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Executives

LeAnne Zumwalt - VP of IR

Kent Thiry - CEO

Rich Whitney - CFO

Analysts

Darren Lehrich - Deutsche Bank Securities

Gary Lieberman- Stanford Group Company

Justin Lake - UBS

Bill Bonello - Wachovia Securities

John Ransom - Raymond James & Associates

Gary Taylor - Citigroup

Mark Arnold - Piper Jaffray & Co

David MacDonald - SunTrust Robinson Humphrey

Balaji Gandhi - Oppenheimer & Co.

Mark Afrasiabi – PIMCO

Paul Lee

Dawn Brock - JPMorgan

Art Henderson - Jefferies & Co

DaVita Inc. (DVA) Q2 2008 Earnings Call August 4, 2008 5:00 PM ET

Operator

Good afternoon. My name is Jeff and I will be your conference operator today. At this time, I would like to welcome everyone to the DaVita second quarter earnings conference call. (Operator Instructions)

Thank you. Ms. Zumwalt, you may begin your conference.

LeAnne Zumwalt

Thank you, Jeff, and thanks everyone for joining our second quarter conference call. We appreciate your continued interest in our company. I am LeAnne Zumwalt, Vice President of Investor Relations and with me today are Kent Thiry, our CEO and Rich Whitney, our CFO.

I would like to start with our forward-looking disclosure statements. During this call, we may make forward-looking statements, which can be generally identified by the content of such statements or the use of forward-looking terminology, and includes statements that do not concern historical facts. All such forward-looking statements are subject to known and unknown risks and uncertainties that could cause the actual results to differ materially from those described in the forward-looking statements.

For further details concerning these risks and uncertainties, please refer to our SEC filings included in our most recent quarterly report on Form 10-Q and annual report on Form 10-K. Our forward-looking statements are based on information currently available to us and we undertake no obligation to update these statements, whether as a result of changes in underlying factors, new information, future events or other developments.

Additionally, our press release and related disclosures include certain non-GAAP financial measures. These measures should be considered in addition to the results prepared in accordance with GAAP and should not be considered a substitute for GAAP results. Also included in the press release is a reconciliation of these non-GAAP measures to the most comparable GAAP financial measure.

I will now turn the call over to Kent Thiry.

Kent Thiry

Okay, thank you, LeAnne. Second quarter was a good quarter and our near-term operating prospects also look very solid. I will go through three items to kick the call off. Number one: clinical results, two: public policy and number three: our '08 forecast and a little bit of talking about the longer term outlook.

With respect to clinical results, as always, we will present them first because that is what comes first. We are first and foremost a care giving company, taking care of over 109,000 patients. In addition though, from a purely capitalistic point of view, it is a good thing that clinical outcomes are being discussed more and more and hopefully will become increasingly relevant in the shareholder world as well as in the clinical world. We remain advocates of that public discussion, the very public discussion of clinical results.

We will quickly reference four different measures this time. The first is the same one we have done for a long time, adequacy. Essentially, how well we are doing it removing toxins from our patient's blood. This quarter 95% of our patients had a Kt/V greater than 1.2. FMC, the other large dialysis organization or LDO is a very comparable performance and the two LDOs do much better than the rest of the industry, meaning all the small independents and hospital-based centers.

The second clinical area, the placement of fistulas, we had 60% of our patients with fistulas placed, once again the combined LDOs doing better than the rest of the industry. Third area, anemia management, 81% of our patients had hemoglobin is greater than or equal to 11 in the quarter. Here, it is worthwhile to make a small national editorial note that there is a growing number of US dialysis patients were seen their hemoglobin levels below 10, literally over 9% of the patients in America now being below 10, which is concerning to many nephrologist.

The fourth clinical area is mortality rate. Here we had a very nice drop in our mortality rate year-over-year. It's very difficult to do apples-to-apples comparisons on this metric right now to other organizations, but you can look at the national data and draw certain conclusions. One being, that we had a very nice drop in our year-over-year mortality from about 17.9 to 17. The last national data by the way, 2005 versus our 2007 showed them an 18.6%, so very nice difference.

Once again, even though you got to be very careful on the apples-to-apples comparing, the LDOs certainly appeared to have mortality that is significantly better than the rest of the community. So, that is a consistent theme across these clinical measures. I do want to repeat again that we remain a fervent advocate of public transparency and standardized measurement methodologies with respect to clinical outcomes.

Finally, we are also very excited to point out the joining of DaVita, as Chief Medical Officer by Allen Nissenson. He has been working with us for a few years and he is simply one of the best known and most respected nephrologists in the world.

Moving on to public policy and legislation, as most of you know in July Congress passed big Medicare legislation with the number of features for kidney care most notably bundling effect of 2011, and an annual update in 2012. The bad news is our Medicare economics are still underwater. So, we've got to charge private patients a lot more in order to fill the Medicare deficit. The good news is, the legislation that passed had some increases in it and is much better than the bill that passed the House of Representatives last year, much better.

Looking forward, the dialysis community is going to have a lot more issues and is gearing up to work with CMS to ensure that bundling implementation is as smooth and successful for all stakeholders as it can be.

Third and finally from my perspective, the outlook, we are narrowing our '08 operating income guidance. The new guidance is $800 million to $840 million versus the previous $790 million to $850 million and we are also providing initial guidance for '09 with all appropriate qualifiers, that guidance is $820 million to $880 million. When you stare at that guidance, private reimbursement remains the biggest swing factor and this 2009 guidance that we just relaid does in fact assume a nontrivial number of patient losses in situations, where payors and DaVita cannot agree on rates and we do in fact lose a fair number of patients. The guidance takes that into account.

I will now turn the call over to our Chief Financial Officer Rich Whitney.

Rich Whitney

Thanks, Kent. We had a good second quarter characterized by our typical strong and stable cash flows, some improved revenue trends and solid cost control. In particular, we have taken no price decreases or material patient losses in the quarter and in fact we are getting increases in certain circumstances.

Here are few key details about our second quarter results. First, the major drivers of operating income results in the quarter. Dialysis revenue per treatment increased about $7 per treatment versus Q1. Half of this increase was due to the increased utilization of physician-prescribed pharmaceuticals. The balance was an improvement in our commercial mix and rate.

