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, 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, DaVita's response to and the continuing impact of the coronavirus (COVID-19) pandemic, the continuing impact of the COVID-19 pandemic on the U.S. and global economies, 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 (MA) plan enrollment, expectations regarding increased competition and marketplace changes, including those related to new or potential entrants in the dialysis and pre-dialysis marketplace and potential impact of innovative technologies, drugs, or other treatments, 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 current macroeconomic and marketplace conditions, and global events, many of which are interrelated and which relate to, among other things, inflation, rising interest rates, labor market conditions, wage pressure, evolving monetary policies, and the continuing impact of the COVID-19 pandemic on our patients, teammates, physician partners, suppliers, business, operations, reputation, financial condition and results of operations; further spread or resurgence of the virus, including as a result of the emergence of new strains of the virus; the continuing impact of the pandemic on our revenues 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; the potential impact of new or potential entrants in the dialysis and pre-dialysis marketplace and potential impact of innovative technologies, drugs, or other treatments on our patients and industry; our ability to successfully implement cost savings initiatives; supply chain challenges and disruptions; and elevated teammate turnover and training costs and higher salary and wage expense, driven in part by persisting 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 even as the pandemic continues to subside;

*•*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, or 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;

*•*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 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, antitrust matters, including, among others, restrictive covenants, and/or labor matters;

*•*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, which continue to increase in the dialysis industry, 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;

*•*our ability to respond to challenging U.S. and global economic and marketplace conditions, including among other things our ability to successfully identify cost savings opportunities and to implement cost savings initiatives such as ongoing initiatives that increase our use of third-party service providers to perform certain activities, initiatives that relate to clinic optimization and capacity utilization improvement, and procurement opportunities, among other things;

*•*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 MA benchmark structure;

*•*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, to successfully integrate any acquired businesses, 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, among other things, 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, 2022 (2022 10-K), our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023, 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 U.S. other 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).

General Economic and Marketplace Conditions

Developments in general economic and market conditions could have a material adverse impact on our patients, teammates, physician partners, suppliers, business, operations, reputation, financial condition, results of operations, share price, cash flows and/or liquidity. Many of these external factors and conditions are interrelated, including, among other things, inflation, rising interest rates, labor market conditions, wage pressure, the continuing impact of COVID-19 on the mortality rates of our patients and other ESKD or CKD patients, supply chain challenges and the potential impact and application of innovative technologies or treatments. Certain of these impacts could be further intensified by concurrent global events such as the ongoing conflict between Russia and Ukraine and armed conflict in Israel, Gaza and surrounding areas, which has continued to drive sociopolitical and economic uncertainty across the globe.

Operational and Financial Impacts

In the third quarter of 2023, treatment volumes were approximately flat compared to the second quarter. We continued to experience improvements with respect to the negative impact of COVID-19 on the mortality rates of our patients. On a full year over full year basis, we continue to experience a negative impact on revenue and treatment volume due to the cumulative and compounding negative impact of COVID-19 on the mortality rates of our patients and the associated adverse impact on our patient census. We expect that this impact would likely continue to negatively impact our revenue and non-acquired growth for a period of time after mortality rates normalize due to the compounding impact of mortalities, among other things. New admission rates, treatment volumes, future revenues and non-acquired growth, among other things, could also continue to be negatively impacted over time to the extent that the ESKD and CKD populations experience elevated mortality levels. The magnitude of these cumulative impacts could have a material adverse impact on our results of operations, financial condition and cash flows.

Ongoing global economic conditions and political and regulatory developments, such as general labor, supply chain and inflationary pressures have also increased, and will continue to increase, our expenses, including, among others, staffing and labor costs. We continue to experience elevated levels of compensation year to date compared to the prior year, though we have experienced slight wage improvement in the third quarter compared to the prior quarter. We expect certain of these increased staffing and labor costs to continue, due to, among other factors, recent legislative changes, such as our implementation of the provisions of Senate Bill 525 in California, and increased training costs. The cumulative impact of these increased costs could be material. In addition, our industry has experienced increased union organizing activities, including the filing of petitions by unions at certain of our competitors' clinics with a number of those clinics voting to unionize. Potential staffing shortages or other potential developments or disruptions related to our teammates, if material, could ultimately lead to the unplanned closures of certain centers or adversely impact clinical operations, or may otherwise have a material adverse impact on our ability to provide dialysis services or the cost of providing those services, among other things.

The cost inflation trends described above have put pressure on our existing cost structure, and as noted above, we expect that certain of those increased costs will persist as inflationary and supply chain pressures and challenging labor market conditions continue. During the third quarter, we continued to implement cost savings opportunities and invest in other initiatives to help mitigate these cost and volume pressures. These opportunities include anticipated cost savings related to the achievement of general and administrative cost efficiencies through ongoing initiatives that increase our use of third party service providers to perform certain activities, including, among others, finance and accounting functions and related information technology functions. These opportunities and investments also include, among others, initiatives relating to clinic optimization, capacity utilization improvement and procurement opportunities, as well as investments in revenue cycle management. We have incurred, and expect to continue to incur, charges in connection with the continued implementation of certain of these initiatives. There can be no assurance that we will be able to successfully execute these initiatives or that they will achieve expectations or succeed in helping offset the impact of these challenging conditions.

