Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-looking statements

This Quarterly Report on Form 10-Q, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains statements that are forward-looking statements within the meaning of the federal securities laws and as such are intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. These forward-looking statements could include, among other things, DaVita's response to and the expected future impacts of the novel coronavirus (COVID-19), including statements about our balance sheet and liquidity, our expenses and expense offsets, revenues, billings and collections, availability or cost of supplies, treatment volumes, mix expectation, such as the percentage or number of patients under commercial insurance, the availability, acceptance, impact, administration and efficacy of COVID-19 vaccines, treatments and therapies, the continuing impact on the U.S. and global economies, unemployment and labor market conditions, and overall impact on our patients and teammates, as well as other statements regarding our future operations, financial condition and prospects, expenses, strategic initiatives, government and commercial payment rates, expectations related to value-based care, integrated kidney care and Medicare Advantage plan enrollment, and our ongoing stock repurchase program. All statements in this report, other than statements of historical fact, are forward-looking statements. Without limiting the foregoing, statements including the words "expect," "intend," "will," “could,” "plan," "anticipate," "believe" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on DaVita's current expectations and are based solely on information available as of the date of this report. DaVita undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of changed circumstances, new information, future events or otherwise, except as may be required by law. Actual future events and results could differ materially from any forward-looking statements due to numerous factors that involve substantial known and unknown risks and uncertainties. These risks and uncertainties include, among other things:

*•*the continuing impact of the dynamic and evolving COVID-19 pandemic, including, without limitation, on our patients, teammates, physician partners, suppliers, business, operations, reputation, financial condition and results of operations; the government’s response to the COVID-19 pandemic, including, among other things, federal, state and local vaccine mandates or surveillance testing requirements and the extent to which they may ultimately be applicable to us; the pandemic's continuing impact on the U.S. and global economies, unemployment, labor market conditions, inflation and evolving monetary policies; the availability, acceptance, impact and efficacy of COVID-19 vaccines, treatments and therapies; further spread or resurgence of the virus, including as a result of the emergence of new strains of the virus, such as the Omicron variant or Omicron BA2 subvariant; the continuing impact of the pandemic on our revenue and non-acquired growth due to lower treatment volumes;COVID-19's impact on the chronic kidney disease (CKD) population and our patient population including on the mortality of these patients; any potential negative impact on our commercial mix or the number of our patients covered by commercial insurance plans; continued increased COVID-19-related costs; supply chain challenges and disruptions, including with respect to our clinical supplies; and higher salary and wage expense driven in part by labor market conditions and a high demand for our clinical personnel, any of which may also have the effect of heightening many of the other risks and uncertainties discussed below, and in many cases, the impact of the pandemic and the aforementioned global economic conditions on our business may persist after the pandemic subsides;

*•*the extent to which the ongoing implementation of healthcare reform, or changes in or new legislation, regulations or guidance, enforcement thereof or related litigation result in a reduction in coverage or reimbursement rates for our services, a reduction in the number of patients enrolled in higher-paying commercial plans or that are enrolled in or select Medicare Advantage plans or other material impacts to our business or operations; or our making incorrect assumptions about how our patients will respond to any such developments;

*•*risks arising from potential changes in laws, regulations or requirements applicable to us, such as potential and proposed federal and/or state legislation, regulation, ballot, executive action or other initiatives, including, without limitation, those related to healthcare and/or labor matters, such as AB 290 in California;

*•*the concentration of profits generated by higher-paying commercial payor plans for which there is continued downward pressure on average realized payment rates, and a reduction in the number or percentage of our patients under such plans, including, without limitation, as a result of restrictive plan designs, restrictions or prohibitions on the use and/or availability of charitable premium assistance, which may result in the loss of revenues or patients, or our making incorrect assumptions about how our patients will respond to any change in financial assistance from charitable organizations;

*•*our ability to successfully implement our strategies with respect to integrated kidney care and value-based care initiatives and home based dialysis in the desired time frame and in a complex, dynamic and highly regulated environment, including, among other things, maintaining our existing business; meeting growth expectations;

recovering our investments; entering into agreements with payors, third party vendors and others on terms that are competitive and, as appropriate, prove actuarially sound; structuring operations, agreements and arrangements to comply with evolving rules and regulations; finding, training and retaining appropriate staff; and further developing our integrated care and other capabilities to provide competitive programs at scale;

*•*a reduction in government payment rates under the Medicare End Stage Renal Disease program, state Medicaid or other government-based programs and the impact of the Medicare Advantage benchmark structure;

*•*our ability to attract, retain and motivate teammates and our ability to manage operating cost increases or productivity decreases whether due to union organizing activities, legislative or other changes, demand for labor, volatility and uncertainty in the labor market, the current challenging labor market conditions, or other reasons;

*•*U.S. and global economic and marketplace conditions, inflation, unemployment, labor market conditions, and evolving monetary policies, and our ability to respond to these changing conditions, including our ability to successfully implement cost savings innovations in response;

*•*noncompliance by us or our business associates with any privacy or security laws or any security breach by us or a third party involving the misappropriation, loss or other unauthorized use or disclosure of confidential information;

*•*legal and compliance risks, such as our continued compliance with complex, and at times, evolving government regulations and requirements;

*•*the impact of the political environment and related developments on the current healthcare marketplace and on our business, including with respect to the Affordable Care Act, the exchanges and many other core aspects of the current healthcare marketplace, as well as the composition of the U.S. Supreme Court and the current presidential administration and congressional majority;

*•*changes in pharmaceutical practice patterns, reimbursement and payment policies and processes, or pharmaceutical pricing, including with respect to hypoxia inducible factors, among other things;

*•*our ability to develop and maintain relationships with physicians and hospitals, changing affiliation models for physicians, and the emergence of new models of care or other initiatives introduced by the government or private sector that, among other things, may erode our patient base and impact reimbursement rates;

*•*our ability to complete acquisitions, mergers, dispositions, joint ventures or other strategic transactions that we might announce or be considering, on terms favorable to us or at all, or to successfully integrate any acquired businesses, or to successfully operate any acquired businesses, joint ventures or other strategic transactions, or to successfully expand our operations and services in markets outside the United States, or to businesses or products outside of dialysis services;

