				5,999
Customer relationships			—				—				74,515
Non-compete agreements			5,395				8,959				16,585
Amortizable intangible and other long-term assets			986				4,345				4,193
Goodwill			203,326				97,093				221,514
Long-term deferred income taxes			597				(1,467	)			—
Noncontrolling interests assumed			(30,337	)			(18,905	)			(25,963	)
Liabilities assumed			(3,317	)			(1,440	)			(1,883	)
Aggregate purchase cost		$	190,053			$	104,864			$	295,875

Amortizable intangible assets acquired during 2016, 2015 and 2014 had weighted-average estimated useful lives of seven, eight and ten years, respectively. The majority of the intangible assets acquired relate to non-compete agreements and customer relationships. The weighted-average amortization period for customer relationships was ten years for 2014. The weighted-average amortization period for non-compete agreements was seven years for 2016, and eight years for both 2015 and 2014. The total amount of goodwill deductible for tax purposes associated with these acquisitions for 2016, 2015, and 2014 was approximately $173,718, $73,733 and $175,247, respectively.

Other pending transactions

On August 9, 2016, the Company entered into an amendment to its agreement to acquire Colorado-based Renal Ventures Limited, LLC (Renal Ventures). As a result of the amended agreement, the Company will acquire a 100 percent interest in all 38 outpatient dialysis centers owned by Renal Ventures, including one new center under construction, and a fifty-one percent interest in one vascular access clinic. The purchase price will be approximately $360,000 in cash, subject to, among other things, adjustments for certain items such as working capital. The transaction is subject to approval by the Federal Trade Commission (FTC), including Hart-Scott-Rodino antitrust clearance. The Company anticipates that it will be required by the FTC to divest some outpatient dialysis centers as a condition of the transaction. The Company expects the transaction to close in mid 2017.

Pro forma financial information (unaudited)

The following summary, prepared on a pro forma basis, combines the results of operations as if all acquisitions in 2016 and 2015 had been consummated as of the beginning of 2015, including the impact of certain adjustments such as amortization of intangibles, interest expense on acquisition financing and income tax effects.

		Year ended December 31,
		2016				2015
		(unaudited)
Pro forma net revenues		$	14,875,592			$	14,342,138
Pro forma net income attributable to DaVita Inc.			884,284				280,124
Pro forma basic net income per share attributable to DaVita Inc.			4.39				1.32
Pro forma diluted net income per share attributable to DaVita Inc.			4.32				1.30

F-41

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Contingent earn-out obligations

The Company has several contingent earn-out obligations associated with acquisitions that could result in the Company paying the former shareholders of acquired companies a total of up to approximately $19,557 if certain EBITDA, operating income performance targets or quality margins are met over the next one to eight years.

Contingent earn-out obligations are remeasured to fair value at each reporting date until the contingencies are resolved with changes in the liability due to the remeasurement recorded in earnings. See Note 24 to these consolidated financial statements for further details. As of December 31, 2016, the Company has estimated the fair value of these contingent earn-out obligations to be $9,977, of which a total of $7,217 is included in other liabilities and the remaining $2,760 is included in other long-term liabilities in the Company’s consolidated balance sheet.

The following is a reconciliation of changes in the contingent earn-out obligations for the year ended December 31, 2016:

Beginning balance January 1, 2016		$	34,135
Contingent earn-out obligations associated with acquisitions			1,511
Remeasurement of fair value			(4,132	)
Payments of contingent earn-out obligations			(21,537	)
		$	9,977

22.	Variable interest entities

The Company relies on the operating activities of certain entities that it does not directly own or control, but over which it has indirect influence and of which it is considered the primary beneficiary. These entities are subject to the consolidation guidance applicable to variable interest entities (VIEs).

Under U.S. GAAP, VIEs typically include entities for which (i) the entity’s equity is not sufficient to finance its activities without additional subordinated financial support; (ii) the equity holders as a group lack the power to direct the activities that most significantly influence the entity’s economic performance, the obligation to absorb the entity’s expected losses, or the right to receive the entity’s expected returns; or (iii) the voting rights of some investors are not proportional to their obligations to absorb the entity’s losses.

The Company has determined that substantially all of the entities it is associated with that qualify as VIEs must be included in its consolidated financial statements. The Company manages these entities and provides operating and capital funding as necessary for the entities to accomplish their operational and strategic objectives. A number of these entities are subject to nominee share ownership or share transfer restriction agreements that effectively transfer the majority of the economic risks and rewards of their ownership to the Company. In other cases the Company’s management agreements with these entities include both financial terms and protective and participating rights to the entities’ operating, strategic and non-clinical governance decisions which transfer substantial powers over and economic responsibility for the entities to the Company. In some cases such entities are subject to broad exclusivity or noncompetition restrictions that benefit the Company. Further, in some cases the Company has contractual arrangements with its related party nominee owners that effectively indemnify these parties from the economic losses from, or entitle the Company to the economic benefits of, these entities.

The analyses upon which these consolidation determinations rest are complex, involve uncertainties, and require significant judgment on various matters, some of which could be subject to different interpretations. At December 31, 2016, these consolidated financial statements include total assets of VIEs of $747,574 and total liabilities and noncontrolling interests of VIEs to third parties of $425,034.

The Company also sponsors certain deferred compensation plans whose trusts qualify as VIEs and the Company consolidates each of these plans as their primary beneficiary. The assets of these plans are recorded in short-term or long-term investments with related liabilities recorded in accrued compensation and benefits and other long-term liabilities. See Note 16 to these consolidated financial statements for disclosures on the assets of these consolidated non-qualified deferred compensation plans.

F-42

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

23.	Concentrations

Approximately 64%, 66% and 67% of total U.S. dialysis services revenues in 2016, 2015 and 2014, respectively, are from government-based programs, principally Medicare and Medicaid. Related net accounts receivable and other receivables from Medicare, including Medicare-assigned plans, and Medicaid, including Medicaid-assigned plans, were approximately $831,445 and $830,060, as of December 31, 2016 and 2015, respectively.

Approximately 72%, 70% and 71% of DMG’s revenues in 2016, 2015 and 2014, respectively, are from government-based programs, principally Medicare and Medicaid. Approximately 63%, 61% and 64% for 2016, 2015 and 2014, respectively, of DMG’s capitated medical revenues are associated with three health plans. In addition, approximately $289,798 and $231,278 at December 31, 2016 and 2015, respectively, of DMG’s capitated accounts receivables are associated with three health plans.

