Jim Gustafson - Vice President-Investor Relations Kent J. Thiry - Chairman & Chief Executive Officer Javier J. Rodriguez - Chief Executive Officer, Kidney Care Vijay Kotte - Chief Financial Officer - HealthCare Partners James K. Hilger - Interim CFO and Chief Accounting Officer LeAnne M. Zumwalt - Group Vice President-Purchasing and Public Affairs.

Kevin Mark Fischbeck - Bank of America Merrill Lynch Matthew Borsch - Goldman Sachs & Co. Gary Lieberman - Wells Fargo Securities LLC Margaret M. Kaczor - William Blair & Co. LLC Gary P. Taylor - JPMorgan Securities LLC Lisa Bedell Clive - Sanford C. Bernstein Ltd. Whit Mayo - Robert W. Baird & Co., Inc. (Broker).

Welcome and thank you all for standing by. At this time all participants will be in listen-only mode. Now, I'll turn the meeting over to your host, Mr. Jim Gustafson. Sir, you may begin..

Thank you, JR, and welcome everyone to the DaVita HealthCare Partners' First Quarter 2016 Earnings Conference Call. I 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; Javier Rodriguez, CEO of DaVita of Kidney Care; Vijay Kotte, Chief Financial Officer of HealthCare Partners; Jim Hilger, our Interim CFO and Chief Accounting Officer and LeAnne Zumwalt, Group Vice President.

I'd like to start with our forward-looking disclosure statements. 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 actual results to differ materially from those described in the forward-looking statements.

For further details concerning these risks and uncertainties, please refer to our SEC filings including our most recent annual report on Form 10-K and quarterly report on Form 10-Q. Our forward-looking statements are based on information currently available to us, and we do not intend and undertake no duty to update these statements for any reason.

Additionally, I would 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..

Okay. Thank you, Jim, and welcome to all. In the quarter, we delivered solid operating income and strong cash flow. The total adjusted operating income, as you've seen in the release, $458 million, and the operating cash flows of $429 million. In the course of this call, before Q&A, we'll cover clinical outcomes; we'll talk about U.S.

Kidney Care; we'll provide an international update, including talking a little about the deal announced today; we'll cover HealthCare Partners results, HealthCare Partners we now refer to as the DaVita Medical Group; and then we'll provide a few additional financial details.

As to clinical outcomes, we'll discuss them first, as we always do, because that is what comes first. We are, first and foremost, a care-giving company. And the Kidney Care side is where we'll focus our clinical comments on this call. We'll probably rotate back and forth between the various parts of the enterprise each quarter.

We have about 178,000 dialysis patients now in the U.S. That's about 35% of all the patients in the U.S. And from a vaccination point of view, our outcomes relative to the community are very strong; pneumonia vaccinations at 92% for patients, influenza vaccinations 92% for patients and teammate influenza vaccinations at 84%.

And as many of you know, improving performance in vaccinations also leads to fewer hospitalizations and, as always, in our areas around the enterprise, our improved clinical outcomes are also very good for the taxpayer. For more color on U.S. Kidney Care financial results, let's hear from Javier Rodriguez..

Thank you, Kent. I'll divide my comments into two sections. First, I'll cover the quarter, and then secondly I will cover full year guidance. For the quarter, we had a strong operating income of $422 million, and let me cover some of the highlights.

Number one, normalized NAG was 4.1%, which represented continued improvement over the prior quarters, and it is consistent with our guidance that we gave last year for three years of 3.5% to 4.5%. Our rate per treatment increased by $2.34 per treatment and it was mainly driven through higher acute mix and improved commercial mix.

These improvements were partially offset by fewer treatment days which is normal in Q1, and as a reminder, the quarter benefited from an extra day due a leap year, and seasonally higher cost in treatment number one, primarily due to higher personnel costs from payroll taxes and higher pharma costs from seasonally higher Epo utilization due to the delay of the flu.

Happy with the quarter. Our guidance for Kidney Care remains unchanged at $1.625 billion to $1.75 billion. And as always, our range in total captures the majority of the probabilistic outcomes and based on where we are today, we are more likely to be on the top half of the guidance range.