*•*continued increased competition from dialysis providers and others, and other potential marketplace changes, including without limitation increased investment in and availability of funding to new entrants in the dialysis and pre-dialysis marketplace;

*•*the variability of our cash flows, including without limitation any extended billing or collections cycles; the risk that we may not be able to generate or access sufficient cash in the future to service our indebtedness or to fund our other liquidity needs; and the risk that we may not be able to refinance our indebtedness as it becomes due, on terms favorable to us or at all;

*•*factors that may impact our ability to repurchase stock under our stock repurchase program and the timing of any such stock repurchases, as well as our use of a considerable amount of available funds to repurchase stock;

*•*risks arising from the use of accounting estimates, judgments and interpretations in our financial statements;

*•*impairment of our goodwill, investments or other assets;

*•*our aspirations, goals and disclosures related to environmental, social and governance (ESG) matters, including evolving regulatory requirements affecting ESG standards, measurements and reporting requirements; the availability of suppliers that can meet our sustainability standards; and our ability to recruit, develop and retain diverse talent in our labor markets; and

*•*the other risk factors, trends and uncertainties set forth in our Annual Report on Form 10-K for the year ended December 31, 2021 (2021 10-K) and this Quarterly Report on Form 10-Q, and the risks and uncertainties discussed in any subsequent reports that we file or furnish with the Securities and Exchange Commission (SEC) from time to time.

The following should be read in conjunction with our condensed consolidated financial statements.

Company Overview

Our principal business is to provide dialysis and related lab services to patients in the United States, which we refer to as our U.S. dialysis business. We also operate our U.S. integrated kidney care (IKC) business, our other U.S. ancillary services, and our international operations, which we collectively refer to as our ancillary services, as well as our corporate administrative support. Our U.S. dialysis business is a leading provider of kidney dialysis services in the U.S. for patients suffering from chronic kidney failure, also known as end stage renal disease (ESRD) or end stage kidney disease (ESKD).

COVID-19 and General Economic and Marketplace Conditions

The COVID-19 pandemic continues to impact our business and operations. In addition, we continue to be impacted by general conditions in the global economy, including challenges with respect to supply chains, inflation and wage pressure, among other things. Certain of these impacts could be further intensified by concurrent global events such as potential COVID-19 lockdowns in portions of China or the ongoing conflict between Russia and Ukraine, the latter of which has resulted in increasing levels of sociopolitical and economic uncertainty and volatility in Europe and across the globe.

Operational and Financial Impacts

As part of our continued focus on the health, safety and well-being of our patients, teammates and physician partners, we have continued to dedicate substantial resources in response to COVID-19, including the implementation of additional protocols and initiatives to help safely maintain continuity of care for our patients and help protect our caregivers. The significant increase in cases resulting from the Omicron variant surge required us to continue to implement dedicated care shifts for patients with confirmed or suspected COVID-19 and other enhanced clinical practices, including procuring additional equipment and clinical supplies, such as personal protective equipment (PPE).

During the first quarter of 2022, these ongoing clinical measures placed additional pressure on staffing in an already challenging labor market. Additionally, as a result of these ongoing COVID-19-related clinical measures, in combination with general labor and inflationary pressures, we have incurred higher incentive pay, increased utilization of contract labor, and inefficient productivity. In addition, during 2022, we have and expect to continue to experience higher than usual wage increases for our teammates. The cumulative impact of the foregoing will continue to put additional pressure on our cost structure, some of which is expected to abate with the decline of the impact of COVID-19. Potential staffing shortages or disruptions, if material, could ultimately lead to the unplanned closures of certain centers or adversely impact clinical operations, and may otherwise have a material adverse impact on our ability to provide dialysis services or the cost of providing those services, among other things. Prolonged volatility, uncertainty, labor supply shortages and other challenging labor market conditions, including, among other things, due to inflationary pressures or evolving monetary policies that may be independent of the pandemic, could also have an adverse impact on our ability to execute on our strategic initiatives and a material adverse impact on our labor costs. These inflationary pressures or evolving monetary policies could more broadly impact our supply and other costs as noted below, and may drive certain increased expenses, including interest expense. While we continue to identify and implement cost savings opportunities to help mitigate these pressures, including cost savings associated with certain pharmaceutical supplies, and potential cost savings related to G&A efficiencies, capacity utilization improvement, clinic operations optimization and improvement and procurement improvement, there is no assurance that these initiatives will succeed in offsetting the impact of these challenging conditions, which ultimately could have a material adverse impact on our results of operations, financial condition and cash flows.

We also continued to experience significant cost inflation during the first quarter, including with respect to PPE and other medical supplies, among other things. We believe that the cost of PPE and other medical supplies will remain elevated and as our COVID-19 response continues, we expect to continue to incur extended and significant additional costs for these supplies, and we expect that certain of these increased costs may persist due to the overall challenges and disruptions of global supply chains. Ongoing global supply chain challenges have impacted the availability of certain of our equipment and clinical supplies. Prolonged strain on global supply chains may result in additional equipment and clinical supply shortages, disruptions, delays or associated price increases that could materially impact our ability to provide dialysis services or the cost of providing those services, among other things. On the other hand, our COVID-19 response has continued to reduce certain other expenses, such as those related to teammate travel, though it remains uncertain how much of these reductions, if any, will persist as our teammates return to their respective office locations.

In the first quarter, treatment volumes reflected continued pressure primarily driven by the ongoing impact of COVID-19 on mortality rates for dialysis patients which has had a negative impact on our patient census. The latest Omicron variant surge led to a significant increase in COVID-19 cases in our patient population. While the mortality rate associated with this latest surge preliminarily appears to be lower than in prior surges, the magnitude of the case increase resulted in an increased level of excess patient mortalities in the first quarter as compared to the prior quarter. We expect that the impact of COVID-19 is likely

to continue to negatively impact our revenue and non-acquired growth for a period of time even as the pandemic subsides due to the compounding impact of mortalities, among other things. Depending on the ultimate severity and duration of the pandemic, the magnitude of these cumulative impacts could have a material adverse impact on our results of operations, financial condition and cash flows. In light of the cumulative impact of these excess mortalities and these other marketplace dynamics that have been intensified by the pandemic, we are seeking to identify and implement cost savings opportunities, and any failure on our part to appropriately adjust our business and operations could have a material adverse effect on our business, results of operations, financial condition and cash flows and could materially harm our reputation.