Other Developments

Developments in the healthcare marketplace related to new or innovative technologies, drugs and other treatments have the potential to impact the rate of growth of the ESKD patient population or may lead to reductions in demand for dialysis

treatments, and uncertainty surrounding the development of such new technologies, drugs and other treatments may drive volatility in our stock price. For example, in October 2023, a clinical study for Novo Nordisk's Ozempic®, a glucagon-like peptide 1 (GLP-1) receptor agonist was stopped early for efficacy. This development generated uncertainty in the marketplace with respect to the potential impact of these or other similar classes of drugs or new classes of drugs or treatments on the rate of growth of the ESKD patient population. We expect that further information on GLP-1s and their potential application to kidney care will be released by third parties later this year and in the first half of 2024, and the release of such information then or in the future, or the release of any other information regarding current or future new or innovative technologies, drugs and other treatments may drive volatility in our stock price. Any sustained or significant decline in the rate of growth of the ESKD patient population or demand for our services, whether as a result of developments related to new or innovative technologies, drugs, treatments or otherwise, may have a material adverse impact on our business, results of operation, financial condition, cash flows and stock price.

Any failure on our part to adjust our business and operations to address these developments or other marketplace dynamics, or any failure to appropriately implement these cost savings initiatives in accordance with applicable legal, regulatory or compliance requirements could adversely impact our ability to provide dialysis services or the cost of providing those services, among other things. If this adverse impact is significant or sustained, it may ultimately have a material adverse effect on our business, reputation, results of operations, financial condition, cash flows and stock price.

We believe that the aforementioned general economic and marketplace conditions will continue to impact the Company in the future. We believe that their ultimate impact will depend on future developments that are highly uncertain and difficult to predict.

Financial Results

The discussion below includes analysis of our financial condition and results of operations for the three months ended September 30, 2023 compared to the three months ended June 30, 2023, and the year-to-date periods for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Consolidated results of operations

The following tables summarize our revenues, operating income and adjusted 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												Q3 2023 vs. Q2 2023
			September 30, 2023						June 30, 2023						Amount						Percent
			(dollars in millions)
Revenues:
U.S. dialysis			$	2,785					$	2,731					$	54					2.0		%
Other — Ancillary services			363						292						71						24.3		%
Elimination of intersegment revenues			(27)						(22)						(5)						(22.7)		%
Total consolidated revenues			$	3,121					$	3,000					$	121					4.0		%
Operating income (loss):
U.S. dialysis			$	509					$	461					$	48					10.4		%
Other — Ancillary services			28						(22)						50						227.3		%
Corporate administrative support			(41)						(34)						(7)						(20.6)		%
Operating income			$	496					$	405					$	91					22.5		%
Adjusted operating income (loss)(1):
U.S. dialysis			$	537					$	487					$	50					10.3		%
Other — Ancillary services			28						(22)						50						227.3		%
Corporate administrative support			(41)						(33)						(8)						(24.2)		%
Adjusted operating income			$	525					$	432					$	93					21.5		%

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

(1)For a reconciliation of adjusted operating income by reportable segment, see "Reconciliations of Non-GAAP measures" section below.

			Nine months ended												YTD Q3 2023 vs. YTD Q3 2022
			September 30, 2023						September 30, 2022						Amount						Percent
			(dollars in millions)
Revenues:
U.S. dialysis			$	8,128					$	7,942					$	186					2.3		%
Other — Ancillary services			938						816						122						15.0		%
Elimination of intersegment revenues			(72)						(65)						(7)						(10.8)		%
Total consolidated revenues			$	8,994					$	8,693					$	301					3.5		%
Operating income (loss):
U.S. dialysis			$	1,331					$	1,231					$	100					8.1		%
Other — Ancillary services			(18)						(57)						39						68.4		%
Corporate administrative support			(100)						(91)						(9)						(9.9)		%
Operating income			$	1,213					$	1,083					$	130					12.0		%
Adjusted operating income (loss)(1):
U.S. dialysis			$	1,425					$	1,281					$	144					11.2		%
Other — Ancillary services			(18)						(57)						39						68.4		%
Corporate administrative support			(98)						(91)						(7)						(7.7)		%
Adjusted operating income			$	1,308					$	1,133					$	175					15.4		%

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

(1)For a reconciliation of adjusted operating income by reportable segment, see "Reconciliations of Non-GAAP measures" section below.

U.S. dialysis results of operations

Treatment volume:

			Three months ended												Q3 2023 vs. Q2 2023
			September 30, 2023						June 30, 2023						Amount						Percent
Dialysis treatments			7,306,948						7,231,242						75,706						1.0		%
Average treatments per day			92,493						92,708						(215)						(0.2)		%
Treatment days			79.0						78.0						1.0						1.3		%
Normalized non-acquired treatment growth(1)			0.5		%				(0.2)		%

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.

			Nine months ended												YTD Q3 2023 vs. YTD Q3 2022
			September 30, 2023						September 30, 2022						Amount						Percent
Dialysis treatments			21,655,618						21,714,773						(59,155)						(0.3)		%
Average treatments per day			92,545						92,798						(253)						(0.3)		%
Treatment days			234.0						234.0						—						—		%

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 third quarter of 2023 from the second quarter of 2023 was primarily driven by one additional treatment day and non-acquired growth. This increase was partially offset by decreased average treatments per day due to mix of treatment days and a decrease in hospital inpatient treatments.

