DAVITA INC.

Previous wording

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws. Please read the cautionary notice regarding forward-looking statements in Item 7 of Part II of this Annual Report on Form 10-K under the heading "Management’s Discussion and Analysis of Financial Condition and Results of Operations." These forward-looking statements involve risks and uncertainties, including those discussed below, which could have a material adverse effect on our business, cash flows, financial condition, results of operations and/or reputation. The risks and uncertainties discussed below are not the only ones facing our business. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial could also have a material adverse effect on our business, cash flows, financial condition, results of operations and/or reputation.

Current wording

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws. Please read the cautionary notice regarding forward-looking statements in Item 7 of Part II of this Annual Report on Form 10-K under the heading "Management’s Discussion and Analysis of Financial Condition and Results of Operations." These forward-looking statements involve risks and uncertainties, including those discussed below, and if any of the following risks or uncertainties develop into actual events or if the circumstances described in the risk or uncertainties occur or continue to occur, they could individually or in the aggregate, have a material adverse effect on our business, cash flows, financial condition, results of operations and/or could materially harm our reputation. The risks and uncertainties discussed below are not the only ones facing our business. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial could also have a material adverse effect on our business, cash flows, financial condition, results of operations and/or could materially harm our reputation.

Previous wording

•increases in labor costs, including, without limitation, due to shortages, changes in certification requirements and/or higher than normal turnover rates in skilled clinical personnel; currently pending or future governmental laws, rules, regulations or initiatives; our ability to attract and retain key leadership talent or employees; or union organizing activities or other legislative or other changes;

Current wording

•our business is labor intensive and we may experience increases in labor costs, our ability to attract and retain key leadership talent or employees, or union organizing activities;

Previous wording

•our ability to successfully implement our strategy with respect to integrated kidney care, value-based care and home-based dialysis;

Current wording

•our ability to successfully implement our strategic and operational initiatives, including with respect to integrated kidney care, value-based care and home-based dialysis;

Previous wording

•our ability to effectively maintain, operate or upgrade our information systems or those of third-party service providers upon which we rely, including, without limitation, our clinical, billing and collections systems, and our ability to adhere to federal and state data sharing and access requirements and regulations;

Current wording

•our ability to effectively maintain, operate or upgrade our information systems or those of third-party service providers upon which we rely, including, without limitation, our clinical, billing and collections systems, and our ability to adhere to federal and state data sharing and access requirements and regulations, and successfully adopt or adapt to new technologies;

Previous wording

We invested in and implemented cost savings initiatives designed to help mitigate these cost and volume pressures. These included, among other things, identified cost savings related to the achievement of general and administrative cost efficiencies through ongoing initiatives, including, among others, those that increase our use of third party service providers to perform certain activities. These opportunities and investments also included, among others, initiatives relating to clinic optimization, capacity utilization improvement and procurement opportunities, as well as investment in revenue cycle management. We incurred charges in connection with the continued implementation of these initiatives. There can be no assurance that we will be able to continue to successfully execute these initiatives or that they will achieve expectations or succeed in helping offset the impact of these challenging conditions. Any failure on our part to adjust our business and operations in this manner, to adjust to other marketplace developments or dynamics or to appropriately implement these initiatives in accordance with applicable legal, regulatory or compliance requirements could adversely impact our ability to provide dialysis services or the cost of providing those services, among other things, and ultimately could have a material adverse effect on our business, reputation, results of operations, financial condition and cash flows.

Current wording

We continue to invest in initiatives designed to help mitigate cost and volume pressures that may develop, including as a result of these external conditions or developments. There can be no assurance that we will be able to continue to successfully execute these initiatives, that they will achieve expectations or succeed in helping offset the impact of these challenging conditions or that any mitigation efforts are possible. Any failure on our part to implement potential initiatives to mitigate these pressures, adjust our business operations in this manner in accordance with applicable legal, regulatory or compliance requirements or to adjust to other marketplace developments or dynamics, could adversely impact our ability to provide dialysis services or the cost of providing those services to our patients, among other things, and ultimately could have a material adverse effect on our business, results of operations, financial condition and cash flows and could materially harm our reputation.

Previous wording

Any decrease in growth rates for the ESKD or CKD patient population, higher mortality rates for dialysis patients or other reductions in demand for dialysis treatments, if sustained or significant, could have a material adverse effect on our business, results of operations, financial condition and cash flows. Any such impact would be magnified to the extent it also resulted in a lower number of patients with commercial insurance or a lower percentage of patients under commercial insurance relative to government-based programs.

Current wording

Global health conditions may adversely impact our patient census and treatment volumes. For example, severe flu seasons and the ongoing incidence of other infectious diseases such as COVID-19 in recent years have driven elevated mortality in our patient population, which has in turn had a negative impact on treatment volume. The negative perception of vaccinations in the U.S. has exacerbated these risks. To the extent that these and other global health conditions such as any future severe flu seasons, global health crises, pandemics or epidemics drive sustained elevated mortality levels in the overall ESKD or CKD populations, we may experience adverse impacts on our new-to-dialysis admission rates, treatment volumes, future revenues and non-acquired growth, among other things. Other trends in health conditions and changing population or demographic trends may also impact overall ESKD growth rates and our associated treatment volumes, including, among others, the growth and aging of the U.S. population, changing U.S. immigration levels, the availability of transplant opportunities, incidence rates for diseases that cause kidney failure such as diabetes and hypertension, or growth rates of minority populations with higher-than-average incidence rates of ESKD. Any decrease in growth rates for the ESKD or CKD patient population, higher mortality rates for dialysis patients or other reductions in demand for dialysis treatments, if sustained or significant, could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Previous wording

Some of our operations, including our clinical laboratory, dialysis centers and other facilities, as well as the operations of our third party suppliers and service providers, may be adversely impacted by the effects of natural or other disasters, political instability, public health crises such as global pandemics or epidemics, or adverse weather events such as hurricanes, earthquakes, fires or flooding. Each of these effects and risks may be further intensified by the potential impact of climate change on a global scale. In addition, these risks are particularly heightened for our patients in part because individuals with chronic illness may be more susceptible to the adverse effects of epidemics or other public health crises and also because any natural or other disaster, political instability or adverse weather event that disrupts or limits the operation of any of our centers or other facilities or services may delay or otherwise impact the critical services we provide to dialysis patients. Further, any such event or other occurrence that results in a failure of the fitness of our clinical laboratory, dialysis centers and related operations and/or other facilities or the operations of our third party suppliers and service providers or otherwise adversely impacts the safety of our teammates or patients at any of those locations could lead us to face adverse consequences, including, without limitation, the potential loss of data, including PHI or PII, compliance or regulatory investigations, any of which could materially impact our business, results of operations and financial condition, and could materially harm our reputation. For example, our clinical laboratory is located in Florida, a state that has in the past experienced and may in the future experience hurricanes. Natural or other disasters or adverse weather events could significantly damage or destroy our facilities, disrupt operations, increase our costs to maintain operations and require substantial expenditures and recovery time to fully resume operations. In addition, if the frequency, intensity and widening potential geographic scope of natural or other disasters or adverse weather events increase or a number of laws or regulations adopted in response to such changes, we may face increased costs associated with operating our clinics, as well as potential interruptions to and changes in our clinical and business operations, including, without limitation, with respect to increasing costs for energy, supplies of water, or pharmaceuticals or other supplies necessary to the operations or our clinics. For additional information regarding the risks to our supply chain and third party service providers, see the discussion in the risk factor under the heading "If certain of our suppliers and service providers…"

Current wording

Severe weather events or natural disasters could also strain global supply chains to the extent such events result in equipment and clinical supply shortages, disruptions, delays or associated price increases. Because we are a nationwide provider, certain of our facilities, clinics or key suppliers are in areas that may be more susceptible to such effects and risks. For example, our clinical laboratory is in Florida, a state that has in the past experienced and may in the future experience hurricanes. These effects and risks may be further intensified by what has been documented as an increased risk of severe weather events. If the frequency, intensity and widening potential geographic scope of natural or other disasters or adverse weather events increase, we may face increased costs associated with operating our clinics, potential interruptions to and changes in our clinical and business operations, and increased compliance or regulatory risk to the extent laws or regulations are adopted in response to the increasing frequency of such events. These increased costs may include, without limitation, costs for energy, supplies of water, or pharmaceuticals or other supplies necessary to the operations of our clinics.

