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 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 and other labor market conditions, interest rates, 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 and its subvariants; 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; our ability to successfully implement planned cost savings initiatives in response to COVID-19-related impacts on us; 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 or that select higher-paying commercial plans, including for example Medicare Advantage ("MA") 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 and the Dialysis Clinic Requirements Initiative 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; a reduction in the number or percentage of our patients under such plans, including, without limitation, as a result of restrictions or prohibitions on the use and/or availability of charitable premium assistance, which may result in the loss of revenues or patients, as a result of our making incorrect assumptions about how our patients will respond to any change in financial assistance from charitable organizations; as a result of payors' implementing restrictive plan designs, including, without limitation, actions taken in response to the U.S. Supreme Court’s decision in Marietta Memorial Hospital Employee Health Benefit Plan, et al. v. DaVita Inc. et al. ("Marietta"); how and whether regulators and legislators will respond to the Marietta decision including, without limitation, whether they will issue regulatory guidance or adopt new legislation; how courts will interpret other anti-discriminatory provisions that may apply to restrictive plan designs; whether there could be other potential negative impacts of the Marietta decision; and the timing of each of these items;

*•*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 and highly competitive labor market conditions, or other reasons;

*•*U.S. and global economic and marketplace conditions, interest rates, 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 initiatives 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), our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 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, General Economic and Marketplace Conditions, and Legal and Regulatory Developments

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 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. In addition, we are monitoring the situation around the recent spread of the monkeypox virus and have worked with the Centers for Disease Control and Prevention to develop related protocols. Legal and regulatory developments may also impact our business and operations, such as the recent U.S. Supreme Court ruling related to the Medicare Secondary Payer Act (MSPA), as well as the commencement of price transparency regulation enforcement.

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. Cases resulting from the Omicron variant and subvariants 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 second quarter of 2022, these ongoing clinical measures have continued to strain staffing in an already challenging labor market. Additionally, as a result of these ongoing COVID-19-related clinical measures, in combination with general labor, supply chain and inflationary pressures, we have incurred higher incentive pay, increased utilization of contract labor, and inefficient productivity. In addition, during 2022, we have experienced and expect to continue to experience increased labor costs. 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 COVID-19 pandemic, could also have an adverse impact on our growth and ability to execute on our other strategic initiatives and a material adverse impact on our labor costs.

These inflationary pressures and evolving monetary policies, as well as ongoing global supply chain challenges, also have more broadly impacted our supply and other costs, and may continue to drive certain increased expenses, including, among other things, with respect to other medical and other supplies and interest expense. We continue to identify and implement cost savings opportunities to help mitigate these pressures, including potential cost savings related to G&A efficiencies, capacity utilization improvement and procurement, including certain pharmaceutical supplies. However, there is no assurance that these initiatives will achieve expectations or otherwise be successful, or succeed in helping offset the impact of these challenging conditions, which could impact our ability to provide dialysis services or the cost of providing those services, among other things, and ultimately could have a material adverse impact on our results of operations, financial condition and cash flows. Our COVID-19 response has reduced certain 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 second quarter, treatment volumes continued to reflect the ongoing impact of COVID-19 on mortality rates and missed treatments for dialysis patients which has had a negative impact on our patient census. While the mortality rates associated with the latest Omicron and subvariants surge preliminarily appear to be lower than in prior surges, the magnitude of the case increases has resulted in an increased level of excess patient mortalities through the course of this surge. 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 and economic conditions that have, in some cases, been intensified by the pandemic, we are seeking to identify and implement cost savings opportunities as noted above, and any failure on our part to appropriately adjust our business and operations in this manner 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 COVID-19 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 in effect from April 1, 2022 through June 30, 2022 and 2% Medicare sequestration in effect beginning July 1, 2022. While in effect, the suspension of sequestration significantly increased our revenues.