The decrease in our U.S. dialysis treatments for the nine months ended September 30, 2023 from the nine months ended September 30, 2022 was primarily driven by decreased average treatments per day and decreased hospital inpatient treatments, partially offset by an increase in patient count.

Revenues:

			Three months ended												Q3 2023 vs. Q2 2023
			September 30, 2023						June 30, 2023						Amount						Percent
			(dollars in millions, except per treatment data)
Total revenues			$	2,785					$	2,731					$	54					2.0		%
Average patient service revenue per treatment			$	380.33					$	376.73					$	3.60					1.0		%

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

			Nine months ended												YTD Q3 2023 vs. YTD Q3 2022
			September 30, 2023						September 30, 2022						Amount						Percent
			(dollars in millions, except per treatment data)
Total revenues			$	8,128					$	7,942					$	186					2.3		%
Average patient service revenue per treatment			$	374.46					$	364.89					$	9.57					2.6		%

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 third quarter of 2023 compared to the second quarter of 2023 increased, primarily due to favorable changes in commercial and Medicare Advantage mix, a net increase in average reimbursement rates and other normal fluctuations. Our U.S. dialysis average patient service revenue per treatment was negatively impacted by a decrease in hospital inpatient revenues.

U.S. dialysis average patient service revenue per treatment for the nine months ended September 30, 2023 increased compared to the nine months ended September 30, 2022 primarily driven by normal annual rate increases, favorable changes in commercial and Medicare Advantage mix and a net increase in Medicare rate due to a base rate increase in 2023, partially offset by the phased-in increase of sequestration of 1% in April 2022 and full 2% beginning July 1, 2022 and thereafter. Other drivers of this change include improved cash collections on previously reserved balances assumed to be uncollectible.

On October 27, 2023, Centers for Medicare & Medicaid Services (CMS) issued a final rule to update the Medicare ESRD Prospective Payment System payment rate and policies for calendar year 2024. Among other things, the final rule updates the Acute Kidney Injury dialysis payment rate for renal dialysis services furnished by ESRD facilities and requirements for the ESRD Quality Incentive Program. CMS estimates that the overall impact of the rule will increase ESRD facilities’ average reimbursement by 2.1% in 2024.

Operating expenses:

			Three months ended												Q3 2023 vs. Q2 2023
			September 30, 2023						June 30, 2023						Amount						Percent
			(dollars in millions, except per treatment data)
Patient care costs			$	1,827					$	1,826					$	1					0.1		%
General and administrative			281						279						2						0.7		%
Depreciation and amortization			176						172						4						2.3		%
Equity investment income			(8)						(8)						—						—		%
Total operating expenses and charges			$	2,276					$	2,270					$	6					0.3		%
Patient care costs per treatment			$	250.08					$	252.57					$	(2.49)					(1.0)		%

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

			Nine months ended												YTD Q3 2023 vs. YTD Q3 2022
			September 30, 2023						September 30, 2022						Amount						Percent
			(dollars in millions, except per treatment data)
Patient care costs			$	5,485					$	5,469					$	16					0.3		%
General and administrative(1)			819						755						64						8.5		%
Depreciation and amortization			515						507						8						1.6		%
Equity investment income			(22)						(21)						(1)						(4.8)		%
Total operating expenses and charges			$	6,797					$	6,711					$	86					1.3		%
Patient care costs per treatment			$	253.30					$	251.88					$	1.42					0.6		%

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

(1)General and administrative expenses for the nine months ended September 30, 2022 include advocacy costs of approximately $51 million to counter union policy efforts, including a California ballot initiative.

Charges impacting operating income

Closure costs. During the third quarter of 2023, we continued the strategic review of our outpatient clinic capacity requirements and utilization, which have been impacted both by declines in our patient census in some markets due to the COVID-19 pandemic, as well as by our initiatives toward, and advances in, increasing the proportion of our home dialysis patients. This continuing review, begun in the third quarter of 2022, has resulted in higher than normal charges for center capacity closures over the last number of quarters. These capacity closure costs include net losses on assets retired, lease costs, asset impairments and accelerated depreciation and amortization.

During the third quarter of 2023, we incurred charges for U.S. dialysis center closures of approximately $24.0 million, which increased our patient care costs by $4.4 million, our general and administrative expenses by $3.4 million and our depreciation and amortization expense by $16.2 million. By comparison, during the second quarter of 2023, U.S. dialysis center closures were approximately $21.1 million, which increased our patient care costs by $5.7 million, our general and administrative expenses by $7.8 million and our depreciation and amortization expense by $7.6 million.

During the nine months ended September 30, 2023, U.S. dialysis center closures were approximately $67.3 million, which increased our patient care costs by $22.7 million, our general and administrative expenses by $16.0 million and our depreciation and amortization expense by $28.6 million. By comparison, during the nine months ended September 30, 2022, U.S. dialysis center closures were approximately $50.3 million, which increased our patient care costs by $14.7 million, our general and administrative expenses by $13.9 million and our depreciation and amortization expense by $21.7 million.

We will continue to optimize our U.S. dialysis center footprint through center mergers and/or closures and expect our center closure rates to remain at elevated levels over the next several quarters.

