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, revenues, billings and collections, patient census, availability or cost of supplies, including without limitation the impact of the reduction in clinical and other supplies delivered to DaVita by Baxter International Inc. or its subsidiaries (collectively, Baxter) due to closures of Baxter facilities following Hurricane Helene, treatment volumes, mix expectation, such as the percentage or number of patients under commercial insurance, the effects of the recent Change Healthcare (CHC) cybersecurity outage on us and our operations, current macroeconomic, marketplace 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, capital allocation plans, expenses, cost saving initiatives, other strategic initiatives, use of contract labor, government and commercial payment rates, expectations related to value-based care (VBC), integrated kidney care (IKC), Medicare Advantage (MA) plan enrollment and our international operations, expectations regarding increased competition and marketplace changes, including those related to new or potential entrants in the dialysis and pre-dialysis marketplace and the potential impact of innovative technologies, drugs, or other treatments on the dialysis industry, expectations regarding the impact of our continuing cost-savings initiatives and our 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:

*•*current macroeconomic and marketplace conditions, including without limitation, the impact of global events and political or governmental volatility; the impact of the domestic political environment and related developments on the current healthcare marketplace, our patients and on our business; the continuing impact of the COVID-19 pandemic on our operations, reputation, financial condition and the chronic kidney disease (CKD) population and our patient population; supply chain challenges and disruptions, including without limitation with respect to certain key services provided to us and certain critical clinical supplies and equipment, and including any impacts on our supply chain as a result of natural disasters; 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; elevated teammate turnover or labor costs; the impact of continued increased competition from dialysis providers and others; and our ability to respond to challenging U.S. and global economic and marketplace conditions, including, among other things, our ability to successfully identify cost saving opportunities and to invest in and implement cost saving initiatives;

*•*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 commercial plans, including, without limitation, as a result of continuing legislative efforts to restrict or prohibit the use and/or availability of charitable premium assistance, or as a result of payors implementing restrictive plan designs;

*•*risks arising from potential changes in or new laws, regulations or requirements applicable to us, including, without limitation, those related to healthcare, antitrust matters, including, among others, non-competes and other restrictive covenants, and acquisition, merger, joint venture or similar transactions and/or labor matters, and potential impacts of changes in enforcement thereof or related litigation impacting, among other things, coverage or reimbursement rates for our services or the number of patients enrolled in or that select higher-paying commercial plans, and the risk that we make incorrect assumptions about how our patients will respond to any such developments;

*•*our ability to successfully implement our strategies with respect to IKC and VBC initiatives and home based dialysis in the desired time frame and in a complex, dynamic and highly regulated environment;

*•*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;

*•*our reliance on significant suppliers, service providers and other third party vendors to provide key support to our business operations and enable our provision of services to patients, such as, among others, CHC, Baxter and other suppliers of certain pharmaceuticals, services or critical clinical products; and risks resulting from a closure, reduction or other disruption in the services or products provided to us by such suppliers, service providers and third party vendors, such as the closure of certain Baxter manufacturing facilities following Hurricane Helene;

*•*noncompliance by us or our business associates with any privacy or security laws or any security breach by us or a third party, such as the recent cyberattack on CHC, including, among other things, any such non-compliance or breach involving the misappropriation, loss or other unauthorized use or disclosure of confidential information;

*•*legal and compliance risks, such as compliance with complex, and at times, evolving government regulations and requirements, and with additional laws that may apply to our operations as we expand geographically or enter into new lines of business;

*•*our ability to attract, retain and motivate teammates and our ability to manage potential disruptions to our business and operations, including potential work stoppages, 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, including due to the ongoing nationwide shortage of skilled clinical personnel, or other reasons;

*•*changes in pharmaceutical practice patterns, reimbursement and payment policies and processes, or pharmaceutical pricing, including with respect to oral phosphate binders, 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 that, among other things, may erode our patient base and impact reimbursement rates;

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

*•*the variability of our cash flows, including, without limitation, any extended billing or collections cycles including, without limitation, due to defects or operational issues in our billing systems or in the billing systems or services of third parties on which we rely, such as the operational issues at CHC resulting from a recent cyberattack; 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;

*•*the effects on us or others of natural or other disasters, public health crises or adverse weather events such as hurricanes, earthquakes, fires or flooding;

*•*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 any use by us of a considerable amount of available funds to repurchase stock;

*•*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; and

*•*the other risk factors, trends and uncertainties set forth in our Annual Report on Form 10-K for the year ended December 31, 2023 (2023 10-K), 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 functions. 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; Legal and Regulatory Developments

Developments in general economic and market conditions have directly and indirectly impacted the Company and in the future 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, potential interest rate volatility and other economic conditions, labor market conditions, wage pressure, the increased mortality rates of our patients and other ESKD or CKD patients, supply chain challenges and the potential impact and application of innovative technologies, drugs or other treatments. Certain of these impacts could be further intensified by concurrent global events such as the ongoing conflicts between Russia and Ukraine and in Israel, Gaza and the surrounding areas, which have continued to drive sociopolitical and economic uncertainty across the globe, as well as severe weather events and other natural disasters, such as Hurricane Helene and Hurricane Milton, which have impacted national supply chain challenges, among other things.

Operational and Financial Impacts

In the third quarter of 2024, treatment per day volumes were generally flat compared to the second quarter of 2024. We continue to experience a negative impact on revenue and treatment volume due to, among other things, elevated mortality rates of our patients in comparison to the periods prior to the pandemic and the associated adverse impact on our patient census. Treatment volumes during the year have been and may continue to be adversely impacted by higher than expected missed treatment rates, which during the quarter were driven primarily by severe weather events. In addition, new-to-dialysis admission rates, treatment volumes, future revenues and non-acquired growth, among other things, could continue to be negatively impacted over time to the extent that the ESKD and CKD populations experience sustained 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 increased, and will likely continue to increase, our expenses, including, among others, staffing, labor, and supply costs. We have significant suppliers and service providers, with a substantial portion of our total vendor spend concentrated with a limited number of third party suppliers and service providers. These third party suppliers and service providers include, without limitation, providers performing certain key functions for us such as claims processing functions, suppliers of pharmaceuticals or clinical products that may be the primary source of products critical to the services we provide, or to which we have committed obligations to make purchases, sometimes at particular prices. It may be difficult, costly and time consuming for us to transition away from any of these significant suppliers and service providers. We have experienced service disruptions relating to key business functions and supply chain shortages with respect to certain of our equipment and clinical supplies, including critical clinical and other supplies. While we have made certain operational changes in response to the foregoing, there can be no assurance that a future shortage or disruption would not require additional resources or further operational changes in the future.

