Welcome to the DaVita HealthCare Partners Fourth Quarter 2015 Earnings Conference Call. At this time all participants are in listen-only mode. After the discussion, we will conduct a question-and-answer session. And now, I'll turn the call over to your host. Mr. Jim Gustafson. Thank you. You may begin.

Thank you, Vin, and welcome everyone to our fourth quarter conference call. We appreciate your continued interest in our company. I'm Jim Gustafson, Vice President of Investor Relations, and with me today are Kent Thiry, our CEO; Jim Hilger, our Interim CFO and Chief Accounting Officer; Vijay Kotte, our CFO for HealthCare Partners; and LeAnne Zumwalt, Group Vice President. I'd like to start by noting that during this call we may make forward-looking statements within the meaning of the federal securities laws. All of these statements are subject to known and unknown risks and uncertainties that could cause the actual results to differ materially from those described in these statements. Further details concerning the risks and uncertainties, please refer to our SEC filings included in our most recent annual report and subsequent quarterly reports. Our forward-looking statements are based upon information currently available to us, and we do not intend and disclaim any duty to update these statements for any reason. Additionally, we'd like to remind you that during this call we will discuss some non-GAAP financial measures. A reconciliation of these non-GAAP measures to the most comparable GAAP financial measures is included in our Form 8-K submitted to the SEC and available on our website. I'll now turn the call over to Kent Thiry, our Chief Executive Officer. Kent J. Thiry - Chairman & Chief Executive Officer: All right. Thank you, Jim, and welcome to all. This will be a pretty high density call, and I'll be covering more topics than normal because of some of the nuances contained therein. As usual, I will first talk about our clinical outcomes because that is what comes first. Second, for each major business unit I'll talk about the operating performance for the quarter, year, and provide some thoughts on 2016. Third,…

Thanks, Kent. I'll take a few minutes to provide more detail into the investments we're making into the future. As Kent stated before, we are continuing to make both remedial and offensive investments into the business. The best way to look at these items is to put 2015 and 2016 together. When you do that, we have a total of approximately $80 million in incremental investments over 2014. To provide more context into these investments, I'll put them into three primary buckets. First, we have information technology; second, legal and compliance; and, third, next generation capability and change match. In the bucket of IT, we plan to spend $40 million more in 2016 than we did in 2014. This includes the following areas. First, security; second, applications to support population health; third, a community portal to enhance communication between patients and providers; an enterprise data warehouse; our accounting system conversion; and a national IT infrastructure to enable our creation of one company. Next, in the legal and compliance bucket, we will invest an additional $10 million to $15 million over 2014. In our final bucket, we're investing approximately $18 million into research and development related to next generation care management capability, a team we call Catalyst, with applications to our current markets as well as others. Now, Jim Hilger, our CFO, will walk you through a few more details on the numbers in the quarter.

Thanks, Vijay. First, I'd like to point out a couple of non-GAAP items in the quarter. In the fourth quarter, we recorded an estimated accrual of $23 million for potential damages and liabilities in our DaVita Rx pharmacy business. We have excluded these numbers from our reported non-GAAP income from continuing operations. A few words about this estimated accrual. The reserves relate to the period from 2010 through 2015. As a part of our normal process, last spring, we initiated an internal compliance review of DaVita Rx, during which we identified potential billing and operational issues. We notified the government in September of 2015 that we were conducting this review of DaVita Rx and began providing regular updates of our review. Upon completion of our review, we filed a self-disclosure with the OIG on February 5, 2016, and we have been working to address and update the practices we identified in the self-disclosure. In addition, as disclosed earlier today, on February 5, 2016, DaVita Rx received a Civil Investigative Demand from the U.S. Attorney's Office. The information requested has some overlap with the items we self-disclosed, and we do not know if the U.S. Attorney knew we are already in a process of developing a self-disclosure with the OIG. At HCP, we took an estimated $206 million impairment charge of non-cash goodwill in an intangible asset of certain HealthCare Partners' operating units. These impairments were driven primarily by underperformance of the business reporting units in recent quarters as well as changes in other market conditions, including government reimbursement cuts and our expected ability to mitigate those cuts. The final amount of these impairment charges will depend upon the final outcome of this valuation work, which we expect to be completed in the first quarter of 2016. This non-cash charge will…

