德維特 (DVA) 2018 Q2 法說會逐字稿

Good evening. My name is Christine, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the DaVita Second Quarter 2018 Earnings Call. (Operator Instructions) Mr. Gustafson, you may begin your conference.

Thank you, Christine, and welcome, everyone, to our second 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; Joel Ackerman, our CFO; Javier Rodriguez, CEO of DaVita Kidney Care; Jim Hilger, our Chief Accounting Officer; and LeAnne Zumwalt, Group Vice President. Please note that during this call, we will make forward-looking statements within the meaning of 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 the forward-looking statements. For further details concerning these risks and uncertainties, please refer to our second quarter earnings release of earlier today and 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 upon information currently available to us, and we do not intend and undertake no duty to update these statements.

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 earnings press release submitted to the SEC and available on our website.

I'll now turn the call over to Kent Thiry, our Chief Executive Officer.

Thank you, Jim, and thanks to all out there on the phone for your interest in DaVita. I'll make 3 quick points upfront. As Javier will review, we had a strong quarter for Kidney Care operations. Second point is the DMG sale process continues to progress and is on track to close this year. And number three is we've deployed significant cash toward share repurchases during the quarter. However, as we are, first and foremost, a caregiving company, I will start our call, as always, with clinical results.

Infection is one of the leading causes of hospitalizations in our population. In the second quarter, we delivered the lowest infection rate since we started tracking these rates. For our in-center patients, infection rate actually decreased by 9% year-over-year. Home patients even better. Our current minus rate improved, decreased by 19% year-over-year. This is not only an unambiguous example of quality improvement on the clinical side. It also leads to a dramatic improvement in quality of life and lower costs for the system.

And on that happy note, I will turn things over to Javier.

Thank you, Kent, and good afternoon. The second quarter was strong, with solid fundamentals and solid earnings growth in our dialysis business. I'll give you 3 high-level points on the financials, and then Joel will go into more detail.

First, normalized non-acquired growth was flat for the first quarter. Second, revenue per treatment was up slightly after adjusting for Medicare bad debt recovery in the first and second quarters. Third, we continue to contain our costs despite wage pressure.

For today's call, I will focus on 5 topics. First, as you probably know, the preliminary 2019 Medicare rate was released a few weeks ago. After 5 years of practically no increase, we are encouraged to be back in an environment where Medicaid fee-for-service rates will be growing again and help offset the inflationary reality.

Second, calcimimetics. The transition from Part D to Part B reimbursement continues to go well. In the second quarter, utilization and economics looked similar to the first quarter. Across our Kidney Care business, we expect the net impact of calcimimetics to be a mid-single-digit margin before our indirect costs to administer the drug.

For the third topic, let me provide an update on the human activities and some bad public policies they're seeking to pass. There are 3 different issues the industry faces and is opposing. Number one, a bill in California to seek -- that seeks to restrict dialysis patients' access to charitable premium systems by creating hurdles to patients and charities and limiting the provider's reimbursement for commercial patients to Medicare rate. Number two, the ballot measure in California, the cap reimbursement from private payers and interferes with our contract to the benefit of private insurance. Number three, we will likely face a similar ballot measure in Ohio. In the next 2 weeks, we will know if the Ohio measure has qualified.

The dialysis community is committed to advocating against the measures on behalf of our patients, our teammates and our shareholders. We're working with a broad coalition of over 100 healthcare providers and patient groups to oppose these measures and intend to do whatever is necessary to educate voters on why these measures are flawed. Unfortunately, educating voters on regulations around a complex and life-saving therapy, such as dialysis, will be expensive.

On to the fourth topic, GranuFlo. A jury recently handed down a negative verdict involving DaVita's use of GranuFlo, one of the components used to produce dialysate. Before I comment on the case, I want to be clear. DaVita's first priority always has been and will continue to be the care and safety of our patients. DaVita has a clear record of improving patient quality of life and reducing patient mortality over the last 2 decades.

Now on to the case. We do not believe the verdict is supported by the fact or the law. We will be pursuing all avenues to overturn this verdict and do not believe that the verdict will stand in its current form.

