Good morning. My name is Patrick and I will be your conference operator today. At this time, I would like to welcome everyone to the first quarter DaVita conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator's instruction) Thank you. I would now like to turn the call over to LeAnne Zumwalt.

Thank you, Patrick. Good morning, everyone and welcome to our first quarter conference call. We appreciate your continued interest in DaVita. I am LeAnne Zumwalt, and with me today are Kent Thiry, our CEO, and Rich Whitney, our CFO. I will start the forward-looking statement disclosure. During this call, we may make forward-looking statements which can generally be identified by the content of such statement or the use of forward-looking terminology and includes statements that do not concern historical facts. All such forward-looking statements are subject to known and unknown risks and uncertainties that could cause the actual results to differ materially from those described in the forward-looking statement. For further details concerning these risks and uncertainties, please refer to our SEC filings including our most recent annual report on Form 10-K. Our forward-looking statements are based on information currently available to us, and we undertake no obligation to update these statements, whether as a result of changes in underlying factors, new information, future events, or other developments. Additionally, our Press Release and related disclosures include certain non-GAAP financial measures. These measures should be considered in addition to the results prepared in accordance with GAAP and should not be considered a substitute for GAAP results. Also included in the Press Release is a reconciliation of these non-GAAP measures to the most comparable GAAP financial measure. I will now turn the call over to Kent Thiry, our CEO.

Okay, thank you LeAnne and welcome to all of you. Thank you for your interest. It was another solid quarter. I will provide review of one, clinical results; two, the economic and product policy environment and three, talk a little bit about the 2009 forecast and some longer term outlook perspective. First, clinical results, we would present them first. Now, this what comes first. We are a care-giving Company serving nearly 114,000 patients at this point. With respect to adequacy which is essentially how well we are doing in removing toxins from our patient's blood, this quarter we once again had 95% of our hemodialysis patients with a Kt/V review greater than 1.2. Second, with respect to vascular access, we know have 62 plan of our patients with fistulas placed received analysis. Fistulas has been the preferred form of vascular access as many of you know, and third in the area of anemia management, we now have 87% of our patients between hemoglobin levels between 10 and 13 over the last three months across all modalities. These and other clinical measures compared very favorably to national averages. I would like to try to anticipate a few questions you may have just to make this maximally efficient for you. Question number one potentially is how is unemployment affecting our pair mix? To date, there has not been an impact. There are some reasons why this is not surprising for our segment and we would go over those again in Q&A if you would like as Rich did last quarter. Now that said, we also want to repeat what we said last quarter that no one is totally insulated from an economic recession and we are likely to see some impact if the recession continues for a long time and as was…

Thanks, Kent. The first quarter was characterized by consistent volume growth, stable private pricing as Kent mentioned and strong cash flows. Year-over-year, treatments per day up 5%, revenue up 7.7%, operating income of 7.2%, earnings per share of 15% and our balance sheet continues to be strong with 2.8 times net leverage and approximately $400 million of cash on hand. Now, a few more details about these results. In Q1, we had the typical seasonal decline in treatment days as Q1 had three fewer treatment days than Q4. Non-acquired growth in the quarter was 4.0% consistent with recent quarters. As of late April, we had about 53 centers completed in a waiting certification. So, the good news here is that the number has not grown over the past three months; the bad news is that we are still experiencing significant delays in certification of our de novo centers which is impacting our non-acquired growth. We continue to expect non-acquired growth of around 4% for the year. Dialysis revenue increased about $4 per treatment sequentially from Q4. About $1.50 of the increase was due to the 1% Medicare composite rate increase and the ASP changes both effective January 1st. Another $1.50 per treatment relates to a lab Medicare rate increase, also effective January 1st and seasonally higher lab testing in Q1. The remainder, about $1 a treatment was due to private rate increases and CPI increases on contracts partially offset by a decrease in physician-prescribed Epogen. As we had expected and noted in our capital markets presentation in February, EPO utilization did decline from Q4. However, as we exited the quarter, it was turning back up and right now where we are is about a few percent lower than where we were in Q4. Dialysis operating expense increased about $3.60 per…