We believe the ultimate impact of the COVID-19 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 and its subvariants; 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, labor market conditions, interest rates, inflation and monetary policies, as well as our ability to successfully implement cost-savings initiatives in response; 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 three months ended June 30, 2022 compared to the three months ended March 31, 2022, and the year to date periods for six months ended June 30, 2022 compared to the six months ended June 30, 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 present our results of operations for the most recently completed fiscal year to date period compared 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 otherwise exclude comparisons of the most recently completed quarter to 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												Q2 2022 vs. Q1 2022
			June 30, 2022						March 31, 2022						Amount						Percent
			(dollars in millions)
Revenues:
U.S. dialysis			$	2,663					$	2,575					$	88					3.4		%
Other — Ancillary services			283						265						18						6.8		%
Elimination of intersegment revenues			(19)						(22)						3						13.6		%
Total consolidated revenues			$	2,927					$	2,818					$	109					3.9		%
Operating income (loss):
U.S. dialysis			$	473					$	406					$	67					16.5		%
Other — Ancillary services			(9)						(32)						23						71.9		%
Corporate administrative support			(31)						(36)						5						13.9		%
Operating income			$	433					$	338					$	95					28.1		%

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

			Six months ended												YTD Q2 2022 vs. YTD Q2 2021
			June 30, 2022						June 30, 2021						Amount						Percent
			(dollars in millions)
Revenues:
U.S. dialysis			$	5,238					$	5,266					$	(28)					(0.5)		%
Other — Ancillary services			548						523						25						4.8		%
Elimination of intersegment revenues			(42)						(53)						11						20.8		%
Total consolidated revenues			$	5,744					$	5,737					$	7					0.1		%
Operating income (loss):
U.S. dialysis			$	879					$	1,014					$	(135)					(13.3)		%
Other — Ancillary services			(41)						(30)						(11)						(36.7)		%
Corporate administrative support			(67)						(51)						(16)						(31.4)		%
Operating income			$	771					$	933					$	(162)					(17.4)		%

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												Q2 2022 vs. Q1 2022
			June 30, 2022						March 31, 2022						Amount						Percent
Dialysis treatments			7,269,160						7,109,788						159,372						2.2		%
Average treatments per day			93,194						92,335						859						0.9		%
Treatment days			78.0						77.0						1.0						1.3		%
Normalized non-acquired treatment growth(1)			(1.9)		%				(1.9)		%										—		%

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.

			Six months ended												YTD Q2 2022 vs. YTD Q2 2021
			June 30, 2022						June 30, 2021						Amount						Percent
Dialysis treatments			14,378,948						14,700,431						(321,483)						(2.2)		%
Average treatments per day			92,767						94,841						(2,074)						(2.2)		%
Treatment days			155.0						155.0						—						—		%

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

Our U.S. dialysis treatment volume is directly correlated with our operating revenues and expenses. The increase in our U.S. dialysis treatments for the second quarter of 2022 from the first quarter of 2022 was primarily driven by one additional treatment day and fewer missed treatments.

The decrease in our U.S. dialysis treatments for the six months ended June 30, 2022 from the six months ended June 30, 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												Q2 2022 vs. Q1 2022
			June 30, 2022						March 31, 2022						Amount						Percent
			(dollars in millions, except per treatment data)
Total revenues			$	2,663					$	2,575					$	88					3.4		%
Average patient service revenue per treatment			$	365.54					$	361.35					$	4.19					1.2		%

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

			Six months ended												YTD Q2 2022 vs. YTD Q2 2021
			June 30, 2022						June 30, 2021						Amount						Percent
			(dollars in millions, except per treatment data)
Total revenues			$	5,238					$	5,266					$	(28)					(0.5)		%
Average patient service revenue per treatment			$	363.47					$	357.35					$	6.12					1.7		%

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 second quarter of 2022 compared to the first quarter of 2022 increased, primarily due to normal seasonal improvements driven by patients meeting their co-insurance and deductibles, as well as the continued shift to Medicare Advantage plans. Our U.S. dialysis average patient service revenue per treatment was negatively impacted by a seasonal decrease in hospital inpatient treatments and decreased government rate related to the reinstatement of 1% Medicare sequestration beginning April 1, 2022.

U.S. dialysis average patient service revenue per treatment for the six months ended June 30, 2022 increased compared to the six months ended June 30, 2021 primarily driven by an increase in commercial mix and rate, an increase in the Medicare base rate in 2022 and the continued shift to Medicare Advantage plans, partially offset by the reinstatement of 1% Medicare sequestration as described above.

In June 2022, CMS issued a proposed rule to update the Medicare ESRD Prospective Payment System payment rate and policies. Among other things, the proposed rule would update the Acute Kidney Injury dialysis payment rate for renal dialysis services furnished by ESRD facilities and requirements for the ESRD Quality Incentive Program, as well as refine the ESRD Treatment Choices Model. CMS estimates that the overall impact of the proposed rule will increase ESRD facilities’ average reimbursement by 3.1% in 2023.