There can be no assurance that our third party suppliers and service providers will provide, or continue to provide, the services or products that we require or that substitute services or products, or alternate suppliers or service providers, can be identified or transitioned to on a timely or cost-effective basis or at all. If our significant suppliers and service providers do not meet our needs, and we are not able to find adequate alternative sources for these products or services on a timely or cost-effective basis, it could require us to make significant operational changes, could impact our ability to provide dialysis services we offer, and could otherwise have a material adverse impact on our business, results of operations, financial condition and cash flows.

In September 2024, Baxter International Inc. (Baxter) notified us that Hurricane Helene caused extensive damage to its manufacturing plant in North Cove, North Carolina. The damage required Baxter to close the facility and halt production of certain clinical products Baxter supplies to us and other health care providers, including saline and peritoneal dialysate. As a result of this disruption, we worked with Baxter, other suppliers, and federal and state governmental agencies to identify alternate sources for these supplies and have implemented certain operational measures, including conservation measures and a temporary hold on new starts for PD home-based dialysis, all of which were developed to maintain continuity of care for our

patients. Most of these operational changes remain ongoing, and we are continuing to assess the potential impact of this storm and other severe weather events on our business and results of operations. In general, we are continuing to assess the balance of efficiency and resilience in evaluating the risk of future supply chain shortages or service disruptions. For further discussion of the risks related to our supplier needs, see the discussion in the risk factors in Part I, Item 1A Risk Factors of our 2023 10-K under the heading, "If certain of our suppliers do not meet our needs..."

During the quarter we continued to pay elevated compensation levels to our teammates compared to the prior year. We expect certain of these increased staffing and labor costs to continue, due to, among other factors, the continuation of a challenging healthcare labor market. The cumulative impact of these increased costs could be material. In addition, 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. Our industry has also experienced increased union organizing activities. For example, union petitions have been filed in nine of our clinics in California and eight of these petitions are in different stages of the voting process and have been subject to legal challenges. We also have experienced a week-long attempted union-related work stoppage in these eight clinics, which concluded without impacting our ability to provide patient care. Regardless of the outcome of the ongoing elections, other teammates at other clinics may file similar petitions in the future, and these petitions, if filed, may lead to additional elections. If a significant portion of our teammates were to become unionized, we could experience, among other things, potential additional work stoppages or other business disruptions; adverse impacts to our financial results due to the costs of bargaining or implementing a grievance procedure and processing grievances; decreases in our operational flexibility and efficiency; or negative impacts on our employee culture. In addition, we are and may continue to be subject to targeted corporate campaigns by union organizers in response to which we have been and expect to continue to be required to expend substantial resources, both time and financial. Any of these events or circumstances, including our responses to such events or circumstances, could have a material adverse effect on our employee relations, treatment growth, productivity, business, results of operations, financial condition, cash flows and reputation. For further discussion of the risks related to rising labor costs and union organizing activities, see the discussion in the risk factors in Part I, Item 1A Risk Factors of our 2023 10-K under the heading, "Our business is labor intensive..."

The impact of the pandemic on our patient population combined with the cost inflation trends and the inability of government reimbursement rates to keep pace with these cost trends, have put pressure on our existing cost structure, and we expect that certain of those increased costs will persist as inflationary and supply chain pressures and challenging labor market conditions continue, each as noted above. During the third quarter of 2024, we continued to invest in and implement cost savings initiatives designed to help mitigate these cost and volume pressures. These include identified cost savings related to the achievement of general and administrative cost efficiencies through ongoing initiatives, including, among others, those that increase our use of third party service providers to perform certain activities. 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.

Legal and Regulatory Developments

As previously reported, on May 7, 2024, the Federal Trade Commission (FTC) published in the federal register a final rule that would generally ban all post-employment non-compete clauses with employees and prohibit employers from enforcing existing non-compete clauses in contracts with workers, with limited exceptions. On August 20, 2024, a federal court issued an injunction against the rule, preventing the FTC from enforcing it nationwide. As result, the FTC cannot implement or enforce its rule against any employer without violating the nationwide ban. The FTC is considering whether to appeal. Even though the rule has been enjoined, many state legislatures continue to introduce legislation that seeks to place limitations on restrictive covenants with workers. While few of these states have passed legislation that has directly affected our business, it is possible that new legislation could be introduced in the future. We are continuing to assess the potential impact of the rule as well as Congressional and state legislative efforts on our business. Such efforts, if successful, could have an adverse impact on, among other things, our agreements with teammates, our arrangements with medical directors, or the terms of our existing agreements with physicians. Any failure on our part to adequately adjust to any state regulations or future federal or state regulations and the potential impact thereof could have a material adverse effect on our business, results of operations, financial condition, cash flows and reputation.

Change Healthcare

As previously reported, due to a cybersecurity breach that affected Change Healthcare (CHC), a subsidiary of UnitedHealth Group (United) that serves as an intermediary for processing the vast majority of our payment claims for domestic commercial and government payors, we temporarily suspended all claims processing activity with CHC (CHC Outage), primarily during a period of time during the first and second quarters, which impacted our cash flows. We have since resumed claims submissions and billing processes through CHC’s information technology systems and as of the date of this filing, through a combination of CHC's platform and certain alternate billing processes, we are current on our primary claims submissions. However, the CHC Outage, and the resultant delay in claims submissions, led to an increase in our days sales outstanding, among other things, which increase has since subsided, but we do continue to see delays in, and issues with, collections with some payors.