Okay, thanks Rich. Another solid quarter, equally important, our operating and offensive capability is getting stronger each quarter. However, the biggest questions are healthcare reform and private pair activity and let us just step back a little bit on those big ones. Without predicting exact timing, the pair world is now moving irreducibly and steadily towards broader bundles of integrated care. It just is and it is no longer long-term futuristic. This will be very much to our advantage. There are three reasons for that; One, our size. Two, our share and three, the capabilities that we have been working on for the past few years with CMS and with the private insures. I will just give two examples. We have a globally competitive at-risk demo project with the government that has been running for over three years with over 400 members, $32 million annual revenue that achieved substantial cost savings compared to fee-for-service Medicare using rigorous actuarial payables, hit 20 of 23 CMS defined quality incentive, reduced capital usage by 35% in an area where they were already around the national average, has happier patients and happier physicians. It is a window in to what the future will look like, a demo that is predicting exact timing, took a lot of work and a lot of money to get there and we are there. Second example; our focus kidney care pharmacy now delivers all the oral drugs to 16,000 kidney care patients and the only place where that happens in the world is just powerful because for the first time, each specialists, the cardiologist because most of our patients have cardiovascular issues, the endocrinologist because 50% of our patients are diabetics, the internist because 30% of our patients are hypertensive, etc, etc, etc; each doctor can know not only…

(Operator's instruction) Your first question comes from the line of Justin Lake - UBS.

A couple of questions here. First, on the patient care cost, those were up about $3 in the quarter. Given that the EPO dosing sounds like a decline, down sequentially, I am just curios what is driving that and if that is a sustainable run rate or we might see some decline as we go through the year.

Yes, Justin, you are referring to the sequential increase in operating cost?

Correct.

Yes, it is a, a big part of it is the impact of Q1 in the short treatment days and so, I think as I mentioned in my comments that about 2/3 of the increase that you are seeing there is related to labor increases. We do have some fixed labor cost about a third so you are seeing some impact just of spreading the labor cost over fewer treatments and then we have the seasonally higher payroll taxes which are material in the quarters. So, that is the biggest part of the story as well as fixed facility operating cost we would rent and things like that that are spread over fewer treatments. So, there were some offsets of the EPO but I think we where experience sequential operating cost increases in line with where our expectation would be for this time of the year.

Perfect, and now just a couple of quick numbers question, the revenue per treatment breakdown was very helpful. It sounds like most of that was sustainable, Rich. Am I missing anything there or this is a good run rate if we think about going the rest of the year?

Yes, based upon the drivers of the revenue per treatment increase, I think this is a sustainable rate absent any changes on the private pay side.

Perfect, then just on the M&A, you spent $40 million to acquire seven centers. Can you just give us a patient down there?

Yes, and I guess the one thing I was reflecting Justin the $1.50 of the increase was the lab related to the seasonal testing as well as the Medicare rate increase. About 2/3s, a little bit more of that relates to the seasonal testing so I think you can think about a little more than a $1 per treatment of the sequential increase, all else being equal as not being sustainable as we move through the year.

Perfect, that is what I am looking for. And then just that M&A question, how many patients did you acquire and does that $40 million matched up for the seven centers you acquired?

We acquired centers treating approximately 500 patients.

Your next question comes from the line of Gary Lieberman - Wachovia.

I guess just to follow up a little bit on the revenue per treatment questions, it would appear that based on your comments that EPO utilization slowing in the quarter and on the other comments, it would look like the commercial rates were up nicely in the quarter. Is there anymore color you could give there? Were there any specific contracts that I guess in the past you would have characterized as having been contentious that you were able to renegotiate or anything along those lines?

We have a number of contracts that have CPI rate increases that tend to be more weighted towards the beginning of the year. So, I think that is a big part of what you are seeing here, not out of line with expectations.

Okay and then maybe if you could give us some color on some of the startup losses, up and new initiatives, I know at the Investor Day, Kent, you talked about maybe being a little bit disappointed or behind target in terms of what some of those losses, where were you in the first quarter and does the outlook for the full year changed at all?

Could you say that question again, please, so I do not mumble?

Just in terms of the Investor Day, just going back to some of the comments on the operating losses that you had accrued and were anticipating on the new initiatives, you had talked about maybe being a little bit behind schedule and so I was just looking for an update along those.

Yes, so far in 2009 we are on track.