The primary reason for leaving our guidance unchanged is driven by some economic uncertainties surrounding the exchange plans of the ACA. Let me summarize with four points on our experience on the ACA. Number one, it is working for patients. Americans who otherwise would not have insurance are now insured.

Number two, many people are far better insured and have better coverage than they had before including many of our patients that are benefiting from the insurance coverage. Number three, the regulatory environment around exchanges is still being built.

While many payers are living up to the spirit of the ACA, others are changing their fine print in their plan designs to avoid paying for expensive chronic diseases either by cost shifting to the patient or by making the plans unattractive for the expense of chronically ill in other ways. It might be helpful to give an example.

We had in one state a plan that tried to limit dialysis benefits and shifted significant economic responsibility to the patient, which as many of you know, these patients can clearly not afford. Once we alerted the regulatory agencies, the plans were instructed to remedy their behavior.

That being said, we're seeing more effort by some of the payers to improve their economics in the exchange plan by making it more difficult for dialysis patients to enroll. This is a complicated issue which will require regulatory environment. As you know, it happens to be a tough year because of the election and many are distracted.

Therefore, the dynamics around enforcement are hard for us to predict. I'll state the obvious. Patients and providers will continue to work with regulators as this unfolds. Lastly, as you know, not unique to us, there are larger macroeconomics and political risks that are clouding the future of the exchanges.

Therefore, it's hard to handicap with certainty how this will play out for us. We will talk about some of these issues in our longer term outlook in two weeks as we see you in Capital Markets. So I'll pass it back to you, Kent..

All right. Thanks, JR. I'm going to cover international now. The losses, as you've seen, were $10 million in the quarter and this is in line with our guidance of approximately $40 million on the year.

The most noteworthy new news on the international front is our definitive agreement to form a joint venture to grow our Kidney Care business in Asia with two partners, Khazanah and Mitsui. Khazanah is a highly respected sovereign wealth fund of the Government of Malaysia with an investment portfolio greater than $30 billion.

And Mitsui, as many of you know, one of the largest and oldest business groups in Japan, with about $45 billion in annual revenue, and they recently designated healthcare as a key strategic domain for themselves corporately going forward. They're both experienced in healthcare already and are value-added partners for us, not just investors.

One of their noteworthy successes in the Asian healthcare scene is they have a majority stake – approximately, a 60% stake in IHH Healthcare, which many don't realize is the second largest hospital company in the world by market cap. Their market cap is about $13 billion at this point, and we're very excited to have them as our partners.

The financial terms, just at a summary level, each of Khazanah and Mitsui will invest $150 million over the next few years, and each will receive in return a 20% ownership stake. We will, of course, still be the majority owner, therefore, and we will be running the enterprise with them as our very active partners.

Just to give you a sense of the current scope of the business, we have 64 clinics that serve about 3,300 patients across five countries in that part of the world. The definitive agreement is subject to a few closing conditions. So it could take some time to complete, but all three parties are working to make that happen as soon as is possible.

And now let's turn to what has historically been called HealthCare Partners but is now, at least internally, referred to as the DaVita Medical Group, Vijay Kotte, the Chief Financial Officer..

Thanks, Kent. We'll first start with a review of the HCP Q1 performance. Operating income for the quarter adjusted for the $77 million goodwill impairment and the $16 million Nevada hospice reserve gets us to $36 million on a non-GAAP basis. Included in the $36 million are approximately $9 million of one-time costs.

When adjusted for these one-time costs, we get a normalized operating income of $45 million for the quarter. One question you will likely ask is to reconcile this with the first quarter of last year.

To do this, we start with 2015 Q1 OI of $60 million, subtract one-quarter of the $58 million in MA and Medicaid rate cuts we had previously disclosed or $15 million, and that gets you to $45 million, demonstrating a relatively flat underlying performance year-over-year. Now let's break down some of the drivers of performance for the quarter.