CHC has publicly reported online and in notices to affected individuals that it identified protected health information (PHI), or personally identifiable information (PII), from users of the CHC systems, and while CHC has been conducting investigations and data forensics, to date, we have not been informed that any of our data, including any PHI or PII from our patients, was impacted by the CHC Outage. However, the ultimate impact of the CHC Outage remains subject to future developments and risks that are difficult to predict. These risks may include, among other things, a recurrence of system outages or service suspensions or the risk that our information technology systems or our proprietary information and sensitive or confidential data, including PHI or PII, may have been compromised through the CHC Outage, any of which may have a material adverse effect on our business, results of operations, financial condition, cash flows and reputation. For a discussion of the risks associated with outages, disruptions or incidents at third parties on which we rely, see the risk factors in Part I, Item 1A of our 2023 10-K under the headings, "Failing to effectively maintain, operate or upgrade our information systems or those of third-party service providers upon which we rely..." and "Privacy and information security laws are complex…"

We believe that the aforementioned recent developments and general economic and marketplace conditions will continue to impact the Company in the future. Their ultimate impact depends 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, 2024 compared to the three months ended June 30, 2024, and the year-to-date periods for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Consolidated results of operations

The following tables summarize our revenues, operating income (loss) and adjusted operating income (loss) 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 2024 vs. Q2 2024
			September 30, 2024						June 30, 2024						Amount						Percent
			(dollars in millions)
Revenues:
U.S. dialysis			$	2,906					$	2,841					$	65					2.3		%
Other — Ancillary services			376						362						14						3.9		%
Elimination of intersegment revenues			(19)						(17)						(2)						(11.8)		%
Total consolidated revenues			$	3,264					$	3,187					$	77					2.4		%
Operating income (loss):
U.S. dialysis			$	549					$	550					$	(1)					(0.2)		%
Other — Ancillary services			14						(19)						33						173.7		%
Corporate administrative support			(29)						(25)						(4)						(16.0)		%
Operating income			$	535					$	506					$	29					5.7		%
Adjusted operating income (loss)(1):
U.S. dialysis			$	549					$	550					$	(1)					(0.2)		%
Other — Ancillary services			14						(19)						33						173.7		%
Corporate administrative support			(29)						(25)						(4)						(16.0)		%
Adjusted operating income			$	535					$	506					$	29					5.7		%

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

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

			Nine months ended												YTD Q3 2024 vs. YTD Q3 2023
			September 30, 2024						September 30, 2023						Amount						Percent
			(dollars in millions)
Revenues:
U.S. dialysis			$	8,503					$	8,128					$	375					4.6		%
Other — Ancillary services			1,080						938						142						15.1		%
Elimination of intersegment revenues			(63)						(72)						9						12.5		%
Total consolidated revenues			$	9,521					$	8,994					$	527					5.9		%
Operating income (loss):
U.S. dialysis			$	1,625					$	1,331					$	294					22.1		%
Other — Ancillary services			(16)						(18)						2						11.1		%
Corporate administrative support			(84)						(100)						16						16.0		%
Operating income			$	1,525					$	1,213					$	312					25.7		%
Adjusted operating income (loss)(1):
U.S. dialysis			$	1,590					$	1,357					$	233					17.2		%
Other — Ancillary services			(16)						(18)						2						11.1		%
Corporate administrative support			(84)						(87)						3						3.4		%
Adjusted operating income			$	1,490					$	1,252					$	238					19.0		%

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

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

U.S. dialysis results of operations

Treatment volume:

			Three months ended												Q3 2024 vs. Q2 2024
			September 30, 2024						June 30, 2024						Amount						Percent
Dialysis treatments			7,350,784						7,265,444						85,340						1.2		%
Average treatments per day			93,048						93,147						(99)						(0.1)		%
Treatment days			79						78						1						1.3		%
Normalized non-acquired treatment growth(1)			(0.2)		%				0.4		%

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 2024 vs. YTD Q3 2023
			September 30, 2024						September 30, 2023						Amount						Percent
Dialysis treatments			21,767,740						21,655,618						112,122						0.5		%
Average treatments per day			92,787						92,545						242						0.3		%
Treatment days			235						234						1						0.4		%

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 2024 from the second quarter of 2024 was primarily driven by one additional treatment day, partially offset by an increase in missed treatments and decreased patient count. The increase in our U.S. dialysis treatments for the nine months ended September 30, 2024 from the nine months ended September 30, 2023 was primarily driven by one additional treatment day and increased treatments from acquired and non-acquired treatment growth.

Revenues:

			Three months ended												Q3 2024 vs. Q2 2024
			September 30, 2024						June 30, 2024						Amount						Percent
			(dollars in millions, except per treatment data)
Total revenues			$	2,906					$	2,841					$	65					2.3		%
Average patient service revenue per treatment			$	394.49					$	390.22					$	4.27					1.1		%

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

			Nine months ended												YTD Q3 2024 vs. YTD Q3 2023
			September 30, 2024						September 30, 2023						Amount						Percent
			(dollars in millions, except per treatment data)
Total revenues			$	8,503					$	8,128					$	375					4.6		%
Average patient service revenue per treatment			$	389.79					$	374.46					$	15.33					4.1		%

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 2024 compared to the second quarter of 2024 increased primarily due to increases in average reimbursement rates and other normal fluctuations.

U.S. dialysis average patient service revenue per treatment for the nine months ended September 30, 2024 increased compared to the nine months ended September 30, 2023 primarily driven by the increase in average reimbursement rates from normal annual rate increases including Medicare rate increases, as well as revenue cycle improvements, favorable changes in mix and an increase in hospital inpatient dialysis rates.

In June 2024, Centers for Medicare & Medicaid Services (CMS) issued a proposed rule to update the Medicare ESRD Prospective Payment System payment rate and policies for calendar year 2025. Among other things, the proposed rule, if finalized, would allow Medicare payment for dialysis in the home setting for beneficiaries with acute kidney injury and update requirements for the ESRD Quality Incentive Program. CMS estimates that the overall impact of the proposed rule will increase ESRD freestanding facilities’ average reimbursement by 2.1% in 2025.