My fifth and final topic is DaVita Rx. As we talked about in the past, changes in the oral pharmacy space, including reimbursement reduction, have hurt the economics of DaVita Rx. As a result, we've been looking for a new way to deliver high-quality pharmacy services to our patients in a more cost-effective manner while maintaining our medication management capabilities. As such, we will be outsourcing the customer service and fulfillment functions of DaVita Rx. We will maintain our renal-related medication management capabilities in-house, which will help us provide differentiated integrated care to dialysis patients. And in 2019 and beyond, what remains of DaVita Rx will be accounted for as part of our U.S. Dialysis and Lab segment similarly to how we handle our Labs.

Let me finish by emphasizing that the underlying dialysis operations and clinical results remain strong. These results allowed us to maintain our adjusted operating income guidance range while absorbing the significant anticipated advocacy costs.

Now on to Joel for some financial details on our results.

Thanks, Javier. Adjusted operating income from continuing operations for the second quarter was $419 million. This includes $12 million in non-recurring Medicare bad debt recoveries from prior periods relating to the change in revenue recognition standards we implemented at the beginning of 2018. This is slightly above the $6 million to $8 million we expected. As you will recall, in Q1, we recognized $24 million from this change. We do not expect any significant prior period revenue from this going forward.

Excluding this impact, net dialysis revenue per treatment was up approximately $1 from the previous quarter. This was driven by an increase in commercial and government rates, partially offset by a seasonal decline in acute treatment mix.

Our continued strategic review of our business portfolio resulted in 3 changes this quarter, creating some noise in the quarter's financials.

First, following up on Javier's comments on DaVita Rx. In the first half of 2018, the Rx business was approximately breakeven before intercompany management fees and excluding an $11 million charge related to write-off of assets in Q2. We expect to incur some additional charges in the remainder of the year related to this plan. These charges are excluded from adjusted operating income and guidance. For the second half of the year, we expect to incur an adjusted loss on DaVita Rx operations of $20 million to $35 million due to duplicative costs during the transition. This loss has been reflected in our adjusted operating income guidance for continuing operations. In 2019 and beyond, we expect no significant net financial impact from DaVita Rx.

Second, we sold our remaining stake in Tandigm to Independence Blue Cross. As a result of this sale, we have recognized an after-tax gain of $19 million, which is included in our discontinued operations.

Third, we sold Paladina Health in June and recognized a one-time operating income gain of $35 million, which is excluded from our adjusted operating income and adjusted operating income guidance. Regarding the sale of DMG, we continue to be on track to close the transaction in 2018.

For International, our adjusted operating income in the quarter was $3 million, which included a $5 million foreign exchange gain from the cash balance in our Asia Pacific joint venture. We continue to expect to achieve breakeven adjusted operating income in late 2018, excluding any foreign exchange gains or losses. This is incorporated in our enterprise-adjusted operating income guidance for 2018.

Now, cash flow. Operating cash flow from continuing operations was $606 million for the quarter. We continue to expect OCF from continuing operations for the year to be $1.4 billion to $1.6 billion. We also expect CapEx for continuing operations for the year to be consistent with the approximately $925 million we mentioned previously.

Finally, on share repurchases. Through July 31, 2018, year-to-date, we purchased approximately 15.9 million shares for approximately $1.1 billion, representing nearly 9% of our shares outstanding at the beginning of the year. This includes approximately $500 million of stock repurchased since our last earnings call. As we said last quarter, we view this as an early deployment of the enhanced liquidity we expect later this year. On July 11, our Board of Directors approved an additional share repurchase authorization. The total amount of our repurchase authorization remaining as of July 31 was approximately $1.4 billion.

For our annual adjusted operating income guidance, we are maintaining the range of $1.5 billion to $1.6 billion, but we have now included in this guidance our expected costs associated with countering the union policy efforts. This guidance does imply lower expected operating income in the second half of the year than in the first half. This is a result of 2 positive items in the first half of the year and 2 negative items expected in the second half. The positive items are $36 million in Medicare bad debt revenue recognized in the first half due to the implementation of the new revenue accounting standards and $17 million in DaVita Health Solutions revenue recognized in the first quarter that we do not expect to recur. The negative items are the $20 million to $35 million anticipated second half adjusted loss at DaVita Rx and the increased advocacy costs expected in countering the union policy efforts. We incurred some costs in the first half of the year, but we expect costs in the second half to be significantly higher and heavily weighted in the third quarter. Therefore, the fact that we are maintaining our adjusted operating income guidance range while incorporating this additional cost shows our increasing confidence in the underlying financial performance for 2018.