Federal, State and Local Government Response

Federal COVID-19 relief legislation suspended the 2% Medicare sequestration from May 1, 2020 through December 31, 2021. The Protecting Medicare and American Farmers from Sequester Cuts Act, signed into law on December 10, 2021, extended the suspension of the 2% Medicare sequestration from December 31, 2021 through March 31, 2022, with 1% Medicare sequestration beginning April 1, 2022 through June 30, 2022 and 2% Medicare sequestration beginning July 1, 2022. While in effect, the suspension of sequestration has significantly increased, and will continue to significantly increase, our revenues.

We believe the ultimate impact of this public health crisis on the Company will depend on future developments that are highly uncertain and difficult to predict, including among others the ultimate severity and duration of the pandemic; further spread or resurgence of the virus, including as a result of the emergence of new strains of the virus, such as the Omicron variant or Omicron BA2 subvariant; COVID-19's impact on the chronic kidney disease (CKD) patient population and our patient population, including on the mortality of these patients; the availability, acceptance, impact and efficacy of COVID-19 vaccines, treatments and therapies; the pandemic’s continuing impact on our revenue and non-acquired growth due to lower treatment volumes, the U.S. and global economies, unemployment, labor market conditions, inflation and monetary policies; the potential negative impact on our commercial mix or the number of patients covered by commercial insurance plans; continued increased COVID-19-related costs; supply chain challenges and disruptions; the responses of our competitors to the pandemic and related changes in the marketplace; the timing, scope and effectiveness of federal, state and local government responses to the continuing pandemic; and any potential changes to the extensive set of federal, state and local laws, regulations and requirements that govern our business. In many cases, the impact of the pandemic and the aforementioned global economic and marketplace conditions on our business may persist after the pandemic subsidies.

For additional discussion of the COVID-19 pandemic and our response, including its impact on us and related risks and uncertainties, please see the discussion in Part I Item 1. Business of the 2021 10-K under the headings, "COVID-19 and its impact on our business" and "Human Capital Management," as well as the risk factor in Part I Item 1A. Risk Factors of the 2021 10-K under the heading "We face various risks related to the dynamic and evolving novel coronavirus pandemic, many of which may have a material adverse impact on us."

Financial Results

The discussion below includes analysis of our financial condition and results of operations for the quarter ended periods for the three months ended March 31, 2022 compared to the three months ended December 31, 2021, and the year to date periods for three months ended March 31, 2022 compared to the three months ended March 31, 2021. The SEC amended its guidance on Management's Discussion and Analysis of Financial Condition and Results of Operations to permit companies to compare their most recently completed quarter to either the corresponding quarter of the prior year or to the immediately preceding sequential quarter to allow for flexibility in comparison of interim periods reported to help companies provide a more tailored and meaningful analysis relevant to their business cycles. Beginning with the first quarter of 2022, our Management’s Discussion and Analysis of Financial Condition and Results of Operations will present our results of operations for the most recently completed fiscal year to date period to the corresponding year to date period of the prior year, as well as the most recently completed quarter compared to the immediately preceding sequential quarter, and will otherwise exclude comparisons of the most recently completed quarter and the corresponding quarter of the prior year.

Consolidated results of operations

The following tables summarize our revenues and operating income by line of business. See the discussion of our results for each line of business following the tables. When multiple drivers are identified in the following discussion of results, they are listed in order of magnitude:

			Three months ended												Q1 2022 vs. Q4 2021
			March 31, 2022						December 31, 2021						Amount						Percent
			(dollars in millions)
Revenues:
U.S. dialysis			$	2,575					$	2,703					$	(128)					(4.7)		%
Other — Ancillary services			265						262						3						1.1		%
Elimination of intersegment revenues			(22)						(20)						(2)						(10.0)		%
Total consolidated revenues			$	2,818					$	2,944					$	(126)					(4.3)		%
Operating income (loss):
U.S. dialysis			$	406					$	451					$	(45)					(10.0)		%
Other — Ancillary services			(32)						(29)						(3)						(10.3)		%
Corporate administrative support			(36)						(33)						(3)						(9.1)		%
Operating income			$	338					$	389					$	(51)					(13.1)		%

Certain columns, rows or percentages may not sum due to the presentation of rounded numbers.

			Three months ended												YTD Q1 2022 vs. YTD Q1 2021
			March 31, 2022						March 31, 2021						Amount						Percent
			(dollars in millions)
Revenues:
U.S. dialysis			$	2,575					$	2,590					$	(15)					(0.6)		%
Other — Ancillary services			265						261						4						1.5		%
Elimination of intersegment revenues			(22)						(31)						9						29.0		%
Total consolidated revenues			$	2,818					$	2,820					$	(2)					(0.1)		%
Operating income (loss):
U.S. dialysis			$	406					$	480					$	(74)					(15.4)		%
Other — Ancillary services			(32)						(12)						(20)						(166.7)		%
Corporate administrative support			(36)						(25)						(11)						(44.0)		%
Operating income			$	338					$	443					$	(105)					(23.7)		%

Certain columns, rows or percentages may not sum due to the presentation of rounded numbers.

U.S. dialysis results of operations

Treatment Volume:

			Three months ended												Q1 2022 vs. Q4 2021
			March 31, 2022						December 31, 2021						Amount						Percent
Dialysis treatments			7,109,788						7,455,560						(345,772)						(4.6)		%
Average treatments per day			92,335						94,374						(2,039)						(2.2)		%
Treatment days			77.0						79.0						(2.0)						(2.5)		%
Normalized non-acquired treatment growth(1)			(1.9)		%				(1.8)		%										(0.1)		%

Certain columns, rows or percentages may not sum due to the presentation of rounded numbers.