Operating expenses:

			Three months ended												Q3 2024 vs. Q2 2024
			September 30, 2024						June 30, 2024						Amount						Percent
			(dollars in millions, except per treatment data)
Patient care costs			$	1,893					$	1,855					$	38					2.0		%
General and administrative			301						282						19						6.7		%
Depreciation and amortization			171						160						11						6.9		%
Equity investment income			(8)						(6)						(2)						(33.3)		%
Total operating expenses and charges			$	2,357					$	2,291					$	66					2.9		%
Patient care costs per treatment			$	257.46					$	255.25					$	2.21					0.9		%

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

			Nine months ended												YTD Q3 2024 vs. YTD Q3 2023
			September 30, 2024						September 30, 2023						Amount						Percent
			(dollars in millions, except per treatment data)
Patient care costs			$	5,572					$	5,485					$	87					1.6		%
General and administrative			858						819						39						4.8		%
Depreciation and amortization			504						515						(11)						(2.1)		%
Equity investment income			(20)						(22)						2						9.1		%
Gain on changes in ownership interest			(35)						—						(35)						(100.0)		%
Total operating expenses and charges			$	6,878					$	6,797					$	81					1.2		%
Patient care costs per treatment			$	255.96					$	253.30					$	2.66					1.1		%

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

Charges impacting operating income

Closure costs. In the third quarter of 2022, we began a strategic review of our outpatient clinic capacity requirements and utilization, which had been significantly impacted by declines in our patient census due to the COVID-19 pandemic. This review continued through 2023, and has resulted in higher than normal charges for center capacity closures over the last several quarters. These capacity closure costs include net losses on assets retired, lease termination costs, asset impairments and accelerated depreciation and amortization.

During the third quarter of 2024, we incurred charges for U.S. dialysis center closures of approximately $18.3 million, which increased our patient care costs by $3.5 million, our general and administrative expenses by $3.8 million and our depreciation and amortization expense by $11.0 million. By comparison, during the second quarter of 2024, charges for U.S. dialysis center closures were approximately $15.3 million, which increased our patient care costs by $6.5 million, our general and administrative expenses by $8.7 million and our depreciation and amortization expense by $0.1 million.

During the nine months ended September 30, 2024, charges for U.S. dialysis center closures were approximately $48.2 million, which increased our patient care costs by $13.3 million, our general and administrative expenses by $19.6 million and our depreciation and amortization expense by $15.3 million. By comparison, during the nine months ended September 30, 2023, charges for 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.

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 remainder of 2024.

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 charges of $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 2024 increased from the second quarter of 2024 primarily due to increased compensation expenses, including increased wage rates and payroll taxes. Patient care costs per treatment were also affected by increases in health benefit expense and other direct operating expenses associated with our dialysis centers, including seasonal increases in utilities expense, as well as increased minor equipment expense. These increases were partially offset by decreases in insurance costs and travel costs. Additionally, our fixed other direct operating expenses positively impacted patient care costs per treatment due to increased treatments in the third quarter of 2024. Patient care costs per treatment were also favorably impacted by decreased medical supplies expense, professional fees and center closure costs.

U.S. dialysis patient care costs per treatment for the nine months ended September 30, 2024 increased from the nine months ended September 30, 2023 primarily due to increased compensation expenses, including increased wage rates and headcount, as well as increases in health benefit expense, medical supplies expense, insurance costs and other direct operating expenses associated with our dialysis centers, including lower expense in the nine months ended 2023 related to our virtual power purchase arrangements. These increases were partially offset by decreased contributions to charitable organizations, contract wages, center closure costs, IT-related costs and professional fees.

General and administrative expenses. U.S. dialysis general and administrative expenses in the third quarter of 2024 increased from the second quarter of 2024 primarily due to increased advocacy costs, compensation expenses, IT-related costs, travel costs and professional fees. These increases were partially offset by a decrease in center closure costs.

U.S. dialysis general and administrative expenses for the nine months ended September 30, 2024 increased from the nine months ended September 30, 2023 due to increased compensation expenses, including increased wage rate and headcount, as well as increases in advocacy costs, including a refund received in 2023 related to 2022 advocacy costs. Other drivers of this change include increases in IT-related costs, contract wages, center closure costs and professional fees. These increases were partially offset by decreased severance costs, as described above, and contributions to charitable organizations.

Depreciation and amortization. U.S. dialysis depreciation and amortization expenses in the third quarter of 2024 increased compared to the second quarter of 2024 primarily due to increased accelerated depreciation related to center closures.

U.S. dialysis depreciation and amortization expenses for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 decreased primarily due to decreased accelerated depreciation related to center closures.

Equity investment income. U.S. dialysis equity investment income for the third quarter of 2024 compared to the second quarter of 2024 increased due to increased profitability at certain nonconsolidated dialysis partnerships. Equity investment income for the nine months ended September 30, 2024 decreased compared to the nine months ended September 30, 2023 due to the consolidation of a previously nonconsolidated dialysis partnership in the first quarter of 2024, partially offset by increased profitability at certain nonconsolidated dialysis partnerships.

Gain on changes in ownership interests. During the first quarter of 2024, we acquired a controlling interest in a previously nonconsolidated dialysis partnership for which we recognized a non-cash gain of $35.1 million on our prior investment upon consolidation.

Operating income and adjusted operating income:

			Three months ended												Q3 2024 vs. Q2 2024
			September 30, 2024						June 30, 2024						Amount						Percent
			(dollars in millions)
Operating income			$	549					$	550					$	(1)					(0.2)		%

			Nine months ended												YTD Q3 2024 vs. YTD Q3 2023
			September 30, 2024						September 30, 2023						Amount						Percent
			(dollars in millions)
Operating income			$	1,625					$	1,331					$	294					22.1		%
Adjusted operating income(1)			$	1,590					$	1,357					$	233					17.2		%

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

U.S. dialysis operating income for the third quarter of 2024 compared to the second quarter of 2024 was negatively impacted by increased compensation expenses, health benefit expense and other direct operating expenses associated with our dialysis centers, including seasonal increases in utilities expense. Operating income was also negatively impacted by increased advocacy costs, center closure costs, as described above, IT-related costs and minor equipment expense. Operating income was positively impacted by increased average patient service revenue per treatment and dialysis treatments, as described above, as well as decreased insurance costs.