I should note that margins on pharmaceuticals are considerably less than they were four or five years ago due to the changes in the way Medicare reimburses for these drugs and because of this, and increased bundling of our contracts in our private portfolio increases and decreases in drug intensities just have a much smaller impact on our operating profit than they have had in the past. Other revenue increased $1.40 per treatment sequentially, primarily due to growth in our specialty pharmacy business. Overall, operating expense was stable at 69.2% of total revenues, increasing $5.78 per treatment sequentially.

Now this increase, about half of it was due to the increased expense for physician-prescribed pharmaceuticals, including increased pharma utilization and the first rounds of the heparin price increases. I should note that heparin prices have increased four-fold so far this year. While, we saw some impact in Q2, the largest increase will hit us in Q3 and this expected impact is incorporated into our 2008 guidance.

Operating expenses also increased about $1 per treatment this quarter because of the growth in our non-dialysis businesses primarily our specialty pharmacy, which has larger margins than our core dialysis business. G&A was at 8.9% of revenues, increasing little less than $0.50 per treatment and you should continue to expect G&A for the full year to be around this 9% of revenue level.

As for our balance sheet, accounts receivable, days sales outstanding or DSO increased two days sequentially and one day year-over-year to 70 days due to some billing and payment delays for certain Medicaid and other government payors. As for cash flow, rolling 12 month operating cash flow was strong at $545 million. Q2 cash flow was on target and we are reiterating our operating cash flow expectations for 2008 of $480 million to $530 million. Through June 30th, we had certified 39 de novo centers and we had an additional 47 centers that are built and awaiting Medicare certification.

Based upon this de novo pipeline, we now expect to certify about 80 centers this year versus our original guidance of 60 centers, although this number could vary depending upon the timing of Medicare certifications, which have been slower than normal in some areas. Accordingly, we are also increasing our growth CapEx estimates for both acquisitions and de novos combined to $250 million to $300 million for the full year 2008. This compares to $176 million spent year-to-date.

A few other comments. Q2 non-acquired growth of 4.5% was within our stated range of 4% to 4.5% for the year. Secondly, our lower tax rate in the quarter was noted and described in our earnings release, and we should point out that we expect the rate for the balance of the year to be in the 38.5% to 39.5% range. Then finally year-to-date, we have spent $170 million of our available cash to repurchase approximately 3.5 million shares or about 3.3% of our outstanding shares at an average price of approximately $49 per share.

I will now turn the call back to Kent for some closing remarks before we go to Q&A.

Kent Thiry

As we look out a little bit longer than the next couple of quarters, which looks solid, I think there are three worthwhile elements to keep in mind that we have talked about them for years. The unit demand looks stable. Number two, cash flow looks wonderfully stable. Number three, our ability to add more value to both private and government payors continues to go up every year. Our ability to bring down total healthcare cost continues to become more and more extensive, tangible and applicable. As the quarters roll forward, hopefully we will become economically more and more materially relevant.

And Jeff, let's go on to Q&A, please.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Darren Lehrich.

Darren Lehrich - Deutsche Bank Securities

Thanks, good afternoon, everyone. I do have a couple questions here. The first one I want to ask was just, in reference to some of your prepared remarks about a nontrivial number of patients, I think that you expect to lose, could you just share with us your comments on what is driving that and was that the result of some of the bigger payor re-contracting that you had, during the second quarter?

Kent Thiry

No, not at all. It is just that as we provided '09 guidance, we wanted to let you know that that guidance does assume, and in some cases we are not going to reach agreements on rates and therefore, we are going to lose some patients rather than sacrifice too much on the rate side. Therefore, if we are able to avoid that, we can do better, but you are not at risk of a surprise, where we were assuming somehow a world in which rates held up and volumes continued to grow and then had any unpleasant surprises if those two conditions didn't hold. So, it is just to let you know that we had baked in the assumption that in some cases we are going to be throwing in the mats and losing some patients.

Darren Lehrich - Deutsche Bank Securities

That is helpful. So we can think through that a little bit more, can you help us think about a range of what this volume loss might be, so we can put that into context, Kent?

Kent Thiry

Sorry, Darren, I think at this point, it only being early August, it just not a good idea, because obviously the forecast is the combination of about 10,000 different variables and we are trying to let you know that we are not sitting here forecasting that every single thing is going to go perfectly. So, hopefully that is value-added in the guidance, but to throw out a specific range is, which is pretty impossible given the number of payors we are talking to and the number of ways in which you can roll out.

Darren Lehrich - Deutsche Bank Securities

That is fair, but can I just clarify the fact that you called it out as a risk factor here now, are we to assume that this is the biggest of the swing factors for 2009?

Kent Thiry

It is certainly way up there. I mean, it could very well be the biggest and it is certainly in the top three.

Darren Lehrich - Deutsche Bank Securities

Okay, and then a question for Rich, please. As you have discussed and we can see the expense per treatment did jump almost $6 sequentially. Can you just share with us a little bit more of your thoughts on what is driving that in the second quarter? It is certainly a lot more than we would have expected just to be even with the pharma mix going off. So, a little bit of color on that would be helpful.

Rich Whitney

Sure, Darren. Right around half of it is related to the increases in the physician-prescribed drugs and then in the neighborhood of $1 is related to growth in our new businesses. In the balance, you start to get into a long list of items, of which one, significant one would be the increase in the number of certified de novos we have and the number of de novos in our pipeline that are built, but not yet generating revenue. We also had our nationwide leadership meeting in Q2, as we do every year. So, that contributed to some of the sequential increase. Of course, operating expenses is one of these categories, that is growing year-by-year and the biggest components are pharma supplies and labor.

Darren Lehrich - Deutsche Bank Securities

Okay, thanks. One more and then I will jump back in the queue. Can you just share with us, Kent just your thoughts about some of the ancillary initiatives and maybe just update us on any bigger developments with those few business lines that are non-core and can you remind us the investment in income statement is relative to the original amounts? I think you shared with us at the Capital Markets Day.

Kent Thiry

Yes, fair question. Let me take a stab at it then you and subsequent questioners can probe more if I don't hit enough of it. Last part first, we told you that in '08, we were going to invest about $32 million meaning that would be the P&L hit from the two biggest ancillary initiatives, that being the Integrated Care Management, which we call VillageHealth comes in different forms and Davita Rx, which is our oral pharmacy and we are on track to have the investment be right about exactly that number here as we go through the year. So, just on the pure '08 mathematical front, we are on plan with what we told you at Capital Markets.