(1)Normalized non-acquired treatment growth reflects year over year growth in treatment volume, adjusted to exclude acquisitions and other similar transactions, and further adjusted to normalize for the number and mix of treatment days in a given quarter versus the prior year quarter.

			Three months ended												YTD Q1 2022 vs. YTD Q1 2021
			March 31, 2022						March 31, 2021						Amount						Percent
Dialysis treatments			7,109,788						7,286,934						(177,146)						(2.4)		%
Average treatments per day			92,335						94,636						(2,301)						(2.4)		%
Treatment days			77.0						77.0						—						—		%
Normalized non-acquired treatment growth(1)			(1.9)		%				(2.2)		%										0.3		%

Certain columns, rows or percentages may not sum due to the presentation of rounded numbers.

(1)Normalized non-acquired treatment growth reflects year over year growth in treatment volume, adjusted to exclude acquisitions and other similar transactions, and further adjusted to normalize for the number and mix of treatment days in a given quarter versus the prior year quarter.

Our U.S. dialysis treatment volume is directly correlated with our operating revenues and expenses. The decrease in our U.S. dialysis treatments for the first quarter of 2022 from the fourth quarter of 2021 was primarily driven by two fewer treatment days, increased mortality and higher missed treatments. We believe the increased mortality is largely attributable to the impact of COVID-19 on our patient population.

The decrease in our U.S. dialysis treatments for the three months ended March 31, 2022 from the three months ended March 31, 2021 was primarily driven by the impact of increased mortality over recent periods on our patient population, slightly offset by acquisition-related growth. We believe the increased mortality is largely attributable to the impact of COVID-19 on our patient population.

Revenues:

			Three months ended												Q1 2022 vs. Q4 2021
			March 31, 2022						December 31, 2021						Amount						Percent
			(dollars in millions, except per treatment data)
Total revenues			$	2,575					$	2,703					$	(128)					(4.7)		%
Average patient service revenue per treatment			$	361.35					$	361.70					$	(0.35)					(0.1)		%

Certain columns, rows or percentages may not sum due to the presentation of rounded numbers.

			Three months ended												YTD Q1 2022 vs. YTD Q1 2021
			March 31, 2022						March 31, 2021						Amount						Percent
			(dollars in millions, except per treatment data)
Total revenues			$	2,575					$	2,590					$	(15)					(0.6)		%
Average patient service revenue per treatment			$	361.35					$	354.50					$	6.85					1.9		%

Certain columns, rows or percentages may not sum due to the presentation of rounded numbers.

U.S. dialysis average patient service revenue per treatment for the first quarter of 2022 compared to the fourth quarter of 2021 decreased, driven by a seasonal decline from co-insurance and deductibles, partially offset by an increase in the Medicare base rate in 2022, increases in commercial rate and mix, favorable changes due to the continued shift to Medicare Advantage plans and a seasonal increase from hospital inpatient dialysis treatments.

U.S. dialysis average patient service revenue per treatment for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 increased, primarily driven by increases in the Medicare base rate in 2022 and commercial mix, as well as favorable changes due to the continued shift to Medicare Advantage plans.

Operating expenses:

			Three months ended												Q1 2022 vs. Q4 2021
			March 31, 2022						December 31, 2021						Amount						Percent
			(dollars in millions, except per treatment data)
Patient care costs			$	1,796					$	1,850					$	(54)					(2.9)		%
General and administrative			217						243						(26)						(10.7)		%
Depreciation and amortization			162						166						(4)						(2.4)		%
Equity investment income			(6)						(7)						1						14.3		%
Total operating expenses and charges			$	2,169					$	2,251					$	(82)					(3.6)		%
Patient care costs per treatment			$	252.61					$	248.12					$	4.49					1.8		%

Certain columns, rows or percentages may not sum or recalculate due to the presentation of rounded numbers.

			Three months ended												YTD Q1 2022 vs. YTD Q1 2021
			March 31, 2022						March 31, 2021						Amount						Percent
			(dollars in millions, except per treatment data)
Patient care costs			$	1,796					$	1,739					$	57					3.3		%
General and administrative			217						221						(4)						(1.8)		%
Depreciation and amortization			162						156						6						3.8		%
Equity investment income			(6)						(6)						—						—		%
Total operating expenses and charges			$	2,169					$	2,110					$	59					2.8		%
Patient care costs per treatment			$	252.61					$	238.69					$	13.92					5.8		%

Certain columns, rows or percentages may not sum or recalculate due to the presentation of rounded numbers.

Patient care costs. U.S. dialysis patient care costs per treatment for the first quarter of 2022 increased from the fourth quarter of 2021 primarily due to compensation expenses driven by increased wage rates and seasonal increases in payroll taxes. In addition, our fixed other direct operating expenses in our dialysis centers negatively impacted patient care costs per treatment due to fewer number of treatments in the first quarter of 2022. These increases were partially offset by decreased health benefit expenses, pharmaceutical unit costs and medical supplies expense.

U.S. dialysis patient care costs per treatment for the three months ended March 31, 2022 increased from the three months ended March 31, 2021 primarily due to compensation expenses driven by increased wage rates, as well as increases in fixed other direct operating expenses associated with our dialysis centers, as described above. Other drivers of this change include increases in utilities expense resulting from lower expense in the first quarter of 2021 related to our virtual power purchase arrangements, medical supplies expense, costs related to management meetings and insurance expense. These increases were partially offset by decreased pharmaceutical unit costs and professional fees.

General and administrative expenses. U.S. dialysis general and administrative expenses in the first quarter of 2022 decreased from the fourth quarter of 2021 primarily due to declines in compensation expense, professional fees, office supplies, other purchased services and health benefit expenses.

U.S. dialysis general and administrative expenses for the three months ended March 31, 2022 decreased from the three months ended March 31, 2021 primarily due to a decline in professional fees, partially offset by increased costs related to management meetings.

