Runs roughly 2,800 clinics where kidney failure patients receive mandatory, three-times-weekly dialysis paid for mainly by Medicare.
What stands out
- Returns appear driven by leverage
At a glance
Runs roughly 2,800 clinics where kidney failure patients receive mandatory, three-times-weekly dialysis paid for mainly by Medicare.
DaVita runs roughly 2,800 outpatient centers where kidney failure patients receive dialysis three times a week, every week, for the rest of their lives — and because Medicare automatically covers anyone with end-stage renal disease and pays a fixed rate of around $240 per session, nearly every treatment DaVita performs is billed to the same federal formula. Each center is built around a specific municipal water connection, a fixed number of chairs, and a contracted supervising physician, so the only way to serve more patients in a given area is to open another physical location rather than run the existing one harder. Because each patient's treatment is calibrated to their individual vascular access and medical history over months or years, and their transportation and family schedules are organized around a single center's address and shift times, leaving for a competitor carries real medical and logistical cost — which means occupied chairs tend to stay occupied. The vulnerability running underneath all of this is that CMS sets the per-session rate for every center at once, so if it restructured reimbursement to favor home dialysis, patients would vacate chairs permanently while the leases, water infrastructure, and physician contracts at all 2,800 locations remained.
How does this company make money?
The primary source of revenue is a fixed payment of roughly $240 per dialysis session from Medicare under the ESRD Prospective Payment System, collected three times a week for each patient. Patients covered by commercial insurance rather than Medicare generate additional per-session payments, typically at higher rates. The company also earns revenue from routine blood tests that Medicare requires dialysis patients to have regularly, billed as laboratory services.
What makes this company hard to replace?
Each patient's treatment is calibrated over time to their specific vascular access setup and medical parameters — switching centers means starting that calibration over, which carries real medical risk. Transportation arrangements and family schedules are built around a specific center's location and time slots, and unwinding those is genuinely disruptive. New dialysis facilities also face Medicare certification requirements that take time to satisfy, so there are not many alternatives to switch to in most local areas.
What limits this company?
The number of chairs at each certified location is the hard ceiling. Patients cannot skip or compress sessions without serious medical risk, so no amount of extra hiring or new equipment can push more patients through a center than its chair count and shift schedule physically allow.
What does this company depend on?
The company cannot operate without municipal water treatment systems at each center location, because high-purity water is required for every session. It relies on Fresenius and Baxter for the dialysis machines, dialyzers, and bloodlines used in every treatment. Contracted nephrologists must legally oversee each patient's care under Medicare rules. Medicare and Medicaid together cover more than 80% of patients, making federal reimbursement the financial foundation of the business. And because many dialysis patients cannot drive, specialized patient transportation services are essential to keeping chairs filled three times a week.
Who depends on this company?
End-stage renal disease patients depend on it most directly — missing sessions causes life-threatening toxin buildup within days, so there is no fallback. Nephrologists who treat chronic kidney disease depend on reliable dialysis centers to refer their sickest patients to. Medicare itself depends on outpatient dialysis centers to keep kidney failure patients out of hospitals, where treatment would cost far more.
How does this company scale?
Clinical protocols and administrative systems are highly standardized, so they can be copied to new locations without rebuilding from scratch each time. What does not scale easily is geography: each center can only serve patients who live close enough to travel there three times a week, so growth requires opening more physical locations rather than simply running existing ones harder.
What external forces can significantly affect this company?
The biggest external pressure is Medicare's ESRD Prospective Payment System rate, which CMS sets and can adjust — a downward revision would cut revenue across every center simultaneously. Aging Baby Boomers are raising rates of diabetes and hypertension, which are the leading causes of kidney failure, so the patient population is growing. FDA regulations govern the safety of dialysis equipment and water quality standards, adding a layer of compliance that each center must maintain continuously.
Where is this company structurally vulnerable?
If CMS restructures the ESRD Prospective Payment System to pay materially more for home dialysis, patients would shift their treatment home and vacate clinic chairs permanently. The fixed costs at each of the roughly 2,800 locations — leases, water infrastructure, nephrologist contracts — would remain, but the revenue tied to each chair would fall. Because every center's finances are governed by the same federal rate formula, a single policy change resets the economics of the entire network at once.
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