Okay, anything specifically that you were able to do differently in the first quarter?

Operate it with more confidence.

Your next question comes from the line of Darren Lehrich - Deutsche Bank Securities.

I wanted to just first ask you about some of the recent changes you made with your advocacy efforts. I know that you had have a new person in the legislative affairs group. I also noted that KCP did reorganization. Can you just discuss your advocacy efforts in general and how you think DaVita organizationally and how the community is positioned right now in Washington?

I will take a quick stab and then you redirect me to any place you want to go. Number one, we are very excited that John Schaeffler joined us from GE Medical Systems. We have known John for a while. We tried to recruit him before and glad we got him now and I guess enough said there. Second, the Kidney Care Partners coalition, that is the KCP one for those who are not familiar that Darren is referring to. We got that going, oh boy, five or six years ago now. It seems like a lifetime and it is level of awareness and credibility on the hill. For a segment, our size is very healthy. It is one of the few segments in American healthcare in the real world where the leading patient groups, nursing groups, physician groups, provider groups, large and small profit and for profit pharma and device actually get in the same room every three months and works through agonizing processes to deliver consensus recommendation to the hill that it literally does not happen in most of healthcare and we have done it four or five years in a row and it is not a small part of why we have been successful on a relative basis and it is at the same time in any given year, things always look very difficult keeping the coalition together and getting stuff done with the Congress has preoccupied by some of the larger policy, aircraft carriers of their like addition fee increases and hospitals and public insurance and stuff like that.

That is responsive. Can you also maybe just touch on your views on MSP and everybody has been thinking about pay force as we get further into the reform legislative drafting and how important you think that is in terms of your lobbying priorities?

I was in it. I was in an office when they held just a week ago and that person I had not met was with her member and brought up that she had now finally gotten familiar with MSP and it was on her short list and that is just an anecdote to be enforced to the broader assertion that with respect to the policy merit of extending the private pay period as well as the magnitude of the pay for, the awareness has never been higher because it was scored by the CBO and it is very attractive in a world where sooner or later, they are going to have to start paying for some of the checks that they are writing and that thing is getting very, very intense very, very quickly when that moment arrives. In the policy point of view, the fact that our patients are uniquely discriminated against there, no other patients in America where you are at hold, you cannot keep your private insurance even if you think it is in your and your family's best interest. More and more members of Congress are finding out that that is actually true and do not like it. In addition, what that does is create a totally progress incentive where private employers do not want to provide value-added services to kidney care patients and dialysis patients because they are hoping they drop their insurance and flip to Medicare early. So, from all perspective it is bad policy and it is a big pay for. Therefore, we have a very solid shot at eliminating that unique discrimination from our patients' lives.

And what is the scoring framework that you are working within right now?

Well, I am not going to merit for sure, the CBO score to that maybe $1.2 billion over 10 years but there are in few policies to follow up. We will the right number but it is the CBO number on the record is something like that.

Fair enough, let me just ask one more question if I could on the ancillary piece and the revenue is backed up. It looks like it is just a tiny bit sequentially but you did improve the operating loss there just to touch. Can you update us a little bit more on how you see this collection of businesses is trending and what you view is on operating losses there for the balance of the year?

Darren, as Kent mentioned, we are feeling that we are on track here as we finish Q1 and you recall in capital markets that we had indicated that we expected the operating losses for that collection of business to be about $22 million in 2009 and we expect it to be on track to be round about $14 million as we move to 2010.

Okay but in just terms of the revenue, it is not a big difference but we have seen sequential, pretty substantial sequential growth over the last several quarters so I just want to get a sense for what $71 million in revenue is relative to the $73 million in fourth quarter. Is there just less sequential growth now if the business is maturing particularly in the DaVita Rx side, just talk about the level of the growth perhaps?

Yes, the biggest difference that you are seeing from Q4 to Q1 is simply for the shorter quarter.

Your next question comes from the line of Kevin Ellich - RBC Capital Markets.

Kent, I was wondering if you could talk about pharma utilizations and you talked about EPO and maybe just give us an update on heparin.