Depreciation and amortization. U.S. dialysis depreciation and amortization expenses for the quarter ended March 31, 2022 compared to the quarter ended December 31, 2021 decreased primarily due to a decline in accelerated depreciation for expected center closures, partially offset by increased depreciation and amortization related to hardware associated with our clinical system and other corporate technology projects.

U.S. dialysis depreciation and amortization expenses for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 increased primarily related to increased depreciation and amortization related to hardware associated with our clinical system and other corporate technology projects, as well as the development of new centers. We expect depreciation and amortization to increase going forward as a result of the expected rollout of our new clinical system.

Equity investment income. U.S. dialysis equity investment income was relatively flat for the first quarter of 2022 compared to the fourth quarter of 2021 and the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

Operating income:

			Three months ended												Q1 2022 vs. Q4 2021
			March 31, 2022						December 31, 2021						Amount						Percent
			(dollars in millions)
Operating income			$	406					$	451					$	(45)					(10.0)		%

			Three months ended												YTD Q1 2022 vs. YTD Q1 2021
			March 31, 2022						March 31, 2021						Amount						Percent
			(dollars in millions)
Operating income			$	406					$	480					$	(74)					(15.4)		%

U.S. dialysis operating income for the first quarter of 2022 decreased from the fourth quarter of 2021 primarily due to a decrease in dialysis treatments, a decrease in our average patient service revenue per treatment and increases in compensation expenses, as described above. Operating income was positively impacted by decreases in health benefit expenses, pharmaceutical unit costs, medical supplies expense and professional fees.

U.S. dialysis operating income for the three months ended March 31, 2022 decreased from the three months ended March 31, 2021 primarily due to a decrease in dialysis treatments and increases in compensation expenses and fixed other direct operating expenses associated with our dialysis centers, as described above, as well as increases in costs related to management meetings and medical supplies expense. Operating income was positively impacted by an increase in our average patient service revenue per treatment, as described above, and a decrease in professional fees and pharmaceutical unit costs.

Other—Ancillary services

Our other operations include ancillary services that are primarily aligned with our core business of providing dialysis services to our network of patients. As of March 31, 2022, these consisted principally of our U.S. integrated kidney care business (IKC), certain U.S. other ancillary businesses (including our clinical research programs, transplant software business, and venture investment group), and our international operations.

These ancillary services generated revenues of approximately $265 million in the first quarter of 2022, representing approximately 9% of our consolidated revenues. As part of our growth strategy, we have invested, and expect to continue to invest, significant resources in the further development of our integrated care business and value-based care initiatives. There can be no assurances that we will be able to successfully implement our strategies with respect to value-based care and integrated kidney care in the desired time frame and in a complex, dynamic and highly regulated environment, and we face risks including, among other things, those related to maintaining our existing business, recovering our investments, entering into agreements with payors, physicians, third party vendors and others on terms that are competitive, and as appropriate, that

prove actuarially sound; structuring these agreements and arrangements to comply with evolving rules and regulations, including, among other things, rules and regulations related to the use of protected health information; and further developing our operational, IT and other capabilities to enable us to provide competitive programs at scale. If our value-based care and integrated kidney care programs are unsuccessful, it could result in a loss of our investments and have a material adverse effect on our growth strategy, and could have an adverse impact on our business, results of operations, financial condition and cash flows.

Furthermore, if any of our other ancillary services, such as our international operations, are unsuccessful, this could have a negative impact on our business, results of operations, financial condition and cash flows, and we may determine to exit that line of business, which could result in significant termination costs or loss of investment. In addition, we have in the past and may in the future incur material restructuring, write-off or impairment charges on our investment in one or more of these ancillary services, including goodwill.

We expect to add additional service offerings or product lines to our business and to pursue opportunities. While these opportunities could include, among other things, healthcare services not related to dialysis, we have focused our ongoing efforts on opportunities with strong strategic links to kidney care, dialysis or integrated kidney care.

As of March 31, 2022, our international dialysis operations provided dialysis and administrative services through a total of 346 outpatient dialysis centers located in 11 countries outside of the United States.

Ancillary services results of operations

			Three months ended												Q1 2022 vs. Q4 2021
			March 31, 2022						December 31, 2021						Amount						Percent
			(dollars in millions)
Revenues:
Integrated kidney care			$	87					$	86					$	1					1.2		%
Other U.S. ancillary			5						6						(1)						(16.7)		%
International			173						170						3						1.8		%
Total ancillary services revenues			$	265					$	262					$	3					1.1		%
Operating (loss) income:
Integrated kidney care			$	(37)					$	(39)					$	2					5.1		%
Other U.S. ancillary			(3)						4						(7)						(175.0)		%
International(1)			8						6						2						33.3		%
Total ancillary services operating loss			$	(32)					$	(29)					$	(3)					(10.3)		%

Certain columns, rows or percentages may not sum due to the presentation of rounded numbers.

(1)The reported operating income for the three months ended March 31, 2022 and December 31, 2021 includes foreign currency gains (losses) embedded in equity method income recognized from our APAC JV of approximately $0.3 million and $(1.0) million, respectively.

			Three months ended												YTD Q1 2022 vs. YTD Q1 2021
			March 31, 2022						March 31, 2021						Amount						Percent
			(dollars in millions)
Revenues:
Integrated kidney care			$	87					$	93					$	(6)					(6.5)		%
Other U.S. ancillary			5						6						(1)						(16.7)		%
International			173						162						11						6.8		%
Total ancillary services revenues			$	265					$	261					$	4					1.5		%
Operating (loss) income:
Integrated kidney care			$	(37)					$	(27)					$	(10)					(37.0)		%
Other U.S. ancillary			(3)						1						(4)						(400.0)		%
International(1)			8						13						(5)						(38.5)		%
Total ancillary services operating loss			$	(32)					$	(12)					$	(20)					(166.7)		%

Certain columns, rows or percentages may not sum due to the presentation of rounded numbers.

(1)The reported operating income for the three months ended March 31, 2022 and March 31, 2021 includes foreign currency gains embedded in equity method income recognized from our APAC JV of approximately $0.3 million and $2.7 million, respectively.