Previous wording

The impact of the pandemic on our patient population combined with cost inflation trends and the failure of government reimbursement rates to keep pace with these cost trends have put pressure on our existing cost structure, and we expect that certain of those increased costs will persist as inflationary and supply chain pressures and challenging labor market conditions continue. Prolonged geopolitical or global economic volatility, uncertainty, trade disputes, labor supply shortages and other challenging labor market conditions could have an adverse impact on our growth and ability to execute on our other strategic initiatives and a material adverse impact on our labor costs, among other things. Prolonged strain on global supply chains, including as a result of trade disputes, geopolitical instability, fluctuations in foreign currency exchange rates or regulatory requirements may result in equipment and clinical supply shortages, disruptions, delays or associated price increases that could impact our ability to provide dialysis services or the cost of providing those services, among other things. Moreover, to the extent that monetary policies, tariffs, or other factors impacting structural costs over the long term have contributed to or may in the future contribute to inflationary pressures, this may in turn continue to increase our labor and supply costs at a rate that outpaces the Medicare or any other rate increases we may receive. In our value-based care and other programs where we assume financial accountability for total patient cost, an increase in our underlying staffing and labor expenses could have an impact on total cost of care. This increase may in turn impact the profitability of those programs relative to their respective funding.

Current wording

Certain economic conditions, including, among others, geopolitical and global economic volatility and instability, inflationary conditions and interest rate volatility, fluctuations in foreign currency exchange rates or regulatory requirements, trade disputes, labor supply shortages and other challenging labor market conditions have continued to put pressure on our existing cost structure, including among other things, staffing, labor and supply costs. We expect that certain of those increased costs will persist in the near term as inflationary and supply chain pressures and challenging labor market conditions continue. If these conditions continue for a prolonged period of time or if new adverse conditions emerge, we may experience increased labor and supply costs at a rate that outpaces Medicare or any other rate increases we may receive, and we may experience equipment and clinical supply shortages, disruptions, delays or associated price increases that could impact our ability to provide dialysis services or the cost of providing those services or adversely impact our ability to execute on our other strategic initiatives, among other things.

Previous wording

Deterioration in economic conditions, whether driven by macroeconomic conditions, global events, domestic political or governmental volatility or other events beyond our control, including the aforementioned inflationary and labor market pressures, changes in domestic policies, volatility and uncertainty, as well as potential volatility in the global trade markets or interest rates, could have a material adverse effect on our business, results of operations, financial condition and cash flows. Among other things, the potential decline in federal and state tax revenues that may result from a deterioration in economic conditions or political initiatives targeted at reducing government spending may create additional pressures to government sponsored programs. Any potential period of extended or increased job losses in the U.S. as a result of adverse economic conditions, including economic deterioration or changes in immigration regulations, could ultimately result in a smaller percentage of our patients being covered by an employer group health plan and a larger percentage being covered by lower-paying government insurance programs or being uninsured. In addition, the potential expiration at the end of 2025 of premium tax credits available for patients who purchase health insurance on marketplaces developed under the ACA for may similarly lead to a smaller percentage of patients being covered by a commercial insurance plan. In the event a material reduction in the share of our patients covered by commercial insurance plans occurs, it would have a material adverse impact on our business, results of operations, financial condition and cash flows. The extent of these effects will depend upon, among other things, the extent and duration of any increased unemployment levels for our patient population, any economic deterioration or potential recession; and patients’ ability to retain existing insurance and their individual choices with respect to their coverage, all of which are highly uncertain and difficult to predict. Declining economic conditions or political or other pressures that drive increased focus on healthcare costs may lead employers to select more restrictive commercial plans with lower reimbursement rates. To the extent that payors are negatively impacted by a decline in the economy, we may experience further pressure on commercial rates, a slowdown in collections and a reduction in the amounts we expect to collect. For additional information on risks regarding the potential impact of decreases to the percentage or number of our patients with commercial insurance, see the risk factor under the heading "If the number or percentage of patients with higher-paying commercial insurance declines..."

Current wording

If adverse economic conditions lead to a period of extended or increased job losses in the U.S., it could ultimately result in a smaller percentage of our patients being covered by an employer group health plan, a larger percentage being covered by lower-paying government insurance programs or being uninsured or underinsured, and an increase in uncollectible accounts independent of whether general economic conditions subsequently improve. The extent of these effects will depend upon, among other things, the extent and duration of any economic deterioration or potential recession and any resultant increased unemployment levels for our patient population, and the ability of our patients to retain existing insurance and their individual choices with respect to their coverage, all of which are highly uncertain and difficult to predict. If these adverse economic conditions persist or remain uncertain for an extended period of time, and associated adverse impacts on our revenues and financial results may be material and may in turn lead us to incur future charges to recognize impairment in the carrying amount of our goodwill and other intangible assets.

Previous wording

The aforementioned impacts may also drive an increased need for additional liquidity funded by accessing existing credit facilities, raising new debt in the capital markets, or other sources, and we may seek to refinance existing debt, which may be more difficult or costly in an uncertain or declining economic environment. For additional information regarding the risks related to our indebtedness, see the discussion in the risk factor under the heading "The level of our current and future debt..."

Current wording

The aforementioned impacts may also drive an increased need for additional liquidity funded by accessing existing credit facilities, raising new debt in the capital markets, or other sources, and we may seek to refinance existing debt, which may be more difficult or costly in an uncertain or declining economic environment.

Previous wording

Any or all of these economic conditions or developments, as well as other consequences of these conditions or developments, some of which are beyond our control and none of which we can reasonably predict, could have a material adverse effect on our patients, teammates, physician partners, suppliers, business, results of operations, financial condition and/or cash flows or materially harm our reputation. In addition, these conditions or developments each may heighten many of the other risks and uncertainties discussed herein.

Current wording

Any or all of the external conditions or developments discussed above, as well as other consequences of these conditions or developments, many of which are beyond our control and none of which we can reasonably predict, could have a material adverse effect on our patients, teammates, physician partners, suppliers, business, results of operations, financial condition and/or cash flows or materially harm our reputation.

Previous wording

Our business is subject to a complex set of governmental laws, regulations and other requirements and any failure to adhere to those requirements, or any changes in those requirements, could have a material adverse effect on our business, results of operations, financial condition and cash flows, could materially harm our stock price, and in some circumstances, could materially harm our reputation.

Current wording

Our business is subject to a complex set of governmental laws, regulations and other requirements and any failure to adhere to those requirements, or any changes in those requirements or in federal or state legislation or regulations, could have a material adverse effect on our business, and operations, and in some circumstances, could materially harm our reputation.

Previous wording

We operate in a complex regulatory environment with an extensive and evolving set of federal, state and local governmental laws, regulations and other requirements that apply to us. These laws, regulations and other requirements are promulgated and overseen by a number of different legislative, regulatory, administrative, and quasi-regulatory bodies, each of which may have varying interpretations, judgments or related guidance. As such, we utilize considerable resources on an ongoing basis to monitor, assess and respond to applicable legislative, regulatory and administrative requirements, but there is no guarantee that we will be successful in our efforts to adhere to all of these requirements.

Current wording

We operate in a complex regulatory environment with an extensive and evolving set of federal, state and local governmental laws, regulations and other requirements, including executive orders, that apply to us and shape the competitive environment in which we operate. These laws, regulations and other requirements are promulgated and overseen by a number of different legislative, regulatory, administrative, and quasi-regulatory bodies, each of which may have evolving priorities and varying interpretations, judgments or related guidance. Each of these laws, regulations and other requirements are continuously changing, and we utilize considerable resources on an ongoing basis to monitor, assess and respond to applicable legislative, regulatory and administrative requirements. Despite these efforts, there is no guarantee that we will be successful in our efforts to adhere to all of these requirements and there is no assurance that we will be able to accurately predict the nature, timing or extent of any changes to these laws, regulations or requirements or the impact of such changes on the markets in which we conduct business.