There're some good things and some bad things. We'll start with the bad things. In addition to the rate cuts, Medicare Advantage enrollment in our legacy geographies grew less than in prior years and we grew in line with our geographies. Additionally, our commercial membership continues to decline with the market. Now let's turn to some good stuff.

We continue to close transactions. Earlier in the quarter we closed on the Everett Clinic, a nationally recognized physician group that has over 500 clinicians across 20 plus clinics, serving over 300,000 patients with an expected annual revenue of over $400 million.

In addition, within our existing geographies, we have a healthy pipeline of opportunities including a number of small tuck-ins as well as a few larger acquisitions in process.

One example is our prior announcement of our intent to combine with Mountain View Medical Group, which has 50 clinicians across 14 clinics serving over 80,000 patients which, if closed, will strengthen our already healthy capabilities in Colorado Springs. As we have said before, we continue building capabilities.

Here are a couple of examples, one clinical and one operational. On the clinical side, we're expanding our very successful home care program from other geographies to Nevada, focusing on the needs of our high risk patients in order to avoid unnecessary hospitalizations and re-admissions.

On the operational front, we're centralizing national operations and expect to realize savings from scale and vendor consolidation. To remind you, there has been a significant transformation of the leadership team and that group is picking up new momentum every month.

The progress on all these activities, we have a good shot at adding approximately $30 million to OI in the remaining three quarters of 2016, above the Q1 normalized rate of $170 million, bringing us to approximately $200 million for the year, the midpoint of our guidance range.

So we are maintaining our guidance range of $175 million to $225 million, although we acknowledge that achieving the high end may be less likely. We'll provide more details on our ongoing investments and operational capabilities and our longer term outlook at Capital Markets Day in two weeks. Now I'll turn it over to Jim Hilger..

Thanks, Vijay. In regards to the overall enterprise, our debt expense was $103 million in the first quarter, consistent with recent quarters. Next, the effective tax rate attributable to DaVita HealthCare Partners was 40% in the quarter, when you adjust for the non-deductible goodwill impairment charge and the HCP Nevada hospice accrual.

For the full year, we now expect the 2016 effective tax rate attributable to DaVita HealthCare Partners to be in the range of 39.5% to 40.5%. Now turning to cash flow. We continued to generate strong cash flows. Operating cash flow was $429 million in the first quarter and on an adjusted basis $1.88 billion for the 12 months.

As we've discussed before, over time, Kidney Care contributes about 75% of our operating cash flows. HCP contributes about 25%, notably higher than its contribution percentage to our enterprise operating income.

Regarding capital deployment, during the first quarter we purchased 3.7 million shares for $249 million at an average price of $67.61, but we have not made any additional repurchases since our last earnings call.

Please note that we continuously weigh capital deployment opportunities across growth investment, share repurchases, debt repayment and holding cash. And now, finally, on to outlook, I'd just like to restate our outlook. We are still expecting our consolidated operating income for 2016 to be in the range of $1.8 billion to $1.95 billion.

We expect our operating income for Kidney Care to be in the range of $1.625 billion to $1.725 billion, and we expect income for HCP to be in the range of $175 million to $225 million. And our operating cash flow expectation is in the range of $1.55 billion to $1.75 billion.

As always, these guidance ranges capture a majority of the probabilistic outcomes that we can foresee. And, with that, operator, let's go ahead and open it up for Q&A..

Absolutely. Thank you. We will now begin the question-and-answer session. Our first question is from the line of Mr. Kevin Fischbeck. Sir, your line is open..

Okay. Great. Thanks.

Can you talk a little about the $9 million of one-time costs in HCP, what that was related to?.

Sure. The one time costs, Kevin, were related to three primary things. One was the move of our California headquarters. Two is some compensation related accruals and the third is just some expense true-ups for prior periods..

Okay. And then you guys earlier kind of quantified the 2017 MA rate headwind of $25 million.

I guess how do you think about offsetting that and any kind of tailwinds you think about into next year versus this year?.

We're not going to give full 2017 guidance or that information, but related to the rate headwinds themselves there are some things related to the health insurer tax that will give some tailwinds but not enough to overcome those headwinds.