Revenues:

IKC revenues for the first quarter of 2022 increased compared to the fourth quarter of 2021 due to the recognition of shared savings from our ESRD seamless care organizations (ESCOs) and increased revenue related to our special needs plans, partially offset by a decrease in revenues related to our value based care arrangements. Other U.S. ancillary revenues for the first quarter of 2022 compared to the fourth quarter of 2021 decreased due to a decrease in revenues in our clinical research programs, slightly offset by increased revenues related to our transplant software business. International revenues for the first quarter of 2022 increased from the fourth quarter of 2021 primarily due to acquisition-related growth.

IKC revenues for the three months ended March 31, 2022 decreased from the three months ended March 31, 2021 due to a reduction in members in our special needs plans, slightly offset by the recognition of ESCO shared savings in the first quarter of 2022. Other U.S. ancillary services revenues for the three months ended March 31, 2022 decreased compared to the three months ended March 31, 2021 for the same reasons stated above. Our international revenues for the three months ended March 31, 2022 increased from the three months ended March 31, 2021 primarily due to acquisition-related growth.

Operating loss:

IKC operating loss for the first quarter of 2022 compared to the fourth quarter of 2021 decreased driven by decreased professional fees, partially offset by continued investments in our integrated care support functions. Other U.S. ancillary services operating results for the first quarter of 2022 compared to the fourth quarter of 2021 were impacted by a non-recurring benefit received in the fourth quarter of 2021. International operating income for the first quarter of 2022 increased from the fourth quarter of 2021 primarily due to an increase in equity income resulting from fluctuations in foreign currency at our APAC JV.

IKC operating loss for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 increased primarily related to continued investments in our integrated care support functions. Other U.S. ancillary services operating results for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 decreased due to a non-recurring benefit received in first quarter of 2021. International operating results for the three months ended March 31, 2022 decreased from the three months ended March 31, 2021 primarily due to a decrease in equity income resulting from fluctuations in foreign currency at our APAC JV.

Corporate administrative support

			Three months ended												Q1 2022 vs. Q4 2021
			March 31, 2022						December 31, 2021						Amount						Percent
			(dollars in millions)
Corporate administrative support			$	(36)					$	(33)					$	(3)					(9.1)		%

			Three months ended												YTD Q1 2022 vs. YTD Q1 2021
			March 31, 2022						March 31, 2021						Amount						Percent
			(dollars in millions)
Corporate administrative support			$	(36)					$	(25)					$	(11)					(44.0)		%

Corporate administrative support expenses for the quarter ended March 31, 2022 compared to the quarter ended December 31, 2021 and the three months ended March 31, 2022 compared to the three months ended March 31, 2021 increased primarily due to an increase in legal fees.

Corporate-level charges

			Three months ended												Q1 2022 vs. Q4 2021
			March 31, 2022						December 31, 2021						Amount						Percent
			(dollars in millions)
Debt expense			$	74					$	72					$	2					2.8		%
Other (loss) income, net			$	(2)					$	(2)					$	—					—		%
Effective income tax rate			21.7		%				20.8		%										0.9		%
Effective income tax rate attributable to DaVita Inc.(1)			26.0		%				25.8		%										0.2		%
Net income attributable to noncontrolling interests			$	44					$	62					$	(18)					(29.0)		%

(1)For a reconciliation of our effective income tax rate attributable to DaVita Inc., see "Reconciliations of Non-GAAP measures" section below.

			Three months ended												YTD Q1 2022 vs. YTD Q1 2021
			March 31, 2022						March 31, 2021						Amount						Percent
			(dollars in millions)
Debt expense			$	74					$	67					$	7					10.4		%
Other (loss) income, net			$	(2)					$	1					$	(3)					(300.0)		%
Effective income tax rate			21.7		%				22.6		%										(0.9)		%
Effective income tax rate attributable to DaVita Inc.(1)			26.0		%				26.4		%										(0.4)		%
Net income attributable to noncontrolling interests			$	44					$	54					$	(10)					(18.5)		%

(1)For a reconciliation of our effective income tax rate attributable to DaVita Inc., see "Reconciliations of Non-GAAP measures" section below.

Debt expense

Debt expense for the first quarter of 2022 increased compared to the fourth quarter of 2021 and the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to an increase in our weighted average effective interest rate and weighted average outstanding debt balance, which included draws on our revolving line of credit in the first quarter of 2022 and subsequent repayment in full as of quarter-end.

Our overall weighted average effective interest rate for the three months ended March 31, 2022 was 3.35% compared to 3.34% for the three months ended December 31, 2021 and 3.08% for the three months ended March 31, 2021. See Note 6 to the condensed consolidated financial statements for further information on the components of our debt.

Other (loss) income, net

Other loss was relatively flat for the first quarter 2022 from the fourth quarter 2021 due to a decrease in losses recognized on investments and foreign currency transactions offset by a reduction in interest income. The net recognized loss for the three months ended March 31, 2022 when compared to the net recognized income for the three months ended March 31, 2021 was principally driven by losses on investments in the current period partially offset by a decrease in foreign currency transaction losses and an increase in interest income.

Effective income tax rate

The effective income tax rate and the effective tax rate attributable to DaVita Inc. increased for the first quarter of 2022 compared to the fourth quarter of 2021 primarily due to an increase in forecasted non-deductible advocacy spend in 2022 partially offset by a change in the portion of earnings attributable to our non-controlling interests.

The effective income tax rate and the effective tax rate attributable to DaVita Inc. for the three months ended March 31, 2022 decreased from the three months ended March 31, 2021 due to a decrease in our foreign provision expense and a change in the portion of earnings attributable to our non-controlling interests, partially offset by an increase in estimated nondeductible advocacy spend in 2022.

Net income attributable to noncontrolling interests

The decrease in net income attributable to noncontrolling interests for the first quarter of 2022 from the fourth quarter of 2021 and for the three months ended March 31, 2022 from the three months ended March 31, 2021 was primarily due to reduced earnings at certain U.S. dialysis partnerships driven by lower treatment volumes.