One commercial payor, Humana, accounted for approximately 11% of total consolidated net revenues.

There is no single commercial payor that accounted for more than 10% of total consolidated accounts receivable at December 31, 2016 and 2015.

24.	Fair values of financial instruments

The Company measures the fair value of certain assets, liabilities and noncontrolling interests subject to put provisions (temporary equity) based upon certain valuation techniques that include observable or unobservable inputs and assumptions that market participants would use in pricing these assets, liabilities, temporary equity and commitments. The Company has also classified certain assets, liabilities and temporary equity that are measured at fair value into the appropriate fair value hierarchy levels as defined by FASB.

The following tables summarize the Company’s assets, liabilities and temporary equity measured at fair value on a recurring basis as of December 31, 2016 and 2015:

		Total				Quoted prices in active markets for identical assets (Level 1)				Significant other observable inputs (Level 2)				Significant unobservable inputs (Level 3)
December 31, 2016
Assets
Available for sale securities		$	47,404			$	47,404			$	—			$	—
Cash surrender value of life insurance policies		$	59,646			$	—			$	59,646			$	—
Interest rate cap agreements		$	9,929			$	—			$	9,929			$	—
Funds on deposit with third parties		$	75,877			$	75,877			$	—			$	—
Liabilities
Contingent earn-out obligations		$	9,977			$	—			$	—			$	9,977
Temporary equity
Noncontrolling interests subject to put provisions		$	973,258			$	—			$	—			$	973,258
December 31, 2015
Assets
Available for sale securities		$	33,482			$	33,482			$	—			$	—
Cash surrender value of life insurance policies		$	56,840			$	—			$	56,840			$	—
Interest rate cap agreements		$	15,127			$	—			$	15,127			$	—
Interest rate swap agreements		$	516			$	—			$	516			$	—
Funds on deposit with third parties		$	82,679			$	82,679			$	—			$	—
Liabilities
Contingent earn-out obligations		$	34,135			$	—			$	—			$	34,135
Temporary equity
Noncontrolling interests subject to put provisions		$	864,066			$	—			$	—			$	864,066

F-43

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Available for sale securities represent investments in various open-ended registered investment companies, or mutual funds, and are recorded at fair value estimated based upon quoted prices reported by each mutual fund. See Note 9 to these consolidated financial statements for further discussion.

Investments in life insurance policies are carried at their cash surrender value which approximates their fair value. See Note 16 to these consolidated financial statements for further discussion.

The interest rate swap and cap agreements are recorded at fair value based upon valuation models utilizing the income approach and commonly accepted valuation techniques that use inputs from closing prices for similar assets and liabilities in active markets as well as other relevant observable market inputs at quoted intervals such as current interest rates, forward yield curves, implied volatility and credit default swap pricing. The Company does not believe the ultimate amount that could be realized upon settlement of these interest rate swap and cap agreements would be materially different from the fair values currently reported. See Note 14 to these consolidated financial statements for further discussion.

The funds on deposit with third parties represent funds held with various third parties as required by regulation or contract and invested by those parties in various investments, which are measured at estimated fair value based primarily on quoted market prices.

The estimated fair value measurements of contingent earn-out obligations are primarily based on unobservable inputs including projected EBITDA, estimated probabilities of achieving gross margin of certain medical procedures and the estimated probability of earn-out payments being made using an option pricing technique and a simulation model for expected EBITDA and operating income. In addition, a probability adjusted model was used to estimate the fair values of the quality measures involved. The estimated fair value of these contingent earn-out obligations will be remeasured as of each reporting date and could fluctuate based upon any significant changes in key assumptions, such as changes in the Company credit risk adjusted rate that is used to discount obligations to present value.

See Note 18 to these consolidated financial statements for a discussion of the Company’s methodology for estimating the fair value of noncontrolling interests subject to put obligations.

Other financial instruments consist primarily of cash, accounts receivable, accounts payable, other accrued liabilities and debt. The balances of the non-debt financial instruments are presented in the consolidated financial statements at December 31, 2016 and 2015 at their approximate fair values due to the short-term nature of their settlements. The carrying balance of the Company’s senior secured credit facilities totaled $4,217,348 as of December 31, 2016, and the fair value was approximately $4,336,969 based upon quoted market prices. The fair value of the Company’s Senior Notes was approximately $4,530,875 at December 31, 2016 based upon quoted market prices, as compared to the carrying amount of $4,500,000.

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

F-44

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

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.

F-45

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

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.

F-46

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

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

26.	Supplemental cash flow information

The table below provides supplemental cash flow information:

		Year ended December 31,
		2016				2015				2014
Cash paid:
Income taxes		$	339,411			$	156,075			$	238,615
Interest			406,987				405,120				351,967
Non-cash investing and financing activities:
Fixed assets under capital lease obligations			28,127				74,035				72,389

F-47

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

27.	Selected quarterly financial data (unaudited)

		2016																2015
		December 31				September 30				June 30				March 31				December 31				September 30				June 30				March 31
Net revenues		$	3,715,742			$	3,730,576			$	3,717,651			$	3,581,136			$	3,533,589			$	3,525,665			$	3,434,618			$	3,287,965
Operating income (loss)		$	381,428			$	819,156			$	329,070			$	364,889			$	244,935			$	509,368			$	480,548			$	(64,156	)
Income (loss) before income taxes		$	278,072			$	716,451			$	229,391			$	264,981			$	146,307			$	408,371			$	330,539			$	(162,081	)
Net income (loss) attributable to DaVita Inc.		$	157,726			$	571,332			$	53,382			$	97,434			$	(6,000	)		$	215,872			$	170,477			$	(110,617	)
Basic net income (loss) per share attributable to DaVita Inc.		$	0.81			$	2.80			$	0.26			$	0.48			$	(0.03	)		$	1.02			$	0.80			$	(0.52	)
Diluted net income (loss) per share attributable to DaVita Inc.		$	0.80			$	2.76			$	0.26			$	0.47			$	(0.03	)		$	1.00			$	0.78			$	(0.52	)

28.	Consolidating financial statements

The following information is presented in accordance with Rule 3-10 of Regulation S-X. The operating and investing activities of the separate legal entities included in the Company’s consolidated financial statements are fully interdependent and integrated. Revenues and operating expenses of the separate legal entities include intercompany charges for management and other services. The Company’s Senior Notes are guaranteed by substantially all of its domestic subsidiaries. Each of the guarantor subsidiaries has guaranteed the Senior Notes on a joint and several basis. However, the guarantor subsidiaries can be released from their obligations in the event of a sale or other disposition of all or substantially all of the assets of such subsidiary, including by merger or consolidation or the sale of all equity interests in such subsidiary owned by the Company, if such subsidiary guarantor is designated as an unrestricted subsidiary or otherwise ceases to be a restricted subsidiary, and if such subsidiary guarantor no longer guaranties any other indebtedness of the Company. Certain domestic subsidiaries, foreign subsidiaries, joint ventures, partnerships and third parties are not guarantors of the Senior Notes.