Operating expenses:

			Three months ended												Q2 2022 vs. Q1 2022
			June 30, 2022						March 31, 2022						Amount						Percent
			(dollars in millions, except per treatment data)
Patient care costs			$	1,796					$	1,796					$	—					—		%
General and administrative(1)			241						217						24						11.1		%
Depreciation and amortization			161						162						(1)						(0.6)		%
Equity investment income			(7)						(6)						(1)						16.7		%
Total operating expenses and charges			$	2,190					$	2,169					$	21					1.0		%
Patient care costs per treatment			$	247.14					$	252.61					$	(5.47)					(2.2)		%

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

(1)General and administrative expenses for the three months ended June 30, 2022 includes advocacy costs of approximately $23 million to counter union policy efforts, including a California ballot initiative.

			Six months ended												YTD Q2 2022 vs. YTD Q2 2021
			June 30, 2022						June 30, 2021						Amount						Percent
			(dollars in millions, except per treatment data)
Patient care costs			$	3,593					$	3,496					$	97					2.8		%
General and administrative(1)			458						456						2						0.4		%
Depreciation and amortization			323						316						7						2.2		%
Equity investment income			(14)						(15)						1						6.7		%
Total operating expenses and charges			$	4,359					$	4,253					$	106					2.5		%
Patient care costs per treatment			$	249.85					$	237.79					$	12.06					5.1		%

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

(1)General and administrative expenses for the six months ended June 30, 2022 includes advocacy costs of approximately $23 million to counter union policy efforts, including a California ballot initiative.

Patient care costs. U.S. dialysis patient care costs per treatment for the second quarter of 2022 decreased from the first quarter of 2022 primarily due to decreased other direct operating expenses associated with our dialysis centers, including decreased utilities expense due to seasonality and our virtual power purchase arrangements. In addition, our fixed other direct operating expenses positively impacted patient care costs per treatment due to increased treatments in the second quarter of 2022. Other drivers of this change include declines in compensation expenses primarily related to seasonal decreases in payroll taxes, as well as decreases in health benefit expenses, professional fees, pharmaceutical unit costs and medical supplies expense. These decreases were partially offset by increased insurance expense.

U.S. dialysis patient care costs per treatment for the six months ended June 30, 2022 increased from the six months ended June 30, 2021 primarily due to increased compensation expenses driven by increased wage rates and increases in other direct operating expenses associated with our dialysis centers, which include increases in utilities expense resulting from lower expense in the first half of 2021 related to our virtual power purchase arrangements. In addition, our fixed other direct operating expenses negatively impacted patient care costs per treatment due to decreased treatments in 2022. Other drivers of this change

include increases in insurance expense and costs related to travel and management meetings, partially offset by decreased pharmaceutical unit costs and professional fees.

General and administrative expenses. U.S. dialysis general and administrative expenses in the second quarter of 2022 increased from the first quarter of 2022 primarily due to increased advocacy costs to counter union policy efforts, including a California ballot initiative, increased compensation expense including increased wage rates, as well as increased travel costs. These increases were offset by gains recognized on the sale of our self-developed properties.

U.S. dialysis general and administrative expenses for the six months ended June 30, 2022 increased from the six months ended June 30, 2021 primarily due to increases in advocacy costs, as described above, travel costs and compensation expenses. U.S. dialysis general and administrative expenses were positively impacted by the gains on sale, as described above, and decreases in professional fees and contributions to our charitable foundation.

Depreciation and amortization. U.S. dialysis depreciation and amortization expenses for the quarter ended June 30, 2022 decreased compared to the quarter ended March 31, 2022 primarily due to a decline in depreciation and amortization related to corporate technology projects, partially offset by increased depreciation from the rollout of our new clinical system in May 2022.

U.S. dialysis depreciation and amortization expenses for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 increased primarily related to increased depreciation and amortization for hardware associated with our new clinical system and other corporate technology projects, as well as the development of new centers, partially offset by a decline in accelerated depreciation for expected center closures. Beginning in the third quarter of 2022 we expect depreciation and amortization expenses to increase as a result of recognizing a full quarter of depreciation for our new clinical system.

