Segment Reporting

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Segment reporting

Segment reporting

The Company operates two major divisions, DaVita Kidney Care (Kidney Care) and DaVita Medical Group (DMG). The Kidney Care division is comprised of the Company’s U.S. dialysis and related lab services business, various ancillary services and strategic initiatives, including its international operations, and the Company’s corporate administrative support. The Company’s U.S. dialysis and related lab services business is its largest line of business, and is a leading provider of kidney dialysis services in the U.S. for patients suffering from chronic kidney failure, also known as ESRD. The Company’s DMG division is a patient- and physician-focused integrated healthcare delivery and management company with over two decades of providing coordinated outcomes-based medical care in a cost-effective manner.

The Company’s ancillary services and strategic initiatives consist primarily of pharmacy services, disease management services, vascular access services, clinical research programs, physician services, direct primary care and the Company’s international dialysis operations.

The Company’s operating segments have been defined based on the separate financial information that is regularly produced and reviewed by the Company’s chief operating decision maker in making decisions about allocating resources to and assessing the financial performance of the Company’s various operating lines of business. The chief operating decision maker for the Company is its Chief Executive Officer.

The Company’s separate operating segments include its U.S. dialysis and related lab services business, its DMG operations in each region, each of its ancillary services and strategic initiatives, and its consolidated international kidney care and other healthcare operations in the European and Middle Eastern, Latin America, and Asia Pacific markets, and under the Saudi Ministry of Health charter. The U.S. dialysis and related lab services business and the DMG business each qualify as separately reportable segments, and all of the other ancillary services and strategic initiatives operating segments, including the international operating segments, have been combined and disclosed in the other segments category.

The Company’s operating segment financial information included in this report is prepared on the internal management reporting basis that the chief operating decision maker uses to allocate resources and assess the financial performance of the operating segments. For internal management reporting, segment operations include direct segment operating expenses but exclude corporate administrative support costs, which consist primarily of indirect labor, benefits and long-term incentive based compensation of certain departments which provide support to all of the Company’s various operating lines of business. These corporate administrative support costs are reduced by internal management fees received from the Company’s ancillary lines of businesses.

The following is a summary of segment net revenues, segment operating margin (loss), and a reconciliation of segment operating margin to consolidated income before income taxes:

	Three months ended March 31,
	2017			2016
Segment net revenues:
U.S. dialysis and related lab services
Patient service revenues:
External sources	$	2,348,901		$	2,313,663
Intersegment revenues	23,760			14,308
Total dialysis and related lab services revenues	2,372,661			2,327,971
Less: Provision for uncollectible accounts	(106,770		)	(104,751		)
Net dialysis and related lab services patient service revenues	2,265,891			2,223,220
Other revenues(1)	5,303			3,973
Total net dialysis and related lab services revenues	2,271,194			2,227,193
DMG
DMG revenues:
Capitated revenues	889,686			866,019
Net patient service revenues	178,971			112,433
Other revenues(2)	18,269			10,335
Intersegment capitated and other revenues	59			71
Total net DMG revenues	1,086,985			988,858
Other—Ancillary services and strategic initiatives
Net patient service revenues	67,293			51,383
Capitated revenues	28,350			21,028
Other external sources	267,280			307,053
Intersegment revenues	15,302			11,827
Total ancillary services and strategic initiatives revenues	378,225			391,291
Total net segment revenues	3,736,404			3,607,342
Elimination of intersegment revenues	(39,121		)	(26,206		)
Consolidated net revenues	$	3,697,283		$	3,581,136
Segment operating margin (loss):
U.S. dialysis and related lab services(3)	$	944,740		$	440,055
DMG	12,308			(57,145		)
Other—Ancillary services and strategic initiatives	(58,220		)	(11,100		)
Total segment operating margin	898,828			371,810
Reconciliation of segment operating margin to consolidated income before income taxes:
Corporate administrative support	(10,592		)	(6,921		)
Consolidated operating income	888,236			364,889
Debt expense	(104,429		)	(102,884		)
Other income, net	4,243			2,976
Consolidated income before income taxes	$	788,050		$	264,981

(1) Includes management fees for providing management and administrative services to dialysis centers that are wholly-owned by third parties and legal entities in which the Company owns a noncontrolling equity investment.

(2) Includes medical consulting service fees and management fees for providing management and administrative services to unconsolidated joint ventures, as well as revenue related to the maintenance of existing physician networks.

(3) U.S. dialysis and related lab services operating income includes the net gain on the settlement with the VA.

Depreciation and amortization expense by reportable segment is as follows: 

	Three months ended March 31,
	2017		2016
U.S. dialysis and related lab services	$	125,029	$	116,537
DMG	57,323		46,263
Ancillary services and strategic initiatives	7,854		6,555
	$	190,206	$	169,355

Summary of assets by reportable segment is as follows: 

Subsequent to issuance of the Company’s fiscal year 2016 consolidated financial statements and their inclusion in its Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 24, 2017 (the “2016 10-K”), the Company determined that it had misstated its disclosure of segment assets at December 31, 2016 in Note 25 to those consolidated financial statements. This misstatement resulted in an overstatement of “U.S. dialysis and related lab services” segment assets of $338,963 and a corresponding understatement of “Other - ancillary services and strategic initiatives” segment assets of the same amount.  The Company performed an assessment of the materiality of this misstatement and concluded that this misstatement as originally disclosed was not materially misleading in its 2016 consolidated financial statements taken as a whole.  The Company therefore has not amended its financial statements filed on its 2016 10-K to correct this misstatement, but has provided the corrected disclosure here.

	March 31, 2017		December 31, 2016
Segment assets
U.S. dialysis and related lab services (including equity    investments of $85,769 and $66,924, respectively)	$	11,744,695	$	11,099,137
DMG (including equity investments of $12,579 and $10,350,    respectively)	6,209,369		6,213,091
Other—Ancillary services and strategic initiatives (including    equity investments of $423,500 and $425,115, respectively)	1,434,200		1,429,029
Consolidated assets	$	19,388,264	$	18,741,257

Expenditures for property and equipment by reportable segment is as follows: 

	Three months ended March 31,
	2017		2016
U.S. dialysis and related lab services	$	173,528	$	133,450
DMG	27,788		20,145
Ancillary services and strategic initiatives	13,219		19,592
	$	214,535	$	173,187