Consolidating Statements of Income

		DaVita Inc.				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Consolidating Adjustments				Consolidated Total
For the twelve months ended December 31, 2016
Patient services revenues		$	—			$	6,766,138			$	3,761,590			$	(173,567	)		$	10,354,161
Less: Provision for uncollectible accounts			—				(278,761	)			(172,592	)			—				(451,353	)
Net patient service revenues			—				6,487,377				3,588,998				(173,567	)			9,902,808
Capitated revenues			—				1,795,673				1,723,279				(273	)			3,518,679
Other revenues			767,791				2,089,749				125,203				(1,659,125	)			1,323,618
Total net revenues			767,791				10,372,799				5,437,480				(1,832,965	)			14,745,105
Operating expenses and charges			524,108				9,735,334				4,424,085				(1,832,965	)			12,850,562
Operating income			243,683				637,465				1,013,395				—				1,894,543
Debt expense			(407,925	)			(358,535	)			(50,710	)			402,788				(414,382	)
Other income, net			396,797				6,196				8,529				(402,788	)			8,734
Income tax expense			79,301				210,338				166,174				—				455,813
Equity earnings in subsidiaries			726,620				651,832				—				(1,378,452	)			—
Net income			879,874				726,620				805,040				(1,378,452	)			1,033,082
Less: Net income attributable to noncontrolling interests			—				—				—				(153,208	)			(153,208	)
Net income attributable to DaVita Inc.		$	879,874			$	726,620			$	805,040			$	(1,531,660	)		$	879,874

F-48

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Consolidating Statements of Income

		DaVita Inc.				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Consolidating Adjustments				Consolidated Total
For twelve months ended December 31, 2015
Patient services revenues		$	—			$	6,578,185			$	3,047,048			$	(144,954	)		$	9,480,279
Less: Provision for uncollectible accounts			—				(285,454	)			(142,406	)			—				(427,860	)
Net patient service revenues			—				6,292,731				2,904,642				(144,954	)			9,052,419
Capitated revenues			—				1,776,311				1,733,027				(243	)			3,509,095
Other revenues			727,887				1,875,133				32,137				(1,414,834	)			1,220,323
Total net revenues			727,887				9,944,175				4,669,806				(1,560,031	)			13,781,837
Operating expenses and charges			488,595				9,565,667				4,116,911				(1,560,031	)			12,611,142
Operating income			239,292				378,508				552,895				—				1,170,695
Debt (expense) and refinancing charges			(449,598	)			(340,176	)			(42,500	)			375,822				(456,452	)
Other income, net			365,752				11,562				7,401				(375,822	)			8,893
Income tax expense			81,221				173,063				41,442				—				295,726
Equity earnings in subsidiaries			195,507				318,676				—				(514,183	)			—
Net income			269,732				195,507				476,354				(514,183	)			427,410
Less: Net income attributable to noncontrolling interests			—				—				—				(157,678	)			(157,678	)
Net income attributable to DaVita Inc.		$	269,732			$	195,507			$	476,354			$	(671,861	)		$	269,732
For the year ended December 31, 2014
Patient services revenues		$	—			$	6,246,683			$	2,739,204			$	(117,549	)		$	8,868,338
Less: Provision for uncollectible accounts			—				(238,600	)			(128,284	)			—				(366,884	)
Net patient service revenues			—				6,008,083				2,610,920				(117,549	)			8,501,454
Capitated revenues			—				1,681,668				1,579,804				(184	)			3,261,288
Other revenues			684,066				1,639,828				24,155				(1,315,685	)			1,032,364
Total net revenues			684,066				9,329,579				4,214,879				(1,433,418	)			12,795,106
Operating expenses and charges			443,951				8,269,025				3,700,407				(1,433,418	)			10,979,965
Operating income			240,115				1,060,554				514,472				—				1,815,141
Debt (expense) and refinancing charges			(502,762	)			(363,623	)			(43,449	)			401,992				(507,842	)
Other income, net			385,532				11,731				7,103				(401,992	)			2,374
Income tax expense			46,856				397,268				2,219				—				446,343
Equity earnings in subsidiaries			647,085				335,691				—				(982,776	)			—
Net income			723,114				647,085				475,907				(982,776	)			863,330
Less: Net income attributable to noncontrolling interests			—				—				—				(140,216	)			(140,216	)
Net income attributable to DaVita Inc.		$	723,114			$	647,085			$	475,907			$	(1,122,992	)		$	723,114

F-49

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Consolidating Statements of Comprehensive Income

		DaVita Inc.				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Consolidating Adjustments				Consolidated Total
For the year ended December 31, 2016
Net income		$	879,874			$	726,620			$	805,040			$	(1,378,452	)		$	1,033,082
Other comprehensive loss			(290	)			—				(29,337	)			—				(29,627	)
Total comprehensive income			879,584				726,620				775,703				(1,378,452	)			1,003,455
Less: Comprehensive income attributable to noncontrolling interest			—				—				—				(153,398	)			(153,398	)
Comprehensive income attributable to DaVita Inc.		$	879,584			$	726,620			$	775,703			$	(1,531,850	)		$	850,057
For the year ended December 31, 2015
Net income		$	269,732			$	195,507			$	476,354			$	(514,183	)		$	427,410
Other comprehensive loss			(10,920	)			—				(23,889	)			—				(34,809	)
Total comprehensive income			258,812				195,507				452,465				(514,183	)			392,601
Less: Comprehensive income attributable to noncontrolling interest			—				—				—				(157,678	)			(157,678	)
Comprehensive income attributable to DaVita Inc.		$	258,812			$	195,507			$	452,465			$	(671,861	)		$	234,923
For the year ended December 31, 2014
Net income		$	723,114			$	647,085			$	475,907			$	(982,776	)		$	863,330
Other comprehensive income (losses)			580				—				(22,952	)			—				(22,372	)
Total comprehensive income			723,694				647,085				452,955				(982,776	)			840,958
Less: Comprehensive income attributable to noncontrolling interest			—				—				—				(140,216	)			(140,216	)
Comprehensive income attributable to DaVita Inc.		$	723,694			$	647,085			$	452,955			$	(1,122,992	)		$	700,742