Severance costs. During the fourth quarter of 2022, we committed to a plan to increase efficiencies and cost savings in certain general and administrative support functions. As a result of this plan, we recognized expenses related to termination and other benefit commitments in our U.S. dialysis business. This plan included additional charges of $4.3 million and $5.0 million during the third and second quarter of 2023, respectively and $26.3 million during the nine months ended September 30, 2023.

Patient care costs. U.S. dialysis patient care costs per treatment for the third quarter of 2023 decreased from the second quarter of 2023 primarily due to decreased minor equipment expense and utilities expense driven by our virtual power purchase arrangements. Other drivers of this change include decreased pharmaceutical costs, professional fees, medical supplies expense, contract wages and travel costs. In addition, our fixed other direct operating expenses positively impacted patient care costs per treatment due to increased treatments in the third quarter of 2023. Our patient costs per treatment were negatively impacted by increased compensation expenses including increased wages and headcount, health benefit expense due to higher claims volume, as well as increased insurance costs.

U.S. dialysis patient care costs per treatment for the nine months ended September 30, 2023 increased from the nine months ended September 30, 2022 primarily due to increased compensation expenses including increased wage rates and headcount, as well as increases in professional fees, medical supplies expense, repairs and maintenance expense and travel costs. Other drivers of this change include increased utilities expense driven by our virtual power purchase arrangements and increased center closure costs, as described above. In addition, our fixed other direct operating expenses unfavorably impacted patient care costs per treatment due to decreased treatments in 2023. These increases were partially offset by decreased pharmaceutical costs and contract wages.

General and administrative expenses. U.S. dialysis general and administrative expenses in the third quarter of 2023 increased from the second quarter of 2023 primarily due to increases in contributions to our charitable foundation, management meeting costs and IT-related costs. These increases were partially offset by decreased compensation expenses, center closure costs, as described above, and long-term incentive compensation.

U.S. dialysis general and administrative expenses for the nine months ended September 30, 2023 increased from the nine months ended September 30, 2022 primarily due to increases in compensation expenses including increased wage rates and severance costs, as described above. Other drivers of this change include gains recognized on the sale of our self-developed properties in the second quarter of 2022, increased IT-related costs and travel costs, and increased contributions to our charitable foundation. These increases were partially offset by decreased advocacy costs, including a refund received in 2023 related to 2022 advocacy costs, and decreased professional fees.

Depreciation and amortization. U.S. dialysis depreciation and amortization expenses for the quarter ended September 30, 2023 increased compared to the quarter ended June 30, 2023 primarily due to accelerated depreciation related to center closures, as described above, partially offset by decreased depreciation related to corporate IT projects.

U.S. dialysis depreciation and amortization expenses for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 increased primarily due to accelerated depreciation related to center closures, as described above as well as a full year of depreciation from the rollout of our new clinical system which was placed in service in May of 2022. These increases were partially offset by a decrease in depreciation related to leasehold improvements due to the reduction in number of centers operated.

Equity investment income. U.S. dialysis equity investment income remained relatively flat for the third quarter of 2023 compared to the second quarter of 2023 and for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Operating income and adjusted operating income:

			Three months ended												Q3 2023 vs. Q2 2023
			September 30, 2023						June 30, 2023						Amount						Percent
			(dollars in millions)
Operating income			$	509					$	461					$	48					10.4		%
Adjusted operating income(1)			$	537					$	487					$	50					10.3		%

(1)For a reconciliation of adjusted operating income by reportable segment, see "Reconciliations of Non-GAAP measures" section below.

			Nine months ended												YTD Q3 2023 vs. YTD Q3 2022
			September 30, 2023						September 30, 2022						Amount						Percent
			(dollars in millions)
Operating income			$	1,331					$	1,231					$	100					8.1		%
Adjusted operating income(1)			$	1,425					$	1,281					$	144					11.2		%

(1)For a reconciliation of adjusted operating income by reportable segment, see "Reconciliations of Non-GAAP measures" section below.

U.S. dialysis operating income for the third quarter of 2023 compared to the second quarter of 2023 and for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, was impacted by center closure and severance costs, as described above.

U.S. dialysis operating income and adjusted operating income for the third quarter of 2023 were positively impacted by increased average patient service revenue per treatment and dialysis treatments, as described above. Operating income and adjusted operating income were also positively impacted by decreases in minor equipment expense, utilities expense, as described above, pharmaceutical costs, contract wages, depreciation expense related to IT projects, as well as decreased professional fees and long-term incentive compensation. Operating income and adjusted operating income were negatively impacted by increased compensation expenses, health benefit expenses, insurance costs, contributions to our charitable foundation and IT-related costs.

U.S. dialysis operating income and adjusted operating income for the nine months ended September 30, 2023 were positively impacted by increased average patient service revenue per treatment, as described above. U.S. dialysis operating income and adjusted operating income were also positively impacted by decreases in pharmaceutical costs, contract wages and advocacy costs, as described above. Operating income and adjusted operating income were negatively impacted by increases in compensation expenses, decreased gains on sale and decreased dialysis treatments, each described above. U.S. dialysis operating income and adjusted operating income were also impacted by increases in travel costs, IT-related costs, repairs and maintenance expense, medical supplies expense, utilities expense, as described above, professional fees 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 September 30, 2023, these consisted principally of our U.S. 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 $363 million and $938 million in the third quarter of 2023 and nine months ended September 30, 2023, respectively, representing approximately 12% and 10% of our consolidated revenues, respectively.