Previous wording

Any future penalties, sanctions or other consequences could be more severe in certain circumstances if the OIG or a similar regulatory authority determines that we knowingly or repeatedly failed to comply with laws, regulations or requirements that apply to our business. Additionally, the healthcare sector, including the dialysis industry, is regularly subject to negative publicity, including as a result of governmental investigations, adverse media coverage and political debate surrounding the U.S. healthcare system, among other things. Negative publicity, regardless of merit, regarding the dialysis industry generally, the U.S. healthcare system or DaVita in particular may adversely affect us.

Current wording

If any of our personnel, representatives, third party vendors or operations are found to violate any of these or other laws, regulations or requirements, we could suffer severe consequences that could have a material adverse effect on our business, results of operation, financial condition and cash flows. Any future penalties, sanctions or other consequences could be more severe in certain circumstances if any regulatory authority determines that we knowingly or repeatedly failed to comply with laws, regulations or requirements that apply to our business. Because the healthcare sector, including the dialysis industry, is regularly subject to negative publicity, the announcement or other public disclosure of governmental allegations or investigations and any associated adverse media coverage and political debate, regardless of merit, regarding the dialysis industry generally, or the U.S. healthcare system or DaVita in particular, may adversely affect our reputation and stock price and could impact our relationships and/or contracts related to our business, among other things. See Note 15 to the consolidated financial statements included in this report for further details regarding certain pending legal proceedings and regulatory matters to which we are or may be subject from time to time, any of which may include allegations of violations of applicable laws, regulations and requirements.

Previous wording

Among other things, the regulatory framework of the healthcare marketplace continues to evolve as a result of executive orders, presidential memoranda, legislative, regulatory and administrative developments and judicial proceedings. These changes shape the landscape for our current dialysis and ancillary businesses as well as for emerging comprehensive and integrated kidney care markets. For example, as described below, we have made substantial investments in and dedicated resources toour integrated care business, value-based care initiatives and home-based dialysis business to address regulatory developments that include innovative payment models, and there are risks to those investments, or additional investments may be required, in the event the regulatory environment changes and we do not adequately adapt to such changes.

Current wording

Changes to the complex and dynamic regulatory environment in which we operate can alter the regulatory framework of the healthcare marketplace and shape the competitive landscape for our current dialysis and ancillary businesses as well as for comprehensive and integrated kidney care markets. Such changes may require us to shift strategic priorities and initiatives to successfully compete. These changes may take the form of executive orders, presidential memoranda, legislative, regulatory and administrative developments and judicial proceedings, and may therefore be subject to evolving priorities and interpretations over time. As a result, considerable uncertainty exists surrounding the continued development of the healthcare regulatory and legislative environment including access to healthcare and the availability and affordability of commercial insurance over time. As an example, while the ACA and subsequent COVID-era legislation, including the enhanced premium tax credits offered for ACA exchange enrollment, resulted in an increasing number of patients with health insurance, recent legislative and executive action such as the One Big Beautiful Bill Act (OBBBA) or the decision to let those enhanced premium tax credits expire at the end of 2025 may ultimately decrease the number of patients with access to health insurance, including Medicare and Medicaid. If access to healthcare is significantly altered or if other reforms limiting access to healthcare are enacted in the future, such changes could materially impact our business. Similar uncertainty surrounds government pilot programs and innovative payment models, healthcare reform measures and/or other changes or extensions to laws, regulations and other requirements at the federal and/or state level that govern our business. We have invested significant resources to adapt to any such changes or developments in the healthcare marketplace, and subsequent modifications, terminations or other developments may require additional investment or result in losses. For example, as described below in the risk factor under the heading "We invest in strategic and operational initiatives to maintain our business and expand our capabilities...", we have made substantial investments in and dedicated resources toour integrated care business, value-based care initiatives and home-based dialysis business to address regulatory developments that include innovative payment models, and these investments are subject to risk in the event the regulatory environment changes and we do not or cannot adequately adapt to such changes. More broadly, changes to the overall business and regulatory landscape, including, for example, changes related to the antitrust and competitive environment, also may require us to evaluate and adapt our operations or otherwise impact our business and ability to grow through acquisitions.

Previous wording

To the extent that the information above describes statutory and regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions that are referenced. For additional information related to the laws, rules and other regulations described above, see Part I Item 1. "Business" under the heading "Government Regulation."

Current wording

To the extent that the information above describes statutory and regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions that are referenced. For additional information, see Part I Item 1. "Business" under the heading "Government Regulation."

Previous wording

We are, and may in the future be, subject to investigations and audits by governmental agencies, private civilqui tam complaints filed by relators and other lawsuits, demands, claims, legal proceedings and/or other actions alleging our failure to comply with a rule, regulation, law or practice of medicine. We are, and can be in the future, subject to audits from the government concerning the billing for our patients. If, following the conclusion of any audit, the government were to require us to refund amounts and/or modify our business practices, and such amounts or changes are significant, it could have a material adverse effect on our business, results of operations, financial condition and cash flows. The healthcare industry is highly visible and politically charged, and any allegation against us, our personnel, representatives, third party vendors, or operations in such matters or matters that involve patients suffering adverse health outcomes, may, among other things harm our reputation, stock price, and it could impact our relationships and/or contracts related to our business, among other things. Each of these impacts may be material.

Current wording

We operate in a highly regulated industry, including, among other things, through our participation in government-sponsored healthcare programs and as a government contractor. As a result, we are, and may in the future be, subject to investigations and audits by governmental agencies, private civilqui tam complaints filed by relators and other lawsuits, demands, claims, legal proceedings and/or other actions alleging our failure to comply with a rule, regulation, law or practice of medicine. We are, and may be in the future, subject to audits from the government concerning the billing for our patient. If, following the conclusion of any audit, the government were to require us to refund amounts and/or modify our business practices, and such amounts or changes are significant, it could have a material adverse effect on our business, results of operations, financial condition and cash flows. The healthcare industry is highly visible and politically charged, and any allegation against us, our personnel, representatives, third party vendors, or operations in such matters or matters that involve patients suffering adverse health outcomes, may materially harm our reputation and stock price, and materially impact our relationships and/or contracts related to our business, among other things.

Previous wording

Responding to subpoenas, investigations and other lawsuits, claims and legal proceedings, as well as defending ourselves in such matters, will continue to require management's attention and cause us to incur significant legal expense. Negative developments, findings or terms and conditions that we might agree to accept as part of a negotiated resolution of pending or future legal or regulatory matters, or have been forced upon us, could result in, among other things, harm to our reputation, substantial financial penalties or awards against us, substantial payments made by us, required changes to our business practices, impacts on our various relationships and/or contracts related to our business, exclusion from future participation in Medicare, Medicaid and other healthcare programs and, in certain cases, criminal penalties, any of which could have a material adverse effect on us. It is possible that criminal proceedings may be initiated against us and/or individuals in our business in connection with governmental investigations. Other than as may be described in Note 15 to the consolidated financial statements included in this report, we cannot predict the ultimate outcomes of the various legal proceedings and regulatory matters to which we are or may be subject from time to time, or the timing of their resolution or the ultimate losses or impact of developments in those matters, which could have a material adverse effect on our business, results of operations, financial condition, cash flows, reputation and stock price. See Note 15 to the consolidated financial statements included in this report for further details regarding these and other legal proceedings and regulatory matters.

Current wording

Responding to subpoenas, investigations and other lawsuits, claims and legal proceedings, as well as defending ourselves in such matters, will continue to require management's attention and cause us to incur significant legal expense. Negative developments, findings or terms and conditions that we might agree to accept as part of a negotiated resolution of pending or future legal or regulatory matters, or that have been forced upon us, could result in, among other things, harm to our reputation, substantial financial penalties or awards against us, substantial payments made by us, required changes to our business practices, impacts on our various relationships and/or contracts related to our business, exclusion from future participation in Medicare, Medicaid and other healthcare programs and, in certain cases, criminal penalties, any of which could have a material adverse effect on us. It is possible that criminal proceedings may be initiated against us and/or individuals in our business in connection with governmental investigations. Other than as may be described in Note 15 to the consolidated financial statements included in this report, we cannot predict the ultimate outcomes of the various legal proceedings and regulatory matters to which we are or may be subject from time to time, or the timing of their resolution or the ultimate losses or impact of developments in those matters, which could have a material adverse effect on our business, results of operations, financial condition, cash flows and stock price, and could materially harm our reputation.