Thank you. Our first question comes from Mr. Matthew Borsch with Goldman Sachs. Your line is now open. Matthew Borsch - Goldman Sachs & Co.: Yes, hi. Thank you. Could you maybe just address the areas of operating performance improvement that you're expecting in the HCP business? Maybe just – I don't know if there's any kind of granularity that you're prepared to give at this point, whether it's by geography or function. I'm just curious the types of things that you think are going to be going better this year versus last? Kent J. Thiry - Chairman & Chief Executive Officer: Matthew, this is Kent. Thanks for getting on the call. It's pretty broad-based. So there's nothing really that jumps out. There's no dramatic disparity in unit growth or margin enhancement, either through MLR improvement or G&A savings or revenue enhancement. So it's pretty mixed across the portfolio. Matthew Borsch - Goldman Sachs & Co.: And let me ask on a different front still related to HCP. As you look at things that are potentially for sale and you mentioned prices are high, is that still principally because of the major hospital systems that are bidding up? Is it, I mean, more of the same hospitals? How much is hospitals? How much is managed care versus other? Kent J. Thiry - Chairman & Chief Executive Officer: It's certainly health systems bid sometimes breathtaking amounts for these medical groups, but we have been surprised by some of the other players, including some of the health insurance entities and the offers that they have put on the table as well. Matthew Borsch - Goldman Sachs & Co.: Okay. All right. Thank you.

Thank you. Our next question comes from Mr. Kevin Ellich with Piper Jaffray. Your line is open. Kevin K. Ellich - Piper Jaffray & Co (Broker): Good afternoon. Thanks for taking the questions. Kent, I guess just kind of big picture, thinking about the guidance, which historically you've had a track record of being conservative. But if you look over the last few years, we haven't seen much growth in operating income. I guess, clearly, there has been some issues with HealthCare Partners. But I guess, broadly speaking, what will it take to get growth reaccelerating? Kent J. Thiry - Chairman & Chief Executive Officer: A very fair question, Kevin, and one that we are pretty intense about on the inside. On the Kidney Care front, with that flat Medicare reimbursement that's just a real problem that we've got to get addressed. And then, hopefully, through a new partner or the same partner in a new partnership with ESAs, or getting some integrated care runway, we can start to break out of the current trend. On the HCP side, of course, some of the declines have taken away the Kidney Care gains. And so if we just stop that and get back to a reasonable steady growth on HCP, that together with the normal growth in Kidney Care could start to generate some much more interesting numbers. And then, lastly, international is unfortunately just a couple of years away from being able to really help, although, once it starts helping it could be a long-term big deal. Kevin K. Ellich - Piper Jaffray & Co (Broker): Got it. Okay. And then, going back to your comments on Kidney Care and the potential downside and three factors for potential upside. In the ESA component, you said that contract expires in 2018.…

Certainly. We do plan to do some pilots over the next year. Kevin K. Ellich - Piper Jaffray & Co (Broker): Okay. Will you go with one source or will you try different options, LeAnne?