This change to include anticipated advocacy costs in our updated guidance also impacts our expected tax rate because these costs are not tax-deductible. For the second quarter, our effective tax rate on income attributable to DaVita Rx from continuing operations was 29.5% in the quarter. For the full year, we now expect our effective tax rate on income attributable to DaVita from continuing operations to be 28.5% to 29.5%.

Now I will turn it over to Kent for some closing remarks.

A quick restatement of a few of the key takeaways. Number one, we are experiencing a material amount of non-business external friction, particularly on the union side. Importantly, however, number two, we continue to be strategically well positioned, both from the context of the current business model and for the longer term providing integrated care to Kidney Care patients across the country. And lastly, number three, we continue to generate strong cash flows.

And with that, operator, can we go on to Q&A, please?

(Operator Instructions) And our first question in queue is from Kevin Fischbeck of Bank of America.

Great. I wanted to see about the guidance. Is it fair to say that now that your guidance includes, because you didn't say how much your advocacy costs are going to be, but let's say, $50 million of additional costs, that you're more comfortable at the low end of the guidance? Or are you saying that the core business improvement has improved through the year, and you're comfortable at least at the midpoint of that guidance range?

Just, I guess, I would say, we are comfortable adding the advocacy costs. And obviously, bringing in a new cost to maintain the guidance is a positive sign. I would not interpret anything about where we expect to be in this guidance range relative to where we had expected to be beforehand based on the fact that the advocacy costs are coming in. Is that responsive?

I mean, I guess, it's basically saying you're not going to comment. So that's fine, though. I guess, you mentioned the 2 California bills and the Ohio ballot. When we think about those things, how do you quantify the potential impact of these things would be going through?

Yes, Kevin, we figured you'd ask the question. Unfortunately, the answer is not very satisfying because there are so many variables in play, and literally, every day, there's a new dynamic. As you can imagine, they're all very different. But if the ballot initiative passes in California, you will instantly have approximately 66,000 patients that are being treated in centers that mostly will be unsustainable. And so to assume that there's going to be some kind of a plan, a backup for that, is just unrealistic. So then you got to go into, well, how would it play out? And then you go into, well, okay, is there going to be some intervention by policymakers to avoid a crisis? Is there some regulatory things or some legal challenges we could do, so on and so forth? But the answer to your question is we're not going to give a number. Too hard to do so.

All right. Maybe you can help clarify a couple of things. I've gotten questions from people about what the California ballot initiative is actually trying to do because the language says the rebates go back to the commercial payers, which some people have interpreted to mean that the 15% margin is actually tied to only commercial payers rather than the 15% margin to the site across all payers on average. Can you just clarify your interpretation of how that margin is applied?

Yes. Well, first of all, we got to be careful with the phrase 15% margin because the ballot defines 115% of allowable cost, and allowable cost is poorly defined. So there's going to be a lot of debate as to what's in it and what's not. But to assume that there's 15% margin is probably not realistic there. As it relates to the second part of it, I think it is a rebate to the commercial patient, and that is the commercial plan. Is that the second question you were asking?

It's a rebate to commercial plan, but that 15% of allowable cost, is that on the site-level across all payers that includes Medicare and Medicaid? Or is it only applied to your commercial customers, which will obviously be a different thing, if you had allowable cost on Medicare, that would help. Obviously, you're not making your 15% on Medicare and therefore, would increase the overall profits or the facility rather than if you were only to apply that to the commercial side of things.

Right. So it's an all cost to all payers, the de facto, because Medicare is, in essence, a low cost, in many instances, we really are thinking about the commercial payers.

Yes, okay. That's how we were thinking about it. And then, I guess, on to the last question then. On the bill that's being debated in California, how do you think about -- you guys have quantified some impacts before about if CPA was to go away. And do you -- how do you think about that, I guess, in rough terms? Would that be similar to the gross impact exposure, weighted by the California exposure of that? Or do you think that it would be the kind of net number you say that there would be offset in that -- the number's closer to 100 to 250 is more the way to think about California being 20% of that? It's just got an order of magnitude on that.

Yes. Unfortunately, the math is not straightforward on the numbers that we gave you in the past and this one because if you look at the bill, it could effectively eliminate charitable assistance for dialysis patients because its got inconsistencies between the bill and the OIG guidance relating to the dialysis charity assistance. So it could literally result in disproportionately hurting low-income population. And so then you have to go into how will that population behave? What plan would they pick? What's happening in our competitors? Are they having less capacity in their centers, so patients are having to, in essence, go deeper into their pocketbook because they don't want to be displaced, et cetera? So again, 1156 is quite dynamic and keeps changing. And every time it changes, it introduces a new twist. But the math is not intuitive at that level that you have.