U.S. dialysis operating income for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was impacted by a gain on changes in ownership interest and severance costs, as described above. U.S. dialysis operating income and adjusted operating income for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 were positively impacted by an increase in 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 contributions to charitable organizations, center closure costs, as described above, and contract wages. Operating income and adjusted operating income were negatively impacted by increases in compensation expenses, health benefit expense, medical supplies expense and advocacy costs, including the refund described above. Operating income and adjusted operating income were also negatively impacted by increases in insurance costs, IT-related costs and other direct operating expenses associated with our dialysis centers.

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, 2024, 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.

As of September 30, 2024, DaVita IKC provided integrated care and disease management services to approximately 69,500 patients in risk-based integrated care arrangements and to an additional 13,900 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 kidney disease.

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 2023 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, 2024, our international dialysis operations provided dialysis and administrative services through a total of 453 outpatient dialysis centers located in 13 countries outside of the United States.

Ancillary services results of operations

			Three months ended												Q3 2024 vs. Q2 2024
			September 30, 2024						June 30, 2024						Amount						Percent
			(dollars in millions)
Revenues:
U.S. IKC			$	112					$	114					$	(2)					(1.8)		%
U.S. other ancillary			6						7						(1)						(14.3)		%
International			258						242						16						6.6		%
Total ancillary services revenues			$	376					$	362					$	14					3.9		%
Operating (loss) income:
U.S. IKC			$	(2)					$	(34)					$	32					94.1		%
U.S. other ancillary			(2)						(2)						—						—		%
International(1)			18						17						1						5.9		%
Total ancillary services operating income (loss)			$	14					$	(19)					$	33					173.7		%

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, 2024 and June 30, 2024 includes foreign currency (losses) gains embedded in equity method income recognized from our APAC JV of approximately $(3.7) million and $0.4 million, respectively.

			Nine months ended												YTD Q3 2024 vs. YTD Q3 2023
			September 30, 2024						September 30, 2023						Amount						Percent
			(dollars in millions)
Revenues:
U.S. IKC			$	342					$	351					$	(9)					(2.6)		%
U.S. other ancillary			20						18						2						11.1		%
International			719						569						150						26.4		%
Total ancillary services revenues			$	1,080					$	938					$	142					15.1		%
Operating (loss) income:
U.S. IKC			$	(62)					$	(66)					$	4					6.1		%
U.S. other ancillary			(6)						(7)						1						14.3		%
International(1)			51						54						(3)						(5.6)		%
Total ancillary services operating (loss) income			$	(16)					$	(18)					$	2					11.1		%
Adjusted operating (loss) income(2):
U.S. IKC			$	(62)					$	(65)					$	3					4.6		%
U.S. other ancillary			(6)						(7)						1						14.3		%
International(1)			51						54						(3)						(5.6)		%
Total ancillary services adjusted operating (loss) income			$	(16)					$	(18)					$	2					11.1		%

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, 2024 and September 30, 2023 includes foreign currency (losses) gains embedded in equity method income recognized from our Asia Pacific joint venture (APAC JV) of approximately $(1.8) million and $1.0 million, respectively.

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

Revenues

IKC revenues for the third quarter of 2024 decreased compared to the second quarter of 2024 due to a decrease in revenues related to the disposal of our physician services business, partially offset by an increase in revenues from our special needs plans and a net increase in shared savings. U.S. other ancillary revenues for the third quarter of 2024 remained relatively flat compared to the second quarter of 2024. International revenues for the third quarter of 2024 increased compared to the second quarter of 2024 due to acquired treatment growth.

IKC revenues for the nine months ended September 30, 2024 decreased compared to the nine months ended September 30, 2023 due to decreased revenues from our special needs plans and the disposal of our physician services business, partially offset by a net increase in shared savings. U.S. other ancillary services revenues for the nine months ended September 30, 2024 remained relatively flat compared to the nine months ended September 30, 2023. Our international revenues for the nine months ended September 30, 2024 increased from the nine months ended September 30, 2023 due to acquired and non-acquired treatment growth and 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 loss for the third quarter of 2024 compared to the second quarter of 2024 decreased, primarily due to decreased medical costs and increased revenues related to our special needs plans, as well as the disposal of our physician services business. U.S. other ancillary services operating loss for the third quarter of 2024 was relatively flat compared to the second quarter of 2024. International operating income for the third quarter of 2024 increased from the second quarter of 2024 primarily due to increased revenues, as described above, partially offset by acquisition-related operating costs and decreased equity income resulting from fluctuations in foreign currency at our APAC JV.

IKC operating loss for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was impacted by severance costs, as described above. IKC operating loss and adjusted operating loss for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 decreased, primarily due to a net increase in shared savings, the disposal of our physician services business and decreased medical costs for our special needs plans. These increases were partially offset by continued investments in our integrated care support functions and decreased revenues from our special needs plans. Other U.S. ancillary services operating loss for the nine months ended September 30, 2024 remained relatively flat compared to the nine months ended September 30, 2023. International operating income for the nine months ended September 30, 2024 decreased compared to the nine months ended September 30, 2023 primarily driven by increased acquisition-related costs, partially offset by increases in revenue, as described above.

Corporate administrative support

			Three months ended												Q3 2024 vs. Q2 2024
			September 30, 2024						June 30, 2024						Amount						Percent
			(dollars in millions)
Corporate administrative support			$	(29)					$	(25)					$	(4)					(16.0)		%

			Nine months ended												YTD Q3 2024 vs. YTD Q3 2023
			September 30, 2024						September 30, 2023						Amount						Percent
			(dollars in millions)
Corporate administrative support			$	(84)					$	(100)					$	16					16.0		%
Adjusted corporate administrative support(1)			$	(84)					$	(87)					$	3					3.4		%

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

Accruals for legal matters. During nine months ended September 30, 2023, we recorded a charge of $11 million for a legal matter within corporate administrative support.