Certainly we'll try multiple options. Kevin K. Ellich - Piper Jaffray & Co (Broker): Okay, great. And then, I guess going to hammer, going to the share repurchase, you guys were very active in January. I think you said you have $259 million remaining. Should we expect to see continued share repurchase activity maybe get – are you guys going to go back to the board to get – to re-up the authorization? And even though you don't provide EPS guidance, is that part of your outlook for 2016? Kent J. Thiry - Chairman & Chief Executive Officer: I'll go ahead and take that one. We're going to apply the same sort of measured calculus we've always applied looking at the alternative deployments, looking at the different scenarios going forward, looking at interest rates, looking at the stock price. As the CEO, I'm feeling a little sheepish about the fact that we bought back quite a bit when the stock was a fair amount higher than it is today and we would have done more value for – created more value for our long-term shareholders by waiting a little bit as opposed to buying when we were at above historical average EBITDA multiples. So we bring our normal sort of intellectual calculus to it, but certainly we've demonstrated over the last year and certainly many of you were actively engaging and encouraging us too. Certainly, we've demonstrated, as we have at different times in our history, the willingness to going to the market and take some shares out of play. Kevin K. Ellich - Piper Jaffray & Co (Broker): Okay. Thank you. Kent J. Thiry - Chairman & Chief Executive Officer: Thanks, Kevin.

Thank you. Our next question comes from Mr. Kevin Fischbeck of Bank of America Merrill Lynch. Your line is open.

Hi. This is actually Joanna Gajuk filling in for Kevin today. Thanks for taking question. So on HCP guidance and the breakdown on different elements that are impacting the operating income. Specifically, I recall the company mentioned on the last call, Medicaid headwinds of $20 million. So should we assume that you no longer include that headwind or it's just small that you didn't disclose that? Kent J. Thiry - Chairman & Chief Executive Officer: What happened is we thought it would be Medicaid of $20 million, it turns out the Medicaid is $8 million. And so when we talked about $58 million, $50 million was that RAF model...

Okay, got it. Kent J. Thiry - Chairman & Chief Executive Officer: ...in Medicare, $8 million was Medicaid.

Okay. That makes sense. So then I know you mentioned that those headwinds, you expect to be offset by a broad, I guess, based operating improvement. But are you willing to talk about the legacy market's performance in 2015? I don't know whether specific numbers are up or down, or the magnitude of the improvement. And then, what do you think this would be 2016 versus 2015? Kent J. Thiry - Chairman & Chief Executive Officer: Right. In 2015, our legacy markets contributed to the profit growth, the OI growth as did our new markets. So both were contributors to our ability to offset the bad stuff that happened in normal medical cost inflation and our big investments. In 2016, we anticipate the same that independent of the rate cuts, that both legacy markets and new markets will do better than they did in 2015.

Great. And then just a follow up on your comment around the dialysis business, and the pricing, that you expect the pricing to be positive in first half, but there's less visibility for the second half of the year. So can you shed a little more light why you think that? Kent J. Thiry - Chairman & Chief Executive Officer: It's not because of any particular normal negotiation between us and the payor. It's just because of all the noise in the air with everything going on with exchanges, regulatory ambiguity in those areas, what some of the new payors are going to do in terms of getting in and out of exchanges. So there's just so much going on that we're uneasy, increasingly uneasy, and we thought we should share that.

So there's nothing specific to cause because I want to say you mentioned something around some specific contracts, or I guess maybe that was on the HCP side, so maybe that's irrelevant. And I guess that's all for me now. Thank you. Kent J. Thiry - Chairman & Chief Executive Officer: Okay. Thank you. I think you might be referring to the DaVita RX renewals I referred to.

Right. Kent J. Thiry - Chairman & Chief Executive Officer: But that isn't independent point separate from what's going on in mainstream Kidney Care.

Great. Thanks. Kent J. Thiry - Chairman & Chief Executive Officer: Thank you.