Previous wording

A substantial portion of our U.S. dialysis patient service revenues are generated from patients who have commercial payors as their primary payor. The majority of these patients have insurance policies that pay us on terms and at rates that are generally significantly higher than Medicare rates. As such our revenue and net income levels are sensitive to the number of our patients with higher-paying commercial insurance coverage and the percentage of our patients under higher-paying commercial plans relative to government-based programs. The payments we receive from commercial payors generate nearly all of our profit and all of our nonacute dialysis profits come from commercial payors.

Current wording

A substantial portion of our U.S. dialysis patient service revenues are generated from patients on commercial plans who have private payors as their primary payor. The majority of these patients have insurance policies that pay us on terms and at rates that are generally significantly higher than Medicare rates. As such, our revenue and net income levels are sensitive to the number of our patients with higher-paying commercial insurance coverage and the percentage of our patients under higher-paying commercial plans relative to government-based programs. The payments we receive from commercial payors generate nearly all of our profit and all of our nonacute dialysis profits come from commercial payors. Depending on the extent of a reduction in the share of our patients covered by commercial insurance plans, it could have a material adverse impact on our business, results of operations, financial condition and cash flows.

Previous wording

Finally, there have also been rule making and legislative efforts at both the federal and state level regarding the use of charitable premium assistance for ESRD patients. For example, as described in Part I Item 1. "Business" under the heading "Government Regulation," certain provisions of California bill (AB 290), including the amount of reimbursement paid to certain providers for services provided to patients with commercial insurance who receive charitable premium assistance (reimbursement cap), could have negative consequences on our business if implemented in its proposed form. Depending on what provisions are implemented, organizations that provide charitable premium assistance may choose to withdraw from California, which would have an adverse impact on the ability of patients to afford Medicare premiums and Medicare supplemental and commercial coverage. We expect that such an adverse impact will in turn adversely impact our business, results of operations, financial condition and cash flows. In the past, bills similar to AB 290 have been introduced in other states, but none has become law. If these or similar bills are introduced and implemented in other jurisdictions, and organizations that provide charitable premium assistance in those jurisdictions are similarly impacted, it could in the aggregate have a material adverse impact on our business, results of operations, financial condition and cash flows. For additional information on risks associated with charitable premium assistance for ESRD patients and the potential impact of decreases to the percentage or number of our patients with commercial insurance, see the risk factor under the heading"If the number or percentage of patients with higher-paying commercial insurance declines..."

Current wording

The availability and affordability of commercial insurance may also be impacted by rulemaking and legislative efforts at both the federal and state level regarding the use of charitable premium assistance for ESRD patients. For example, if implemented in its proposed form, certain provisions of California bill (AB 290), including the amount of reimbursement paid to certain providers for services provided to patients with commercial insurance who receive charitable premium assistance (reimbursement cap), could have negative consequences on the ability of patients to afford commercial coverage, which may in turn adversely impact our business, results of operations, financial condition and cash flows. If AB 290 or similar bills are introduced and implemented in other jurisdictions or if CMS or another regulatory agency or legislative authority issues new rules or guidance that challenges or restricts charitable premium assistance, organizations that provide charitable premium assistance may choose to withdraw from such jurisdictions, which may make it difficult for patients to obtain, or continue to receive, or receive for a limited duration, such financial assistance. In turn, this may limit the ability of patients to obtain and maintain optimal insurance coverage, which could ultimately lead to a reduction in the number of our patients covered under commercial insurance plans. The aggregate impact of any rulemaking or legislative efforts that results in a reduced number of our patients covered under commercial insurance plans could have a material adverse effect on our business, results of operation, financial condition and cash flows.

Previous wording

Our arrangements and negotiations with payors also impact the number or percentage of patients with higher-paying commercial insurance. We continuously are in the process of negotiating existing and potential new agreements with commercial payors who aggressively negotiate terms with us, and we can make no assurances about the ultimate results of these negotiations or the timing of any potential rate changes resulting from these negotiations. A material portion of both our commercial revenue and MA revenue is concentrated with a limited number of commercial payors, and any changes impacting our highest paying commercial payors or our relationships with these payors will have a disproportionate impact on us. Sometimes many significant agreements are being renegotiated at the same time. We believe payor consolidations have significantly increased the negotiating leverage of commercial payors, and ongoing consolidations may continue to increase this leverage in the future. In addition, our agreements and rates with commercial payors may be impacted by new business activities of these commercial payors as well as steps that these commercial payors have taken and may continue to take to control the cost of and/or the eligibility for access to the services that we provide, including, without limitation, relative to products on and off the healthcare exchanges. These efforts could impact the number of our patients who are eligible to enroll in commercial insurance plans, and remain on the plans, including plans offered through healthcare exchanges. We continue to experience downward pressure on some of our rates with commercial payors as a result of these and other general conditions in the market, including, among other things, as employers seek to shift to less expensive options for medical services or as commercial payors dedicate increased focus on dialysis services.

Current wording

We continuously negotiate existing and potential new agreements with private payors who aggressively negotiate terms with us, and we can make no assurances that these negotiations will result in agreements on competitive terms or at all, nor can we accurately predict the timing of any potential rate changes resulting from these negotiations. Our negotiations with private payors may relate to commercial fee-for-service contracts, value-based care (VBC) contracts and MA agreements. A material portion of both our commercial revenue and MA revenue is concentrated with a limited number of private payors, and any changes impacting our highest paying private payors or our relationships with these payors will have a disproportionate impact on us. We have in the past, and we currently are, renegotiating many significant agreements with large private payors at the same time, which further increases this risk.

Previous wording

Our negotiations with commercial payors may relate to commercial fee-for-service contracts and value-based care (VBC) contracts in which we share risk with commercial payors or other structures that allow the parties to share in cost savings upon the achievement of certain outcomes, as well as contracts to provide dialysis services to MA patients. If we fail to maintain contracts with payors and other healthcare providers with competitive or favorable terms, either with respect to commercial plans, commercial VBC contracts, MA plans or otherwise, including, without limitation, with respect to reimbursement rates, scope and duration of coverage and in-network benefits, contract term or termination rights, or if we fail to accurately estimate the price for and manage our medical costs in an effective manner, whether due to inflationary pressures or otherwise, such that the profitability of our commercial or other value-based products is negatively impacted, it could have a material adverse effect on our business, results of operations, financial condition and cash flows. The ultimate result of our negotiations with payors cannot be predicted as they occur in a highly competitive environment and are influenced by changes to payment rates set by CMS and other marketplace dynamics such as those previously discussed. Among other things, these negotiations may result in termination or non-renewals of existing agreements, decreases in contracted rates, and reduction in the number of our patients that are covered by commercial plans, and we may not be able to enter into new agreements on competitive terms or at all. In the event that our ongoing negotiations with commercial payors result in overall rate reductions in excess of overall rate increases, the cumulative effect could have a material adverse effect on our business, results of operations, financial condition and cash flows. In addition, to the extent that these negotiations result in a reduction in the number of our patients covered by plans with commercial payors, it could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Current wording

We negotiate reimbursement rates as part of these discussions, and we continue to experience downward pressure on some of our rates with private payors as a result of the aforementioned and other general conditions in the market and political environment, including, among other things, as employers seek to shift to less expensive options for medical services, as commercial payors dedicate increased focus on dialysis services and, in the case of MA plans, as pressures to reduce government spending impact MA rates paid to these private payors. These negotiations may therefore result in decreases in contracted rates, may result in termination or non-renewals of existing agreements, or may adversely impact the scope and duration of coverage and in-network benefits available to our patients, among other things. If we fail to maintain contracts with payors and other healthcare providers with competitive or favorable terms, this may in turn lead to reductions in the number of our patients that are covered by commercial plans. In addition, if we fail to accurately estimate the price for or manage our medical costs in an effective manner, whether due to inflationary pressures or otherwise, such that the profitability of our commercial, MA or other value-based products is negatively impacted, the cumulative effect of these negotiations could have a material adverse effect on our business, results of operations, financial condition and cash flows, and could materially harm our reputation.