Equity investment income. U.S. dialysis equity investment income was relatively flat for the second quarter of 2022 compared to the first quarter of 2022 and the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

Operating income:

			Three months ended												Q2 2022 vs. Q1 2022
			June 30, 2022						March 31, 2022						Amount						Percent
			(dollars in millions)
Operating income			$	473					$	406					$	67					16.5		%

			Six months ended												YTD Q2 2022 vs. YTD Q2 2021
			June 30, 2022						June 30, 2021						Amount						Percent
			(dollars in millions)
Operating income			$	879					$	1,014					$	(135)					(13.3)		%

U.S. dialysis operating income for the second quarter of 2022 increased from the first quarter of 2022 primarily due to an increase in dialysis treatments, an increase in our average patient service revenue per treatment, gains on sale and decreased other direct operating expenses associated with our dialysis centers, each described above. Other drivers of this change include decreases in health benefit expenses, professional fees, pharmaceutical unit costs and compensation expenses, as described above. Operating income was negatively impacted by increases in advocacy costs to counter union policy efforts, insurance expense and travel costs.

U.S. dialysis operating income for the six months ended June 30, 2022 decreased from the six months ended June 30, 2021 primarily due to a decrease in dialysis treatments and increases in compensation expenses, advocacy costs and other direct operating expenses associated with our dialysis centers, as described above. Other drivers of this change included increases in costs related to travel and management meetings and insurance expense. Operating income was positively impacted by an increase in our average patient service revenue per treatment and gains on sale, each described above, as well as decreases in professional fees and pharmaceutical unit costs and contributions to our charitable foundation.

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 June 30, 2022, these consisted principally of our U.S. integrated kidney care (IKC) business, 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 $283 million and $548 million in the second quarter of 2022 and six months ended June 30, 2022, respectively, representing approximately 10% of our consolidated revenues in both periods.

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 June 30, 2022, our international dialysis operations provided dialysis and administrative services through a total of 349 outpatient dialysis centers located in 11 countries outside of the United States.

Ancillary services results of operations

			Three months ended												Q2 2022 vs. Q1 2022
			June 30, 2022						March 31, 2022						Amount						Percent
			(dollars in millions)
Revenues:
Integrated kidney care			$	103					$	87					$	16					18.4		%
Other U.S. ancillary			5						5						—						—		%
International			175						173						2						1.2		%
Total ancillary services revenues			$	283					$	265					$	18					6.8		%
Operating (loss) income:
Integrated kidney care			$	(21)					$	(37)					$	16					43.2		%
Other U.S. ancillary			(2)						(3)						1						33.3		%
International(1)			15						8						7						87.5		%
Total ancillary services operating loss			$	(9)					$	(32)					$	23					71.9		%

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 June 30, 2022 and March 31, 2022 includes foreign currency gains embedded in equity method income recognized from our APAC JV of approximately $2.1 million and $0.3 million, respectively.

			Six months ended												YTD Q2 2022 vs. YTD Q2 2021
			June 30, 2022						June 30, 2021						Amount						Percent
			(dollars in millions)
Revenues:
Integrated kidney care			$	189					$	176					$	13					7.4		%
Other U.S. ancillary			10						11						(1)						(9.1)		%
International			348						336						12						3.6		%
Total ancillary services revenues			$	548					$	523					$	25					4.8		%
Operating (loss) income:
Integrated kidney care			$	(59)					$	(55)					$	(4)					(7.3)		%
Other U.S. ancillary			(6)						2						(8)						(400.0)		%
International(1)			23						24						(1)						(4.2)		%
Total ancillary services operating loss			$	(41)					$	(30)					$	(11)					(36.7)		%

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

(1)The reported operating income for the six months ended June 30, 2022 and June 30, 2021 includes foreign currency gains embedded in equity method income recognized from our APAC JV of approximately $2.4 million and $2.6 million, respectively.

Revenues:

IKC revenues for the second quarter of 2022 increased compared to the first quarter of 2022 due to a net increase in shared savings including from our new programs as well as an increase in revenues from our special needs plans. Other U.S. ancillary revenues for the second quarter of 2022 compared to the first quarter of 2022 were relatively flat. International revenues for the second quarter of 2022 increased from the first quarter of 2022 primarily due to increased treatment volume.