And beyond that, we'll give more detail of our operational expectations and similar other things at Capital Markets in a couple of weeks..

Okay.

Actually I was the health insurance fee, is that explicitly built into your contracts as a flow-through or is that something that you have to go back and kind of renegotiate as an offset?.

It varies by contract and so we've already addressed it with most of our payers..

Okay. And then I guess maybe last question, I guess as far as Epo costs for the year, I guess Amgen was pushing through a rate increase on Epo and then encouraging people to move over to Aranesp.

Any thoughts there about how you guys are dealing with that? Is that the move that you've done or do you expect Epo pressure through the year?.

LeAnne, would you like to go ahead and take that one please..

Yes and you may need to clarify if I don't answer your question correctly. As it relates to Epogen pricing, we did not experience a price increase this year.

So I don't know if that answers your question or you referred to Aranesp?.

I guess my understanding was that Amgen was trying to move people to the longer-lasting Epo product, generally speaking maybe your contract might be different than others, but I wasn't sure if that was something that you guys were looking to do and whether that was going to be a cost advantage to you under your contract this year..

We certainly use some Aranesp now in the population and we use both products. They are both very clinically appropriate for patients. And so we just use whichever the physician is ordering at this point in time and there's not a contractual difference..

Okay. All right, great. Thanks..

Thank you. Our next question is from the line of Mr. Matthew Borsch of Goldman Sachs. Sir, you line is open..

Yes. Just first question I was curious, your perspective on the slowdown.

I realize it's a much broader dynamic than just DaVita Medical Group, but the slowdown in Medicare Advantage enrollment, and if there is anything that the DaVita Medical Group physicians are seeing on the frontlines that might help inform what's going on?.

At this point, we don't have a good sense of what 2017, 2018, 2019 are going to look like. We still think Medicare Advantage is going to be growing in our markets as in the country overall. We and a lot of other people continue to add more services and capabilities that will fuel that fire.

At the same time, if the payers decide in any given period to leave benefits stagnant or in fact even pull back a little bit, that has a big impact. And so we remain very bullish on fundamental growth.

But at this point, the notion of sort of guesstimating what's going to happen in 2017 and 2018, we're not feeling certain enough to add any value there..

Yeah. That makes sense.

And I'm just curious, when the Medical Group sees MA patients, is there any distinction in terms of the financials, if that's an employer group MA member or a regular, I guess, you'd say, retail MA member?.

Can you restate the question, Matthew? I'm not understanding it..

Well, I guess, you think about the major Medicare Advantage plans, they typically have – for every 800 individual MA members, they maybe have another 200 that come from employer groups that are doing retiree coverage. It's all Medicare Advantage.

I'm just wondering if there is any distinction that the Medical Group sees in terms of the financial arrangements, risk-taking arrangements between group and individual..

No, we have not seen anything significant in that vein..

Okay.

And you don't really know how many is one or the other, is that correct?.

Yeah, I don't think we have anything useful to say about this, Matthew, but by Capital Markets, if there is anything useful to say, we'll be prepared to say it..

Okay. That sounds great. Just one last question.

On the ACA Exchange plan dynamic, can you give us some sense of how to think about what the numbers are? In other words, I wouldn't think the numbers would be very big in terms of your overall patient base, but is there a higher concentration relative to, say, how the ACA Exchange enrollment compares to the overall insured population?.

Let me take a stab at that, Matthew, and then you tell me if I'm hitting the right thing. Exchanges are a tiny percentage of what we're about.

At the same time, when we have exchange business that's private insurance, that is additive in the same way that our private insurance patients are in general, since as you know, the 10% or so of patients we have are private subsidize the 90% that are government on which we lose money on the margin.

And so exchanges are a tiny percentage but just like with the rest of private pay, little movements add up..

And have you ever contemplated starting your own exchange plans to get around the problems that you have had with the payers?.

Up to this point, we have not..

Okay. All right. Thank you very much..

All right. Thank you, Matthew..

Thank you. At this point, I would like to open the line for Mr. Gary Lieberman..

I was going to make a joke, but I decided not to. Host is going to say, oh, well..

