Davita Swot

DaVita Swot Analysis Christopher Tracy BBA .41
By: Graham Lawless June 12th 2012 Olivet Nazarene University

DaVita inc. is the world’s second leading provider of hemodialysis services. Hemodialysis is a replacement therapy for people who suffer with kidney failure. With this therapy people can live a rather normal life, while they wait for a kidney transplant. Dialysis is not a cure, but rather a treatment. DaVita serves about 200,000 patients a year in US where over 500,000 people are in kidney failure. The company owns and operates over 1800 stand alone clinics and is partnered with over 1500 hospitals in the US to provide inpatient services. This analysis will outline the strengths, weaknesses, opportunities, and threats to DaVita Inc.
A lot of the internal strengths in DaVita have to do with its business standpoints. The company is growing at a healthy rate while revenue is increasing each year. DaVita’s ability to raise capital comes from its strong stock price which trades at $88.72 per share. With this capital it has enabled them to buy out many smaller corporations and position DaVita for a strong run at the world’s leading provider. In the renal dialysis industry there have been a lot of mergers and the ability to grow is huge for long-term success with the way healthcare reimbursement is changing. HRM can help us with the acquisitions of smaller companies, and leading their employees under our umbrella.
While DaVita has more strengths than weaknesses it does have its soft spots like every company. DaVita’s main competitor is Fresenius Medical Care which is the world’s leading provider. Fresenius was formed through a merger with Everest and Neomedica in the early 1990’s. With over 2700 clinics worldwide Fresenius is substantially larger. DaVita formed in 2000so it has had less time in the market than Fresenius. Fresenius also has more of a global footprint because it has clinics in over 20 countries. Along with providing the patient care Fresenius provides equipment and renal dialysis products. This is a market that DaVita has not entered just yet. DaVita clinics still use Fresenius machines and supplies so while they are direct competitors, DaVita is a major account for products for Fresenius. HRM can assist with training development of new equipment outside of the competitor and with a more stringent needs assessment.
With the healthcare world seeming to be in a merger stage the renal sector is no different. DaVita has a lot of opportunities to purchase and build new facilities. Between DaVita and Fresenius they account for sixty-five percent of the overall market. That leaves about thirty-five percent that is owned by hospital based providers and independent privateers. The United States government is the main payer for services; over ninety percent of the overall revenue comes from government payer. The reimbursement for dialysis-related services changed substantially in 2011 when the government instituted a bundling service reimbursement package. What this does is regardless of the service or patient, the provider will get the same reimbursement amount. This is for any patient on Medicare and since any patient over 30 months on dialysis automatically gets Medicare this is a huge reimbursement cut. This is the reason DaVita and Fresenius are buying out all the smaller companies as they are trying to get a bigger seat at the table when they negotiate the rates with the government.HRM can provide assessments of new companies to help with initial investments costs into them
As big as DaVita is and with all the current growth it has sustained, Fresenius is growing as well. Recently Fresenius the world’s leading dialysis provider merged with Liberty Dialysis the world’s third leading provider. While the gap between number and number two was wide prior to the merger and this has only spread it even wider. This is a threat to DaVita because of the fact that the government provides 90% of the reimbursement, a third of DaVita’s profit comes from the ten percent of privately insured patients. Medicare reimburses $249 per treatment and private insurers average about $1200 per treatment. With less clinics than the competitor the chance for my commercially insured to patients to go elsewhere is that much greater. With this being so greatly linked to profit the growth of competition is a huge threat to DaVita. HRM does not really have any say so in this other then evaluating costs of running a business and helping get that information to the business executives to better prepare them for rate negotiations.
With a growing market and strong capital backing DaVita is primed to still be a leader in their industry. Their biggest opportunities are in the growth sector and they should have keen eye on what all other providers are doing as this might affect how they are able to operate moving forward. They have to also keep an eye on what the world’s leading provider is doing and try to strategize there next move. This is a growing field and DaVita will remain one of the top contenders.