Okay. Actually, I have one more question. Given these 3 things, I'm a big fan of you guys buying back stock in advance of DMG closing if you got good visibility on that closing, but I guess, how did you think about buying back stock in front of these 3 things? I guess, any one of these things could be meaningful to the company. So how do you think about valuing the company, given those potential risks, and that's it.

Yes. It's a tough question to answer, Kevin, given the uncertainty that these 3 things create looking forward. But we stuck to our principles, which were looking at the long-term intrinsic value of the company and using that as well as a number of items to decide the pace at which we want to buy, which is, obviously, influenced by the DMG closing and are not wanting to have to accumulate rapidly during some artificially high-stock price. So you put that all in the mix, and that's where we came out in terms of our buyback for the quarter.

And our next question is from Steve Tanal of Goldman Sachs.

I guess, just as you're looking at sort of the RPTs and less patient care cost per treatment, I guess sort of a measure of gross profit per treatment, it looks like the margin was down about 300 bps year-on-year just on that measure. And I'm just sort of curious to understand if there's anything to spike out there and whether there's been any change on the calcimimetics side, either from a reimbursement or margin standpoint versus Q1.

Yes, so a few things. Obviously, you've got to back out all the noise. Two things to point out. One is the 401(k), which was an artificially -- an artificial improvement to 2017. So that would probably be the single biggest thing to call out, looking at how to adjust year-over-year margins.

Got it, okay. So that's -- I was actually going to ask you about that, too. And is that still consistent with sort of the $100 million for the year? And is that ratable exactly?

I'm sorry, I didn't hear the second part of the question. Is that...

The guidance for the 401(k) headwind was $100 million for the year, if I recall. And I'm just trying to check the cadence of that, and if it's still sort of similar to where you expect it would be.

Yes, it is. And it's relatively flat across the year. So there's not a lot of quarterly variation in that.

Great. And then just secondly, just on the G&A line. Looked out of control sort of relative to how we'd modeled it. Is there anything unusual to break out there? Or is that a good run rate to use going forward?

The best thing to do is to look at it as an annual number, and there's not much to report on that.

Got it. Okay. And just lastly for me, I just wanted to clarify the comments on Ohio. It sounded like you said the ballot measure has qualified. Is that the case? It seems like there's news reports out that suggests maybe it is not.

No, I apologize if that's what you heard. We will find out in, August 13, I believe, if it qualifies on the next couple of weeks.

And our next question is from Justin Lake of Wolfe Research.

I just want to go back to Kevin's question on the OI guide. Obviously, very good that you can absorb all these incremental costs. You gave us this DaVita Rx number. Can you give us a ballpark ballot cost estimate? Or is that just too competitive and you want to keep that out of the call?

You're correct. We'd like to keep it out.

Okay. So...

Thank you for asking and answering. I like that.

Well, you guys are teaching me. I am trainable. So the second thing -- so you got -- your -- it's August 1, and you've still got a $100 million wide guidance range. I would think there's more visibility in the business there. So I don't think it's unreasonable to ask where do you think within that range, the higher -- I know you have a history of doing the higher end. Where within that guidance range you think you're more likely to fall, probabilistically, of course?

Yes. So I think the reason the range remains so wide is advocacy. That is contributing to an uncertainty that remains at this stage in the year. In terms of where in the range, I think we're just comfortable with the range, and we'll let it play out.

Okay. Maybe for this quarter, can you tell us where you were? I mean, it certainly looked like it was ahead of my estimates, and I think consensus in terms of OI. Can you tell us how it looks relative to your internal expectations?

We don't guide quarterly, and I don't think we're going to comment quarterly on where we came out relative to internal expectations. We're going to stick with kind of guiding for the year. We think that gives you the visibility that we can offer.

Okay, I'll ask one more. Can you tell us why the tax rate is up 200 basis points?

Yes. It's the expected non-deductibility of our advocacy costs that we expect to pay in the balance of the year. Yes, it's been in the balance of the year.

Yes, Justin, I misspoke in the script. I think I said I was -- I referenced the tax associated with DaVita Rx. I know it's just a foot fault. I just meant DaVita, in case that wasn't clear. But yes, the 200 basis points is from the advocacy, which is not deductible.