F-50

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Consolidating Balance Sheets

		DaVita Inc.				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Consolidating Adjustments				Consolidated Total
As of December 31, 2016
Cash and cash equivalents		$	549,921			$	59,192			$	304,074			$	—			$	913,187
Accounts receivable, net			—				1,215,232				702,070				—				1,917,302
Other current assets			277,911				736,727				135,101				—				1,149,739
Total current assets			827,832				2,011,151				1,141,245				—				3,980,228
Property and equipment, net			337,200				1,689,798				1,148,369				—				3,175,367
Intangible assets, net			487				1,491,057				36,223				—				1,527,767
Investments in subsidiaries			9,717,728				2,002,660				—				(11,720,388	)			—
Intercompany receivables			3,250,692				—				866,955				(4,117,647	)			—
Other long-term assets and investments			39,994				86,710				523,874				—				650,578
Goodwill			—				7,838,984				1,568,333				—				9,407,317
Total assets		$	14,173,933			$	15,120,360			$	5,284,999			$	(15,838,035	)		$	18,741,257
Current liabilities		$	303,840			$	1,865,193			$	527,412			$	—			$	2,696,445
Intercompany payables			—				2,322,124				1,795,523				(4,117,647	)			—
Long-term debt and other long-term liabilities			8,614,445				1,215,315				392,053				—				10,221,813
Noncontrolling interests subject to put provisions			607,601				—				—				365,657				973,258
Total DaVita Inc. shareholders' equity			4,648,047				9,717,728				2,002,660				(11,720,388	)			4,648,047
Noncontrolling interests not subject to put provisions			—				—				567,351				(365,657	)			201,694
Total equity			4,648,047				9,717,728				2,570,011				(12,086,045	)			4,849,741
Total liabilities and equity		$	14,173,933			$	15,120,360			$	5,284,999			$	(15,838,035	)		$	18,741,257
As of December 31, 2015
Cash and cash equivalents		$	1,186,636			$	109,357			$	203,123			$	—			$	1,499,116
Accounts receivable, net			—				929,390				794,838				—				1,724,228
Other current assets			431,504				769,947				78,485				—				1,279,936
Total current assets			1,618,140				1,808,694				1,076,446				—				4,503,280
Property and equipment, net			268,066				1,575,890				944,784				—				2,788,740
Intangible assets, net			540				1,634,920				51,866				—				1,687,326
Investments in subsidiaries			8,893,079				1,597,185				—				(10,490,264	)			—
Intercompany receivables			3,474,133				—				701,814				(4,175,947	)			—
Other long-term assets and investments			74,458				53,346				113,246				—				241,050
Goodwill			—				7,834,257				1,460,222				—				9,294,479
Total assets		$	14,328,416			$	14,504,292			$	4,348,378			$	(14,666,211	)		$	18,514,875
Current liabilities		$	185,217			$	1,730,123			$	483,798			$	—			$	2,399,138
Intercompany payables			—				2,750,102				1,425,845				(4,175,947	)			—
Long-term debt and other long-term liabilities			8,730,673				1,130,988				305,838				—				10,167,499
Noncontrolling interests subject to put provisions			541,746				—				—				322,320				864,066
Total DaVita Inc. shareholders' equity			4,870,780				8,893,079				1,597,185				(10,490,264	)			4,870,780
Noncontrolling interests not subject to put provisions			—				—				535,712				(322,320	)			213,392
Total equity			4,870,780				8,893,079				2,132,897				(10,812,584	)			5,084,172
Total liabilities and equity		$	14,328,416			$	14,504,292			$	4,348,378			$	(14,666,211	)		$	18,514,875

F-51

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Consolidating Statements of Cash Flows

		DaVita Inc.				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Consolidating Adjustments				Consolidated Total
For the year ended December 31, 2016
Cash flows from operating activities:
Net income		$	879,874			$	726,620			$	805,040			$	(1,378,452	)		$	1,033,082
Changes in operating assets and liabilities and non-cash items included in net income			(614,642	)			335,166				(168,614	)			1,378,452				930,362
Net cash provided by operating activities			265,232				1,061,786				636,426				—				1,963,444
Cash flows from investing activities:
Additions of property and equipment, net			(139,303	)			(382,305	)			(307,487	)			—				(829,095	)
Acquisitions			—				(472,413	)			(91,443	)			—				(563,856	)
Proceeds from asset sales, net of cash divested			—				70,342				(5,617	)			—				64,725
Investments and other items			153,031				(29,038	)			2,565				—				126,558
Net cash provided by (used in) investing activities			13,728				(813,414	)			(401,982	)			—				(1,201,668	)
Cash flows from financing activities:
Long-term debt and related financing costs, net			(92,460	)			(27,830	)			(4,152	)			—				(124,442	)
Intercompany borrowing			237,988				(249,182	)			11,194				—				—
Other items			(1,061,203	)			(21,525	)			(144,811	)			—				(1,227,539	)
Net cash used in financing activities			(915,675	)			(298,537	)			(137,769	)			—				(1,351,981	)
Effect of exchange rate changes on cash			—				—				4,276				—				4,276
Net (decrease) increase in cash and cash equivalents			(636,715	)			(50,165	)			100,951				—				(585,929	)
Cash and cash equivalents at beginning of the year			1,186,636				109,357				203,123				—				1,499,116
Cash and cash equivalents at the end of the year		$	549,921			$	59,192			$	304,074			$	—			$	913,187
For the year ended December 31, 2015
Cash flows from operating activities:
Net income		$	269,732			$	195,507			$	476,354			$	(514,183	)		$	427,410
Changes in operating assets and liabilities and non-cash items included in net income			(146,531	)			688,106				74,032				514,183				1,129,790
Net cash provided by operating activities			123,201				883,613				550,386				—				1,557,200
Cash flows from investing activities:
Additions of property and equipment, net			(115,269	)			(319,695	)			(273,034	)			—				(707,998	)
Acquisitions			—				(76,983	)			(19,486	)			—				(96,469	)
Proceeds from asset sales			—				19,715				—				—				19,715
Investments and other items			(74,474	)			(2,144	)			(20,414	)			—				(97,032	)
Net cash used in investing activities			(189,743	)			(379,107	)			(312,934	)			—				(881,784	)
Cash flows from financing activities:
Long-term debt and related financing costs, net			640,009				(11,953	)			(8,358	)			—				619,698
Intercompany borrowing			486,588				(394,735	)			(91,853	)			—				—
Other items			(572,295	)			(66,382	)			(119,991	)			—				(758,668	)
Net cash provided by (used in) financing activities			554,302				(473,070	)			(220,202	)			—				(138,970	)
Effect of exchange rate changes on cash			—				—				(2,571	)			—				(2,571	)
Net increase in cash and cash equivalents			487,760				31,436				14,679				—				533,875
Cash and cash equivalents at beginning of the year			698,876				77,921				188,444				—				965,241
Cash and cash equivalents at the end of the year		$	1,186,636			$	109,357			$	203,123			$	—			$	1,499,116

