### DaVita’s Growth Outlook: A Turning Point?
DaVita provides dialysis treatment to patients with end-stage renal disease. As the population ages, the number of people needing dialysis also increases. Because of this, admissions to DaVita dialysis centers have been increasing steadily over the past five years.
However, mortality remained elevated from 2020 until very recently. As a result, patients spent less time on dialysis compared to pre-2020. Despite increasing admissions, the number of dialysis treatments has remained flat for five full years.
Increasing admissions + elevated mortality = zero volume growth.
Mortality rates are extremely important for DaVita and the dialysis industry. DaVita executives and analysts have mentioned “mortality” 20-30 times in all of the company's recent earnings calls.
### A Recurring Pattern in SEC Reports
Every quarter, DaVita’s SEC filings tell the same story. Revenue grows due to acquisitions and higher insurance reimbursements. Yet, organic volume growth remains absent.
I reviewed all of DaVita’s recent quarterly reports. They show normalized year-over-year volume growth ranging from -2.2% to a high of +0.7% in Q4 2023. No quarter has surpassed even 1% growth since early 2020. On every earnings call, DaVita executives emphasize that elevated mortality is the key reason for stagnation in organic volume.
A decline in mortality rates would be a game changer. This shift could drive significant EPS increases and justify multiple expansion.
### Why Q4 2024 Could Mark a Turning Point
For the first time in nearly five years, I believe DaVita will report strong organic volume growth in Q4 when they release earnings this week.
Although there is no direct data on dialysis patient deaths per quarter, there is a useful proxy: quarterly deaths for the 85+ age group (available at mortality.org). This age group shares key characteristics with dialysis patients, including a median life expectancy of about five years and heightened susceptibility to infectious diseases.
### Key Data Insights
- The Q4 2024 raw death count for the 85+ group was **165,061**, significantly lower than **173,505** in Q4 2023.
- For the first time in nearly five years, deaths are now lower than Q4 2018 and 2019, before the pandemic.
### Calculating the Impact on Dialysis Growth
Comparing Q4 2024 vs. Q4 2023:
\[
(173,505 - 165,061) / 173,505 = 4.9\%
\]
The raw death count decreased by **4.9%**.
Adjusting for an estimated **2% annual population increase**, the true death rate decline is **6.9%**.
Since we are looking at a single quarter, we divide by four:
\[
6.9\% / 4 = +1.7\%
\]
### Projected Full-Year Growth
Reported normalized treatment growth for prior quarters in 2024:
- **Q1:** +0.4%
- **Q2:** +0.4%
- **Q3:** -0.2%
- **Predicted Q4:** +1.7%
If this estimate holds, full-year 2024 treatment growth will be approximately **+0.6%**.
### A Breakthrough in Organic Growth?
If DaVita reports **+1.7% organic volume growth for Q4**, it would be the first time in **18 quarters** that growth exceeded **1%**. Expect the company to discuss this decline in mortality at length during their earnings call. I also believe this shift will lead to a significant stock price increase.
### Why This Trend Could Continue
While one quarter of improved mortality and volume growth is important, this may mark a longer-lasting shift.
Infectious disease waves tend to disproportionately kill the most vulnerable. This means that the dialysis patient population today is, on average, more resilient than before 2020. This phenomenon, known as the **harvesting effect**, has already played out in countries hit hard early in the pandemic. Bulgaria’s **85+ death rate in 2023 was 6% lower than pre-2020 levels**!
If **+1.7% quarterly volume growth** continues, this translates to around **7% annual growth** for at least the next two years. Coupled with DaVita’s ongoing growth from acquisitions, the stock has **tremendous upside potential** over the next 2-3 years.
### A Shift in Outlook
Consider the following statement from DaVita’s CFO during the last earnings call:
> “And then on mortality, I don't think there's anything new here that negatively impacts our view of 2025. I think the fact that the elevated mortality continues and hasn't gone back to pre-COVID levels. Every quarter that that happens, it informs our views a bit. But I don't think we saw anything over this quarter that changed our views for next year significantly.”
This outlook **changes completely** after earnings this week.
I think anyway. Invest responsibly. No YOLOs. This is not financial advice. Position: $48k DVA shares.