There is nothing new on heparin. We are still eagerly awaiting new suppliers and are optimistic that that will happen. We continue to think that Fresenius, not the Fresenius that does dialysis and dialysis products but I think it is FSE, it is the correct letters made a really poor business decision by engaging in the aggressive and a ballistic pricing, really poor business decision for the long term but right now, nothing new has happened there good or bad and I do not know if you want me to go beyond that or not, so I will stop.

Well, I guess I was wondering if you had any specific timeframe in mind as when you expect the new suppliers to come online.

It is on the FDA's hands I believe and therefore only a fool would go into the predicting world.

Okay, that is helpful.

First, there has been a lot more experience in that.

Sure and then going back to the economy, you gave good color on what you are seeing and what not but I was wondering if there is any of the impact on the business in regards to over the pricing environment on the commercial side or a cost deflation given the maybe a larger supply of medical professionals in the field.

No, there was nothing else beyond what Rich said. The good news is private rates had been stable. We have been getting the annual upticks that we hope for and depend on. The bad news is that could change tomorrow and the good news on the cost front is that we do have a number of suppliers that were accommodating on prices to try to maintain market share and on the wage front, just so everyone knows, competitive wages are not going up with the same rate that they were and maybe in some places, they are going down but not really in the healthcare. So, the [yawn and the yen] of each of those two, private revenue and labor which pretty much hit and there is nothing dramatic going on right now.

Okay and then last question, going back to your comments about the demo with CMS on the capitated patient, could you give us a little bit more color on the margin differential and the cost savings that you are demonstrating to CMS?

No, at this point we actually prefer to keep all that private. It is still basically a big, big R&D project that is going well. We also have some limitations when you are working with the government on the demo. There are some of the data that they co-own with us and we cannot share it without their permission and I am worried if I started soaring too many numbers spontaneously, I might cross that boundary. The important takeaways are that it is taking a bunch of work but it is going well. We figured out a lot of stuff. We have developed some systems. We have developed operating insights. We figured out how to approach some of this stuff because every single aspect of what you do has to change somewhat, with the doctors, the hospitals, the patients, their families, the centers and so it is going nicely and I probably should just leave it there.

Okay, then if I could ask one last question, Rich, interest expense was a little bit lower. Obviously you guys have some debt tied to LIBOR. Could you give us your expectation as to where interest expense should be for the year?

Well, it kind of depends upon what happens to LIBOR rates. If you, so maybe the way to answer that question is to indicate that our debt as we sit here right now is about 2/3s sticks and 1/3 floating and the floating rate of that is that LIBOR plus 150. So, it really depends upon your prediction for LIBOR rates going forward. It is a pretty flat yield for right now.

Okay. I guess I am trying to figure out if your expectation that LIBOR is going to increase through the remainder of the year?

Well, the yield curve would say that it would not but I do not know that we would necessarily predict one way or another which direction LIBOR would go in which is why tend to have some fixed rate debt and some variable rate debt. Although maybe the final thing I will stand, even after is say I will not predict, the final thing I would say is we are at in amazingly low interest rate environment and so I think if you just step back and said our interest rates are likely to go up over time, I think it would be hard to answer that question in any other way than to say yes over time, they are likely to go up.

Your next question comes from the line of Mark Arnold - Piper Jaffray & Co. Mark Arnold - Piper Jaffray & Co.: Can you just elaborate a little bit more on the cost per treatment line? I just want to clarify what the answer to a question just a minute ago, you guys talked a lot about hopefully, we would see some wage pressures abate a bit this year given the economy but it sounds like and by looking at the numbers that you did not really benefit a whole lot from that in Q1. Am I reading that correctly and kind of what is your outlook for, do you expect to see maybe some savings or at least not as big of increase you see for the rest of this year or is this something maybe going forward we see a little bit of benefit on?

I think it is fair to say that we did not experience much of that benefit in the first quarter of 2009. However, I do want to reiterate that sequential increases are primarily driven by the fewer treatment days in the quarter, the higher payroll taxes that you get at the beginning of the year and those two factors we see pretty much every year in the first quarter just the way the calendar falls. Mark Arnold - Piper Jaffray & Co.: Okay and then I guess wanted to, maybe Kent if you could elaborate a little bit more on health reform discussion that you talked about in your prepared remarks. As it relates to the dialogue you are having with lawmakers on the healthcare reform legislation that is being kind of crafted right now, I am sure the discussion about broader bundles of integrated care is part of that discussion but how is it part of it? Is it something that would be laid out in the legislation or is it something that over time with CMS maybe having more power to implement projects on their own, is that something, I guess I am curios on the timing of something like that given CMS is still yet to implement any bundled care even with the pharmaceuticals here and we are still a few years away from that.