IKC revenues for the six months ended June 30, 2022 increased compared to the six months ended June 30, 2021 due to an increase in shared savings revenues including savings from new programs. Other U.S. ancillary services revenues for the six months ended June 30, 2022 decreased compared to the six months ended June 30, 2021 as a result of decreased revenues in our clinical research programs, slightly offset by revenues from our newly acquired transplant software business. Our international revenues for the six months ended June 30, 2022 increased from the six months ended June 30, 2021 primarily due to acquisition-related growth.

Operating loss:

IKC operating loss for the second quarter of 2022 compared to the first quarter of 2022 decreased due to the increase in revenues as described above, partially offset by continued investments in our integrated care support functions. Other U.S. ancillary services operating loss for the second quarter of 2022 decreased compared to the first quarter of 2022, driven by a benefit received from run-off of a legacy business in the current quarter. International operating income for the second quarter of 2022 increased from the first quarter of 2022 primarily due to changes in fair value of contingent consideration associated with prior acquisitions, increased treatment volume, as noted above, and an increase in equity income resulting from fluctuations in foreign currency at our APAC JV.

IKC operating loss for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 increased primarily due to continued investments in our integrated care support functions, partially offset by increased revenues, as described above. Other U.S. ancillary services operating loss for the six months ended June 30, 2022 compared to the operating income for the six months ended June 30, 2021 was impacted by revenues, as described above, as well as a benefit received from run-off of a legacy business in the six months ended June 30, 2021. International operating income for the six months ended June 30, 2022 decreased compared to the six months ended June 30, 2021 primarily driven by the impact of increased mortality over recent periods on our patient population, partially offset by acquisition-related growth.

Corporate administrative support

			Three months ended												Q2 2022 vs. Q1 2022
			June 30, 2022						March 31, 2022						Amount						Percent
			(dollars in millions)
Corporate administrative support			$	(31)					$	(36)					$	5					13.9		%

			Six months ended												YTD Q2 2022 vs. YTD Q2 2021
			June 30, 2022						June 30, 2021						Amount						Percent
			(dollars in millions)
Corporate administrative support			$	(67)					$	(51)					$	(16)					(31.4)		%

Corporate administrative support expenses for the quarter ended June 30, 2022 compared to the quarter ended March 31, 2022 decreased primarily due to decreases in legal fees and long-term incentive compensation expense. Corporate administrative support expenses for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 increased primarily due to an increase in legal fees.

Corporate-level charges

			Three months ended												Q2 2022 vs. Q1 2022
			June 30, 2022						March 31, 2022						Amount						Percent
			(dollars in millions)
Debt expense			$	83					$	74					$	9					12.2		%
Other (loss) income, net			$	(1)					$	(2)					$	1					50.0		%
Effective income tax rate			18.4		%				21.7		%										(3.3)		%
Effective income tax rate attributable to DaVita Inc.(1)			22.1		%				26.0		%										(3.9)		%
Net income attributable to noncontrolling interests			$	60					$	44					$	16					36.4		%

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

			Six months ended												YTD Q2 2022 vs. YTD Q2 2021
			June 30, 2022						June 30, 2021						Amount						Percent
			(dollars in millions)
Debt expense			$	156					$	140					$	16					11.4		%
Other (loss) income, net			$	(3)					$	16					$	(19)					(118.8)		%
Effective income tax rate			19.8		%				20.6		%										(0.8)		%
Effective income tax rate attributable to DaVita Inc.(1)			23.8		%				23.8		%										—		%
Net income attributable to noncontrolling interests			$	103					$	111					$	(8)					(7.2)		%

(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 second quarter of 2022 increased compared to the first quarter of 2022 and the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to an increase in our weighted average effective interest rate and weighted average outstanding credit facility balance, which included draws on our revolving line of credit in the first and second quarters of 2022.

Our overall weighted average effective interest rate for the three months ended June 30, 2022 was 3.68% compared to 3.35% for the three months ended March 31, 2022. See Note 6 to the condensed consolidated financial statements for further information on the components of our debt.

Other (loss) income, net

Other loss decreased for the second quarter of 2022 from the first quarter of 2022, primarily driven by an increase in interest income, partially offset by an increase in losses on foreign currency transactions. Other (loss) income for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was impacted by losses on investments in 2022 compared to gains on investments in 2021, as well as increased losses on foreign currency transactions, partially offset by an increase in interest income.