Thank you. Our next question comes from Ms. Margaret Kaczor with William Blair. Your line is open. Margaret M. Kaczor - William Blair & Co. LLC: Good afternoon, guys. First of all, thanks for all the details in terms of where you guys are investing in HCP. So maybe a question on that. What impact should we expect these investments to have? I might assume it's better outcomes that are going to lead to these higher patient adds. But even more specifically, over what timeframe should we see the fruits of these investments, is it as early as 2017, or is it more 2018, 2019, 2020? Kent J. Thiry - Chairman & Chief Executive Officer: Well, Margaret, we knew this question was going to come and dreaded it because it's going to be the answer you hate. It's not going to happen right away. For example, in technology space it'll take a year, one to two years to get a lot of that stuff done. And then the benefit it has does not immediately leap off the P&L. In terms of our next-gen care management and changed management group, that's got some near term upside. When you're managing $4 billion of medical cost, the spending that extra whatever it is, $20 million with some new talents, with some new analytics, and with some new approaches, you can get a pretty good payback on that pretty quickly. But the whole team is so new and the processes we're putting in place are so new that we would just hate to create expectations and then fail. We're very bullish on the impact they're going to have, but it just is not going to be overnight. Margaret M. Kaczor - William Blair & Co. LLC: Okay. So maybe to take that even further,…

Yeah. The DeNovo backlog is still about the same as what it was last quarter, but what we're seeing is a much better improvement in opening new clinics. So that's where we'll see improvement in the first half of the year. Kent J. Thiry - Chairman & Chief Executive Officer: And that person speaking is Patrick McKinnon, Chief Financial Officer of Kidney Care. Margaret M. Kaczor - William Blair & Co. LLC: Great. Thanks, guys. Kent J. Thiry - Chairman & Chief Executive Officer: Thanks, Margaret.

Thank you. Our next question comes from Mr. Gary Lieberman with Wells Fargo. Your line is open.

Good afternoon. Thanks for taking the question. Sticking with HCP for a second, is it possible to get some color on Albuquerque, maybe just how the recovery has gone on, and where it is today versus where it was, say, a year or two years ago? Kent J. Thiry - Chairman & Chief Executive Officer: Boy (42:28) Gary, this is Kent Thiry. I'll handle that. The difference between a year or two years ago is night and day. This is just huge orders of magnitude, better. So that's the high level answer. The operations have been stabilized. We're in very constructive risk pool conversations with one of the major payors. We're in healthy collaboration discussions with two other significant health systems. The leadership has been stabilized. The management team has been improved. So there hasn't been any – I mean, the numbers are certainly way better than two years, but I'm not wanting to represent this as we're on some stunningly steep trajectory of profit improvement, but all the fundamentals are better, and now we'll see what we can get done in the next couple of years.

Okay. And then how much of your time are you spending on HCP versus on the Kidney Care business? Kent J. Thiry - Chairman & Chief Executive Officer: I spend significantly more time on HCP than on domestic Kidney Care.

Okay. And then maybe just talking about the self-disclosure and the CID both happening on the same day. Is that just coincidence, or is there something else that we could read into from that? Kent J. Thiry - Chairman & Chief Executive Officer: It's just totally coincidence.

Okay. And then is there any additional color you could give us around it? Kent J. Thiry - Chairman & Chief Executive Officer: I don't think so, Gary. We just don't know much yet. The good news is that through our own internal normal compliance processes we uncovered some issues, and we did the right thing in investigating them. We did the right thing in reporting to the government. We did the right thing in doing some refunds. All of these were small dollar issues, and transactions that were a tiny, tiny percentage of overall transactions. And we kept the OIG up-to-date along the way as to the work we were doing but not completed, and then we send off our formal self-disclosure document. And then it just so happened that very same day that we got the CID from the Department of Justice, and we have no idea if the Department of Justice had any idea that we were already nine months down the track with the OIG.

Okay. And then I think you said your analysis went back to 2010, and it looks like their inquiry goes back to 2006. Is there anything to read into that? Kent J. Thiry - Chairman & Chief Executive Officer: No, I guess, it would suggest, again, that the two things aren't at all linked because clearly they were coming up with their own set of issues and their own set of dates, but beyond that we don't know. As you know, in many instances once they decide to take a look, they often that first document is very, very broad because, why not?