Then, on the business front, the good news on VillageHealth is that we are learning a lot and adding more and more value for patients in terms of improved clinical care and taxpayer, payors in terms of reduced total care. So, the value-added capability we wanted to develop and refine is growing. The bad news on VillageHealth has been we haven't grown enrollment in the way that we wanted to. So, that is the yin and the yang there and of course, we are happy about it and still pushing on the value-added, and are not happy in pushing on the low enrollment. The other big one, the oral pharmacy unit is currently running at about almost $100 million in annualized revenue is on plan.

It is doing some good things for patients and hopefully generating the proof that it can be a good thing for taxpayers. Doctors love it. Patients love it. It is more work for our caregivers. So, I can't claim that they always love it. We are also able to offer pharmaceutical companies data that they can't get anywhere else around compliance, effectiveness, etc cetera. So, that is the cryptic summary of the two biggest areas of investment from a dollar perspective.

Darren Lehrich - Deutsche Bank Securities

With VillageHealth, I think you have been investing a lot in your infrastructure there, just maybe in contrast to the enrollment growth which you said is disappointing. Should we expect that infrastructure to remain intact even if the enrollment isn't there for you?

Kent Thiry

Well, no way. If enrollment would not grow, there is no way to maintain that infrastructure. It is the job of that infrastructure to be good enough to grow the enrollment. So, there is no way that two statements will be true at the same time. Number one, enrollment doesn't grow a bunch, and number two that infrastructure stays as it is today. At this point, anticipating the next question, as you look at '09, we are anticipating that the combined economics of those two business units will be a smaller drain on operating profit than they are here in 08.

Darren Lehrich - Deutsche Bank Securities

That was my next question. Thanks a lot.

Kent Thiry

All right. Thank you.

Operator

Your next question comes from the line of Gary Lieberman.

Gary Lieberman- Stanford Group Company

Thanks, good afternoon. You had mentioned in the prepared remarks that part of the revenue per treatment increase was from improved commercial mix. Can you just give a little bit more detail about that? What is driving that?

Kent Thiry

Sure. I mean basically just higher percentage of patients that have better paying plans basically PPO plans or other plans that would or better paying plans, a change in the mix of Medicare patients versus non-Medicare patients, et cetera.

Gary Lieberman- Stanford Group Company

Is there anything that you can put your finger on that is driving that or is that just a random event?

Kent Thiry

No, it bounces around quarter-to-quarter. I would not describe any particular long-term trend to it.

Gary Lieberman- Stanford Group Company

Okay. Then, on the commercial rates, which helped you out in the quarter, in the past you have talked about a number of contracts that you were in somewhat tenuous negotiations. Could you quantify have you gone through all of those or have you gone through half of those? Can you help us out there?

Rich Whitney

Yes. The payors that we have referred to nothing has been settled with those in the quarter. So, the rate increases are not attributable to final settlement of any of those contracts.

Gary Lieberman- Stanford Group Company

Okay. So, is this current course of negotiations with the other commercial payors still the same spread out through the year or was there an abundance of contracts that were either renegotiated or saw increases in the quarter?

Rich Whitney

We saw increases in a number of different parts of our portfolio. I would say there was not any bolus of contracts. As you probably know, a lot of our contracts are short-term and can be change that by either side on relatively short notice.

Gary Lieberman- Stanford Group Company

Okay. Then just going into '09 in the guidance, with regards to heparin, specifically are you baking in any decreases in heparin or the continued pricing as of July 1?

Rich Whitney

Right now we are baking in the assumption that we are able to improve our utilization in that area. Now this line item has gone from a very small one to one that is material to us. So that would be the only assumption that would be factored into our guidance going forward, as it relates to heparin.

Gary Lieberman- Stanford Group Company

Okay, great. Thanks a lot.

Operator

Your next question comes from the line of Justin Lake.

Justin Lake - UBS

Thanks. Good afternoon.

Kent Thiry

Hi, Justin.

Justin Lake - UBS

Just first on regards to that '09 guidance, you did mention the commercial pressures. First, obviously we have got a fairly wide guidance range there. At the high end of that guidance, does that still imbed some pressure just maybe not as much or is that a continuation of '08 being a non-event?

Kent Thiry

Some pressure, not as much.

Justin Lake - UBS

Okay. You mentioned that it is up in the top three. What are the other two or one or two issues that you think are as meaningful as commercial pricing to the '09 guidance.

Kent Thiry

I believe this specific question was about patient losses and it was that biggest driver? That is the question I answered if I misheard it because the second one in the big three would be rate, as opposed to volume. The third would be any significant shifts in government reimbursement or policy. For example, an extension of the private pay coverage time, that is a positive development. A negative development would be I guess we can all imagine our nightmares there what would be done negatively, but those would be the top three.

Justin Lake - UBS

Got it. So one would be whether you are accepting a contract at a lower rate. The second would be walking away and actually just losing the volume.

Kent Thiry

Yes. Exactly. So private volume is one, private rate is two, government policy is three. That would be my answer to the question of the top three economic swing factors.

Justin Lake - UBS

That is helpful. Then just in the quarter, you mentioned changes in prescription drugs as a driver of revenue per treatment. Were there any other factors in there that I might have missed, as far as maybe commercial pricing or anything else? I suppose that is a $7 sequential increase.

Kent Thiry

Yes, the three factors, Justin, were the pharmaceuticals, which is around half of that and the balance was commercial mix and rate.

Justin Lake - UBS

Perfect. As we look at that 336 in the quarter, is that a new, is that a good run rate to use as we look into Q3 or was that something that was ramping, that maybe the run rate coming out of the quarter might have been higher or lower.

Kent Thiry

I don't think there is any run rate impact. That is a pretty good representative number of the way we exited in the quarter.

Justin Lake - UBS

Okay. Just last question on bad debt a very small pickup, but given how extremely consistent that number has been overtime as a percentage of revenue, is there anything you might be able to give us color on there as far as what you are seeing?

Kent Thiry

Yes, as you point out, it is such a small increase, but as it happens, the underlying core dialysis business was actually pretty stable at that number and we had some small increases in bad debt provision for some of the non-dialysis businesses, but there is really not much action in that line in this quarter.

Justin Lake - UBS

Perfect. Thanks for the help.

Kent Thiry

Sure.

Rich Whitney

Thanks, Justin.

Operator

Your next question comes from the line of Bill Bonello.