F-52

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Consolidating Statements of Cash Flows

		DaVita Inc.				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Consolidating Adjustments				Consolidated Total
For the year ended December 31, 2014
Cash flows from operating activities:
Net income		$	723,114			$	647,085			$	475,907			$	(982,776	)		$	863,330
Changes in operating assets and liabilities and non-cash items included in net income			(597,992	)			120,772				90,521				982,776				596,077
Net cash provided by operating activities			125,122				767,857				566,428				—				1,459,407
Cash flows from investing activities:
Additions of property and equipment, net			(51,374	)			(312,191	)			(277,765	)			—				(641,330	)
Acquisitions			—				(228,569	)			(43,525	)			—				(272,094	)
Proceeds from asset sales			—				8,791				—				—				8,791
Investments and other items			(333,803	)			(316	)			(38,977	)			—				(373,096	)
Net cash used in investing activities			(385,177	)			(532,285	)			(360,267	)			—				(1,277,729	)
Cash flows from financing activities:
Long-term debt and related financing costs, net			4,513				(12,545	)			43				—				(7,989	)
Intercompany borrowing			410,437				(282,461	)			(127,976	)			—				—
Other items			(58,207	)			(14,099	)			(84,684	)			—				(156,990	)
Net cash provided by (used in) financing activities			356,743				(309,105	)			(212,617	)			—				(164,979	)
Effect of exchange rate changes on cash			—				—				2,293				—				2,293
Net increase (decrease) in cash and cash equivalents			96,688				(73,533	)			(4,163	)			—				18,992
Cash and cash equivalents at beginning of the year			602,188				151,454				192,607				—				946,249
Cash and cash equivalents at the end of the year		$	698,876			$	77,921			$	188,444			$	—			$	965,241

F-53

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

29.	Supplemental data (unaudited)

The following information is presented as supplemental data as required by the indentures governing the Company’s Senior Notes.

Condensed Consolidating Statements of Income

		Consolidated Total				Physician Groups				Unrestricted Subsidiaries				Company and Restricted Subsidiaries(1)
For the year ended December 31, 2016
Patient services revenues		$	10,354,161			$	449,473			$	—			$	9,904,688
Less: Provision for uncollectible accounts			(451,353	)			(12,696	)			—				(438,657	)
Net patient service revenues			9,902,808				436,777				—				9,466,031
Capitated revenues			3,518,679				1,617,794				—				1,900,885
Other revenues			1,323,618				32,938				—				1,290,680
Total net revenues			14,745,105				2,087,509				—				12,657,596
Operating expenses and charges			12,850,562				2,035,001				110				10,815,451
Operating income			1,894,543				52,508				(110	)			1,842,145
Debt expense			(414,382	)			(10,140	)			—				(404,242	)
Other income, net			8,734				576				—				8,158
Income tax expense			455,813				10,643				(44	)			445,214
Net income			1,033,082				32,301				(66	)			1,000,847
Less: Net income attributable to noncontrolling interests			(153,208	)			—				—				(153,208	)
Net income attributable to DaVita Inc.		$	879,874			$	32,301			$	(66	)		$	847,639

Condensed Consolidating Statements of Comprehensive Income

		Consolidated Total				Physician Groups				Unrestricted Subsidiaries				Company and Restricted Subsidiaries(1)
For the year ended December 31, 2016
Net income (losses)		$	1,033,082			$	32,301			$	(66	)		$	1,000,847
Other comprehensive losses			(29,627	)			—				—				(29,627	)
Total comprehensive income (losses)			1,003,455				32,301				(66	)			971,220
Less: Comprehensive income attributable to noncontrolling interest			(153,398	)			—				—				(153,398	)
Comprehensive income (losses) attributable to DaVita Inc.		$	850,057			$	32,301			$	(66	)		$	817,822

(1)	After the elimination of the unrestricted subsidiaries and the physician groups

F-54

DAVITA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(dollars in thousands, except per share data)

Condensed Consolidating Balance Sheets

		Consolidated Total				Physician Groups				Unrestricted Subsidiaries				Company and Restricted Subsidiaries(1)
As of December 31, 2016
Cash and cash equivalents		$	913,187			$	104,691			$	—			$	808,496
Accounts receivable, net			1,917,302				207,430				—				1,709,872
Other current assets			1,149,739				15,124				—				1,134,615
Total current assets			3,980,228				327,245				—				3,652,983
Property and equipment, net			3,175,367				1,378				—				3,173,989
Amortizable intangibles, net			1,527,767				4,858				—				1,522,909
Other long-term assets			650,578				78,215				2,714				569,649
Goodwill			9,407,317				16,405				—				9,390,912
Total assets		$	18,741,257			$	428,101			$	2,714			$	18,310,442
Current liabilities		$	2,696,445			$	223,302			$	—			$	2,473,143
Payables to parent			—				56,699				2,714				(59,413	)
Long-term debt and other long-term liabilities			10,221,813				44,094				—				10,177,719
Noncontrolling interests subject to put provisions			973,258				—				—				973,258
Total DaVita Inc. shareholders' equity			4,648,047				104,006				—				4,544,041
Noncontrolling interests not subject to put provisions			201,694				—				—				201,694
Shareholders' equity			4,849,741				104,006				—				4,745,735
Total liabilities and shareholder's equity		$	18,741,257			$	428,101			$	2,714			$	18,310,442