Previous wording

Certain payors have been attempting to design and implement plans that restrict or limit coverage for treatment needed by ESRD patients in the commercial market. Among other things, these restrictive plan designs seek to limit the duration and/or the breadth of ESRD benefits, limit in-network providers, set arbitrary provider reimbursement rates, or otherwise restrict access to care, all of which may result in a decrease in the number of patients covered by commercial insurance or the reimbursement rate for ESRD services, among other things. Payors have also disputed the scope and duration of ESRD benefit coverage under their plans, and, among other things, have required patients to seek Medicare coverage for ESRD treatments. On June 21, 2022, the U.S. Supreme Court issued a decision in the matter of Marietta Memorial Hospital Employee Health Benefit Plan, et al. v. DaVita Inc., et al., a case evaluating the current language of the Medicare Secondary Payor Act (MSPA), deciding that a group health plan that limits the benefits for outpatient dialysis, but does so uniformly for all plan participants, does not violate the terms of the MSPA because the plan treats all patients uniformly, regardless of whether a participant has ESRD and regardless of whether the participant is eligible for Medicare. We cannot reasonably estimate the ultimate impact of the U.S. Supreme Court’s decision at this time, as there is significant uncertainty as to, among other things, whether and to what extent payors, including, among others employer group health plans, may seek to design and implement plans to restrict access to ESRD in light of the decision; the results of proposed and pending legislative responses to the decision; how courts will interpret other anti-discriminatory provisions of the MSPA that may apply; whether there could be other potential negative impacts of the decision and any resultant plan behavior on our commercial or government mix or the number of our patients covered by commercial insurance; and the timing of each of these items. If more commercial or employer group health plans seek to implement or utilize plan designs that discourage or prevent ESRD patients from retaining their commercial coverage, during upcoming open enrollment periods or otherwise, it may lead to a decrease in the number of patients with commercial plans, the duration of benefits for patients under commercial plans and/or a decrease in the payment rates we receive, any of which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Current wording

We also negotiate or are subject to provisions related to reimbursement for the scope of services that we provide, including relative to products on and off the healthcare exchanges, among other things. Certain payors have been attempting to design and implement plans that restrict or limit coverage for treatment needed by ESRD patients in the commercial market. Among other things, these restrictive plan designs seek to limit the duration and/or the breadth of ESRD benefits, limit in-network providers, set arbitrary provider reimbursement rates, or otherwise restrict access to care, all of which may result in a decrease in the number of patients covered by commercial insurance or the reimbursement rate for ESRD services. Payors have also disputed the scope and duration of ESRD benefit coverage under their plans, and, among other things, have required patients to seek Medicare coverage for ESRD treatments. If commercial or employer group health plans seek to implement or utilize plan designs that discourage or prevent ESRD patients from retaining their commercial coverage, during upcoming open enrollment periods or otherwise, it may lead to a decrease in the number of patients with commercial plans, the duration of benefits for patients under commercial plans and/or a decrease in the payment rates we receive. The ultimate impact of these plan design provisions, and any related negotiations, remains uncertain as we and payors continue to adapt to changes in the legislative and judicial environment, such as the Supreme Court’s decision in Marietta Memorial Hospital Employee Health Benefit Plan, et al. v. DaVita Inc., et.al. (Marietta)and the removal of objective time and distance standards for network adequacy for outpatient dialysis centers. With respect to Marietta, there remains uncertainty as to, among other things, whether and to what extent payors, including employer group health plans, third party administrators and out-of-network payors, may seek to design and implement plans to restrict access to or limit reimbursement for ESRD treatments in light of the decision; the results of proposed and pending legislative responses to the decision; how courts will interpret other anti-discriminatory provisions in Employee Retirement Income Security Act of 1974, as amended and the Medicare Secondary Payor Act that may apply; whether there could be other potential negative impacts of the decision and any resultant employer plan behavior on our payor mix or the number of our patients covered by commercial insurance; and the timing of each of these items.

Previous wording

In addition, some commercial payors are pursuing or have incorporated policies into their provider manuals limiting or refusing to accept charitable premium assistance from non-profit organizations, such as the American Kidney Fund (AKF), which may impact the number of patients who are able to afford commercial plans. Paying for coverage is a significant financial burden for many patients, and ESRD disproportionately affects the low-income population. Charitable premium assistance supports continuity of coverage and access to care for patients, many of whom are unable to continue working full-time as a result of their severe health condition. Many patients with commercial and government insurance also rely on financial assistance from charitable organizations, such as the AKF. Certain payors have challenged our patients' and other providers' patients' ability to utilize assistance from charitable organizations for the payment of premiums, including, without limitation, through litigation and other legal proceedings. The use of charitable premium assistance for ESRD patients has also faced challenges and inquiries from legislators, regulators and other governmental authorities, including California AB 290 as described in the risk factor under the heading, "Changes in federal and state legislation or regulations...", and this may continue. In addition, CMS or another regulatory agency or legislative authority may issue a new rule or guidance that challenges or restricts charitable premium assistance. If any of these challenges to kidney patients' use of premium assistance is successful or restrictions are imposed on the use of financial assistance from such charitable organizations or if organizations providing such assistance are no longer available such that kidney patients are unable to obtain, or continue to receive or receive for a limited duration, such financial assistance, it may restrict the ability of dialysis patients to obtain and maintain optimal insurance coverage and could have a material adverse effect on our business, results of operations, financial condition and cash flows. In addition, if our assumptions about how kidney patients will respond to any change in financial assistance from charitable organizations are incorrect, it could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Current wording

Certain payors have challenged the ability of ESKD patients to utilize assistance from charitable organizations for the payment of premiums, including, through litigation and other legal proceedings. Certain payors have also incorporated policies into their provider manuals limiting or refusing to accept charitable premium assistance from non-profit organizations, such as the American Kidney Fund (AKF). These and other efforts by payors to restrict eligibility and affordability of commercial health plans and dialysis coverage thereunder could impact the number of our patients who are eligible to enroll in, and remain on, commercial insurance plans, including plans offered through healthcare exchanges.

Previous wording

A substantial portion of our dialysis revenues are generated from patients who have Medicare or MA as their primary payor. For patients with Medicare coverage, payments for dialysis treatments are currently made under a single bundled payment rate which provides a fixed payment rate to encompass all goods and services provided during the dialysis treatment that are related to the treatment of dialysis, subject to certain adjustments. Most lab services are also included in the bundled payment.

Current wording

Dialysis treatment reimbursement payments for patients with Medicare coverage are currently made under a single bundled payment that presents certain unique operating and financial risks. The bundled payment provides for a fixed payment rate to encompass all goods and services provided during the dialysis treatment that are related to the treatment of dialysis, subject to certain adjustments (the ESRD Prospective Payment System (PPS)). Most lab services are also included in the bundled payment. Rates and bundled payments under the ESRD PPS are subject to adjustment from time to time based on a number of factors and may not cover our costs thereby having an adverse impact on our revenues. Risks for adjustment include modifications for new drugs, services, treatments, labs or medical equipment and supplies are added to the ESRD bundle or changes based on external data such as time on treatment. Each of these and other similar adjustments to the ESRD PPS may have either a positive financial effect or a negative one depending on whether the government adequately addresses the costs borne by dialysis facilities. Any failure to adequately calculate or fund the costs associated with these items or a material reduction in reimbursement under the ESRD PPS could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Previous wording

•Risk of ensuring that we remain compliant with applicable MA requirements, inclusive of MA marketing and education requirements and restrictions, as well as our contractual terms with associated plans, as our initiatives associated with MA (including chronic condition special needs and dual eligible special needs plans) continue to evolve and progress. Failure to do so could resolve in termination of agreements with plans as well as enforcement by state and federal agencies for violation of insurance, consumer protection and fraud and abuse laws and regulations.

Current wording

We contract with commercial payors that administer MA plans to provide their members with Medicare Part A, Part B and/or Part D benefits. Our MA business presents similar operating, clinical and financial risks as those related to the bundled payment system, which include, without limitation, the risk that CMS sets annual reimbursement rates or modifies risk adjustment methodologies for MA plans that in turn lead commercial payors to seek to reduce their negotiated rates with us and/or fund us less for services rendered, the risk that we are found not to be compliant with applicable MA requirements, inclusive of MA marketing and education requirements and restrictions, as well as the risks that we are found not be compliant with our contractual terms with associated plans, particularly as our initiatives associated with MA (including chronic condition special needs and dual eligible special needs plans) continue to evolve and progress. Failure to do so could result in termination of agreements with plans as well as enforcement by state and federal agencies for violation of insurance, consumer protection and fraud and abuse laws and regulations, among other things.