Effective income tax rate

The effective income tax rate and the effective tax rate attributable to DaVita Inc. decreased for the second quarter of 2022 compared to the first quarter of 2022 primarily due to an increase in recognized tax benefits from stock-based compensation and benefits recognized in connection with a partial settlement reached with federal tax authorities for fiscal years 2014-2015.

The effective income tax rate for the six months ended June 30, 2022 decreased from the six months ended June 30, 2021 primarily due to a change in the portion of earnings attributable to our non-controlling interests. The effective tax rate attributable to DaVita Inc. for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was relatively flat.

Net income attributable to noncontrolling interests

The increase in net income attributable to noncontrolling interests for the second quarter of 2022 from the first quarter of 2022 was due to increased earnings at certain U.S. dialysis partnerships, primarily driven by an additional treatment day in the period. Net income attributable to noncontrolling interests for the six months ended June 30, 2022 decreased from the six months ended June 30, 2021 primarily due to reduced earnings at certain U.S. dialysis partnerships.

Accounts receivable

Our consolidated accounts receivable balances at June 30, 2022 and December 31, 2021 were $2.094 billion and $1.958 billion, respectively, representing approximately 66 and 62 days of revenue 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 first quarter of 2022 to the second 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:

			Six months ended June 30,												YTD Q2 2022 vs. YTD Q2 2021
			2022						2021						Amount						Percent
			(dollars in millions and shares in thousands)
Net cash provided by operating activities:
Net income			$	490					$	643					$	(153)					(23.8)		%
Non-cash items in net income			371						426						(55)						(12.9)		%
Other working capital changes			(295)						(208)						(87)						41.8		%
Other			(56)						(27)						(29)						107.4		%
			$	510					$	834					$	(324)					(38.8)		%
Net cash used in investing activities:
Capital expenditures:
Routine maintenance/information technology/other			$	(181)					$	(181)					$	—					—		%
Development and relocations			(85)						(113)						28						(24.8)		%
Acquisition expenditures			(9)						(24)						15						(62.5)		%
Proceeds from sale of self-developed properties			106						29						77						265.5		%
Other			(95)						6						(101)						(1,683.3)		%
			$	(263)					$	(284)					$	21					(7.4)		%
Net cash (used in) provided by financing activities:
Debt issuances, net			$	341					$	848					$	(507)					(59.8)		%
Distributions to noncontrolling interests			(118)						(99)						(19)						19.2		%
Contributions from noncontrolling interests			9						16						(7)						(43.8)		%
Stock award exercises and other share issuances			(48)						(44)						(4)						9.1		%
Share repurchases			(617)						(561)						(56)						10.0		%
Other			(12)						(4)						(8)						200.0		%
			$	(445)					$	156					$	(601)					(385.3)		%
Total number of shares repurchased			5,973						5,019						954						19.0		%
Free cash flow(1)			242						485						(243)						(50.1)		%

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 six months ended June 30, 2022 decreased compared to the six months ended June 30, 2021 primarily due to a decrease in operating results, timing of income tax payments and changes in total DSO, which increased approximately four days for the six months ended June 30, 2022 compared to an increase of three days for the six months ended June 30, 2021 partially offset by net increases in other working capital items.

Free cash flow during the six months ended June 30, 2022 decreased from the six months ended June 30, 2021 primarily due to a decrease in net cash provided by operating activities partially offset by an increase in proceeds on self-developed properties.

Significant sources of cash from financing activities included a net draw of $425 million on our revolving line of credit in the six months ended June 30, 2022. Significant uses of cash during the period included net debt payments which consisted of regularly scheduled mandatory principal payments under our senior secured credit facilities totaling approximately $44 million on Term Loan A and $14 million on Term Loan B-1, as well as additional required payments under other debt

arrangements. In addition, during the six months ended June 30, 2022 we used cash to repurchase 5,972,974 shares of our common stock.