Right. We are not anticipating that government is going to do anything dramatic with respect to broader bundles of integrated care beyond that which they already decided on dialysis last year in the short term. But that is the way that they want to take the whole system and with it, at some point, they are not for just the future we will go and it will be much to the benefit of all constituents. With respect to what is going on this year with the KCP, the Kidney Care community and the healthcare reform discussion, what we are trying to do is get them to eliminate some of those unique discriminations so in particular what I was talking about before, the fact that our, the only citizens in America, they cannot keep private health insurance in a world where they are trying to get more people insured are ours and it is historical anomaly that used to be in the 1970s with zero months and then Congress moved it up to 12 and then 18 and now it is 30. So, there is strong historical pressing in and it is a just a historical artifact and so the entire kidney care community wants that discrimination eliminated that is creating tremendous incentive for investing in wellness or virtually the entire community I guess just to be safe. And then also the community is advocating that CMS and HHS and Congress start to encourage more care coordination experimenting along the lines of which I have talked about, nothing dramatic but have the broader kidney care system start to experiment with care coordination and so that we can bring the virtues of that in a cost effective way the big chunks of the population in the years to come. But it is not going to be this year. There is not going to be some big dramatic kidney care reform bill this year. That is not what we are pursuing. Mark Arnold - Piper Jaffray & Co.: Then just one more question on health reform, you mentioned in your prepared remarks the understanding or at least the limited understanding by lawmakers of the private subsidization that occurs here in the dialysis sector. How is that part of the discussion right now and particular with some of the things like a public plan option being for out there and how are you guys talking to lawmakers about that issue?

Well, how it is being talked about is just by presenting the data that demonstrates that 87% of our patients are government pay, 82 of those 87 are Medicare. On average, we take a loss on them and therefore rely on the other 13 when we have for 30 months only to subsidize which is why they have rates that are much higher than they would otherwise. So, how we are doing it is just laying out the facts and try providing them enough information so that they can comfortably attempt to triangulate those facts and validate them with CMS, MedPack, CBO, OMB, etc, etc. So, it is a highly imperfect process because these are people who are not set up to do audits of every provider segment P&L nor do they have the time so that is how and then you ask them more qualitative question before that. I think overall on this, the community is doing a solid job. It is not superb or excellent or pervasive yet but it has been solid as of the last 24 to 30 months. Prior to that, it was not even solid so the good news is we are making progress. The bad news is, we are not excellent yet. Is that responsive? Mark Arnold - Piper Jaffray & Co.: Absolutely.

Your next question comes from the line of Arthur Henderson - Jefferies & Co. Arthur Henderson - Jefferies & Co.: Kent, in your opening remarks, you mentioned that unemployment was not really having an impact on the pair mix and I wanted to follow up on that. You said that you had some additional details or we could ask for additional details and I thought I would.

Very fair, I will turn it over to Rich to see if we can be entirely consistent with the last call.

So, I will try. Alright, what we talked about the capital market's day was that there are a number of structural factors that we would want to believe that we might have some insulation from the rising unemployment that we are seeing out there and the two most important are number one, the availability of COBRA for our patients and subsidies for patients to be able to afford the COBRA premiums provided through particular not for profit foundation. So, there are very, very, very few patients that do not elect COBRA because they cannot afford to pay it because of the availability of the assistant. Secondly, about half of our patients qualified for the particulars under a disability program that allows them an extra 11 months of COBRA on top of the initial 18 months and so because of the existence of those two facts, we believe that we have some mitigation against what other provider segments might experienced more significantly or maybe more rapidly when the economy turns and losses its many jobs that it has. I guess third, it is our view that ESRD patients and other patients with chronic conditions are those that are much more likely to want to try to keep their private insurance when they experience a job loss or a job change and that is at least anecdotally in our experience. Arthur Henderson - Jefferies & Co.: Okay, that is helpful.