Previous wording

Primary coverage for a significant number of our patients also comes from state Medicaid programs partially funded by the federal government and we have patients covered by other non-Medicare government-based programs, such as coverage through the Department of Veterans Affairs (VA). As state governments and other governmental organizations face increasing financial hardship and budgetary pressure, including as a result of the COVID-19 pandemic or changes in the political environment, we may in turn face reductions in payment rates, delays in the receipt of payments, limitations on enrollee eligibility or other changes to the applicable programs. For example, certain state Medicaid programs and the VA have recently considered, proposed or implemented payment rate reductions, such as the VA's proposed adoption of Medicare's bundled PPS pricing methodology for any veterans receiving treatment from non-VA providers under a national contracting initiative. Since we are a non-VA provider, these reimbursements are tied to a percentage of Medicare reimbursement, and we have exposure to any dialysis reimbursement changes made by CMS. In addition, in 2019 and subsequently renewed, we entered into a Nationwide Dialysis Services contract with the VA that includes five separate one-year renewal periods throughout the term of the contract. The term structure is similar to our prior five-year agreement with the VA, and is consistent with VA practice for similar provider agreements. With this contract award, the VA has agreed to keep our percentage of Medicare reimbursement consistent with that under our prior agreement with the VA during the term of the contract. As with that prior agreement, this agreement provides the VA with the right to terminate the agreements without cause on short notice, among other things. The current contract expires at the end of September 2025. Should the VA renegotiate, not renew or cancel these agreements for any reason, we may cease accepting patients under this program and may be forced to close centers or experience lower reimbursement rates, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Current wording

Medicaid Programs and Department of Veterans Affairs (VA)

Previous wording

State Medicaid programs are increasingly adopting Medicare-like bundled payment systems, but sometimes these payment systems are poorly defined and are implemented without any claims processing infrastructure, or patient or facility adjusters. If these payment systems are implemented without any adjusters and claims processing infrastructure, Medicaid payments will be substantially reduced and the costs to submit such claims may increase, which will have a negative impact on our business, results of operations, financial condition and cash flows. In addition, some state Medicaid program eligibility requirements mandate that citizen enrollees in such programs provide documented proof of citizenship. If our patients cannot meet these proof of citizenship documentation requirements, they may be denied coverage under these programs, resulting in decreased patient volumes and revenue. These Medicaid payment and enrollment changes, along with similar changes to other non-Medicare government programs, could reduce the rates paid by these programs for dialysis and related services, delay the receipt of payment for services provided and further limit eligibility for coverage which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Current wording

State Medicaid programs are increasingly adopting Medicare-like bundled payment systems, but sometimes these payment systems are poorly defined and are implemented without any claims processing infrastructure, or patient or facility adjusters. These programs may also have complex eligibility requirements that vary across states, including states that may require citizen enrollees to provide documented proof of citizenship, as well as recent requirements in the OBBBA that introduce work requirements for certain “able-bodied” adult beneficiaries, among other things, which could negatively impact our patient based with an ESRD disability. On balance, these eligibility requirements are part of an overarching phase down of federal Medicaid expenditures in the OBBBA, along with provisions such as higher cost-sharing for certain patients and limitations on state funding mechanisms, known as provider taxes and state-directed payments. If these and other changes result in decreased patient volumes and revenue, substantially reduced Medicaid payments, reduction or delay in receipt of payment for dialysis and related services or increased costs for submitting claims or otherwise managing Medicaid program patients, it could have a material adverse impact on our business, results of operations, financial condition and/or cash flows.

Previous wording

Our business is labor intensive and if our labor costs continue to rise, including due to shortages, changes in certification requirements and/or higher than normal turnover rates in skilled clinical personnel; or currently pending or future governmental laws, rules, regulations or initiatives impose additional requirements or limitations on our operations or profitability; or, if we are unable to attract and retain employees or key leadership positions; or if union organizing activities or legislative or other changes result in significant increases in our operating costs or decreases in productivity, we may experience disruptions in our business operations and increases in operating expenses, among other things, any of which could have a material adverse effect on our business, results of operations, financial condition, cash flows and reputation.

Current wording

Our business is labor intensive and if our labor costs continue to rise or if we are unable to attract and retain employees or key leadership positions, it could have a material adverse effect on our business, results of operations, financial condition and cash flows and could materially harm our reputation.

Previous wording

We face increasing labor costs generally, and in particular, we continue to face increased labor costs and difficulties in hiring skilled clinical personnel, including nurses, due to a nationwide shortage of such personnel that has been exacerbated by current macroeconomic conditions and developments in the labor market. As referenced above, the current labor market is challenging and continues to experience volatility, uncertainty and labor supply shortages, particularly in healthcare. Our business is labor intensive, and our financial and operating results have been and continue to be sensitive to variations in labor-related costs, productivity and the number of pending or potential claims against us related to labor and employment practices. We have incurred and expect to continue to incur increased labor costs, including through elevated compensation levels to our teammates, the ultimate extent of which will depend on current macroeconomic conditions and ancillary impacts on the labor market, among other things. For additional discussion of the risks facing us related to the current labor environment, see the risk factor under the heading"External conditions, including those related to general economic, marketplace and global health conditions..."Additionally, to the extent that general inflationary pressures continue or further increase, this may in turn increase our labor and supply costs at a rate that outpaces the Medicare or any other rate increases we may receive.

Current wording

Our business is labor intensive, and our financial and operating results have been and continue to be sensitive to variations in labor-related costs, productivity and the number of pending or potential claims against us related to labor and employment practices. With pressure on increasing hourly wages across many states and the general state of economic pressure, we face increasing labor costs generally, including through elevated compensation levels to our teammates, and we continue to face increased labor costs and difficulties in hiring skilled clinical personnel, including nurses, due to nationwide shortages of such which have been exacerbated by current macroeconomic conditions and a challenging labor market, particularly in healthcare. The ultimate duration and extent of these increased costs will depend on current macroeconomic and political conditions and ancillary impacts on the labor market, among other things. For example, to the extent that general elevated inflationary or other wage pressures continue, this may in turn increase our labor and supply costs at a rate that outpaces Medicare, or any other rate increases we may receive.

Previous wording

We compete for nurses with hospitals and other healthcare providers. The ongoing nursing shortage may limit our ability to expand our operations. Furthermore, changes in certification requirements can impact our ability to maintain sufficient staff levels, including to the extent our teammates are not able to meet new requirements, among other things. In addition, if we experience a higher than normal turnover rate for our skilled clinical personnel, our operations and treatment growth may be negatively impacted, which could adversely affect our business, results of operations, financial condition and cash flows. For example, in 2024, we again had significant teammate turnover, particularly amongst teammates in their first year, which led to increased training costs, among other things.

Current wording

We compete for nurses and nurse practitioners (NPs) with hospitals and other healthcare providers, and the ongoing nursing shortage may limit our ability to expand our operations. Furthermore, changes in certification requirements for nurses may impact our ability to maintain sufficient staff levels, including to the extent our teammates are not able to meet new requirements, and limitations on what services can be provided or oversight required of NPs, could limit our ability to expand our kidney care services in both integrated kidney care (IKC) and kidney care, among other things. In addition, if we experience a higher-than-normal turnover rate for our skilled clinical personnel or if we fail to effectively operationalize, scale and provide sufficient clinical oversight for new initiatives or pilot programs, our operations, operating expenses, including training costs, and treatment growth may be negatively impacted.

Previous wording

We also face competition in attracting and retaining talent for key leadership positions that are responsible for developing and executing the Company's business strategy and operational initiatives. Increased competition for top leadership talent in our industry and general marketplace conditions, including recent negative publicity and events surrounding the healthcare industry, could also impact our ability to attract and retain qualified leaders. If we are unable to attract and retain qualified individuals, including with respect to our leadership team, we may experience disruptions in our business operations, including, without limitation, our ability to achieve strategic goals, which could have a material adverse effect on our business, results of operations, financial condition, cash flows and reputation.