Condensed Consolidating Statements of Cash Flows

		Consolidated Total				Physician Groups				Unrestricted Subsidiaries				Company and Restricted Subsidiaries(1)
For the year ended December 31, 2016
Cash flows from operating activities:
Net income		$	1,033,082			$	32,301			$	(66	)		$	1,000,847
Changes in operating and intercompany assets and liabilities and non-cash items included in net income			930,362				131,863				66				798,433
Net cash provided by operating activities			1,963,444				164,164				—				1,799,280
Cash flows from investing activities:
Additions of property and equipment			(829,095	)			(863	)			—				(828,232	)
Acquisitions and divestitures, net			(563,856	)			—				—				(563,856	)
Proceeds from asset sales			64,725				—				—				64,725
Investments and other items			126,558				(3,014	)			—				129,572
Net cash used in investing activities			(1,201,668	)			(3,877	)			—				(1,197,791	)
Cash flows from financing activities:
Long-term debt and related financing costs, net			(124,442	)			(4	)			—				(124,438	)
Intercompany			—				(143,837	)			—				143,837
Other items			(1,227,539	)			—				—				(1,227,539	)
Net cash used in financing activities			(1,351,981	)			(143,841	)			—				(1,208,140	)
Effect of exchange rate changes on cash			4,276				—				—				4,276
Net increase (decrease) in cash			(585,929	)			16,446				—				(602,375	)
Cash at beginning of the year			1,499,116				88,245				—				1,410,871
Cash at the end of the year		$	913,187			$	104,691			$	—			$	808,496

(1)	After the elimination of the unrestricted subsidiaries and the physician groups

F-55

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 Denver, State of Colorado, on February 24, 2017.

DAVITA INC.
By:		/S/ KENT J. THIRY
		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, James K. Hilger, and Kathleen Waters, 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 on behalf of the registrant and in the capacities and on the dates indicated.

Signature		Title		Date
/S/ KENT J. THIRY		Chairman and Chief Executive Officer		February 24, 2017
Kent J. Thiry		(Principal Executive Officer)
/S/ JAMES K. HILGER		Interim Chief Financial Officer and		February 24, 2017
James K. Hilger		Chief Accounting Officer
		(Principal Accounting Officer)
/S/ PAMELA M. ARWAY		Director		February 24, 2017
Pamela M. Arway
/S/ CHARLES G. BERG		Director		February 24, 2017
Charles G. Berg
/S/ CAROL A. DAVIDSON		Director		February 24, 2017
Carol A. Davidson
/S/ BARBARA J. DESOER		Director		February 24, 2017
Barbara J. Desoer
/S/ PASCAL DESROCHES		Director		February 24, 2017
Pascal. Desroches
/S/ PAUL J. DIAZ		Director		February 24, 2017
Paul J. Diaz
/S/ PETER T. GRAUER		Director		February 24, 2017
Peter T. Grauer
/S/ JOHN M. NEHRA		Director		February 24, 2017
John M. Nehra
/S/ WILLIAM L. ROPER		Director		February 24, 2017
William L. Roper

S-1

Signature		Title		Date
/S/ ROGER J. VALINE		Director		February 24, 2017
Roger J. Valine
/S/ PHYLLIS R. YALE		Director		February 24, 2017
Phyllis R. Yale

S-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

DaVita Inc.:

Under date of February 24, 2017, we reported on the consolidated balance sheets of DaVita Inc. and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2016, which are included in the Annual Report on Form 10-K. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related Schedule II – Valuation and Qualifying Accounts included in the Annual Report on Form 10-K. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on this 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 24, 2017

S-3

DAVITA INC.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

		Balance at								Amounts								Balance
		beginning								charged				Amounts				at end of
Description		of year				Acquisitions				to income				written off				year
		(in thousands)
Allowance for uncollectible accounts:
Year ended December 31, 2014		$	237,143			$	—			$	381,337			$	375,806			$	242,674
Year ended December 31, 2015		$	242,674			$	—			$	437,100			$	415,630			$	264,144
Year ended December 31, 2016		$	264,144			$	—			$	463,030			$	475,118			$	252,056

S-4

EXHIBIT INDEX

2.1		Agreement and Plan of Merger, dated as of May 20, 2012, by and among DaVita Inc., Seismic Acquisition LLC, HealthCare Partners Holdings, LLC, and the Member Representative.(28)
2.2		Amendment, dated as of July 6, 2012, to the Agreement and Plan of Merger, dated as of May 20, 2012, by and among DaVita Inc., Seismic Acquisition LLC, HealthCare Partners Holdings, LLC, and the Member Representative.(29)
3.1		Restated Certificate of Incorporation of DaVita Inc., as filed with the Secretary of State of Delaware on November 1, 2016.(1)
3.2		Certificate of Ownership and Merger Merging DaVita Name Change, Inc. with and into DaVita Inc., as filed with Secretary of State of the State of Delaware on November 1, 2012.(31)
3.3		Amended and Restated Bylaws for DaVita Inc. dated as of September 7, 2016.(1)
4.1		Indenture, dated August 28, 2012, by and among DaVita Inc., the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee.(30)
4.2		Form of 5.750% Senior Notes due 2022 and related Guarantee (included in Exhibit 4.1).(30)
4.3		Indenture, dated June 13, 2014, by and among DaVita Inc., the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee. (34)
4.4		Form of 5.125% Senior Notes due 2024 and related Guarantee (included in Exhibit 4.3). (34)
4.5		Second Supplemental Indenture for the 5.750% Senior Notes due 2022, dated June 13, 2014, by and among DaVita Inc., the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee. (35)
4.6		Indenture for the 5.000% Senior Notes due 2025, dated April 17, 2015, by and among DaVita Inc., the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee. (22)
4.7		Form of 5.000% Senior Notes due 2025 and related Guarantee (included in Exhibit 4.6). (22)
10.1		Employment Agreement, dated as of October 31, 2005, effective October 24, 2005, by and between DaVita Inc. and Dennis Kogod.(6)*
10.2		Amendment to Mr. Kogod’s Employment Agreement, effective December 12, 2008.(18)*
10.3		Second Amendment to Mr. Kogod’s Employment Agreement, effective December 31, 2012.(18)*
10.4		Employment Agreement, effective September 22, 2005, by and between DaVita Inc. and James Hilger.(8)*
10.5		Separation Agreement, effective November 30, 2016, by and between DaVita Inc. and Mr. Kogod.✓*
10.6		Consulting Agreement, effective December 1, 2016, by and between DaVita Inc. and Mr. Kogod.✓*
10.7		Amendment to Mr. Hilger’s Employment Agreement, effective December 12, 2008.(18)*
10.8		Second Amendment to Mr. Hilger’s Employment Agreement, effective December 27, 2012.(33)*
10.9		Employment Agreement, effective July 25, 2008, between DaVita Inc. and Kent J. Thiry.(15)*
10.10		Employment Agreement, effective August 1, 2008, between DaVita Inc. and Allen Nissenson.(16)*
10.11		Employment Agreement, effective March 17, 2010, by and between DaVita Inc. and Javier Rodriguez.(20)*
10.12		Employment Agreement, effective November 1, 2016, by and between DaVita Inc. and Charles G. Berg.✓*
10.13		Employment Agreement, effective February 21, 2017, by and between DaVita Inc. and Joel Ackerman.✓*
10.14		Form of Indemnity Agreement.(12)*
10.15		Form of Indemnity Agreement.(7)*
10.16		DaVita Deferred Compensation Plan.✓*
10.17		Executive Incentive Plan (as Amended and Restated effective January 1, 2009).(19)*
10.18		Executive Retirement Plan.(18)*
10.19		DaVita Voluntary Deferral Plan.(5)*