Matt?.

Hello, I thought someone is going to make a joke there for a second..

Matt, we want to hear the joke..

Sorry, I don't have any jokes for anybody. Maybe talk about the joint venture and kind of the expectations for growth and maybe some of the startup losses that we should expect..

I'm sorry, Gary, there is still some noise on this end. Could you go you ahead and repeat the question. My bad..

Maybe talk about the joint venture a little bit and the expectation for growth and what if any startup losses we would expect to see from it..

Well, we are still losing money in the Asia market and that's not going to change in the near term because if anything, the addition of these two partners is going to accelerate some of our growth, which in the short term could actually increase our losses, kind of depends which countries we're growing the most in.

So I don't know how much useful I can say beyond that but go ahead and fire off another question if you'd like..

I guess in terms of – a little different topic. Just foreign exchange rates, any thoughts there? They've been somewhat volatile.

Any plans to hedge them or is it too small to really worry about it?.

Up to this point we've done little or no hedging. We're paying a lot of attention but the numbers are so small and in particular, given we're spread across 10 different countries, 11 different countries and you kind of do the math, it just isn't that helpful at this point.

But we're making sure we're talking to people who are more thoughtful and sophisticated than we are and trying to figure out exactly when we should start doing more of that..

Okay.

On to the ESAs, is it possible for you to tell us what percentage of patients are currently using Aranesp?.

I can answer that. We're predominantly an Epo shop, though it's quite small..

Is it the 10% that you're allowed to use other ESAs or does that not count, I guess, if it's Aranesp?.

Yeah, Aranesp does not count against us..

Okay.

And then the pricing – the lack of pricing increase on Epo, does that have something to do with you moving some number of patients on to Aranesp?.

No. No, that's not the case. And since I have the floor here, I'm being corrected that we did take a 1% price increase in January. So I apologize for that mistake..

Okay. Okay, that's all I have for right now. Thanks a lot..

Thanks, Gary..

Thank you. Our next question is from the line of Ms. Margaret Kaczor of William Blair. Ma'am, the line is open..

Thank you. Good afternoon, everyone. First question from me....

Hi Margaret..

There is a lot of moving pieces in HCP, and I'm sure you'll address a lot of them at your Capital Markets Day in a few weeks.

But, that said, as you look at HCP and its trajectory really over the next couple of weeks, how important is that patient and revenue growth compared to that profitability improvement and where do you see that going? Can the newer market revenues exceed the legacy markets, since those appear to be slowing, and can those legacy markets even reaccelerate from here?.

Yeah. A very fair question and certainly we're going to hit that hard in the Capital Markets, or at least to the best of our ability. We do think in a couple of our new markets the growth prospects over the next two years, three years on revenue, EBITDA and OI basis is material.

But at the same time we actually have a lot of growth opportunities in the three inherited markets. And so which has more potential, I think we'd probably say they're pretty equivalent and if anything, the legacy markets have more. But it'd be nice to see them in a bit of a race..

Okay. And just to maybe pick a little bit more at that. We saw the senior revenues in the mid single-digit range in 2015.

But as we look out again over that two-year to three-year time horizon, what would you be with happy with seeing in terms of that kind of new patient growth as well as the revenue growth?.

Okay. What would we be happy to see? I would you say if you give us the gift of reflecting on that, we're going to talk about the range that we expect to see at Capital Markets, and then maybe address the happiness thing. But we'll definitely give you our sense of the range of likely outcomes here in a couple of weeks..

All right. Fair enough. And then, on the Kidney Care side, the number of clinics that you guys are opening are growing a little bit faster than they have been the last few quarters and rightfully so.

But should we expect a similar pace of net new centers opening throughout 2016 as you guys catch up with those longer approval time frames from last year? So are you going to reach 120 new clinics for the year? And how quickly can these new clinics help get your NAG back up to that 4.5% or maybe even higher over the near term?.

I'll turn that one over to Javier..

Thank you. We had 30 centers open in the first quarter; our range for the year is 90 centers to 110 centers. The last part of your question on NAG, we're still comfortable with the multiyear range that we addressed earlier, so 3.5% to 4.5%..