Bill Bonello - Wachovia Securities

Good afternoon, guys. Just a couple of follow-up questions: First, couple things on the balance sheet. Rich, this is the second quarter in a row now, where DSO has been up sequentially and you talked about just some timing issues around government pay. I mean is there anything at all that we should be concerned about there, any payments that are in dispute or anything like that?

Rich Whitney

No, I don't think so, Bill, and it is only up a day versus last year. As you know, this bounces around quarter-to-quarter depending upon timing of collections and various payment delays et cetera. The ones that I referred to in my prepared remarks, a bunch of that appears to be related to the national provider identification implementation and then the balance is various state Medicaid programs. We don't think any of those are at risk. It is just a timing delay.

While we are talking about this, I probably should bring up that as of July 1, Medi-Cal, the California's Medicaid program, because they have may able to reach a budget resolution at the state level has suspended our payments, not just our payments, payments to most all healthcare providers as of July 1. Now everybody anticipates that that will be resolved at some point soon, but assuming that it wasn't you would see about a two-day impact on Q3 if that situation remained unresolved.

Bill Bonello - Wachovia Securities

Sure, okay. Then just on that, can you just discuss Medicaid in general? Are there any states or concern there?

Rich Whitney

Concerns regarding…?

Bill Bonello - Wachovia Securities

What might happen with rates?

Rich Whitney

Definitely state budgets are continuing to get tighter. California is the state that is we have the most exposure to. They are, as you probably know, talking about a 10% or as high as a 10% rate cut on Medicaid and that would be about $12 million per year for us, if that was fully implemented. Of course, we don't know whether it will be fully implemented and where that will end up, but we certainly do have some provision for that in our guidance as we move forward throughout the balance of the year.

Bill Bonello - Wachovia Securities

Okay. So it is considered in the guidance. Then I apologize for this question, but I did not understand fully, I think it was just my listening. I did not understand exactly your answer to the heparin question. Are you saying that you have some modest offsets to the cost inflation or you expect the cost inflation to only have a modest impact?

Rich Whitney

No. From an impact standpoint, I think a couple people have written about, maybe even you Bill, I don't remember, have written about a $5 million to $7 million estimated impact per quarter. That is a pretty reasonable estimate of the situation. So, my comments were simply meant to say, someone was asking about our assumptions for how that would progress from here, and of course, we cannot predict what success we might have in reducing prices or in fact, the other way, but we do have a pretty strong initiative going on right now to tighten down our utilization of heparin. I was going to imagine it went from a very small line item; many times you increased the price, fourfold it even the smallest line item becomes a pretty material line item. So, that is the only theme that was baked into our guidance going forward.

Bill Bonello - Wachovia Securities

Okay. Then just on the comment you made about the patient losses. I appreciate that you are putting that into your guidance for next year, it makes a lot of sense but at this point, are there any contracts you are aware of at this point, where you are at that impact and you are walking away from, anticipating losing patients? Or is it just considering that that is a possibility of what could happen?

Rich Whitney

It is the latter, because we are talking about '09 guidance. So it is nothing that has happened already, or that we know will happen. It is simply a probabilistic assessment of what may very well happen that would affect '09.

Bill Bonello - Wachovia Securities

Okay. That is very helpful. Then, just the last question. On the EPO, last quarter, you talked a little bit about that there is some volatility, is the doctor's still getting used to how they are dosing under the new guidelines. Is it because they are afraid of going over the high end and they maybe don't dose appropriately and then the patients get too low, they have hematocrit and then they have to be dosed up and there is a little bit of bouncing around. Obviously, the trend is towards increased utilization in general, but do you think we hit a point of stability or do you expect a lot of quarter-to-quarter volatility still going forward around that item?

Kent Thiry

Yes, one makes any predictions in this area with great trepidation, because who knows exactly how the docs are going to make their decisions, but on a relative basis, we would guess that the next few quarters would be far more stable in terms of utilization trends than the last few.

Bill Bonello - Wachovia Securities

Okay. Thank you very much.

Kent Thiry

Thank you, Bill and I am going to go ahead and add to one answer that Rich already provided, which his on Medicaid, just a slightly higher level answer. On the one hand, if you look at the macro environment, lots of states are in tougher budget situations today than they were two years ago.

On the other hand, if you think about how dramatically we improved our community's ability to advocate for reasonable reimbursement and other policies on the federal level over the last five years, we are in the process of doing that same work at the state level. Right now, our community is much better today than it was two years ago, in terms of making sure that our patient's concerns and our caregiver's concerns are taken into account on some firm basis at the state level.

So there is somewhat of a community competence offset to the worsening macro environment on the Medicaid side.

Bill Bonello - Wachovia Securities

Great. Thanks for that color.

Operator

Your next question comes from the line of John Ransom.

John Ransom - Raymond James & Associates

Hello?

Kent Thiry

Hey, John.

Rich Whitney

Hi, John

John Ransom - Raymond James & Associates

Hi, I couldn't hear if that was me or not. Well, my thunder got stolen on the last question. My question is, as we move to the bundle rate, where are we in negotiating with the Feds on what is in and what is out of the bundle? What are the high level concerns or small victories at this point? Thanks.

Kent Thiry

Where we are is at the starting line. They have got a huge amount of work to do over the next couple of years and we are eager to be a good partner with them and FMC we have databases that ought to be able to help them a lot. We are willing to share them with them on a very open basis, so that they don't step on any of the land mines that could hurt everybody, most particularly the patients.

So we are at the starting line, but it is a massive undertaking and there is an awful lot of complexity to it, even as the legislation reflects, just ethnic issues and comborbid issues and outlier issues et cetera.

John Ransom - Raymond James & Associates

Okay. Thank you. Coming from the macro to the micro, it is for Rich, what should we think about numbers in the second quarter that were not in the first quarter? Except maybe a little better payor mix and maybe a little more expenses of heparin. Is there anything that was in the numbers sequentially that may or may not be in the numbers in the back half of the year from the timing standpoint?

Rich Whitney

Let's see, well, pharma was the big one, right. The sequential increase in the pharma utilization had the impact on the revenue per treatment as well as on the operating expenses.

John Ransom - Raymond James & Associates

Right.

Rich Whitney

Then a little bit better mix as we mentioned, also, rate increases in certain parts of the private portfolio. Then, heparin really didn't have that much of an impact in Q2. It is Q3 where the big part of the heparin increase will kick in.