Okay. So the -- okay. So the -- tax rate for next year, as long as there's no advocacy costs, would revert back to your original guidance, so this is kind of a onetime charge?

Depending on how you view advocacy going forward, yes, it is not a fundamental change to the tax rate.

The next question is from Frank Morgan of RBC Capital Markets.

Yes. I guess, I'll follow-up on Kevin's question earlier about buybacks. Clearly, $1.4 billion left under your existing program, if I heard you correctly. In light of what's ahead of you, with both the ballot initiative and this, I guess, the 1156, what is your appetite now for further purchases ahead of those -- the outcome of those 2 events?

Yes, Frank. We have been comfortable communicating our strategy about buybacks, but we're very reluctant to comment about what we're going to do in any given period. It's not something we want to signal. We don't want to drive the stock up artificially and then be -- feel compelled to buy into that. So we will continue with our buyback strategy, but I don't have any particular color for you in the next quarter or so leading up to the ballot initiative.

No change in cash flow from ops guidance absorbing those advocacy costs. Any changes in your outlook for CapEx in terms of just looking at free cash flow?

No. Still, the $925 million number we've given in the past is still a good number.

Okay. And then final question, just any updates -- any thoughts around the PATIENT Act? Any timing there of updated thoughts from a regulatory or a legislative perspective?

This is KT. The short answer is, it's still the case that we have a real shot. We need the CBO score. And as that comes out at a reasonable level, we have a real shot. We didn't bring it proactively because we figured many of you are sick of hearing that paragraph. But it's still, for us, very, very alive. And every week, we cross our fingers and hope for the CBO score.

And our next question is from John Ransom of Raymond James.

I'm next to a very chatty and loud Southwest gate agent, so sorry for the background noise, if there's any. Two quick questions from me. As you think about CapEx after this year, have you done any more analysis of the relationship of CapEx and growth? Is there a way you can kind of bracket expectations for next year? Or is it too early to do that?

So for next year, we are comfortable saying that we will head back down to a number that's more closely aligned with our 2017 number, and that our view that 2018 had a couple of things worth roughly $100 million that were unusual, and those will go away. So something in the low 800s.

Okay. So that's -- I mean, that's roughly -- that's almost 2x your depreciation. Is that just kind of the permanent plateau no matter what?

Hold on one second. Why don't you give us a few minutes to reflect on the question, and see if we can come back in a satisfactory way?

Yes. It just seems like a big number, but I know...

Yes, let me take it. So the 800 -- I'm sorry, John, the 800 is -- I wouldn't call it a new plateau. It's definitely tied to our growth. Remember, most of that is not maintenance CapEx. It's development CapEx. We are thinking about ways to get the number down, both through small initiatives around lower costs to build de novos and lowering our IT spend and stuff like that as well as some larger ideas that I mentioned briefly on the call last quarter. That said, I don't think we're prepared to guide to any trend on the number ahead of what we've said about 2019.

Okay, fair enough. And secondly, the pharmacy initiative, I know you've called out some losses for the back half of the year. When do you think that transition will be done? And what would be a good expectation for the ongoing contribution of the business?

Yes. The transition will be in Q3, maybe flips into a little of Q4, and the economics post that in '19 would be irrelevant.

It will be -- it would go from losing what you're saying to basically breakeven or off the P&L. Is that a way to think about it?

That's a good way to think about it.

Oh, it's a good guess. So I asked about the pharmacy, I think, last call or 2 calls ago and you guys were pretty adamant that it was a strategic asset that you wanted to keep. So what changed in the last 2 quarters that made you change your mind?

It's mainly a revenue change, John. So we've had a couple of contractual changes and a drug that has a potential, being generic for quite some time. Went generic, and it went generic and the pricing was quite rapid, the decrease in pricing. So the combination of several revenue hits made the decision, while painful, the right one.

Our next question is from Gary Taylor of JPMorgan.

Just a question. I know you had said on the calcimimetics, it was essentially similar contribution at first quarter. In the first quarter, you said it was $19 revenue per treatment. Would you be more precise? Is it right on $19? Is it different?

Yes. It's about $19. No material change.

And it looked like there was almost $10 million of equity investment income, a line item that usually is not material, contributing to the operating income. What was driving that figure?

We are taking a look, Gary.

Yes, I think it was 9.795.