Page 1 of 5

10.20		Deferred Bonus Plan (Prosperity Plan).(17)*
10.21		Amendment No. 1 to Deferred Bonus Plan (Prosperity Plan).(18)*
10.22		Amended and Restated Employee Stock Purchase Plan.(13)*
10.23		Amended and Restated DaVita Inc. Severance Plan.(33)*
10.24		Change in Control Bonus Program.(18)*
10.25		Non-Management Director Compensation Philosophy and Plan.(14)*
10.26		Amended and Restated 2002 Equity Compensation Plan.(4)*
10.27		Amended and Restated 2002 Equity Compensation Plan.(11)*
10.28		Amended and Restated 2002 Equity Compensation Plan.(13)*
10.29		Amended and Restated 2002 Equity Compensation Plan.(18)*
10.30		DaVita Inc. 2002 Equity Compensation Plan.(21)*
10.31		Form of Non-Qualified Stock Option Agreement—Employee (DaVita Inc. 1999 Non-Executive Officer and Non-Director Equity Compensation Plan.(10)*
10.32		Form of Non-Qualified Stock Option Agreement—Employee (DaVita Inc. 2002 Equity Compensation Plan).(2)*
10.33		Form of Non-Qualified Stock Option Agreement—Employee (DaVita Inc. 2002 Equity Compensation Plan).(9)*
10.34		Form of Non-Qualified Stock Option Agreement—Employee (DaVita Inc. 2002 Equity Compensation Plan).(10)*
10.35		Form of Restricted Stock Units Agreement—Employee (DaVita Inc. 2002 Equity Compensation Plan).(2)*
10.36		Form of Restricted Stock Units Agreement—Employee (DaVita Inc. 2002 Equity Compensation Plan).(9)*
10.37		Form of Restricted Stock Units Agreement—Employee (DaVita Inc. 2002 Equity Compensation Plan).(10)*
10.38		Form of Restricted Stock Units Agreement—Employee (DaVita Inc. 2002 Equity Compensation Plan).(18)*
10.39		Form of Stock Appreciation Rights Agreement—Employee (DaVita Inc. 2002 Equity Compensation Plan).(9)*
10.40		Form of Stock Appreciation Rights Agreement—Employee (DaVita Inc. 2002 Equity Compensation Plan).(10)*
10.41		Form of Stock Appreciation Rights Agreement—Board (DaVita Inc. 2002 Equity Compensation Plan).(16)*
10.42		Form of Stock Appreciation Rights Agreement—Board members (DaVita Inc. 2011 Incentive Award Plan).(24)*
10.43		Form of Restricted Stock Units Agreement—Board (DaVita Inc. 2002 Equity Compensation Plan).(16)*
10.44		Form of Restricted Stock Units Agreement—Board members (DaVita Inc. 2011 Incentive Award Plan).(24)*
10.45		Form of Non-Qualified Stock Option Agreement—Board (DaVita Inc. 2002 Equity Compensation Plan).(16)*
10.46		Form of Stock Appreciation Rights Agreement—Executives (DaVita Inc. 2011 Incentive Award Plan).(24)*
10.47		Form of Restricted Stock Units Agreement—Executives (DaVita Inc. 2011 Incentive Award Plan).(24)*
10.48		Form of Restricted Stock Units Agreement (DaVita Inc. 2011 Incentive Award Plan). (33)*
10.49		Form of Stock Appreciation Rights Agreement (DaVita Inc. 2011 Incentive Award Plan). (33)*
10.50		Form of Long-Term Incentive Program Award Agreement (For 162(m) designated teammates) (DaVita Inc. 2011 Incentive Award Plan).(33)*
10.51		Form of Long-Term Incentive Program Award Agreement (DaVita Inc. 2011 Incentive Award Plan). (33)*