As of September 30, 2023, DaVita IKC provided integrated care and disease management services to approximately 59,000 patients in risk-based integrated care arrangements and to an additional 16,000 patients in other integrated care arrangements. We also expect to add additional service offerings to our business and pursue additional strategic initiatives in the future as circumstances warrant, which could include, among other things, healthcare services not related to dialysis.

For a discussion of the risks related to IKC and our ancillary services, see the discussion in the risk factors in Part I, Item 1A Risk Factors of our 2022 10-K under the headings, "The U.S. integrated kidney care, U.S. other ancillary services and international operations that we operate or invest in now or in the future..." and "If we are not able to successfully implement our strategy with respect to our integrated kidney care and value-based care initiatives..."

As of September 30, 2023, our international dialysis operations provided dialysis and administrative services through a total of 359 outpatient dialysis centers located in 11 countries outside of the United States.

Ancillary services results of operations

			Three months ended												Q3 2023 vs. Q2 2023
			September 30, 2023						June 30, 2023						Amount						Percent
			(dollars in millions)
Revenues:
U.S. IKC			$	158					$	94					$	64					68.1		%
U.S. other ancillary			4						7						(3)						(42.9)		%
International			200						190						10						5.3		%
Total ancillary services revenues			$	363					$	292					$	71					24.3		%
Operating (loss) income:
U.S. IKC			$	11					$	(39)					$	50					128.2		%
U.S. other ancillary			(2)						(2)						—						—		%
International(1)			19						20						(1)						(5.0)		%
Total ancillary services operating income (loss)			$	28					$	(22)					$	50					227.3		%
Adjusted operating (loss) income(2):
U.S. IKC			$	11					$	(40)					$	51					127.5		%
U.S. other ancillary			(2)						(2)						—						—		%
International(1)			19						20						(1)						(5.0)		%
Total ancillary services adjusted operating income (loss)			$	28					$	(22)					$	50					227.3		%

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

(1)The reported operating income and adjusted operating income for the three months ended September 30, 2023 and June 30, 2023 includes foreign currency gains embedded in equity method income recognized from our APAC JV of approximately $0.4 million and $1.2 million, respectively.

(2)For a reconciliation of adjusted operating (loss) income by reportable segment, see “Reconciliations of Non-GAAP measures” section below.

			Nine months ended												YTD Q3 2023 vs. YTD Q3 2022
			September 30, 2023						September 30, 2022						Amount						Percent
			(dollars in millions)
Revenues:
U.S. IKC			$	351					$	276					$	75					27.2		%
U.S. other ancillary			18						17						1						5.9		%
International			569						523						46						8.8		%
Total ancillary services revenues			$	938					$	816					$	122					15.0		%
Operating (loss) income:
U.S. IKC			$	(66)					$	(90)					$	24					26.7		%
U.S. other ancillary			(7)						(8)						1						12.5		%
International(1)			54						41						13						31.7		%
Total ancillary services operating loss			$	(18)					$	(57)					$	39					68.4		%
Adjusted operating (loss) income(2):
U.S. IKC			$	(65)					$	(90)					$	25					27.8		%
U.S. other ancillary			(7)						(8)						1						12.5		%
International(1)			54						41						13						31.7		%
Total ancillary services adjusted operating loss			$	(18)					$	(57)					$	39					68.4		%

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

(1)The reported operating income and adjusted operating income for the nine months ended September 30, 2023 and September 30, 2022 includes foreign currency gains embedded in equity method income recognized from our Asia Pacific joint venture (APAC JV) of approximately $1.0 million and $4.7 million, respectively.

(2)For a reconciliation of adjusted operating (loss) income by reportable segment, see “Reconciliations of Non-GAAP measures” section below.

Revenues

IKC revenues for the third quarter of 2023 increased compared to the second quarter of 2023 due to a net increase in shared savings and increased revenues from our special needs plans. Other U.S. ancillary revenues for the third quarter of 2023 decreased compared to the second quarter of 2023 due to a decrease in revenues in our clinical research programs. International revenues for the third quarter of 2023 increased compared to the second quarter of 2023 due to increased treatments primarily from one additional treatment day, as well as acquisition-related growth.

IKC revenues for the nine months ended September 30, 2023 increased compared to the nine months ended September 30, 2022 due to a net increase in shared savings and revenues related to our special needs programs. Other U.S. ancillary services revenues for the nine months ended September 30, 2023 remained relatively flat compared to the nine months ended September 30, 2022. Our international revenues for the nine months ended September 30, 2023 increased from the nine months ended September 30, 2022 due to acquisition-related growth as well as average reimbursement rate increases in certain countries.

Charges impacting operating income - severance and other costs

During the fourth quarter of 2022, similar to U.S. dialysis, we committed to a plan to increase efficiencies and cost savings in certain general and administrative support functions and other overhead costs. As a result of this plan, we recognized expenses related to termination and other benefit commitments in our IKC business of $0.4 million during the nine months ended September 30, 2023.

