DaVita

Economic moat assessment by component: Efficient scale 90/100 (high barriers and limited local market capacity deter new entrants; DaVita estimates ~36% share of U.S. dialysis patients), Switching costs 80/100 (thrice‑weekly, relationship‑intensive care with physician joint ventures, lab integration, and travel convenience make switching centers non‑trivial), Cost advantage 78/100 (procurement, centralized labs, IT and network density), Intangible assets 65/100 (reputation and measured leadership in CMS Five‑Star and QIP programs), Network effects 35/100 (weak at the patient level).

Weighting these by importance (35%/30%/25%/7%/3%) yields ~81. Evidence of durability is supported by scale, clinical programs, and multi‑year payer relationships, but risks to moat include: higher home‑dialysis penetration, plan design limits on commercial coverage, and gradual disease‑progression moderation from SGLT2/GLP‑1 therapies over time.

Pricing is capped by policy. CMS set the CY‑2026 ESRD PPS base rate at $281.71, implying a ~2.2% uplift that tends to lag wage and supply inflation across cycles.

While revenue per treatment rose in 2025 helped by the inclusion of phosphate binders into ESRD payment mechanics and normal rate increases, patient‑care costs per treatment also rose with higher pharmaceutical and compensation expense.

Commercial contracting can carry escalators, but DaVita highlights downward pressure and post‑Marietta plan design risks. Net, we view realized pricing power as moderate: dependable but constrained in the government book, and negotiated but pressured in commercial.

Dialysis is a toll‑like, recurring service with chronic demand. 2025 produced $13.64 billion of revenue and $2.04 billion of operating income, with 2026 guidance calling for adjusted operating income of $2.09–$2.24 billion, adjusted diluted EPS of $13.60–$15.00, and free cash flow of $1.0–$1.25 billion.

Treatment‑day normalization data suggest modest volume steadiness. Offsetting factors include annual Medicare rate resets, seasonal mortality/flu impacts, and potential for gradual incidence moderation from improved cardiometabolic therapies. Overall, the business exhibits high visibility in cash generation with manageable variability.

Strengths: recurring cash flow ($1.02 billion FCF in 2025), liquidity ($676 million cash and an undrawn $1.5 billion revolver), and interest‑rate caps that keep the weighted average effective interest on secured credit facilities around 6.0%.

Constraints: total debt principal of ~$10.34 billion and a 5.51% weighted average interest rate on all debt at year‑end 2025, implying leverage in the mid‑3x EBITDA area, and exposure to refinancing costs in a mid‑4% 10‑year Treasury backdrop. The balance sheet is sound for a stable provider but leaves less room for adverse payer‑mix shocks.

DaVita prioritizes high‑return reinvestment to maintain and expand centers and home programs, invests selectively in ancillary and international assets (for example, acquiring Fresenius operations in Brazil), and concentrates excess cash in repurchases rather than dividends.

In 2025 it repurchased 12.68 million shares for ~$1.79 billion, plus ~$200 million more through February 2, 2026; $1.9 billion of authorization remained as of February 6, 2026. Buybacks are timed through cycles but add leverage risk; management refinanced facilities and issued notes in 2025 to extend maturities.

Track record is solid, albeit aggressive.

CEO Javier Rodriguez has led DaVita since June 2019 after two decades inside the organization and remains focused on clinical quality, value‑based models, and operational execution. Governance includes a long‑standing Berkshire relationship and a board with healthcare depth.

Cultural continuity from the prior era and operating cadence around quality programs are positives. Key watch items: compensation alignment amid heavy buybacks and execution on integrated kidney care at meaningful risk caps.