John Ransom - Raymond James & Associates

Okay. Then when you say pharma, I mean we have been postulating in our little research that some of the non-EPO drug categories look like they are going up. Was that mostly the rebound in EPO or there other drugs contributing to that increase in pharma utilization?

Kent Thiry

That was mostly EPO.

John Ransom - Raymond James & Associates

Okay. Thank you.

Operator

Your next question comes from the line of Gary Taylor.

Kent Thiry

Gary?

Gary Taylor - Citigroup

Yes, can you hear me?

Kent Thiry

Now we can.

Gary Taylor - Citigroup

Okay. First the easy one, have you guys announced the Capital Markets Day for this year?

Kent Thiry

We have not.

Gary Taylor - Citigroup

Okay. Is one contemplated or still uncertain?

Kent Thiry

We are still working on calendars.

Gary Taylor - Citigroup

Okay.

Rich Whitney

However, yes, we will do one.

Gary Taylor - Citigroup

Okay. Going to heparin thanks for the comments you've had already, outside of your own ability or attempts to try to get a handle on utilization a little better. Do you feel like at this point you have any visibility whatsoever on supply in terms of Baxter re-enter, they don't re-enter, another supplier comes in, are you optimistic? Is it too early to tell?

Kent Thiry

We are not optimistic. We are pretty ignorant of exactly what some of the people are thinking that are going to make those decisions including Baxter. So, we are just not in a great position to do any handicapping. We are certainly eager to be a good customer to anyone, who offers good quality at a reasonable rate. We are also eager to talk to the government if anyone is being abusive of a temporary monopoly situation.

Gary Taylor - Citigroup

Were there any potential drug substitutes that make sense here? Or non-obvious?

Kent Thiry

Excuse me?

Gary Taylor - Citigroup

Are there any potential drug substitutes here? Or just non-obvious?

Kent Thiry

We have no substitutes right now.

Gary Taylor - Citigroup

Okay. Moving onto EPO, I understand your outlook for little more stable utilization over the next few quarters from where it has been. I have a question that goes back to the FDA panel, an issue that was raised just around hyporesponders and how physicians are dosing hyporesponders. Is there any discussion, debate within DaVita amongst the docs that gives you any pause that there is any potential change in physician dosing on hyporesponders or any potential data that could come out that could change that?

Kent Thiry

Yes, there have been a lot of healthy conversations about folks that are EPO resistant and I think the single area, the data I have seen, so just if the single area where you have seen the most logical change is, it used to be some doctors, who continue to prescribe significant dosages of EPO to people, who are hypo EPO resistant. That has changed a lot because there is more concern there than anywhere else that someone who was requiring a lot of EPO and was achieving a level above average should in fact have significant downward titration. The good news, I don't know of any protocol including ours that ever encourage that in the first place.

Our protocol had downward titrations starting right at 12 and dramatic titration if you cruised above that, but the answer to your question is yes, that lots of the doctors, out of the small number of doctors, which though prescribe high dosages for people at high hemoglobin levels, most of them have changed. Does that answer for the question you asked?

Gary Taylor - Citigroup

Well, I think it is helpful. I think you are saying you have already seen some changes. I thought the issue the FDA was looking at more was maybe people that were very high doses, but low hemoglobin levels and was taking really substantial doses just to get them to the low end of an acceptable range. Question about whether the dose itself was creating…?

Kent Thiry

Gary, that is also true that there has been a lot of change in that area as well and whether it is more or less than the first category, I could not say for sure, but certainly those are the two, where I have seen the most doctors change their prescribing patterns. Let me just check in with LeAnne, see if she would say the same thing.

LeAnne Zumwalt

Yes.

Gary Taylor - Citigroup

Okay. My last question and I will let you go. As we move towards bundling in 2011, what are the obvious investments you need to make that would interest us as financial analysts primarily thinking about the income statement. Are there some obvious technology people training costs that come through into 2011, just to be ready to operate under a bundled payment system?

Rich Whitney

I think there will be investments in all of those areas. As we sit here in 2008, it would be difficult for us to quantify that for you if that is what you are looking for, but I think, it is a major change in the reimbursement system and so we are going to have to spend a lot of time working through that, but again, we don't as Kent mentioned earlier, the first step here is getting clarity as to what the new reimbursement system will be. We know big picture what it'll be, but we don't yet know how that will be operationalized.

Gary Taylor - Citigroup

Okay.

Rich Whitney

Until the detail is worked out with CMS it is almost impossible to think about how you operationalize it.

Gary Taylor - Citigroup

Okay, thank you.

Operator

Your next question comes from the line of Mark Arnold.

Kent Thiry

Mark, if you could hold off just for one second.

Mark Arnold - Piper Jaffray & Co

Sure.

Kent Thiry

This is Kent again because I am having to quell a minor revolt here in the conference room because I have been informed that the calendar work has been pretty brutal on the capital markets and my blind assurance that we would do that one this year is inappropriate. So, if we miss it by the end of this year, it'll be very early in next year. All right go ahead, Mark.

Mark Arnold - Piper Jaffray & Co

No problem. Just a couple of cleanup questions. You guys mentioned the tax benefit in the quarter. Can you elaborate a little bit more as to what that was and I think you mentioned in your prepared remarks that you expect that to move back up in 2009 but can you just give us a little more color on that.

Rich Whitney

Sure. In the quarter the tax rate was impacted by FIN 48 fluctuations as well as the realization of certain tax benefit. I think the issue is on this line item, it is going to bounce around a lot more than it has historically because of the new requirements surrounding FIN 48, but in particular, in this quarter there were a couple of FIN 48 items and some other tax loss benefits.

Mark Arnold - Piper Jaffray & Co

Okay. Then one thing that stood out to me was it looked like about a $4 million reduction sequentially in your debt expense, even though your debt actually ticked up slightly. Can you help me understand that? I don't think the rates would have changed that much, the underlying LIBOR rates that much between the quarters. Was there something that was going on there?

Rich Whitney

No, it is just rate.

Mark Arnold - Piper Jaffray & Co

Okay.

Rich Whitney

It is just changes in the LIBOR rate on the unhedged portion of our debt.

Mark Arnold - Piper Jaffray & Co

Okay. One thing, it has been almost a year since you acquired HomeChoice last year. Can you give us any color in terms of what you have learned about that business and how does it fit into DaVita going forward?