Operating income (loss) and adjusted operating income (loss)

IKC operating income and adjusted operating income for the third quarter of 2023 compared to the second quarter of 2023 were impacted by increased revenues, as described above, partially offset by increased medical costs for our special needs plans and continued investments in our integrated care support functions. Other U.S. ancillary services operating loss and

adjusted operating loss for the third quarter of 2023 remained flat compared to the second quarter of 2023. International operating income and adjusted operating income for the third quarter of 2023 decreased from the second quarter of 2023 primarily due to favorable changes in the second quarter related to fair value of contingent consideration associated with prior acquisitions, partially offset by increased revenues, as described above, and decreases in equity income resulting from fluctuations in foreign currency at our APAC JV.

IKC operating loss and adjusted operating loss for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 decreased, primarily due to increases in revenue, as described above, partially offset by continued investments in our integrated care support functions. Other U.S. ancillary services operating loss and adjusted operating loss for the nine months ended September 30, 2023 remained relatively flat compared to the nine months ended September 30, 2022. International operating income and adjusted operating income for the nine months ended September 30, 2023 increased compared to the nine months ended September 30, 2022 primarily driven by increases in revenue, as described above, partially offset by decreases in equity income resulting from fluctuations in foreign currency at our APAC JV and other direct operating expenses associated with our international dialysis centers.

Corporate administrative support

			Three months ended												Q3 2023 vs. Q2 2023
			September 30, 2023						June 30, 2023						Amount						Percent
			(dollars in millions)
Corporate administrative support			$	(41)					$	(34)					$	(7)					(20.6)		%

			Nine months ended												YTD Q3 2023 vs. YTD Q3 2022
			September 30, 2023						September 30, 2022						Amount						Percent
			(dollars in millions)
Corporate administrative support			$	(100)					$	(91)					$	(9)					(9.9)		%

Corporate administrative support expenses for the quarter ended September 30, 2023 compared to the quarter ended June 30, 2023 and for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 increased primarily due to increased legal fees.

Corporate-level charges

			Three months ended												Q3 2023 vs. Q2 2023
			September 30, 2023						June 30, 2023						Amount						Percent
			(dollars in millions)
Debt expense			$	98					$	104					$	(6)					(5.8)		%
Debt extinguishment and modification costs			$	—					$	8					$	(8)					(100.0)		%
Other (loss) income, net			$	(20)					$	1					$	(21)					(2,100.0)		%
Effective income tax rate			18.2		%				16.5		%										1.7		%
Effective income tax rate attributable to DaVita Inc.(1)			21.8		%				21.3		%										0.5		%
Net income attributable to noncontrolling interests			$	63					$	68					$	(5)					(7.4)		%

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

			Nine months ended												YTD Q3 2023 vs. YTD Q3 2022
			September 30, 2023						September 30, 2022						Amount						Percent
			(dollars in millions)
Debt expense			$	302					$	256					$	46					18.0		%
Debt extinguishment and modification costs			$	8					$	—					$	8					100.0		%
Other loss, net			$	(15)					$	(8)					$	(7)					(87.5)		%
Effective income tax rate			18.2		%				20.0		%										(1.8)		%
Effective income tax rate attributable to DaVita Inc.(1)			22.9		%				24.9		%										(2.0)		%
Net income attributable to noncontrolling interests			$	186					$	163					$	23					14.1		%

(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 third quarter of 2023 compared to the second quarter of 2023 decreased primarily due to decreases in our weighted average outstanding credit facility balance and our weighted average effective interest rate. Debt expense for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 increased primarily due to an increase in our weighted average effective interest rate, partially offset by a decrease in our weighted average outstanding credit facility balance.

Our overall weighted average effective interest rate for the three months ended September 30, 2023 was 4.61% compared to 4.67% for the three months ended June 30, 2023. See Note 7 to the condensed consolidated financial statements for further information on the components of our debt.

Debt extinguishment and modification costs

The nine months ended September 30, 2023 included debt extinguishment and modification costs of $8 million related to the refinancing of our prior Term Loan A and prior revolving line of credit. These costs were composed partially of deferred financing costs written off for the portion of this debt considered extinguished and reborrowed and partially of fees incurred as part of this debt refinancing.

Other (loss) income, net

Other loss for the third quarter of 2023 compared to other income for the second quarter of 2023 was driven by net losses in Mozarc due to the $14.0 million gain recognized in the second quarter on the non-cash assets contributed to Mozarc (Mozarc gain). Other loss for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 increased, primarily driven by increased net losses in Mozarc, including the Mozarc gain, partially offset by an increase in interest income.

Effective income tax rate

The effective income tax rate and the effective income tax rate attributable to DaVita Inc. increased for the third quarter of 2023 compared to the second quarter of 2023 primarily due to a decrease in recognized tax benefits from stock-based compensation and one-time benefits recognized in connection with the closure of our federal IRS exam for tax years 2016-2017 in the second quarter, partially offset by benefits recognized in the third quarter for finalized tax returns.

The effective income tax rate and the effective income tax rate attributable to DaVita Inc. for the nine months ended September 30, 2023 decreased compared to the nine months ended September 30, 2022 primarily due to a decrease in forecasted non-deductible advocacy spend and a larger benefit recognized for tax returns finalized in the third quarter of 2023.