With that said, I think we should reiterate we are worried about it. We are watching it closely and we are assuming that we will experience some impact but pretty reasonable I think to be at that way. Arthur Henderson - Jefferies & Co.: Okay, that is fair. On the free cash flow side or uses of free cash flow, it looks like you consistently had about $400 million of cash on the balance sheet. You are buying back stock but that seems relatively stable. Is that the way we should think about it going forward? I know you have not bought back any shares in the quarter so far but is it acquisitions kind of first and then share repurchases and then debt repayment kind of the way to think about it?

Yes, really not change to the way we view it other than we take into account every quarter the specific facts and circumstances to make a judgment about how to allocate our capital. To reiterate, it is first to fund attractive growth investment to the extent that we have those opportunities and second, we then look at the tradeoff between buying back some stock and paying down some debt and then specifically in this environment has, for the last some period of time as oppose to paying down debt, that tradeoff is buying back stock or holding on to some cash for liquidity and really just because if we pay down debt right now, we do not have the ability to re-borrow it at anywhere near the same rates. So, same tradeoffs. We still view the business the same way that it should have a certain amount of leverage on it over the long term. Well, at times it be above that level, at times it will be below that level and if you sort of look at our capital structure and note the relatively short weighted average maturities and overlay, it has been a pretty volatile debt market over the last six to nine months. I think those are two factors that would all else being equal cause us to be more conservative with our cash than otherwise. Arthur Henderson - Jefferies & Co.: Okay last question and I will get back in the queue. The number of treatments per patient declined, I assume is that because of the fewer days? I imagine that is what it was and then secondly, Kent on the private payerside, it strikes me that things are while you are still cautious there, you are not quite as seemingly nervous about the outlook of private payerrates as you were maybe a couple of quarters ago and I just, I wanted to make sure that I was reading that correctly and maybe I was not but I wanted to ask.

I am glad you bring it up. I think our anxiety, tension, uncertainty level there is ever constant and so any fluctuations in the word choice in any given call are very coincidental. Structural realities of the fair fight between the big payers who would like to not subsidize Medicare so much in us, that is pretty unchanging every quarter. Arthur Henderson - Jefferies & Co.: Okay and then Rich on the treatments per patient?

Yes, the answer to your question is yes, it is from the fewer treatment days in the quarter. The other impact although less of an impact but still important is that there were fewer Monday, Wednesday and Friday in the quarter. So, the quarter started on a Thursday and ended on a Tuesday and typically, we treat more patients on Monday, Wednesday and Fridays than we do on Tuesday, Thursday, Saturdays because of the weekend.

Your next question comes from the line of Andreas Dirnalg - Stephens Inc.

Basically, just a whole bunch of follow ups in terms of just trying to get some more detail. I can remember either Kent or Rich when talking about heparin, you said that the cost was up. Obviously, the cost is up year-over-year. I was wondering, can you give any comment? Are we still seeing an acceleration of the cost sequentially or we have sort of stabilized it in new higher level?

Andreas, in Q1, we stabilized. We have not seen additional increases or decreases. You recall that there was some offsetting utilization reduction.

Right and then Rich on labor cost, everytime you mentioned the $1.50 I think as it was in the quarter, no I am sorry the 2/3s of the $3.60, you kept saying that it was related to payroll taxes. Have you seen regardless of the payroll tax part sort of labor cost begin to moderate it all?

In the first quarter, we have not seen labor cost moderate. However, it is our expectation that going forward, they would moderate somewhat just given the environment and the change in the labor market and labor rate increases across all segments of healthcare, we are sending somewhat down.

Okay, but again, to date, you have not seen any of that. And then in terms of treatment days for the second quarter, is there any change from year-over-year and sequentially there?

Well, there will be more treatment days sequentially. I do not have it; I would have to look at the calendar. I do not have it in front of me but there is always a pick up from Q1 to Q2. I have not looked at Q2 versus the prior year to note the calendar differences. The best way to look at it is the number of Sundays, the fewer Sundays the better. We are free on Sundays and then the more Monday, Wednesday and Fridays the better because we have a heavier load on Monday, Wednesday and Fridays.

Great and in terms or the share repurchase program, what is left under your current authorization?

Around 125 million.