Corporate administrative support expenses for the third quarter of 2024 compared to the second quarter of 2024 increased primarily due to increased payroll taxes and professional fees. Corporate administrative support expenses for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 were affected by accruals for legal matters, as described above. Corporate administrative support expenses and adjusted corporate administrative support expenses for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 decreased primarily due to decreased long-term incentive compensation, partially offset by increased compensation expenses.

Corporate-level charges

			Three months ended												Q3 2024 vs. Q2 2024
			September 30, 2024						June 30, 2024						Amount						Percent
			(dollars in millions)
Debt expense			$	135					$	98					$	37					37.8		%
Debt extinguishment and modification costs			$	10					$	10					$	—					—		%
Other loss, net			$	17					$	27					$	(10)					(37.0)		%
Effective income tax rate			20.8		%				19.3		%										1.5		%
Effective income tax rate attributable to DaVita Inc.(1)			26.5		%				24.2		%										2.3		%
Net income attributable to noncontrolling interests			$	81					$	77					$	4					5.2		%

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

			Nine months ended												YTD Q3 2024 vs. YTD Q3 2023
			September 30, 2024						September 30, 2023						Amount						Percent
			(dollars in millions)
Debt expense			$	332					$	302					$	30					9.9		%
Debt extinguishment and modification costs			$	20					$	8					$	12					150.0		%
Other loss, net			$	57					$	15					$	42					280.0		%
Effective income tax rate			19.3		%				18.2		%										1.1		%
Effective income tax rate attributable to DaVita Inc.(1)			24.1		%				22.9		%										1.2		%
Net income attributable to noncontrolling interests			$	224					$	186					$	38					20.4		%

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

Debt expense

Debt expense for the third quarter of 2024 compared to the second quarter of 2024 increased primarily due to an increase in our weighted average effective interest rate principally related to the expiration of our 2019 interest rate cap agreements on June 30, 2024, which had lower rates than our currently effective interest rate caps. This change was also driven by an increase in our long-term debt balance related to the incremental borrowing on our Term Loan A-1 and issuance of 6.875% senior notes due 2032, partially offset by the repayment of our Term Loan B-1.

Debt expense for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 increased primarily due to an increase in our long-term debt balance related to the issuance of 6.875% senior notes due 2032 and incremental borrowing on our Term Loan A-1, partially offset by the repayment of the non-extended Term Loan B-1, as well as an increase in our weighted average effective interest rate principally related to the expiration of our 2019 interest rate cap agreements, as described above.

Our overall weighted average effective interest rate for the three months ended September 30, 2024 was 5.69% compared to 4.27% for the three months ended June 30, 2024. See Note 7 to the condensed consolidated financial statements for further information on the components of our debt.

Debt prepayment, extinguishment and modification costs

The three months ended September 30, 2024 included debt prepayment, extinguishment and modifications costs of $10 million comprised partially of fees incurred in connection with the additional incremental borrowing on our Term Loan A-1 (the Incremental Term Loan A-1) and partially of deferred financing costs and original issue discount written off for the extinguishment of the non-extended Term Loan B-1. Comparatively, the three months ended June 30, 2024 included debt prepayment, extinguishment and modification costs of $10 million comprised partially of fees incurred in connection with the extension of the maturity date of a portion of our Term Loan B-1 from August 2026 to May 2031 (the Term Loan B-1 Extension) and partially of deferred financing costs and original issue discount written off for the portion of debt considered extinguished and reborrowed as a result of the Term Loan B-1 Extension.

The nine months ended September 30, 2024 included debt prepayment, extinguishment and modification costs of $20 million comprised partially of fees incurred in connection with the Incremental Term Loan A-1 and Term Loan B-1 Extension, each described above, and partially of deferred financing costs and original issue discount written off for the extinguishment of the non-extended Term Loan B-1 as described above. Comparatively, 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. See Note 7 to the condensed consolidated financial statements for further information on the Incremental Term Loan A-1, Term Loan B-1 Extension and the components of our debt.

Other loss, net

Other loss for the third quarter of 2024 decreased compared to the second quarter of 2024 primarily due to a decrease in equity investment losses at Mozarc Medical Holding LLC (Mozarc), increased interest income and decreased losses on foreign currency translation, partially offset by increased net losses on other investments. Other loss for the nine months ended September 30, 2024 increased compared to the nine months ended September 30, 2023, primarily driven by increased equity investment losses in Mozarc, including the $14 million gain recognized in the second quarter of 2023 on the non-cash assets contributed to Mozarc, partially offset by decreases in net losses on other investments and losses on foreign currency translation.

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 2024 compared to the second quarter of 2024 primarily due to an increase in nondeductible executive compensation.

The effective income tax rate and the effective income tax rate attributable to DaVita Inc. for the nine months ended September 30, 2024 increased compared to the nine months ended September 30, 2023 primarily due to one time benefits recognized in the connection with the closure of our federal IRS exam during 2023 and a larger benefit recognized for finalized tax returns in 2023 partially offset by a nontaxable noncash gain on change in ownership recognized in 2024.

Net income attributable to noncontrolling interests

The increase in net income attributable to noncontrolling interests for the third quarter of 2024 from the second quarter of 2024 and for the nine months ended September 30, 2024 from the nine months ended September 30, 2023 was due to increased profitability at certain U.S. dialysis partnerships.

U.S. dialysis accounts receivable

Our U.S. dialysis accounts receivable balances at September 30, 2024 and December 31, 2023 were $1.707 billion and $1.632 billion, respectively, representing approximately 54 days of revenue outstanding (DSO) for both periods. Our DSO calculation is based on the current quarter’s average revenues per day. There were no significant changes from the second quarter of 2024 to the third quarter of 2024 in the carrying amount of accounts receivable outstanding over one year old.