Accounts receivable

Our consolidated accounts receivable balances at March 31, 2022 and December 31, 2021 were $2.044 billion and $1.958 billion, respectively, representing approximately 66 and 62 days sales outstanding (DSO), respectively. Consolidated DSO increased primarily due to temporary billing holds and timing of collections. Our DSO calculation is based on the current quarter’s average revenues per day. There were no significant changes from the fourth quarter of 2021 to the first quarter of 2022 in the carrying amount of accounts receivable outstanding over one year old.

Liquidity and capital resources

The following table shows the summary of our major sources and uses of cash, cash equivalents and restricted cash:

			Three Months Ended March 31,												Q1 2022 vs. Q1 2021
			2022						2021						Amount						Percent
			(dollars in millions and shares in thousands)
Net cash provided by operating activities:
Net income			$	206					$	292					$	(86)					(29.5)		%
Non-cash items in net income			203						209						(6)						(2.9)		%
Other working capital changes			(79)						(328)						249						75.9		%
Other			(8)						(18)						10						55.6		%
			$	322					$	154					$	168					109.1		%
Net cash used in investing activities:
Capital expenditures:
Routine maintenance/information technology/other			$	(84)					$	(90)					$	6					6.7		%
Development and relocations			(39)						(55)						16						29.1		%
Acquisition expenditures			(5)						(4)						(1)						(25.0)		%
Proceeds from sale of self-developed properties			8						16						(8)						(50.0)		%
Other			1						8						(7)						87.5		%
			$	(118)					$	(124)					$	6					4.8		%
Net cash (used in) provided by financing activities:
Debt (payments) issuances, net			$	(45)					$	900					$	(945)					(105.0)		%
Distributions to noncontrolling interests			(65)						(54)						(11)						(20.4)		%
Contributions from noncontrolling interests			5						11						(6)						(54.5)		%
Share repurchases			(236)						(316)						80						(25.3)		%
Other			—						(4)						4						100.0		%
			$	(342)					$	537					$	(879)					(163.7)		%
Total number of shares repurchased			2,104						2,949						(845)						(28.7)		%
Free cash flow(1)			$	147					$	(17)					$	164					964.7		%

Certain columns or rows may not sum due to the presentation of rounded numbers.

(1)For a reconciliation of our free cash flow, see "Reconciliations of Non-GAAP measures" section below.

Consolidated cash flows

Consolidated cash flows from operating activities during the three months ended March 31, 2022 were $322 million, compared to consolidated operating cash flows for the three months ended March 31, 2021 of $154 million. The increase in operating cash flows was primarily driven by changes in total DSO which increased approximately four days for the three months ended March 31, 2022 compared to an increase of seven days for the three months ended March 31, 2021 as well as other working capital items, partially offset by a decrease in operating results.

Free cash flow during the three months ended March 31, 2022 increased from the three months ended March 31, 2021 primarily due to an increase in net cash provided by operating activities as described above.

Other net debt payments during the three months ended March 31, 2022 primarily consisted of regularly scheduled mandatory principal payments under our senior secured credit facilities totaling approximately $22 million on Term Loan A and $7 million on Term Loan B-1, draws on our revolving line of credit in the first quarter of 2022 and subsequent repayment in full as of quarter-end, as well as additional required payments under other debt arrangements. In addition, during the three months ended March 31, 2022 we used cash to repurchase 2,103,905 shares of our common stock.

By comparison, the same period in 2021 included the issuance of $1.0 billion in aggregate principal amount to the existing 4.625% senior notes due 2030 in February 2021. Other net debt payments during the three months ended March 31,

2021 primarily consisted of the repayment in full of $75 million of borrowings under our revolving line of credit, net payments of regularly scheduled mandatory principal payments under our senior secured credit facilities totaling approximately $22 million on Term Loan A and $7 million on Term Loan B-1 and additional required payments under other debt arrangements. In addition, we incurred bond issuance costs of approximately $8 million in cash. For the three months ended March 31, 2021 we used cash to repurchase 2,949,842 shares of our common stock.

Dialysis center footprint and growth

The table below shows the growth in our dialysis operations by number of dialysis centers owned or operated:

			U.S.												International
			Three months ended March 31,												Three months ended March 31,
			2022						2021						2022						2021
Number of centers operated at beginning of period			2,815						2,816						339						321
Acquired centers			—						—						3						2
Developed centers			9						18						1						2
Net change in non-owned managed or administered centers(1)			—						—						3						1
Sold and closed centers(2)			(5)						(1)						—						(3)
Closed centers(3)			(10)						(6)						—						—
Number of centers operated at end of period			2,809						2,827						346						323

(1)Represents dialysis centers which we manage or provide administrative services to but in which we own a noncontrolling equity interest or which are wholly-owned by third parties, including our APAC JV centers.

(2)Represents dialysis centers that were sold and/or closed for which the majority of patients were not retained.

(3)Represents dialysis centers that were closed for which the majority of patients were retained and transferred to one of our other existing outpatient dialysis centers.

Stock repurchases

The following table summarizes our common stock repurchases during the three months ended March 31, 2022 and 2021:

			Three months ended March 31, 2022																		Three months ended March 31, 2021
			Shares repurchased						Amount paid (in millions)						Average paid per share						Shares repurchased						Amount paid (in millions)						Average paid per share
Open market repurchases:			2,103,905						$	233					$	110.90					2,949,482						$	322					$	109.28

See further discussion of our stock repurchases in Note 8 to the condensed consolidated financial statements.

Available liquidity

As of March 31, 2022, we had an undrawn $1.0 billion revolving line of credit under our senior secured credit facilities. Credit available under this revolving line of credit is reduced by the amount of any letters of credit outstanding thereunder, of which there were none as of March 31, 2022. We separately had approximately $108 million in letters of credit outstanding under a separate bilateral secured letter of credit facility.

See Note 6 to the condensed consolidated financial statements for components of our long-term debt and their interest rates. We may from time to time seek to obtain funds or refinance existing debt through additional debt financings or other capital alternatives.