Okay. And then on your comments regarding negotiating an ESA contract. It sounds like – you're talking about it more than I think you had in the past on new contract. Is there anything tangible you can share with us or any hope that it could get done in the near term? Kent J. Thiry - Chairman & Chief Executive Officer: No idea. This is – we are eager. I'll be redundant, but we are eager to have a long-term partner and a long-term plan, and we just think there's a lot of opportunity. But getting there we'll take either our current partner deciding they want to create the next generation together, or doing it with someone else, in which case the implementation of course would have to wait. But the reason we're talking about it more is people are getting more serious because it's just not that far away anymore, and $800 million a year and growing is a lot to play with.

And then, I guess, maybe just last point on that. Is there anything that you can share with us or that you're aware of, of the one short term biosimilar that has been expected to come to market but has not yet? Kent J. Thiry - Chairman & Chief Executive Officer: I personally don't think it makes much sense for us to start talking about individual biosimilars and what exactly is going on. And so LeAnne, I don't know if there's anything you'd like to get out on the table. Anything I do would just be repeating publicly known information.

No Kent, I think you answered that correctly.

Okay. All right. Thanks very much. Kent J. Thiry - Chairman & Chief Executive Officer: All right. Thanks Gary.

Thank you. Our next question comes from Mr. Chris Rigg with Susquehanna. Your line is open.

Good afternoon. Thanks for taking my questions. We're going to get the advanced notice for 2017 MA rates next week, and obviously I don't want to – it's hard for you guys to predict what's going to be in there. But one thing that's been kicked around is potentially adjusting the risk models to better code for duals. Do you have any thoughts on that, particularly if it was budget neutral, and if not, can you at least give us a sense for within the HCP pool of enrollment how many are duals? Thanks. Kent J. Thiry - Chairman & Chief Executive Officer: Yeah. Like you observed, we don't have any idea what they're going to do, and we do believe that currently in Medicare Advantage the sickest people we get under reimbursed for, and the healthiest people they over reimburse for. And for people like us, who are not insurance companies, and we want to keep the patients we have, we do keep them, we can't really determine which new ones come to us, the current reality works to our disadvantage. And then with respect to duals in particular, while we have a bunch, it's impossible to say whether we would benefit materially or not until you know whatever the heck they would do.

Got you. And then changing gears here, just with regard to the seamless payor organization rollout or pilot/fall, can you give us a sense for some initial feedback from patients, or just anything with regards to that would be helpful. Thanks a lot. Kent J. Thiry - Chairman & Chief Executive Officer: Is this regarding ESCOs?

Yes. Kent J. Thiry - Chairman & Chief Executive Officer: It's just too soon. But we can tell you that we've been in a globally capitated pilot with CMS for seven years, eight years now, and it's pretty significant. There's 800 patients there or so. And then we have another 800, 900 globally capitated patients within our HealthCare Partners universe. And in general, and in particular on the Kidney Care side where the C-SNP plan, special needs plan, is focused just on these Kidney Care patients, it's spectacular. The patients get extra services. The doctors have extra support. The referring doctors get better information. The nurses get to provide coordinated care. The patient and family gets support at home. So I can tell you in our mature other where we're globally capitated, it's a spectacular, beautiful, transparent victory.

Great. Thanks a lot.

Thank you. Our next question comes from Mr. Whit Mayo with Robert W. Baird. Your line is open. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): Hey. Thanks. Good afternoon. Kent, you've discussed in the past your desire to reengage in productive conversations with your Health Plan partners to ensure that your incentives are aligned with their incentives, and they treat you as a good partner with the MA rate cuts. And are there just any developments along the re-contracting front that would be of any interest to us? Kent J. Thiry - Chairman & Chief Executive Officer: Yes, is the short answer. I'm not going to get the mix right, but if you ask on Capital Markets Day we'll have it. And Jim Rechtin is not here right now, but I'd say a healthy percentage of our renewals end up with a new agreement where our interests are much more aligned. And that's been true every year. It's a big shift from what existed before. And the same statement is true with respect to health systems in hospitals where a very solid percentage of our new contracts there create a lot more alignment than the old ones which were so zero-sum. So I would say, it's steady progress, nothing dramatic. But it's really healthy in reducing downside risk, and over the long-term will create some shared upside. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): Great. And just on Renal Ventures, I don't think I've heard an update. Just maybe I should know this, but just divestitures, FTC, and any sense for the contribution this year.