Liquidity and capital resources

The following table summarizes our major sources and uses of cash, cash equivalents and restricted cash:

			Nine months ended September 30,												YTD Q3 2024 vs. YTD Q3 2023
			2024						2023						Amount						Percent
			(dollars in millions and shares in thousands)
Net cash provided by operating activities:
Net income			$	901					$	726					$	175					24.1		%
Non-cash items in net income			664						664						—						—		%
Other working capital changes			(71)						191						(262)						(137.2)		%
Other			(21)						(7)						(14)						(200.0)		%
			$	1,474					$	1,574					$	(100)					(6.4)		%
Net cash used in investing activities:
Maintenance capital expenditures(1)			$	(275)					$	(287)					$	12					4.2		%
Development capital expenditures(2)			(110)						(122)						12						9.8		%
Acquisition expenditures			(161)						(8)						(153)						(1,912.5)		%
Proceeds from sale of self-developed properties			11						5						6						120.0		%
Other			12						(192)						204						106.3		%
			$	(523)					$	(604)					$	81					13.4		%
Net cash used in financing activities:
Debt issuances (payments), net			$	1,171					$	(521)					$	1,692					324.8		%
Deferred and debt related financing costs			(46)						(53)						7						13.2		%
Distributions to noncontrolling interests			(229)						(203)						(26)						(12.8)		%
Contributions from noncontrolling interests			11						12						(1)						(8.3)		%
Stock award exercises and other share issuances			(112)						(41)						(71)						(173.2)		%
Share repurchases			(1,021)						—						(1,021)						(100.0)		%
Other			(26)						40						(66)						(165.0)		%
			$	(252)					$	(767)					$	515					67.1		%
Total number of shares repurchased			7,508						—						7,508						100.0		%
Free cash flow(3)			$	882					$	979					$	(97)					(9.9)		%

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

(1)Maintenance capital expenditures represent capital expenditures to maintain the productive capacity of the business and include those made for investments in information technology, dialysis center renovations, capital asset replacements, and any other capital expenditures that are not development or acquisition expenditures.

(2)Development capital expenditures principally represent capital expenditures (other than acquisition expenditures) made to expand the productive capacity of the business and include those for new U.S. and international dialysis center developments, dialysis center expansions and relocations, and new or expanded contracted hospital operations.

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

Consolidated cash flows

Consolidated cash flows from operating activities during the nine months ended September 30, 2024 decreased compared to the nine months ended September 30, 2023. The decrease was principally due to decreased cash collections resulting from the CHC Outage, described above, and increased cash taxes paid, partially offset by improved operating results and increases in other working capital items.

CHC began to restore claims submission functionality on March 28, 2024 and we have resumed claims submissions and billing processes through CHC’s information technology systems. As of September 30, 2024, through a combination of CHC's platform and certain alternate billing processes, we are current on our primary claims submissions. During the third quarter of

2024, accounts receivable balances and DSO have declined, but we do continue to see delays in, and issues with, collections with some payors.

Free cash flow during the nine months ended September 30, 2024 decreased as compared to the nine months ended September 30, 2023 primarily due to a decrease in net cash provided by operating activities, as described above, and increased distributions to noncontrolling interests partially offset by a decrease in capital expenditures.

Significant sources of cash during the period included the extension of the maturity date from August 2026 to May 2031 for a portion of our Term Loan B-1 (the Extended Term Loan B-1 transaction) in the aggregate principal amount of approximately $1,640 million, (such portion referred to as the Extended Term Loan B-1), the incurrence of an incremental Term Loan A-1 tranche in the aggregate principal amount of $1,100 million (such portion referred to as the Incremental Term Loan A-1), the issuance of 6.875% senior notes due 2032 in the amount of $1,000 million (the 6.875% Senior Notes) and Change Healthcare temporary funding assistance of $120 million, net, pursuant to the CHC Funding Arrangement in the nine months ended September 30, 2024. Significant uses of cash during that same period included debt prepayments on Term Loan B-1 in the aggregate amount of approximately $2,590 million as part of the Extended Term Loan B-1, Incremental Term Loan A-1 and 6.875% Senior Notes transactions, and regularly scheduled principal payments under our senior secured credit facilities totaling approximately $45 million on our Term Loan A-1 and $14 million on Term Loan B-1, as well as additional required payments under other debt arrangements. Additionally, we recognized financing cash outflows of $35 million in deferred financing costs and discount related to the Fourth and Sixth Amendments to the Senior Secured Credit Agreement and 6.875% Senior Notes transactions, as well as $11 million in cap premium fees for our 2024 forward interest rate cap agreements. In addition, during the nine months ended September 30, 2024 we used cash to repurchase 7,507,842 shares of our common stock.

By comparison, the same period in 2023 included 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, and 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, $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 Second and Third 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 our prior 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.

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,
			2024						2023						2024						2023						2024						2023						2024						2023
Number of centers operated at beginning of period			2,672						2,703						2,675						2,724						452						353						367						350
Acquired centers			—						—						12						—						1						2						91						4
Developed centers			3						5						12						18						4						3						5						8
Net change in non-owned managed or administered centers(1)			—						1						(8)						3						—						1						—						1
Sold and closed centers(2)			(2)						—						(11)						(3)						—						—						(2)						(2)
Closed centers(3)			(13)						(15)						(20)						(48)						(4)						—						(8)						(2)
Number of centers operated at end of period			2,660						2,694						2,660						2,694						453						359						453						359

(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 nine months ended September 30, 2024:

			Three months ended September 30, 2024																		Nine months ended September 30, 2024
			Shares repurchased (in thousands)						Amount paid (in millions)****(1)						Average price paid per share**(2)**						Shares repurchased (in thousands)						Amount paid (in millions)****(1)						Average price paid per share**(2)**
Open market repurchases:			2,734						$	406					$	147.20					7,508						$	1,022					$	134.98

(1)Includes commissions and the 1% excise tax imposed on certain stock repurchases made after December 31, 2022 by the Inflation Reduction Act of 2022. The excise tax is recorded as part of the cost basis of treasury stock repurchased and, as such, is included in stockholders’ equity.

(2)Excludes commissions and the excise tax described above.

We did not repurchase any shares during the three and nine months ended September 30, 2023.