Okay and then when it comes to, we were talking about the various needs against versus the possible pressures from unemployment, do you, I mean I am sure you are tracking, can you share with us sort of whether you have seen an increase in the number of the percentage of your patients that are on either COBRA or they are getting subsidies from kidney fund or has that remained fairly steady?

We do track it and I would sort of hesitate to give you specific numbers because frankly we track it a lot better now in the last four to six months than we had previously because of the situation.

But again without specific numbers, I mean general trend, is it relatively flat? Have you seen a slight increase, a slight decrease?

Yes, we have not seen any dramatic change in that and that is one of the factors that influenced our thinking regarding have said to you that we have not seen at this time any change related to other point.

Wonderful and then final question maybe for Kent; Kent, we are in a period right now when it comes to sort of DC where there is obviously a lot of things going on and one of the things that is going on is there is I guess a deadline out there for establishing a new bundles rate and entirely new sort of reimbursement structure. In your discussions with CMS, I mean have they even started on this? Do they have the bandwidth to look at this in time to sort of put it in place by sort of mid or end of next year?

Yes, CMS is working very hard on the bundle that was outlined by Congress 10 months ago and we and other members of the community are coordinating to provide them with a lot of information to help them get it right.

Okay and then final question, when it comes to the bundling, I guess it is legislated that the bundling will be at 98% of spending. Can you just refresh us in terms of what timeframe that they are using to establish the base of which they will base the 98%?

It is LeAnne. Two components to that, let me be just so you understand it, pharma utilization will be that on the lower of 2007, 2008 or 2009. Once that is established, 98% applies to the bundles purposes that they would put together, they will take a 2% share cut.

And then that is on the pharma utilization. What about on the composite rate?

No, 2% across all of the services; lab services, pharmaceutical, composite rates, etc. Once that group of services is established, what they would have otherwise spent with adjustment utilization, we cut by 2%.

And that is based off at the lower of 2007, 2008 or 2009.

Correct.

Just for pharma.

Just for pharma.

The lower of 2007, 2008 or 2009. For the non pharma, what is the period that they use?

It would be otherwise what had been spent in the first year.

The first year of the bundle that is Andreas.

Okay, so for example it will base off of the 2010 Medicare composite rate?

Yes, since the credit is correct.

Okay, so it is the 1% increase in effect that you are getting in 2009 and 2010 basically taking back.

Correct, a long wind, a haircut against the pharmaceuticals.

Right. Okay, great.

Your next question comes from the line of David MacDonald - Suntrust Robinson Humphrey.

Just a couple, what I missed, Rich, can you give us the number of de novos waiting approval again? I know it is 56 last quarter, what was it this quarter?

Fifty three.

Okay and I know Texas was a state that kind of stood out last quarter. Is there any change there, any states that are overly problematic besides Texas?

Little Texas in California are our problem.

Okay, and then Kent, can you just give us a little bit more detail on what would be kind of the next steps with the pilot program in terms of bundled care with CMS, what do we look for over a kind of a next 6 to 12 months in terms of that moving forward and moving towards implementation at some point?

And you are talking in this case about the bundle that was legislated by Congress last year?

No, I am talking about the demonstration project where you guys, it sounds like Fresenius working on the capitated plan.

Right, over the next 6 to 12 months, we should not expect anything dramatic, nothing operationally material.

Okay and so when we think about timeframe, I mean is this more kind of in 2011 or 2012 type of opportunity of that, a couple of years down the road is more realistic timeframe to think about this?

Certainly, more reasonable than anything sooner and we will keep you posted. As I mentioned earlier, this movement has picked up irreducible momentum at the federal level, at the state level and in the private payer world and it is just so difficult to handicap whether it is one year before there is a big change or four years or something in between which is why we are trying to emphasize that predicting timing is just not, unfortunately is not something that we think we can do well. So, all we can do is keep you posted and when that door opens as it is starting to, we are very well positioned to stride through it.

Your next question comes from the line of John Ransom - Raymond James.

I have one peeking in question and one broader one; now, what is the ending share count in the quarter?

We will look it up for you. Do you have another question?

Sure, what was the subsidy in the quarter to specially our x in DaVita village? I know you are still on track for your number for the year that you mentioned that you are investing in.

People are passing it on pay for they are trying to hand over that share count. Could you repeat the question?

Sure, what was the loss, subsidy is trying on there, what was the loss in the quarter from village and specialty?