Kent Thiry

What we have learned, well, we have learned a lot. I don't know how to easily capture it, but first year of owning any business, you learn a lot and we still like it is comparability to what we are good at to centralized field management, centralized service management, negotiating with payors, working with hospitals and discharge planners. So, we still like the fact that it involves very high overlap in core competencies although again at the same time there is a whole bunch of differences.

It is also creating for us a whole new look on the home world, since that's where it's focused as opposed to us, who primarily are centered focused but do some home and that was one of the other reasons. So, on the learning front, I can just say we know more about all those things I just talked about. Overall, we have done a mediocre to lousy job of working with a good team there. Hopefully we worked through the [Kings] of having them to be a part of DaVita that gave us a poor grade for how we work for them operationally in the first year.

Mark Arnold - Piper Jaffray & Co

Okay. I just have one last question. I think last week CMS posted a list of potential National Coverage Determinations topics which included a number of items affecting dialysis including the use of ESAs. I am just curious if you have any thoughts on what this means and how involved will DaVita be in any potential review.

LeAnne Zumwalt

Yes. Those were a list of topics that they plan to tackle and yes, we will be commenting particularly on the ESA section.

Mark Arnold - Piper Jaffray & Co

Were you surprised at all that was included or is it just the continuation of the same scrutiny that has been going on for the last two years?

LeAnne Zumwalt

I think it is fair to say it is a continuation of the scrutiny.

Kent Thiry

Scrutiny of our ESA practices has gone on for seven years. We expect it will continue as long as it is a really expensive drug and/or as long as we are not in a bundle environment at which point they think about it as being our problem not theirs.

Mark Arnold - Piper Jaffray & Co

Great. Nice quarter guys.

Kent Thiry

Thank you.

Operator

Your next question comes from the line of David MacDonald.

David MacDonald - SunTrust Robinson Humphrey

Good afternoon. Couple of questions, First, I apologize I got disconnected for a bit. Kent, can you run through the de novo numbers again? I missed them.

Rich Whitney

This is Rich. I would be happy to. Through June 30th, we opened 39 new de novos and we had another 47 that are built and awaiting Medicare certification. What we said about our expectations for the balance of the year is that originally we anticipated opening 60 enters and now because of the performance of the first half of the year, and the pipeline of centers awaiting for certification, we are expecting more like 80 centers for the full year.

David MacDonald - SunTrust Robinson Humphrey

Okay. Then, and then, Rich, I know that you guys in the last call talked about, maybe a little bit of a mixed bag in terms of performance from some of the newer de novos that were just going up. Can you give us any more color on how those are performing and anything further there?

Rich Whitney

A little bit better than what we were seeing last quarter. It is still a watch item for us.

David MacDonald - SunTrust Robinson Humphrey

Okay. Then just one question on the commercial renegotiations that are going on, can you give us any sense, when you take a look at all the contracts that you guys are wrestling with a little bit right now, some sense of what percentage is your profits the entire book that you are negotiating with represents right now? Can you give us that number?

Rich Whitney

No, we would not be able to give you that number. It is also such a hard thing to do because what costs you allocate to any one particular contract, but as we said for eight or nine years now, the non-government, the private side of our business represents all of our profits.

David MacDonald - SunTrust Robinson Humphrey

Well, then to ask it a different way. Is there any one particular contract that is north of say 10% of your profits that you guys are negotiating with right now?

Kent Thiry

Very few of our contracts exceed a year in duration, so almost all of our private profit is renegotiated every year, including this year, last year, the year before, next year, et cetera. So, so the real answer to your question, from an analytical point of view is the overwhelming majority of our private profit that subsidizes in Medicare deficit is renegotiated every single year.

David MacDonald - SunTrust Robinson Humphrey

Okay, thanks.

Operator

Your next question comes from the line of Balaji Gandhi.

Balaji Gandhi - Oppenheimer & Co.

Good afternoon. Just two questions about the pharmacy and infusion business. One is could you maybe give us a sense of what percentage of the patients that you serve are being served by those businesses? Then second just trying to understand, I think Rich you had quantified it as about $1.40 a treatment increase from the first quarter. Just trying to understand if that is a function of more patients using those services or a mix or increase in drugs?

Rich Whitney

I can tell you the increase is primarily from more patients on this service and we have not historically disclosed the number of patients on service and I would rather not spontaneously establish a new policy. If you can let us think about it and do it next quarter or call us in a few days, but I just hate to go jumping into new disclosure territories without having our act together.

Balaji Gandhi - Oppenheimer & Co.

Okay. Well, then, maybe another thought on that, it is $57 million in revenue, how much of it is infusion versus specialty pharmacy?

Rich Whitney

The revenue number that I gave before for the run rate for our oral pharmacy, which is in the 90s, close to 100, that is all our oral pharmacy, that is none of the home I.V. The home I.V. business is totally separate from the number I was talking about.

Balaji Gandhi - Oppenheimer & Co.

Okay. Great. I will follow-up with the other stuff later. Thanks.

Rich Whitney

Sorry for the confusion.

Operator

Your next question comes from the line of Mark Afrasiabi.

Mark Afrasiabi – PIMCO

Thanks. I am all set.

Operator

Your next question comes from the line of [Paul Lee]

Paul Lee

Hi, I have a question regarding the private contract negotiations. If you look back in second half of last year, comparing that with this year, would you say you are doing a little bit better than second half of last year or do you think it is at par?

Rich Whitney

Given we disclosed that we did a lousy job in the second half of last year, but the answer to the question is we are doing much better, we can't really swagger since we did poorly in the second half of last year, but the answer is, we are doing better.

Paul Lee

Okay. Great. Thank you.

Operator

You have a follow-up question from Darren Lehrich.

Darren Lehrich - Deutsche Bank Securities

Thanks for taking my follow-ups. I just wanted to dig into, Rich, one of your statements in the prepared remarks, about M&A, CapEx moving up a little bit and maybe if you can help us with that comment in the context where you are seeing M&A opportunities in order of magnitude?

Rich Whitney

Yes, the numbers that I gave were for both de novos and acquisitions combined. That range is $250 million to $300 million. That is up from, I believe, $200 million to $220 million, if I am not mistaken. So it is an increase that is primarily driven by the fact that we are spending more and expect to open more as a result, new centers, as well. Through the first part of the year we have spent a little bit more on acquisitions than we had anticipated, in part because of acquisitions of minority interest.

Darren Lehrich - Deutsche Bank Securities

Okay. Then an earlier caller had asked about the tax rate outlook for 2009. Just going back to '03, your tax rates have been closer to 39% for quite some time. Can you just share with us your outlook on tax rate next year?