And Gary, could you even talk a tad louder?

Yes. I'm sorry.

Yes, Gary, the -- I'll remind you that the APAC joint venture we have is an equity investment, and the foreign exchange swings related to that come through that equity line.

You've called -- I think you'd said the FX was $5 million, so about half of it. So is it fair to think that, that line is probably a few million dollars a quarter but not necessarily $10 million or...

I think you should expect that to swing around and not contribute in either direction over any sustained period of time.

Okay. Just 2 more quick ones. It looks like ancillary, $7 million loss in the 1Q added -- it was a positive $3 million in the 2Q. I don't think that was DaVita Rx yet. So was there something driving that?

I'm sorry. You're asking about the ancillary line?

Yes, where you gave operating income. I think it was negative $7 million negative in the 1Q, and is plus $3 million this quarter, so about a $10 million sequential good guy.

Yes. There is some noise in that line. I think, in Q1, it had the DHS number, which was $17 million good guy. In Q2, it had the Paladina write-off, which was $35 million good guy.

Okay. I might have to follow on that one...

Yes, and Q2 also had the Rx minus 11 running through that line.

Okay. I might have to follow up because it's better, so I'm not sure I understand all that. But I won't tie up folks. Just last question is, so I follow your math on, if you take the first quarter revenue per treatment less the $24 million Medicare bad debt recovery in the 2Q, $352 per treatment, less the $12 million Medicare recoveries puts your sort of normalized revenue per treatment up about $1 sequentially from 1Q to 2Q. But you said that increase was related to commercial and government rates. So I just want to make sure I understand that. I don't think there would be a lot changing on the government rate side intra-year, maybe some intra-year commercial. I guess, generally, I'd consider maybe there's some fluctuation of mix, but I want to make sure I was understanding that properly.

Yes, there is some -- within the government line, remember, Medicare fee-for-service is not our only government payer. There's Medicare Advantage, there's Medicaid fee-for-service and managed Medicaid. So as the mix shifts between those buckets, you can see some shifts in the RPT.

(Operator Instructions) Next one is from Justin Lake of Wolfe Research.

Few more questions. I mean, you said the DMG sale process is on track. Is there anything further you can share with us? For instance, what might be left to do here when you met the second request? So we can understand the clock a little bit. Anything?

Really not much to add. Both parties are working to get it closed in 2018.

Okay. Anything on commercial mix in the quarter in terms of up, down or continues to be pretty steady?

Nothing to call out, Justin.

Okay. And then on share repo, I just ran some back-of-the-envelope numbers. And you bought back 16 million shares. I think we're pulling up about a little over 200 million shares have traded year-to-date. So you guys have been responsible for about 7.5% of the volume. I'm just curious if that's -- is that the gating factor to what percentage of volume you can be out there? Is that the gating factor to what you bought? Or is that 7.5% number -- I'm just trying to think about looking ahead and the timing of share repurchases going forward. Or is there -- is that just -- there's no really rhyme or reason to it and don't use that 7.5% as a proxy?

Yes, I would not use that as a proxy for what we can buy. That has -- what percentage of the volume we are does affect our thinking at times, but I wouldn't say, over the course of the quarter or the year-to-date, that's been a driving factor in how we think about buybacks.

Okay. And then lastly, I just wanted to confirm. When I asked about the tax rate going up 200 basis points, you had indicated that most, if not all, of that is coming from the lack of deductibility of advocacy costs. Is that correct?

Yes.

So that didn't have to do with DaVita Rx or anything else, right?

No. There are other small things related to the change in the tax law that will flow through that, but it's largely related to advocacy.

All right. Because, I mean, I think what's going to -- what people are going to do is put 2 and 2 together here. And basically, you can kind of math into how much advocacy costs have to be then to drive a 200 basis point change in your tax rate.

Yes. I mean, the old rate was a range, and the new rate is a range. So -- but I guess, the math, you want to do.

Yes. I mean, I'm picking up like $75 million. I only say that because I'm sure everybody's going to do it. Is that a number that you'd want to talk us up or down on?

We don't want to comment on what we are going to spend.

And that's the last question in queue at this time.

All right. Thanks, everyone, for your interest. We'll talk to you again in 3 months. Thank you.

Thank you. And that concludes today's call. Thank you for your participation. You may now disconnect.

[SS1]I couldn't figure out what Javier was trying to say either. See around 5:45 mark