Current wording

We also face competition in attracting and retaining talent for key leadership positions that are responsible for developing and executing the Company's business strategy and operational initiatives. Increased competition for top leadership talent in our industry and general marketplace conditions, including recent negative publicity and events surrounding the healthcare industry, could also impact our ability to attract and retain qualified leaders. If we are unable to attract and retain qualified individuals, including with respect to our leadership team, we may experience disruptions in our business operations, including, without limitation, our ability to achieve our strategic goals.

Previous wording

Political or other efforts at the national or local level could result in actions or proposals that increase the likelihood of success of union organizing activities at our facilities and ongoing union organizing activities at our facilities could continue or increase for other reasons. Our industry has also experienced increased union organizing activities. For example, union petitions have been filed in nine of our clinics in California and eight of these petitions are in different stages of the voting process and have been subject to legal challenges. We also have experienced a week-long attempted union-related work stoppage in these eight clinics, which concluded without impacting our ability to provide patient care. Regardless of the outcome of the ongoing elections, other teammates at other clinics may file similar petitions in the future, and these petitions, if filed, may lead to additional elections. If a significant portion of our teammates were to become unionized, we could experience, among other things, potential additional work stoppages or other business disruptions; adverse impacts to our financial results due to the costs of bargaining or implementing a grievance procedure and processing grievances; decreases in our operational flexibility and efficiency; or negative impacts on our employee culture. In addition, we are and may continue to be subject to targeted corporate campaigns by union organizers in response to which we have been and expect to continue to be required to expend substantial resources, both time and financial. Any of these events or circumstances, including our responses to such events or circumstances, could have a material adverse effect on our employee relations, treatment growth, productivity, business, results of operations, financial condition, cash flows and reputation.

Current wording

Our industry has experienced increased union organizing activities and ongoing union organizing activities at our facilities could continue or increase due to, among other things, political or other efforts at the national or local level. Union petitions have been filed at a number of our clinics in California. While we have won some elections, we are in different stages of the voting process and have been subject to legal challenges. We also have experienced a week-long attempted union-related work stoppage in some of these clinics, which subsequently concluded and did not impact our ability to provide patient care. Regardless of the outcome of any particular election in any particular state, other teammates at other clinics may file similar petitions in the future, and these petitions, if filed, may lead to additional elections. If a significant portion of our teammates were to become unionized, we could experience, among other things, potential additional work stoppages or other business disruptions; adverse impacts to our financial results due to the costs of bargaining or implementing a grievance procedure and processing grievances; decreases in our operational flexibility and efficiency; or negative impacts on our employee culture.

Previous wording

If certain of our suppliers and service providers do not meet our needs, if there are material price increases on supplies, if we are not reimbursed or adequately reimbursed for drugs we purchase or if we are unable to effectively access new technology or superior products, it could negatively impact our ability to effectively provide the services we offer and could have a material adverse effect on our business, results of operations, financial condition and cash flows and could materially harm our reputation. We are also subject to the risk associated with our increased reliance on third party service providers.

Current wording

If certain of our suppliers do not meet our needs, if there are material price increases on supplies, if we are not reimbursed or adequately reimbursed for drugs we purchase or if we are unable to effectively access new technology or superior products, it could negatively impact our ability to effectively provide the services we offer and could have a material adverse effect on our business, results of operations, financial condition and cash flows and could materially harm our reputation.

Previous wording

If our significant suppliers and service providers do not meet our needs for the products and services they supply, including, without limitation, in the event of supply chain disruptions due to global events, geopolitical instability, trade disputes, natural disasters or severe weather events, product recalls, logistical challenges, fluctuations in foreign currency exchange rates, varying regulatory requirements or other shortages or disputes, and we are not able to find adequate alternative sources for these products or services on a timely or cost-effective basis; if we experience material price increases from these suppliers or otherwise in connection with our actions to secure needed products that we are unable to mitigate; if some of the drugs that we purchase from our suppliers are not reimbursed or not adequately reimbursed by commercial or government payors; or if we are unable to secure products, including pharmaceuticals at competitive rates and within the desired time frame; it could require us to make significant operational changes, could negatively impact our ability to effectively provide the services we offer or negatively impact our ability to effectively execute certain important corporate functions, and could otherwise have a material adverse impact on our business, results of operations, financial condition and cash flows and materially harm our reputation. In addition, the technology related to the products critical to the services we provide is subject to new developments that may result in superior products, and if we are unable to incorporate these superior products into our business or otherwise find adequate alternatives on a cost-effective and timely basis, it could impact our ability to compete effectively.

Current wording

We have significant suppliers that provide key clinical and other supplies to us, with a substantial portion of our total vendor spend concentrated with a limited number of third party suppliers. Our suppliers may experience prolonged supply chain disruptions due to macroeconomic conditions, global events, geopolitical instability, trade disputes, natural disasters or severe weather events, product recalls, logistical challenges, fluctuations in foreign currency exchange rates, varying regulatory requirements or other shortages or disputes, and we may not be able to find adequate alternative sources for these products or services on a timely or cost-effective basis. As a result, we may experience material price increases from these suppliers or otherwise in connection with our actions to secure needed products that we are unable to mitigate; certain drugs that we purchase from our suppliers may not be reimbursed or not adequately reimbursed by commercial or government payors; or if we may be unable to secure new or existing products, including pharmaceuticals at competitive rates and within the desired time frame. If our significant suppliers do not meet our needs for the products they supply, it could, due to our contract terms or otherwise, require us to make significant operational changes, could among other things, negatively impact our ability to effectively provide the services we offer or negatively impact our ability to effectively execute certain important corporate functions, and could materially increase certain of our costs, and could otherwise have a material adverse impact on our business, results of operations, financial condition and cash flows and materially harm our reputation.

Previous wording

We have experienced service disruptions relating to key business functions and supply chain shortages with respect to certain of our equipment and clinical supplies, including critical clinical and other supplies. For example, in September 2024, one of our suppliers notified us that a severe weather event caused extensive damage to its manufacturing plant. The damage required the supplier to close the facility and halt production of certain clinical products it supplies to us and other health care providers, including saline and peritoneal dialysate. As a result of this disruption, we worked with the supplier, other suppliers, and federal and state governmental agencies to identify alternate sources for these supplies and implemented certain operational measures that were developed to maintain continuity of care for our patients. These operational measures, including securing alternate supply and temporarily holding new starts for PD home-based dialysis resulted in increased expense and slowed growth of our home-based dialysis business in 2024 and the early portion of 2025. In general, while we have made certain operational changes in response to the foregoing, there can be no assurance that a future shortage or disruption would not require additional resources or further operational changes in the future andwe are continuing to assess the balance of efficiency and resilience in evaluating the risk of future supply chain shortages or service disruptions. Separately, current macroeconomic conditions also have resulted in global supply chain challenges and have materially impacted global supply chain reliability, as described in the risk factor under the heading"External conditions, including those related to general economic, marketplace and global health conditions..."

Current wording

We have experienced service disruptions relating to key business functions and supply chain shortages with respect to certain of our equipment and clinical supplies, including critical clinical and other supplies. For example, after a severe weather event in September 2024 damaged a supplier’s manufacturing plant and halted production of critical clinical products, we implemented responsive operational measures to maintain continuity of care for our patients, which resulted in increased expense and slowed growth of our home-based dialysis business in 2024 and the early portion of 2025. We continue to assess the balance of efficiency and resilience in evaluating our third-party vendor strategy and the risk of future supply chain shortages or service disruption. Any of these risks could have a material adverse effect on our business, results of operations, financial condition and cash flows, and could materially harm our reputation.

Previous wording

We rely on these third-party suppliers and service providers to provide the products or services we require, and this reliance subjects us to risks arising from the loss of control over these services, changes in pricing that may affect our operating results, and potentially, termination of provisions of these services by our providers. There can be no assurance that third party suppliers and service providers will provide, or will continue to provide, the services or products that we require, or that substitute services or products, or alternate suppliers or service providers, can be identified or transitioned to on a timely or cost-effective basis or at all. In certain cases, there may be a limited number of viable alternate suppliers or service providers that have the capacity or capability to offer these supplies or services.