Rich Whitney

Yes. To reiterate for the balance of the year, we are estimating that our tax rate would be in the range of 38.5% to 39.5% and then, our best estimates for 2009 would be round about the 40% range.

Darren Lehrich - Deutsche Bank Securities

Okay. The question then is what's driving the tax rate outlook to go up versus longer term tax rate that's been closer to 39%. I just want to make sure that we are not missing something that may have changed with regard to your tax planning. Thanks.

Rich Whitney

Yes. I don't know if there is anything that changed dramatically in the last quarter or two, but we certainly are getting a lot more pressure from various states that are taking more aggressive positions about [Nexus] and things like that. So, there is just a lot more action on the state front in the various parts of our portfolio.

Darren Lehrich - Deutsche Bank Securities

Okay. Then my last thing…

Rich Whitney

I think you were seeing that in the current year if you back out some of the FIN 48 benefits that we have experienced.

Darren Lehrich - Deutsche Bank Securities

Okay. That is helpful. My last thing, just for Kent, you called out the big three swing factors for '09. I just want to make sure, I am thinking about it, right, because the first two sound pretty logical, patients and rates, volume and rate, but the government side, it seems like it is pretty much set given the legislations passed and so, is there something that we are missing as it relates to the Medicare outlook? Or is it just the omen of potential surprise?

Kent Thiry

Yes, two things. Number one, always the element of potential surprise; number two the potential for private pay extension.

Darren Lehrich - Deutsche Bank Securities

Okay, thanks very much.

Kent Thiry

Thank you.

Operator

Your next question comes from the line of Dawn Brock.

Dawn Brock - JPMorgan

Hi there. Kent, I have got two questions for you. Maybe I am just going to give another try at the patient volume side. So, on the patient losses, are you seeing new pressures in your contract talks and negotiations from the commercial payors or have your parameters for a successful contract negotiation changed?

Kent Thiry

No. We are not seeing new pressures, pressures versus the last six, eight months, different pressures versus two years ago, but not versus the last couple of quarters that we have reported.

Dawn Brock - JPMorgan

Okay. Maybe the reason I asked it this way is that, obviously commercial pricing pressure is something that you have highlighted for some time, but the losses seem new. So, is a piece of the message that we should shift our focus from rev per treatment to volume or patient count is the more volatile potential variable?

Rich Whitney

I think the message is that, we ought to look at them both equally and the orientation has been more in the past purely on the rate. What we are trying to do is say that there are two levers of potential upside or downside and they are equally important and they are equally in play. Is that helpful?

Dawn Brock - JPMorgan

Yes, it is, that is fair enough. The second thing is could you talk a little bit about your conversations with the managed-care providers around the VillageHealth offering? Is it a timing issue where they need more prompting or more data? Is the conversation just less fluid? There is more of a hard stop where they are not believing or understanding the financial or clinical value-add. I am just trying to understand why enrollment isn't moving?

Rich Whitney

Okay, you are touching on two very different subjects because the enrollment in VillageHealth is Medicare patients. The private plans for private patients, is a very different conversation with respect to disease management. Now VillageHealth does both. We have private clients and then we have our operation that enrolls Medicare patients. Then, there is an overlap of course, which would be Medicare Advantage patients within a privately-owned Medicare Advantage plan, which is kind of the….

Dawn Brock - JPMorgan

The flip side of it.

Rich Whitney

Yes. So we have got those two different buckets or three different buckets. So, can you just say the question again, so I do a good job?

Dawn Brock - JPMorgan

Sure, I was trying to hit on both. If we are looking at the investment in VillageHealth and we are also looking at the snip plan, if we go onto VillageHealth and we look at enrollment, it has been a little bit irregular, is maybe a good term for it. As we move toward bundling, the question is, is there going to be, or do you anticipate being able to work with the commercial guys on, on the snip side and being able to work with Medicare on the VillageHealth side and hopefully be able to forge some, mutually enjoyable benefits on, in both where you are able to actually provide services to this patient population for less than either of the current providers can and there might be some profit sharing that could go on.

Kent Thiry

Yes. All right, let me tackle them in sequence. I hear where you are coming from. On the government side, the ironic news is in many ways there is more people in Medicare and Congress who are intensely interested in more innovative and integrated care management as a way of improving quality in bringing down taxpayer cost than you find it in the private sector. It is actually rational because as most of you know on the private side after 30 months the government takes over these patients.

So, private payors don't have the same number of chips on the table. So, we find ourselves in the ironic position that there is a lot more government senior people who see that, we have got less than 1% of Medicare enrollees consuming 7% of the dollars and it looks like that 14 hospital days per year could come down quite a bit because some people have pulled that off in the real world.

So, with respect to the government, we are with all the right qualifiers that one has to use when you are working with the Federal Government, and they have got a tough program to administer we think there is some truly exciting upside in improving quality and reducing taxpayer costs. If you recall, we are only about 30% of the total cost of a kidney care ESRD patient, but we have tremendous ability to influence the other 70, if they would just let us do it. The one countervailing factor to that is that Congressman Stark doesn't like the private approach on some of these chronically ill patients. So hopefully, with all the data that we have that it is a great thing for patients, families and taxpayers that we can actually make a lot of progress in the next couple years.

On the private side, we already have several private clients who despite the fact that they give up these patients after 30 months are interested and/or they have got significant Medicare Advantage presence and accountability. So, we are picking up a lot more interest in the private side now than we did a couple of years ago.

None of this stuff happens quickly. So, I want to make sure that my enthusiasm, strategic commitment doesn't somehow imply that in two quarters we are going to have some dramatic uptick in profitability because of making money on these product lines, but the level of interest and the sophistication of interest is up a bunch.

Dawn Brock - JPMorgan

Okay, that is very helpful. Thank you.

Kent Thiry

Thank you.

Operator

Your next question comes from the line of Art Henderson.

Art Henderson - Jefferies & Co

Hi Kent, could you give us your thoughts on home dialysis. Have the prospects there diminished in any way near-term with anything that has happened legislatively?

Kent Thiry

When you say home, are you referring to PD or Home hemo?

Art Henderson - Jefferies & Co

Home hemo.

Kent Thiry

Yes. I would not say the legislation changes the prospects in either direction, but what were you thinking?