Page 2 of 5

10.52		Credit Agreement, dated as of June 24, 2014, by and among DaVita Inc., the guarantors the guarantors party thereto, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, Barclays Bank PLC, and Wells Fargo Bank, National Association as Co-Syndication Agents, Bank of America, N.A., Credit Suisse AG, Goldman Sachs Bank USA, JPMorgan Chase Bank, N.A., Morgan Stanley Senior Funding, Inc., and SunTrust Bank, as Co-Documentation Agents, Barclays Bank PLC, Wells Fargo Securities, LLC, Credit Suisse Securities (USA) LLC, Goldman Sachs Bank USA, J.P. Morgan Securities, LLC, Bank of America, N.A., Morgan Stanley Senior Funding, Inc., and SunTrust Robinson Humphrey, Inc. as Joint Lead Arrangers and Joint Bookrunners, The Bank of Nova Scotia, Credit Agricole Securities (USA) Inc., The Bank of Tokyo-Mitsubishi UFJ, Ltd., and Sumitomo Mitsui Banking Corporation, as Senior Managing Agents, HSBC Securities (USA) Inc., Fifth Third Bank, and Compass Bank as Managing Agents. (35)
10.53		Perfection Certificate executed as of October 20, 2010 and delivered in connection with the closing of the Credit Agreement filed as Exhibit 10.68.(26)**
10.54		Dialysis Organization Agreement between DaVita Inc. and Amgen USA Inc. dated December 20, 2007.(17)**
10.55		Dialysis Organization Agreement between DaVita Inc. and Amgen USA Inc. dated December 17, 2010.(23)**
10.56		Amended and Restated DaVita Inc. 2011 Incentive Award Plan.(35)*
10.57		Amendment No. 2 to Dialysis Organization Agreement between DaVita Inc. and Amgen USA Inc. effective as of July 1, 2011.(25)**
10.58		Form of Non-Competition and Non-Solicitation Agreement, dated as of May 20, 2012, between DaVita Inc. and Dr. Robert Margolis, Dr. William Chin, Dr. Thomas Paulsen, Mr. Zan Calhoun, and Ms. Lori Glisson.(28)
10.59		Form of Non-Competition and Non-Solicitation Agreement, dated as of May 20, 2012, between DaVita Inc. and Mr. Matthew Mazdyasni, Dr. Sherif Abdou, and Dr. Amir Bacchus.(28)
10.60		Escrow Agreement, dated as of August 28, 2012, by and among DaVita Inc., The Bank of New York Mellon Trust Company, N.A., as trustee, The Bank of New York Mellon Trust Company, N.A., as escrow agent and The Bank of New York Mellon Trust Company, N.A., as bank and securities intermediary.(30)
10.61		Form of 2014 Long Term Incentive Program Cash Performance Award Agreement under the DaVita Inc. 2011 Incentive Award Plan and Long-Term Incentive Program (for 162(m) designated teammates). (36) * **
10.62		Form of 2014 Long Term Incentive Program Cash Performance Award Agreement under the DaVita Inc. 2011 Incentive Award Plan and Long-Term Incentive Program. (36)* **
10.63		Form of 2014 Long Term Incentive Program Performance Stock Units Agreement under the DaVita Inc. 2011 Incentive Award Plan and Long-Term Incentive Program (for 162(m) designated teammates). (36) * **
10.64		Form of 2014 Long Term Incentive Program Restricted Stock Units Agreement under the DaVita Inc. 2011 Incentive Award Plan and Long-Term Incentive Program. (36)*
10.65		Form of 2014 Long Term Incentive Program Stock Appreciation Rights Agreement under the DaVita Inc. 2011 Incentive Award Plan and Long-Term Incentive Program. (36)*
10.66		Corporate Integrity Agreement, dated as of October 22, 2014, by and among the Office of Inspector General of The Department of Health and Human Services and DaVita Inc. (27)
12.1		Computation of Ratio of Earnings to Fixed Charges.✓
14.1		DaVita Inc. Corporate Governance Code of Ethics.(3)
21.1		List of our subsidiaries.✓
23.1		Consent of KPMG LLP, independent registered public accounting firm.✓
24.1		Powers of Attorney with respect to DaVita. (Included on Page II-1).
31.1		Certification of the Chief Executive Officer, dated February 24, 2017, pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.✓
31.2		Certification of the Chief Financial Officer, dated February 24, 2017, pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.✓
32.1		Certification of the Chief Executive Officer, dated February 24, 2017, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.✓

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32.2		Certification of the Chief Financial Officer, dated February 24, 2017, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.✓
101.INS		XBRL Instance Document.✓
101.SCH		XBRL Taxonomy Extension Schema Document.✓
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.✓
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.✓
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.✓
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.✓

✓	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.

(37)	Filed on November 2, 2016 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016.

(38)	Filed on November 8, 2004 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004.

(39)	Filed on February 27, 2004 as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

(40)	Filed on May 4, 2005 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.

(41)	Filed on November 8, 2005 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.

(42)	Filed on November 4, 2005 as an exhibit to the Company’s Current Report on Form 8-K.

(43)	Filed on March 3, 2005 as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

(44)	Filed on August 7, 2006 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ending June 30, 2006.

(45)	Filed on July 6, 2006 as an exhibit to the Company’s Current Report on Form 8-K.

(46)	Filed on October 18, 2006 as an exhibit to the Company’s Current Report on Form 8-K.

(47)	Filed on July 31, 2006 as an exhibit to the Company’s Current Report on Form 8-K.

(48)	Filed on December 20, 2006 as an exhibit to the Company’s Current Report on Form 8-K.

(49)	Filed on June 4, 2007 as an exhibit to the Company’s Current Report on Form 8-K.

(50)	Filed on May 8, 2008 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008.

(51)	Filed on July 31, 2008 as an exhibit to the Company’s Current Report on Form 8-K.

(52)	Filed on November 6, 2008 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008.

(53)	Filed on February 29, 2008 as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

(54)	Filed on February 27, 2009 as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008

(55)	Filed on June 18, 2009 as an exhibit to the Company’s Current Report on Form 8-K.

(56)	Filed on April 14, 2010 as an exhibit to the Company’s Current Report on Form 8-K.

(57)	Filed on April 28, 2010 as Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A.

(58)	Filed on April 17, 2015 as an exhibit to the Company’s Current Report on Form 8-K.

(59)	Filed on December 29, 2011 as an exhibit to the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2010.

(60)	Filed on August 4, 2011 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011.

(61)	Filed on December 29, 2011 as an exhibit to the Company’s Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2011.

(62)	Filed on January 17, 2012 as an exhibit to the Company’s Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2011.

(63)	Filed on October 23, 2014 as an exhibit to the Company’s Current Report on Form 8-K.

(64)	Filed on May 21, 2012 as an exhibit to the Company’s Current Report on Form 8-K.

(65)	Filed on July 9, 2012 as an exhibit to the Company’s Current Report on Form 8-K.

(66)	Filed on August 28, 2012 as an exhibit to the Company’s Current Report on Form 8-K.

(67)	Filed on November 1, 2012 as an exhibit to the Company’s Current Report on Form 8-K.

(68)	Filed on August 7, 2013 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013.

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(69)	Filed on February 28, 2013 as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

(70)	Filed on June 16, 2014 as an exhibit to the Company’s Current Report on Form 8-K.

(71)	Filed on August 1, 2014 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.

(72)	Filed on November 6, 2014 as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014.

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