By comparison, the same period in 2021 included the issuance of $1.0 billion in aggregate principal amount of senior notes as an add-on offering to our 4.625% senior notes due 2030 which were issued at an offering price of 101.750% of the principal amount in February 2021. Other net debt payments during the six months ended June 30, 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 amounts due under our senior secured credit facilities totaling approximately $44 million on Term Loan A and $14 million on Term Loan B-1 and additional required payments under other debt arrangements. In addition, we incurred bond issuance costs of approximately $9 million in cash. For the six months ended June 30, 2021 we also used cash to repurchase 5,019,336 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 June 30,												Six months ended June 30,												Three months ended June 30,												Six months ended June 30,
			2022						2021						2022						2021						2022						2021						2022						2021
Number of centers operated at beginning of period			2,809						2,827						2,815						2,816						346						323						339						321
Acquired centers			—						1						—						1						2						5						5						7
Developed centers			18						13						27						31						1						2						2						4
Net change in non-owned managed or administered centers(1)			—						—						—						—						—						1						3						2
Sold and closed centers(2)			(2)						(3)						(7)						(4)						—						—						—						(3)
Closed centers(3)			(15)						(10)						(25)						(16)						—						—						—						—
Number of centers operated at end of period			2,810						2,828						2,810						2,828						349						331						349						331

(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 and six months ended June 30, 2022 and 2021:

			Three months ended June 30,												Six months ended June 30,
			2022						2021						2022						2021
Open market repurchases:			(dollars in millions and shares in thousands, except for per share data)
Shares			3,869						2,070						5,973						5,019
Amount paid			$	370					$	241					$	603					$	563
Average paid per share			$	95.56					$	116.38					$	100.96					$	112.21

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

Available liquidity

As of June 30, 2022, we had $575 million available and $425 million drawn on our $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 June 30, 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 remain 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
			June 30, 2022						March 31, 2022
			(dollars in millions)
Income before income taxes			$	349					$	263
Less: Noncontrolling owners' income primarily attributable to non-tax paying entities			(60)						(44)
Income before income taxes attributable to DaVita Inc.			$	289					$	219
Income tax expense			$	64					$	57
Less: Income tax attributable to noncontrolling interests			—						—
Income tax expense attributable to DaVita Inc.			$	64					$	57
Effective income tax rate on income attributable to DaVita Inc.			22.1		%				26.0		%

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

			Six months ended
			June 30, 2022						June 30, 2021
			(dollars in millions)
Income before income taxes			$	612					$	809
Less: Noncontrolling owners' income primarily attributable to non-tax paying entities			(104)						(112)
Income before income taxes attributable to DaVita Inc.			$	508					$	697
Income tax expense			$	121					$	167
Less: Income tax attributable to noncontrolling interests			(1)						—
Income tax expense attributable to DaVita Inc.			$	121					$	166
Effective income tax rate on income attributable to DaVita Inc.			23.8		%				23.8		%

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

			Six months ended
			June 30, 2022						June 30, 2021
			(dollars in millions)
Net cash provided by operating activities			$	510					$	834
Adjustments to reconcile net cash provided by operating activities to free cash flow:
Distributions to noncontrolling interests			(118)						(99)
Contributions from noncontrolling interests			9						16
Expenditures for routine maintenance and information technology			(181)						(181)
Expenditures for development and relocations			(85)						(113)
Proceeds from sale of self-developed properties			106						29
Free cash flow			$	242					$	485

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. For additional information see Note 7 to the condensed consolidated financial statements.

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 June 30, 2022, we have outstanding letters of credit in the aggregate amount of approximately $108 million under a bilateral secured letter of credit facility separate from our senior secured credit facilities.

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 June 30, 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.

In addition, we have approximately $43 million of existing income tax liabilities for unrecognized tax benefits, including interest, penalties and other long-term tax liabilities. Income tax liabilities were reduced from $88 million as of December 31, 2021 to $43 million as of June 30, 2022, primarily due to a partial settlement reached with federal tax authorities for years 2014-2015.

Finally, on May 25, 2022, we entered into an agreement with Medtronic, Inc. and one of its subsidiaries (collectively, Medtronic) to form a new, independent kidney care-focused medical device company (NewCo). The transaction is expected to close in 2023, subject to customary closing conditions and regulatory approvals. At close, DaVita will make a cash payment to Medtronic of approximately $75 million, subject to certain customary adjustments prior to the closing, and will contribute certain other non-cash assets to NewCo valued at approximately $25 million. Additionally, at close, each of DaVita and Medtronic will contribute approximately $200 million in cash to launch NewCo. DaVita also agreed to pay Medtronic additional consideration of up to $300 million if certain regulatory and commercial milestones are achieved between 2024 and 2028.

New Accounting Standards

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