Available liquidity

As of September 30, 2024, we had an undrawn revolving line of credit under our senior secured credit facilities of $1.5 billion. 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 September 30, 2024. We separately had approximately $154 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 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. From time to time, depending on market conditions, our capital requirements and the availability of financing, among other things, we may seek to refinance our existing debt and may incur additional indebtedness. 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 2023 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.

In connection with a comment letter from the Securities and Exchange Commission Staff, beginning in the second quarter of 2024, we have updated the presentation of our non-GAAP measures to no longer exclude center closure costs for all periods presented. To facilitate comparisons, the non-GAAP measures presented for prior periods also have been conformed to the presentation of the non-GAAP measures for the current period.

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, development capital expenditures, and maintenance capital expenditures; 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, 2024
			U.S. dialysis						Ancillary services																								Corporate administration						Consolidated
						U.S. IKC						U.S. Other						International						Total
			(dollars in millions)
Operating income (loss)			$	549					$	(2)					$	(2)					$	18					$	14					$	(29)					$	535
Adjusted operating income (loss)(4)			$	549					$	(2)					$	(2)					$	18					$	14					$	(29)					$	535

			Three months ended June 30, 2024
			U.S. dialysis						Ancillary services																								Corporate administration						Consolidated
						U.S. IKC						U.S. Other						International						Total
			(dollars in millions)
Operating income (loss)			$	550					$	(34)					$	(2)					$	17					$	(19)					$	(25)					$	506
Adjusted operating income (loss)(4)			$	550					$	(34)					$	(2)					$	17					$	(19)					$	(25)					$	506

			Nine months ended September 30, 2024
			U.S. dialysis						Ancillary services																								Corporate administration						Consolidated
						U.S. IKC						U.S. Other						International						Total
			(dollars in millions)
Operating income (loss)			$	1,625					$	(62)					$	(6)					$	51					$	(16)					$	(84)					$	1,525
Gain on changes in ownership interest(1)			(35)						—						—						—						—						—						(35)
Adjusted operating income (loss)(4)			$	1,590					$	(62)					$	(6)					$	51					$	(16)					$	(84)					$	1,490

			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
Severance and other costs(2)			26						—						—						—						—						1						28
Legal matter(3)			—						—						—						—						—						11						11
Adjusted operating income (loss)(4)			$	1,357					$	(65)					$	(7)					$	54					$	(18)					$	(87)					$	1,252

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

(1)Represents a non-cash gain recognized on the acquisition of a controlling financial interest in a previously nonconsolidated dialysis partnership. See additional discussion above under the heading "Gain on changes in ownership interests" within "U.S. dialysis results of operations". This gain to mark the investment to fair value prior to consolidation does not represent a normal and recurring cost of operating our business or generating revenues and may obscure analysis of underlying trends and financial performance.

(2)Includes severance and other termination costs related to a prior strategic restructuring initiative and associated transition of certain general and administrative support functions to a third party. See additional discussion above under the heading "Severance costs" within "U.S. dialysis results of operations" and "Severance and other costs" within "Ancillary services results of operations".

(3)Represents an accrual for potential third-party settlement costs for the matter further described in Note 8 to our condensed consolidated financial statements under the heading "2017 U.S. Attorney Colorado Investigation". We have excluded this charge, which had been previously disclosed, from our non-GAAP metrics because, among other things, we do not believe it is indicative of our ordinary results of operations. In this instance, among the factors considered were that the claim relates to prior ancillary operations or activities that we sold or closed (or otherwise ceased) prior to June 2020, and the charge is significant and may obscure analysis of underlying trends and financial performance of our current business.

(4)In connection with the conclusion of a comment letter from the Securities and Exchange Commission Staff in July 2024, beginning in the second quarter 2024, we have updated the presentation of our non-GAAP measures to no longer exclude center closure costs for all periods presented. To facilitate comparisons, the non-GAAP measures presented for prior periods also have been conformed to the presentation of the non-GAAP measures for the current period.

			Three months ended												Nine months ended
			September 30, 2024						June 30, 2024									September 30, 2024						September 30, 2023
			(dollars in millions)												(dollars in millions)
Income before income taxes			$	373					$	371								$	1,117					$	888
Less: Noncontrolling owners' income primarily attributable to non-tax paying entities			(81)						(78)									(225)						(186)
Income before income taxes attributable to DaVita Inc.			$	292					$	294								$	892					$	702
Income tax expense			$	78					$	72								$	215					$	162
Less: Income tax attributable to noncontrolling interests			—						—									(1)						(1)
Income tax expense attributable to DaVita Inc.			$	78					$	71								$	215					$	161
Effective income tax rate on income attributable to DaVita Inc.			26.5		%				24.2		%							24.1		%				22.9		%

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

			Nine months ended
			September 30, 2024						September 30, 2023
			(dollars in millions)
Net cash provided by operating activities			$	1,474					$	1,574
Adjustments to reconcile net cash provided by operating activities to free cash flow:
Distributions to noncontrolling interests			(229)						(203)
Contributions from noncontrolling interests			11						12
Maintenance capital expenditures			(275)						(287)
Development capital expenditures			(110)						(122)
Proceeds from sale of self-developed properties			11						5
Free cash flow			$	882					$	979

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 13 to the condensed consolidated financial statements included in this report and Notes 16 and 23 to the consolidated financial statements included in our 2023 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, 2024, we have outstanding letters of credit in the aggregate amount of approximately $154 million under a bilateral secured letter of credit facility separate from our senior secured credit facilities.

As of September 30, 2024, 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 16 to the Company's consolidated financial statements included in our 2023 10-K.

On March 5, 2024, we entered into four separate purchase agreements with Fresenius Medical Care to acquire their dialysis service operations in Chile, Ecuador, Colombia and Brazil. Chile and Ecuador closed during the first six months of 2024. Colombia and Brazil are expected to close during the fourth quarter of 2024 and the first quarter of 2025, respectively, and remain subject to customary closing conditions and regulatory approval as of September 30, 2024. Expected cash payments for these remaining transactions are approximately $180 million, subject to certain customary adjustments.

New Accounting Standards

See discussion of new accounting standards in Note 15 to the condensed consolidated financial statements.