Net income attributable to noncontrolling interests

The decrease in net income attributable to noncontrolling interests for the third quarter of 2023 from the second quarter of 2023 was due to reduced earnings at certain U.S. dialysis partnerships. The increase in net income attributable to noncontrolling interests for the nine months ended September 30, 2023 from the nine months ended September 30, 2022 was due to increased profitability at certain U.S. dialysis partnerships.

Accounts receivable

Our U.S. dialysis accounts receivable balances at September 30, 2023 and December 31, 2022 were $1.708 billion and $1.899 billion, respectively, representing approximately 57 and 66 days of revenue outstanding (DSO), respectively. The decrease in DSO is primarily due to improved collections from certain payers. Our DSO calculation is based on the current quarter’s average revenues per day. There were no significant changes from the second quarter of 2023 to the third quarter of 2023 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:

			Nine months ended September 30,												YTD Q3 2023 vs. YTD Q3 2022
			2023						2022						Amount						Percent
			(dollars in millions and shares in thousands)
Net cash provided by operating activities:
Net income			$	726					$	655					$	71					10.8		%
Non-cash items in net income			664						596						68						11.4		%
Other working capital changes			191						32						159						496.9		%
Other			(7)						(63)						56						88.9		%
			$	1,574					$	1,221					$	353					28.9		%
Net cash used in investing activities:
Capital expenditures:
Routine maintenance/information technology/other			$	(287)					$	(284)					$	(3)					(1.1)		%
Development and relocations			(122)						(125)						3						2.4		%
Acquisition expenditures			(8)						(44)						36						81.8		%
Proceeds from sale of self-developed properties			5						107						(102)						(95.3)		%
Other			(192)						(71)						(121)						(170.4)		%
			$	(604)					$	(417)					$	(187)					(44.8)		%
Net cash used in financing activities:
Debt (payments) net of issuances			$	(521)					$	149					$	(670)					(449.7)		%
Deferred and debt related financing costs			(53)						—						(53)						(100.0)		%
Distributions to noncontrolling interests			(203)						(189)						(14)						(7.4)		%
Contributions from noncontrolling interests			12						11						1						9.1		%
Stock award exercises and other share issuances			(41)						(42)						1						2.4		%
Share repurchases			—						(802)						802						100.0		%
Other			40						(17)						57						335.3		%
			$	(767)					$	(890)					$	123					13.8		%
Total number of shares repurchased			—						8,095						(8,095)						(100.0)		%
Free cash flow(1)			$	979					$	742					$	237					31.9		%

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 nine months ended September 30, 2023 increased compared to the nine months ended September 30, 2022 primarily due to improvements in operating results, cash collections, decreases in cash taxes and other working capital items.

Free cash flow during the nine months ended September 30, 2023 increased from the nine months ended September 30, 2022 primarily due to an increase in net cash provided by operating activities partially offset by an increase in distributions of noncontrolling interest and decreases in proceeds from sale of self-developed properties.

Significant uses of cash during the period included net debt payments which consisted of the pay-off of the remaining principal balance outstanding on our prior Term Loan A and prior revolving line of credit in the amount of $1,444 million and $150 million, respectively. Other uses of cash included regularly scheduled and other principal payments under our senior secured credit facilities totaling approximately $54 million on our prior Term Loan A, $8 million on our new Term Loan A-1, described below, $50 million on Term Loan B-1, additional net repayments of $15 million on our revolving line of credit, as well as additional required payments under other debt arrangements. Additionally, we recognized financing cash outflows of $30 million in deferred financing costs related to the Amendments to the Senior Secured Credit Agreement and $23 million in cap premium fees for our 2023 forward interest cap agreements. Significant sources of cash during the period included the refinancing of the Term Loan A and revolving line of credit with a secured Term Loan A-1 facility in the aggregate principal amount of $1,250 million.

By comparison, the same period in 2022 included a net draw of $275 million on our prior revolving line of credit, net debt payments which consisted of regularly scheduled mandatory principal payments under our senior secured credit facilities totaling approximately $66 million on our prior Term Loan A and $21 million on Term Loan B-1, as well as additional required payments under other debt arrangements. In addition, during the nine months ended September 30, 2022 we used cash to repurchase 8,094,661 shares of our common stock.

Dialysis center footprint

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

			U.S.																								International
			Three months ended September 30,												Nine months ended September 30,												Three months ended September 30,												Nine months ended September 30,
			2023						2022						2023						2022						2023						2022						2023						2022
Number of centers operated at beginning of period			2,703						2,810						2,724						2,815						353						349						350						339
Acquired centers			—						5						—						5						2						3						4						8
Developed centers			5						6						18						33						3						1						8						3
Net change in non-owned managed or administered centers(1)			1						(1)						3						(1)						1						2						1						5
Sold and closed centers(2)			—						(9)						(3)						(16)						—						(2)						(2)						(2)
Closed centers(3)			(15)						(35)						(48)						(60)						—						(1)						(2)						(1)
Number of centers operated at end of period			2,694						2,776						2,694						2,776						359						352						359						352

(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.

Available liquidity

As of September 30, 2023, we had an undrawn revolving line of credit under our senior secured credit facilities of $1.5 billion. Credit available under this new revolving line of credit is reduced by the amount of any letters of credit outstanding thereunder, of which there were none as of September 30, 2023. We separately had approximately $151 million in letters of credit outstanding under a separate bilateral secured letter of credit facility.