The loss for the entire ancillary service business segment which is how we disclose it, there are other things in there was $5 million for the quarter.

And you are still on track, if that change for the year, you are still on track for that number for the year?

We feel at the end of Q1, we are on track for what we told you we will do three months ago, yes.

Okay.

And the ending share count is 103,409 and that is not a diluted number. The diluted number is 104,409.

Okay and I guess the, I do not even know how to ask this question, I probably going to stumble but in the debate about the public plan versus product plan and Nancy-Ann DeParle indicated that the public plan could take a lot of different shapes. There is a Medicare option. There is a hybrid. There is a product plan option. I guess, you have hired a new industry guy to go talk to Washington, how are you going to track this debate and how are you going to weigh in to make sure that the so ons who were dealing this up understand the difference between $230 a treatment and $900 treatment and the requisite of solvency of the dialysis industry if you end up with Medicare for everybody? I think the low end groups at 130 million would drop their private plans and run to Medicare. Medicare is 30% cheaper. It just seems like you have an irresistible political wedge to get people to go to Medicare if you get a hard left healthcare plan but you guys are going to be on the uncomfortable position in trying to argue up here right with the government and it just not clear to me how do you go to see the table and how do you make your case and how are you following this. I do not know if I asked that right.

No, it is a fair question and of course there is no incredibly definitive answer but it is important to point out that right now, all our private patients have the right to go on Medicare. So, we are the only segment in America for whom if that option existed just not have change. Now, that does not meant that sort of the whole environment could change in some way that more people started making that decision but we are the only segment in America where that already exists and has existed for 20 years in our current business model reflexive. And then second, we are doing it the old fashion way, just very straightforward blocking and tackling of going office by office, walking through the economics. Every member of Congress has dialysis centers in their district and does not want them to close and there is a lot of third-party data supporting in rough terms the description of our economic reliance on private pay which is why there have been lot of decisions made, if they has been made over the last four or five years. So, we just have to work it a lot. If the people in Congress are loaded to implement something that could blow up in the face, that is the great fear when they started talking about this reform stuff. So, we are confident that we have a very good shot at having a nice seat at the table but that does not mean you get the outcome you want. It is just not how the process works. It is pretty sloppy.

Well, I mean I understand it is sloppy but the uncertainty this year is obviously magnified tenfold. So, it is interesting.

Your next question comes from the line of Bill Plovanic - Canaccord Adams.

Just how does home therapy fit in with your strategy in preparation for bundling?

Our doctors and patients pick home therapy whenever they think it is in the best interest of the patient. We do more home therapy than anyone else in America and so help me out if I am not being useful here.

As you see bundling coming at you, would you expect increasing usage of home therapy decrease? What would be, does that actually help you save money? Is it more profitable for you? Is there any benefit for you? I know there is benefit for the patient.

Well, there is benefit for some patients and as to the bundle whether or not one is better or soft, it depends on a bunch of variables like what the equipment is priced at and what your local scale is, things like that. But there is no black and white answer on that and in fact on the home hemodialysis, we actually lose more money on Medicare at home than we do in the center. So, it is worst.

Your next question comes from the line of Jack Ruff - Inside Investor.

You talked a little bit about capital allocation with a volatile debt markets in your current majorities. Is part of the reason for the build up in cash that you see a lot of acquisition opportunities, is that also part of it and is the uncertainty with Congress and healthcare changes that part of it too? Can you just go into a little bit more the decision process to build up cash rather than buyback more stock?

In a time of uncertainty, we go to cash. We go to cash for a defensive and an offensive reason. Defensive reason is when times are uncertain and where they might turn out poorly just as you outlined in your question. In addition, it also means things might turn out more poorly for other people less well positioned than us and therefore we also like to have cash for offensive reasons because it might get to buy them at a more attractive price than otherwise. So the funny thing is the uncertainty creates equally powerful defensive and offensive reasons to ere in the side of having more cash rather than less.

Okay, that is fair. It also creates a good opportunity in your stock too.

Hopefully so.

And there are no further questions at this time.

Alright, well thank you all for your thoughtful consideration of DaVita and we will work hard between today and the next day we get in the phone with you. Thank you.

This concludes today's conference call. You may now disconnect.