Art Henderson - Jefferies & Co

Well, I know about a year-ago, this was a topic that was discussed more actively and it seems to have died out a bit. I just wasn't sure whether there was something specific on the reimbursement front, when we were talking about the MSP extension that might have facilitated Home hemo more. I just was more curious about what your outlook was for that particular…?

Kent Thiry

Yes. Our outlook is pretty much the same as it was a year ago. This is an area to quote ourselves, from a year ago, where you hear some people, who are intense evangelists and others who are intense critics both of them marshaling their own clinical and economic arguments. We are totally agnostic, but we are doing a bunch of it. We are collecting data, we think with great rigor on both the clinical and the economic front. We are learning a lot.

So, as CMS has to make the big policy call here over the next couple of years, we think we are going to be well positioned to be their absolute best partner in crafting a policy that is thoughtful for the taxpayer and the patient. So, we are no more or less optimistic or pessimistic than a year ago and anybody who is totally certain of which way that puppy should go, you should ignore.

Art Henderson - Jefferies & Co

Okay, great. Thanks very much.

Operator

(Operator Instructions) You have a follow-up question from Gary Taylor.

Gary Taylor - Citigroup

Hi, thanks. Just a real quick one. On the 80 new de novos contemplated for this year, will there be overlap of medical directors or will you have to recruit 80 new medical directors? When you answer that, can you just talk about generally just the market and the outlook in terms of recruiting and supply of nephrologists in general?

Rich Whitney

In the majority of our de novos we are working with physicians with whom we have worked before and are working with currently in existing centers. Then there is a nontrivial minority of de novos, where it is a doctor with whom we have not worked. That is a non-quantification of the mix but it is a clear strong majority versus minority.

Then overall on the physician recruiting front most of the macro data says that the number of nephrologists is not growing as quickly as the number of patients. I am not so sure that the macro data is right. I am not so sure the difference is big enough to really create any significant change in supply and demand.

There is a whole lot of competition to earn being chosen as the provider with whom a physician wants to be affiliated. So that's intense, but not dramatically different than any time in the past. Did I hit all the parts?

Gary Taylor - Citigroup

Yes, I think so. It just doesn't seem to be a barrier to de novo growth, basically. Competitive but not a hindering.

Rich Whitney

I would word it slightly differently. It is a barrier in some cases because you can have a geography that you think would be a good spot, but you don't have a quality doctor to be the medical director and help you take care of the patients, but it is no more a barrier than the past, that is what I would say.

Gary Taylor - Citigroup

Okay, thank you.

Operator

Your next question comes from the line of Paul Lee.

Paul Lee

Yes, I have a follow-up question on project, VillageHealth. You talked about the enrollment being under your expectation. I am just trying to get what is the reason behind it? Was it because the regulatory environment or the private payors not very enthusiastic about it or the patients not very enthusiastic about it or on your side your execution has been not very good?

I just want to get between the three parties, which one you would say is the reason behind the under expectation, the recruitment under expectation?

Kent Thiry

Yes, we have done and I appreciate the previous questioner using the term irregular. It was very polite. Yes, we have done a lousy job and the reasons for it are several. One is it is hard. Two is we were not thoughtful enough. Three, you have got to be exceptionally careful from a compliance point of view because the government has a lot of concerns about providers marketing stuff like that, anybody marketing stuff like this, but particularly providers. So you have to just bend over backwards to make sure that there is never any inappropriate pressure and only the most positive steps taken in terms of education and invitation et cetera.

Then, fourth, is, some of our best people had to spend a lot of time in Washington DC fighting to preserve special needs plans as opposed to being in the trenches accelerating the cycle time of our learning about how to do enrollment with all the right conservatism. For those who aren't familiar, there were a bunch of people in Congress who wanted to kill special needs plans and in some kill ESRD special needs plans, which would have just been a clinical crime. These special needs plans can be beautiful things for the patients and the taxpayers.

It's hard to imagine America's Medicare problem being solved without them. Of course, simultaneously, what DaVita always says, those plans have to be totally transparent and accountable. Clinically and procedurally with respect to practices and outcomes and we are prepared to pay that price in order to deliver integrated care to this population and to the taxpayers so forgive the sermon, but it was relevant for the he soliloquy, but it was relevant to your question.

Paul Lee

Thank you very much.

Operator

You have a follow-up question from the line of Justin Lake.

Justin Lake - UBS

Just a quick question on minority interest, looks like its running about 5% of operating income. Is that about right?

LeAnne Zumwalt

Yes, Justin, I don't have the numbers in front of me, but I think that sounds right.

Justin Lake - UBS

Is that about the same as far as the percentage of your centers that have a minority partner? With the physicians? Would that be higher or lower?

LeAnne Zumwalt

I believe the percentage of centers with minority partners is slightly higher.

Justin Lake - UBS

Okay. Then as far as the new centers, really I am just curious as to how many are being done in minority partnerships? Then, just a quick comment on what you are seeing there as far as physician interest and whether you expect to be doing more or less of them?

Rich Whitney

Yes, there is a mix in that 80 of both wholly-owned and joint venture partnerships as there has been for a number of years. I would say if anything, maybe there is a small trend towards more, but we are still doing a mix like we always have.

Justin Lake - UBS

Okay.

Kent Thiry

Yeah Justin, I have not run these numbers, but if I had to guess, I would say the percentage that have minority investors is higher than it was two years ago, not lower.

Justin Lake - UBS

Okay, just curious too, of the 80, is it double the amount. I am just trying to find out how this minority interest is spend overtime as a percentage?

Rich Whitney

Yes, we don't have it in front of us, Justin. We just quickly look at the math because we don't normally look at it this way, the way you posed the question, but the minority interest is more like 10%, not 5%.

LeAnne Zumwalt

Of centers.

Rich Whitney

In terms of the trending, it is on minority interest, it bounced around, and it was a little low in Q1 as we had pointed out. We expected it to go up in Q2 which it did and then this level is indicative of a normal level going forward. Though, as Ken pointed out, we are doing somewhat more joint ventures than we had over a couple of years ago. So, maybe you would see slow growth in that number overtime. Does that answer your question?

Justin Lake - UBS

I think so. Thanks a lot.

Operator

There are no more questions at this time.

Kent Thiry

All right, thank you all very much for your interest in DaVita and we will work hard to serve you well over the next three months. Thank you.

Operator

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

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Source: DaVita Inc. Q2 2008 Earnings Call Transcript
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