Okay. And then last one from me. How is the acquisition of Renal Ventures coming along? When should we see kind of the initial impact on results and how long is it going to take for that chain to more closely resemble maybe the financial structure of the DaVita owned clinics? Thanks..

JR, can you take that one please?.

Yes, it's still going through the FTC, so the short answer is we don't know..

Thank you..

Okay. Thank you, Margaret..

Thank you. Our next question is from the line of Mr. Gary Taylor of JPMC. Sir, your line is now open..

Hi. Good evening. Couple of questions. I wanted to go back to the international JV for a second and just make sure I understand what you said. Each of these investing $150 million over several years for 20%, so that was for each of those, right, so $300 million investment combined on 40% of the venture..

Correct..

So that implies something with an equity value of $750 million.

Does DaVita make commensurate capital contribution, or is this capital light to you because you're contributing your market operational intelligence knowhow, et cetera, or what's your contribution?.

Right. This investment will be the growth capital for the entity and what we're submitting into the partnership is the entity itself, which is the kind of things that you mentioned..

Okay.

And are you contributing your existing centers in those five countries into the JV?.

Correct. So our entire business in Kidney Care in that geographic area, that's the asset which we're contributing into the partnership. What they're contributing is the $150 million each of growth capital..

And it implies a pretty sizable capital deployment to that part of the world, I guess, compared to what you've invested thus far.

So are there existing centers to acquire? Is this primarily development or will it be both?.

It will be both, but we're expecting that more of it will be acquisition than de novo. But it almost gets difficult to use some of the labels because in some of these countries, for example, China, you could end up with deal arrangements that are kind of a hybrid..

Okay. And then my other question – I just want to go back to commercial mix. I was taking notes, but I don't know if I missed those comments.

Did you make a comment about commercial mix of patients, which I think was – actually grew year-over-year in 2015 for, I think, the first time in some time, so 1Q of 2016, did that change?.

It did grow in 2015 for the first time in a long time, and so we're pretty pleased with where we are at. I think we disclosed in the 10-K a 12% mix. We're rounding up to 12%. No, we were....

Is that.....

11% – sorry. We were 11%, rounded to 11% in 2015..

11% of our total patients..

You only give us that annually, I believe; is that right?.

That is correct. We disclose it annually..

Okay.

So the commercial mix continued to improve year-over-year in 1Q of 2016 or has that leveled out?.

We continued to improve in the quarter..

And is most of that – is that improvement being driven by exchanges or...?.

That is a portion of the improvement. The improvement we've seen over a multiple-quarter period is in part due to exchanges and in part due to improving economy and in some cases it's difficult to discern which is where. We know where the exchanges are but there also is some cannibalization..

Yeah. Obviously a powerful trend, though. My last question.

What – and I have a feeling maybe I'll get kicked down the curb a couple weeks here to Capital Markets, but what is your average commercial rate increase you're expecting for 2016 that's baked into guidance?.

Yeah. We will go over our expectations on the RPT side at Capital Markets. And we may or may not get quite to that level of granularity. But, as always, we'll give you a three-year outlook on what we think about RPT or revenue per treatment..

Okay. Thank you..

Thank you. At this point I would like to open the line for Ms. Lisa Clive of Bernstein. Ma'am, you may begin with your question..

Hi. Thanks for taking my questions. I have three for you.

First of all, sorry if you I missed the details on this, but could you give us some color on the accrual for HCP, the hospice business in Nevada and am I right, this is about $16 million? Second, on dialysis, could you comment on the ESCO program and your experience with it so far? I believe you have something like 3,000 patients or 4,000 patients and according to your competitor, Medicare has just recently suggested the program could be expanded.

Would you want to participate on a larger scale, or if not, why not? And then lastly, looking further in integrated care, FMC has actually just started a Medicare Advantage Dialysis SNP.

Could you comment on what your integrated care platform looks like beyond ESCO and if you have any initiatives ongoing to grow this?.

All right. Let's go ahead and start with the first one. Go ahead, Vijay..