See Note 7 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.

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 Part I, Item 1A Risk Factors of our 2022 10-K*.*

Reconciliations of Non-GAAP measures

The following tables provide reconciliations of adjusted operating income (loss) to operating income (loss) as presented on a U.S. generally accepted accounting principles (GAAP) basis for our U.S. dialysis reportable segment as well as for our U.S. IKC business, our U.S. other ancillary services, our international business, and for our total ancillary services which combines them and is disclosed as our other segments category, in addition to our corporate administrative support. These non-GAAP or “adjusted” measures are presented because management believes these measures are useful adjuncts to, but not alternatives for, our GAAP results.

Specifically, management uses adjusted operating income (loss) to compare and evaluate our performance period over period and relative to competitors, to analyze the underlying trends in our business, to establish operational budgets and forecasts and for incentive compensation purposes. We believe this non-GAAP measure is also useful to investors and analysts in evaluating our performance over time and relative to competitors, as well as in analyzing the underlying trends in our business. We also believe this presentation enhances a user's understanding of our normal operating income by excluding certain items which we do not believe are indicative of our ordinary results of operations.

In addition, our effective income tax rate on income attributable to DaVita Inc. excludes 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.

Finally, 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 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 September 30, 2023
			U.S. dialysis						Ancillary services																								Corporate administration						Consolidated
						U.S. IKC						U.S. Other						International						Total
			(dollars in millions)
Operating income (loss)			$	509					$	11					$	(2)					$	19					$	28					$	(41)					$	496
Center closure charges			24																																				24
Severance and other costs			4																														—						5
Adjusted operating income (loss)			$	537					$	11					$	(2)					$	19					$	28					$	(41)					$	525

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

			Three months ended June 30, 2023
			U.S. dialysis						Ancillary services																								Corporate administration						Consolidated
						U.S. IKC						U.S. Other						International						Total
			(dollars in millions)
Operating income (loss)			$	461					$	(39)					$	(2)					$	20					$	(22)					$	(34)					$	405
Center closure charges			21																																				21
Severance and other costs			5						—																		—						—						5
Adjusted operating income (loss)			$	487					$	(40)					$	(2)					$	20					$	(22)					$	(33)					$	432

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

			Nine months ended September 30, 2023
			U.S. dialysis						Ancillary services																								Corporate administration						Consolidated
						U.S. IKC						U.S. Other						International						Total
			(dollars in millions)
Operating income (loss)			$	1,331					$	(66)					$	(7)					$	54					$	(18)					$	(100)					$	1,213
Center closure charges			67																																				67
Severance and other costs			26						—																		—						1						28
Adjusted operating income (loss)			$	1,425					$	(65)					$	(7)					$	54					$	(18)					$	(98)					$	1,308

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

			Nine months ended September 30, 2022
			U.S. dialysis						Ancillary services																								Corporate administration						Consolidated
						U.S. IKC						U.S. Other						International						Total
			(dollars in millions)
Operating income (loss)			$	1,231					$	(90)					$	(8)					$	41					$	(57)					$	(91)					$	1,083
Center closure charges			50																																				50
Adjusted operating income (loss)			$	1,281					$	(90)					$	(8)					$	41					$	(57)					$	(91)					$	1,133

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

			Three months ended												Nine months ended
			September 30, 2023						June 30, 2023									September 30, 2023						September 30, 2022
			(dollars in millions)												(dollars in millions)
Income before income taxes			$	378					$	295								$	888					$	819
Less: Noncontrolling owners' income primarily attributable to non-tax paying entities			(63)						(68)									(186)						(163)
Income before income taxes attributable to DaVita Inc.			$	315					$	227								$	702					$	655
Income tax expense			$	69					$	49								$	162					$	164
Less: Income tax attributable to noncontrolling interests			—						—									(1)						(1)
Income tax expense attributable to DaVita Inc.			$	69					$	48								$	161					$	163
Effective income tax rate on income attributable to DaVita Inc.			21.8		%				21.3		%							22.9		%				24.9		%

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

			Nine months ended
			September 30, 2023						September 30, 2022
			(dollars in millions)
Net cash provided by operating activities			$	1,574					$	1,221
Adjustments to reconcile net cash provided by operating activities to free cash flow:
Distributions to noncontrolling interests			(203)						(189)
Contributions from noncontrolling interests			12						11
Expenditures for routine maintenance and information technology			(287)						(284)
Expenditures for development and relocations			(122)						(125)
Proceeds from sale of self-developed properties			5						107
Free cash flow			$	979					$	742

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 8 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 included in this report and Notes 17 and 24 to the consolidated financial statements included in our 2022 10-K.

For information on the maturities and other terms of our long-term debt, see Note 7 to the condensed consolidated financial statements.

As of September 30, 2023, we have outstanding letters of credit in the aggregate amount of approximately $151 million under a bilateral secured letter of credit facility separate from our senior secured credit facilities.

As of September 30, 2023, we have outstanding purchase agreements with various suppliers to purchase set amounts of dialysis equipment, parts, pharmaceuticals 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 2022 10-K.

New Accounting Standards

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