The COVID-19 pandemic, efforts to prevent its spread, and other government actions intended to support those efforts have dramatically impacted global economic activity and driven increased volatility in the financial markets. We have maintained business process continuity during the COVID-19 pandemic by enabling most back office teammates to work remotely, and as of the date of this report, we have not experienced material deterioration in our liquidity position as a result of the COVID-19 crisis. The ultimate impact of the pandemic will depend on future developments that are highly uncertain and difficult to predict.

We believe that our cash flow from operations and other sources of liquidity, including from amounts available under our senior secured credit facilities and our access to the capital markets, will be sufficient to fund our scheduled debt service under

the terms of our debt agreements and other obligations for the foreseeable future, including the next 12 months. Our primary recurrent sources of liquidity are cash from operations and cash from borrowings, which are subject to general, economic, financial, competitive, regulatory and other factors that are beyond our control, as described in Item 1A Risk Factors of our 2021 10-K*.*

Reconciliations of non-GAAP measures

The following tables provide reconciliations of our effective income tax rate on income attributable to DaVita Inc. excluding noncontrolling owners' income, which primarily relates to non-tax paying entities. We believe this adjusted effective income tax rate is useful to management, investors and analysts in evaluating our performance and establishing expectations for income taxes incurred on our ordinary results attributable to DaVita Inc.

In addition, our free cash flow represents net cash provided by operating activities less distributions to noncontrolling interests and all capital expenditures (including development capital expenditures, routine maintenance and information technology), plus contributions from noncontrolling interests and proceeds from the sale of self-developed properties. Management uses this measure to assess our ability to fund acquisitions and meet our debt service obligations and we believe this measure is equally useful to investors and analysts as an adjunct to cash flows from operating activities and other measures under U.S. generally accepted accounting principles (GAAP).

It is important to bear in mind that these non-GAAP “adjusted” measures are not measures of financial performance under GAAP and should not be considered in isolation from, nor as substitutes for, their most comparable GAAP measures.

			Three months ended
			March 31, 2022						December 31, 2021
			(dollars in millions)
Income before income taxes			$	263					$	315
Less: Noncontrolling owners' income primarily attributable to non-tax paying entities			(44)						(62)
Income before income taxes attributable to DaVita Inc.			$	219					$	253
Income tax expense			$	57					$	66
Less: Income tax attributable to noncontrolling interests			—						—
Income tax expense attributable to DaVita Inc.			$	57					$	65
Effective income tax rate on income attributable to DaVita Inc.			26.0		%				25.8		%

Certain columns or rows may not sum or recalculate due to the presentation of rounded numbers.

			Three months ended
			March 31, 2022						March 31, 2021
			(dollars in millions)
Income before income taxes			$	263					$	377
Less: Noncontrolling owners' income primarily attributable to non-tax paying entities			(44)						(54)
Income before income taxes attributable to DaVita Inc.			$	219					$	323
Income tax expense			$	57					$	85
Less: Income tax attributable to noncontrolling interests			—						—
Income tax expense attributable to DaVita Inc.			$	57					$	85
Effective income tax rate on income attributable to DaVita Inc.			26.0		%				26.4		%

Certain columns or rows may not sum or recalculate due to the presentation of rounded numbers.

			Three months ended
			March 31, 2022						March 31, 2021
			(dollars in millions)
Net cash provided by operating activities			$	322					$	154
Adjustments to reconcile net cash provided by operating activities to free cash flow:
Distributions to noncontrolling interests			(65)						(54)
Contributions from noncontrolling interests			5						11
Expenditures for routine maintenance and information technology			(84)						(90)
Expenditures for development			(39)						(55)
Proceeds from sale of self-developed properties			8						16
Free cash flow			$	147					$	(17)

Certain columns or rows may not sum due to the presentation of rounded numbers.

Off-balance sheet arrangements and aggregate contractual obligations

In addition to the debt obligations and operating lease liabilities reflected on our balance sheet, we have commitments associated with letters of credit, as well as certain working capital funding obligations associated with our equity investments in nonconsolidated dialysis ventures that we manage and some that we manage which are wholly-owned by third parties.

We also have potential obligations to purchase the noncontrolling interests held by third parties in many of our majority-owned dialysis partnerships and other nonconsolidated entities. These obligations are in the form of put provisions that are exercisable at the third-party owners’ discretion within specified periods as outlined in each specific put provision. For additional information on these obligations and how we measure and report them, see Note 12 to the condensed consolidated financial statements and Notes 17 and 24 to the consolidated financial statements included in our 2021 10-K.

For information on the maturities and other terms of our long term debt, see Note 6 to the condensed consolidated financial statements.

As of March 31, 2022, we have outstanding letters of credit in the aggregate amount of $108 million under a separate bilateral secured letter of credit facility.

In addition to the commitments listed above, in 2017 we entered into a sourcing and supply agreement with Amgen USA Inc. (Amgen) that expires on December 31, 2022. Under the terms of this agreement, we will purchase EPO from Amgen in amounts necessary to meet no less than 90% of our requirements for erythropoiesis-stimulating agents (ESAs) through the expiration of the contract. The actual amount of EPO that we will purchase will depend upon the amount of EPO administered during dialysis as prescribed by physicians and the overall number of patients that we serve.

As of March 31, 2022, we have outstanding purchase agreements with various suppliers to purchase set amounts of dialysis equipment, parts, and supplies. If we fail to meet the minimum purchase commitments under these contracts during any year, we are required to pay the difference to the supplier, as described further in Note 17 to the Company's consolidated financial statements included in the 2021 10-K.

We also have certain potential commitments to provide working capital funding, if necessary, to certain nonconsolidated dialysis businesses that we manage and in which we own a noncontrolling equity interest or which are wholly-owned by third parties. For additional information see Note 7 to the condensed consolidated financial statements.

In addition, we have approximately $96 million of existing income tax liabilities for unrecognized tax benefits, including interest, penalties and other long-term tax liabilities. We expect a significant portion of these settlements to be paid in the current year.

New Accounting Standards

See discussion of new accounting standards in Note 14 to the condensed consolidated financial statements.