Yes. So on the hospice, it's related to the Nevada hospice business. The reserve is for damages and liabilities associated with our potential eligibility determinations that majority of which predates our acquisition of that business in 2013..

And let's go ahead and we can always come back to that, Lisa, but let's go ahead and hit the second question on ESCOs and, Javier, you want to hit that, please..

Sure. We have about 4,000 patients in our ESCOs right now. It covers four states, three markets and it's too early to tell how these are going to turn out in our excitement on expansion or not. We've only been at it for a couple months so it's too early to go through that.

As it relates to the C-SNPs, we now have five C-SNPs and we continue to find it a good growth vehicle that is really great for integration of transitions of care for the patient. So we'll continue to grow on that side..

Sorry.

Are those C-SNPs, are you partnered with insurers on that or is that something you're doing unilaterally?.

We do have partnerships..

And maybe, Lisa, I'll add a couple of comments on some of these items. Kent Thiry here. First, regarding integrated care beyond ESCOs, we remain as intensely positive about that as we have been for years and think that more and more payers as well as more people in Congress are starting to understand the clinical and economic upside.

And so we will continue to push integrated care outside of ESCOs, both for private pay and for Medicaid and for Medicare. It's impossible to predict when there might be an inflection point, but certainly we're in a lot higher quality conversations and doing a lot more deals of different sorts with payers now than any time before.

And then going back to the hospice, we necessarily have to be pretty circumspect there because there's some active litigation, which is why our commentary is quite sketchy..

Okay. Understood. Thank you..

All right. Thank you..

Thank you. Our last question is from the line of Mr. Whit Mayo of Robert Baird. Sir, your line is open..

For treatment and dialysis, it's trended a lot better than I would have thought for a much longer period of time.

Can you remind me just what's driving that improvement and how long we can expect to see those declines?.

Whit, the first part of your question for some reason, the phone cut off. And so we only heard the last half.

Could you redo it please?.

Yeah. The question was just the G&A trends in dialysis, it's just trended much more favorably than we thought.

I just wanted to know what's driving that and how long we can continue to see improvement?.

Well, I can tell you it's driven by excellent work by Javier and his team, but I'll let him complete the answer.

JR?.

Yes. And unfortunately less powerful, but due to some seasonality we expect G&A to be flat year-over-year..

On a dollar basis or per treatment?.

Per treatment basis..

Okay. And on HCP, I think you referenced in the last quarter that we should anticipate about $10 million of incremental investments this year.

Is there any update around that number and does that include any of the corporate changes, relocating the corporate headquarter that you referenced in your prepared remarks?.

I'm sorry, could you do that one again?.

I'm sorry.

Last quarter you communicated that we should expect about $10 million of incremental investments into HCP, I wanted to know if that was still the right number for 2016 and does it include the corporate headquarter change that you referenced?.

So, one, it did not include the corporate headquarters and what we had planned to invest are still in our plans. There's no significant changes to that. They were intended to be in the later part of the year and as we continue to assess the year we'll see if that changes. But right now we have no plans to change..

And the $10 million are all investments that would be of a recurring nature..

Okay. One last one.

Just looking beyond ESAs, are there any other interesting therapies potentially coming to market, whether if there's an iron drug, vitamin D, just wondering if there are any other drugs that we haven't been paying attention to that you find to be interesting?.

I don't think there's any right now that would affect your three-year forecast. The big variable in the near and intermediate term is what kind of partnership we establish on the ESA front, which everybody is, of course, already aware of, and we're looking forward to wrapping up a good partnership with someone.

But outside of that, there's really nothing to handicap right now..

Okay. Thanks a lot..

Thank you. At this time, speakers there are no additional questions in queue..

Operator, unless you've already gotten somebody else.

Have you?.

Right now we do not have any additional questions in queue..

Okay. Well, we will look forward to seeing a bunch of you and talking to the rest of you at our Annual Capital Markets session where we can obviously go into all this stuff with much more intensity and analysis. So we look forward to that. Take care..

That concludes today's conference. Thank you all for joining. You may now disconnect..