Current wording

We have significant third party service providers that perform key functions for us, including, among others, claims processing, financial accounting, and information technology functions, and we have increased our use of certain third party service providers in recent years. We rely on these third party service providers to provide important and required services, and this reliance subjects us to risks arising from the loss of control over these services, changes in pricing that may affect our operating results, and potentially, termination or disruption of the provision of these services by our providers. There can be no assurance that third party service providers will provide, or will continue to provide, the services that we require, or that substitute services, or alternative service providers, can be identified or transitioned to on a timely or cost-effective basis or at all. In certain cases, there may be a limited number of viable alternate service providers that have the capacity or capability to offer these services.

Previous wording

Medicare bundles certain pharmaceuticals into the ESRD PPS payment rate at industry average doses and prices. Variations above the industry average may be subject to partial reimbursement through the PPS outlier reimbursement policy. Changes to industry averages, which can be caused by, among other things, changes in physician prescribing practices, including in response to the introduction of new drugs, treatments or technologies, changes in best and/or accepted clinical practice, changes on the reliance of artificial intelligence to support clinical practices, changes in private or governmental payment criteria regarding pharmaceuticals and/or devices, or the introduction of administration policies may negatively impact our ability to obtain sufficient reimbursement levels for the care we provide, which could have a material adverse effect on our business, results of operations, financial condition and cash flows. Physician practice patterns, including their independent determinations as to appropriate pharmaceuticals and dosing, are subject to change, including, for example, as a result of changes in labeling of pharmaceuticals or the introduction of new pharmaceuticals. Additionally, commercial payors have increasingly examined their administration policies for pharmaceuticals and, in some cases, have modified those policies. If such policy and practice trends or other changes to private and governmental payment criteria make it more difficult to preserve our margins per treatment, it could have a material adverse effect on our business, results of operations, financial condition and cash flows. Further, increased utilization of certain pharmaceuticals whose costs are included in a bundled reimbursement rate, or decreases in reimbursement for pharmaceuticals whose costs are not included in a bundled reimbursement rate, could also have a material adverse effect on our business, results of operation, financial condition and cash flows.

Current wording

Medicare bundles certain pharmaceuticals and the use of certain medical equipment and supplies into the ESRD PPS payment rate at industry average doses and prices. Variations above the industry average may be subject to partial reimbursement through the PPS outlier reimbursement policy. As a result, our ability to obtain sufficient reimbursement levels for the care we provide depends in part on changes to industry averages or increased utilization of certain pharmaceuticals whose costs are included in a bundled reimbursement rate. We are therefore subject to risks relating to potential drivers of changes to these industry averages or utilization rates, including among other things, changes in physician prescribing practices, including in response to the introduction of new drugs, treatments or technologies, changes in best and/or accepted clinical practice, changes resulting from the use of artificial intelligence to support clinical practices, changes in private payor or governmental payment criteria or changes in administration policies regarding pharmaceuticals and/or devices. If we are unable to preserve our margins per treatment or are not otherwise able to obtain adequate reimbursement for the services we provide, it could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Previous wording

Regulations and processes impacting reimbursement for pharmaceuticals and/or devices and any changes thereto could similarly affect our operating results. Among other things, as new kidney care drugs, treatments or technologies are introduced over time, we expect that the use of transitional payment adjustments to incorporate certain of these new drugs, treatments or technologies as defined by the CMS policy into the bundled Medicare Part B ESRD payment may lead to fluctuations in associated levels of operating income and risk that the reimbursement levels of such drugs, treatments or technologies may not adequately cover our cost to obtain the drug or other associated costs. Drivers of these risks include, among other things, the risk that CMS may not provide adequate funding in the Medicare Part B ESRD payment in the transitional or post-transitional period or such items are not covered by transitional add on pricing, in which case there may be less clarity on the reimbursement, either of which may in turn materially adversely impact our business, results of operations, financial condition and cash flows. For example, under current CMS regulation, certain oral-only drugs were paid separately under Medicare Part D until January 1, 2025, at which time they were incorporated in the ESRD bundled payment. In recent rulemaking, CMS has finalized a policy to increase TDAPA amounts for oral phosphate binders, based on 100% of Average Sales Price, increased by a fixed amount of $36.41 for certain incremental costs. We cannot predict, at this time, whether CMS' TDAPA amounts for oral phosphate binders will adequately account for the inclusion of these oral medications and the additional costs associated with dialysis providers having to supply such drugs. We have developed operational and clinical processes designed to provide the drug as may be required under the applicable regulations and as may be prescribed by physicians and have also worked to contract with manufacturers of drug(s) to establish terms and access to the product, as well as payors, as applicable, for reimbursement and/or administration of the drug. If the government or other payors implement other new requirements or protocols for patients to receive the drug and include pricing in the bundle, we could experience significant fluctuations in our associated levels of operating income and could be subject to material financial, operational and/or legal risk if we are not adequately reimbursed for the cost of the drug, if we are unable to implement effective and appropriate operational measures to distribute or bill for the drug, if we fail to implement appropriate storage and diversion controls or if we cannot obtain competitive pricing for the drug. The aggregate impact of these risks could have a material adverse effect on our business, results of operation, financial condition and cash flows.

Current wording

Regulations and processes impacting reimbursement for pharmaceuticals and/or devices and any changes thereto could similarly affect our operating results. Among other things, as new kidney care drugs, treatments or technologies, medical equipment or supplies are introduced over time, we expect that the use of transitional payment adjustments to incorporate certain of these items as defined by the CMS policy into the bundled Medicare Part B ESRD payment may lead to fluctuations in associated levels of operating income and risk that the reimbursement levels of such drugs, treatments or technologies may not adequately cover our cost to obtain the item or other associated costs. Drivers of these risks include, among other things, the risk that CMS may not provide adequate funding in the Medicare Part B ESRD payment in the transitional or post-transitional period or that such items are not covered by transitional add on pricing, in which case there may be less clarity on the reimbursement. For example, under current CMS regulation, certain oral-only drugs were paid separately under Medicare Part D until January 1, 2025, at which time they were incorporated in the ESRD bundled payment. We cannot predict, at this time, whether CMS' TDAPA amounts for oral phosphate binders or other TDAPA eligible drugs adequately account for the inclusion of these oral medications or other TDAPA eligible drugs and the additional costs associated with dialysis providers having to supply such drugs. We have developed operational and clinical processes designed to provide the drug as may be required under the applicable regulations and as may be prescribed by physicians and have also worked to contract with manufacturers of drug(s) to establish terms and access to the product, as well as payors, as applicable, for reimbursement and/or administration of the drug. If the government or other payors implement other new requirements or protocols for patients to receive the drug and include pricing in the bundle, we could experience significant fluctuations in our associated levels of operating income and could be subject to material financial, operational and/or legal risk if we are not adequately reimbursed for the cost of the drug, if we are unable to implement effective and appropriate operational measures to distribute or bill for the drug, if we fail to implement appropriate storage and diversion controls or if we cannot obtain competitive pricing for the drug. The cumulative impact of these risks could have a material adverse effect on our business, results of operation, financial condition and cash flows.

Previous wording

Similar operating and clinical rigor and appropriate processes will be needed for other potential new drugs, treatments or technologies that are approved and come onto the market, as well as for drugs, treatments or technologies that we contract to receive from different suppliers. Any failure to successfully contract with manufacturers for competitive pricing, failure to successfully contract with the government or other payors for appropriate reimbursement, or failure to prepare, develop and implement processes that provide for appropriate availability and use in our clinics in compliance with applicable laws, including those related to controlled substances, could have a material adverse impact on our business, results of operations, financial condition and cash flows.

Current wording

Similar operating and clinical rigor and appropriate processes will be needed for other potential new drugs, treatments or technologies that are approved and come onto the market, as well as for drugs, treatments or technologies, medical equipment or supplies that we contract to receive from third party suppliers. Any failure to successfully contract with manufacturers for such items, sufficiently and timely access competitive pricing, failure to successfully contract with the government or other payors for appropriate reimbursement, or failure to prepare, develop and implement processes that provide for appropriate availability and use in our clinics in compliance with applicable laws, including those related to controlled substances, could have a material adverse impact on our business, results of operations, financial condition and cash flows and could materially harm our reputation.