Hi. This is Javier Rodriguez, CEO of Kidney Care. There is no update. We're still anticipating a Q2 close. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): Okay. And maybe one last one. It's just, any way to get a sense of the size of DaVita Rx now, either by patients or revenue? Kent J. Thiry - Chairman & Chief Executive Officer: Boy, I don't remember what our historical policy has been. It has certainly grown. It is making some money, it's not losing money anymore. And I'm going to have to turn to Jim Gustafson so I don't violate any policy. Go ahead, Jim.

Yeah. We disclosed we're serving in various capacities 165,000 patients, and that includes both internal and external. Whit Mayo - Robert W. Baird & Co., Inc. (Broker): Great. Thanks, Jim.

Thank you. Our next question comes from Mr. Ryan Newman with Promus Capital. Your line is open.

Hey guys, thanks for taking my call. You spoke a little bit about the softness in some international markets, and how other players were attracted to those assets as well. As well, I know you've expanded a little bit in Colombia, in Portugal, China, Germany. Can you just talk a little bit about where the most softness occurred? Kent J. Thiry - Chairman & Chief Executive Officer: Where the most what has occurred?

Where the softness conditions existed internationally? Kent J. Thiry - Chairman & Chief Executive Officer: Softest conditions?

Yeah. Kent J. Thiry - Chairman & Chief Executive Officer: So soft as in...

The worst performance. Kent J. Thiry - Chairman & Chief Executive Officer: Poor performance? Okay. Thank you. Sorry for my...

No. I misworded the question. I apologize. Kent J. Thiry - Chairman & Chief Executive Officer: I'd say the softest performance from a profit point of view, I mean, my mind is racing as to how much I should disclose.

Sure. Kent J. Thiry - Chairman & Chief Executive Officer: We've had some profit problems in Colombia. That probably sticks out as one of the softest. In Saudi, we've been growing a little bit behind plan, but the microeconomics appear to be solid. And I think beyond that, I'd have to get into so many nuances. In China, we still put in the R&D category where we're very steadily consistently investing to look for the winning formula. And we don't have it yet, but we're not discouraged. We've got some stuff that's working there, and we have some stuff that's not working, and that's kind of the hit rate we expected. India, we know, is a long haul kind of thing, an immense market. But we're not ever going to start doing anything big there quickly because the microeconomics are just too tiny. So there's a little bit of flavor across three or four, and I'm probably giving Jim Gustafson a heart attack by providing all this.

Yeah. That's great. Thanks, guys, for the detail and I appreciate your time. Kent J. Thiry - Chairman & Chief Executive Officer: Thank you.

Thank you. At this time, we no longer have further questions on queue. Kent J. Thiry - Chairman & Chief Executive Officer: Well, the Capital Markets are May 18. Correct, Jim?

Yes. Kent J. Thiry - Chairman & Chief Executive Officer: In New York, we're going to nail down the location. There's a lot to talk about. We look forward to going into more detail. We're going to have a longer general session that we normally do so that we hopefully give you a very comprehensive and analytically thoughtful not only reiteration of our strategy but our progress and the right kind of leading indicators to stare at. So we're looking forward to a real high intensity extended exchange, and we'll do our best in between now and then to get through 2016, and start growing again in 2017. Thank you very much.

Thank you. So that concludes today's conference call. Thank you all for participating. You may now disconnect.