unc davita final paper

CFA Institute Research Challenge

Hosted by CFA Society Colorado

University of Northern Colorado, Monfort College of Business

University of Northern Colorado – Student Research Healthcare Industry

New York Stock Exchange

DaVita HealthCare Partners Inc.

Date: 1/14/2016 Current Price: $67.48 (1/14/2016) Recommendation: Strong Sell

Ticker: DVA Headquarters: Denver, Colorado Target Price: $55.00

Key Stats 52-Week High/Low $85.17/$65.79 Market Cap 14,232.60 Dividend Yield 0% Beta 1.1 Debt/Equity 62.4%/37.6% Volume (mm) 1.77

Highlights Under analysis and valuation, we have come to the recommendation for DaVita HealthCare Partners (DaVita HCP) as a Strong Sell, using our target price of $55.00. We have come to this determination for the following reasons:

• Lack of Growth Prospects o HealthCare Partners 24% of

business o International strategy lacking

• Demographic Issues o Based on population and

obesity, future growth prospects in the United States Kidney Care is less than average

• Government Compliance o Highly regulated to inhibit high

revenue growth o Costly to maintain them o Several litigations and

Settlements for Unethical Behavior

• Investment Risks o Diabetes increasing at a

decreasing rate o Governmental revenue cuts

Recent News

• “DaVita to Pay $389 Million to Settle Federal Charges of Illegal Kickbacks” – New York Times

• “DaVita way of giving” provides two million dollars to local charities.

• HealthCare Partners recognized again for high levels of Medicare advantage quality treatment.

• The Everett Clinic Shareholders approve merger with DaVita HealthCare Partners

• DaVita HealthCare Partners named best military friendly employer in Health Care Industry

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Figure 1: Total Revenue ($ in millions)

Source: Company Data Table 1: US Kidney Care Facilities

Year Facilities Growth %

2011 1812

2012 1954 7.84%

2013 2074 6.14%

2014 2179 5.06%

2015E 2104 -3.44%

2016E 2202 4.64%

2017E 2254 2.37%

2018E 2307 2.35%

2019E 2361 2.34%

2020E 2415 2.32% Source: Company Data Table 2: International Kidney Care Facilities

Year Facilities Growth %

2011 8

2012 36 350%

2013 73 103%

2014 91 25%

2015E 104 14%

2016E 123 18%

2017E 142 16%

2018E 162 13%

2019E 181 12%

2020E 200 11% Source: Company Data

Overview The healthcare industry has been experiencing a shift from hospital-based care to non-acute settings over the last decade. Healthcare markets transforming to a value-based payment system accelerate this shift further. The increasing demand requires physician practices and ancillary providers to be effective in their overall operational performance of care delivery in order to stay profitable. Although diverse in scope, all non-acute care organizations face similar challenges—rising costs, margin pressures and shrinking reimbursements. Approximately 123,000 non-acute care providers, such as physician groups, outpatient medical and surgery centers, diagnostic laboratories, home health and long-term care providers currently leverage Med Assets technology solutions. By sourcing strategies and collective purchasing power of thousands of hospitals, health systems and peers are able to realize greater savings and an increased bottom line, while maintaining quality and patient satisfaction. DaVita HealthCare Partners Inc. (NYSE: DVA) was incorporated in 1994 and is headquartered in Denver, CO. In 2011 DaVita then acquired HealthCare Partners and now operates as two separate divisions: DaVita and HealthCare Partners. DaVita is one of the main providers of kidney dialysis services for comprehensive care for kidney failure and HealthCare Partners offering healthcare management. Revenue Drivers A main revenue source for DaVita comes from their Kidney Care services, bringing a high market share of kidney dialysis care at every stage. While holding offices internationally, the lion’s share of revenue come from domestic operations. More than 2,000 dialysis centers are currently under management, both internationally and domestically. DaVita’s Kidney Care serves approximately 187,000 patients in 46 states, and 11 countries. Kidney Care operations have three subsidiaries: VillageHealth, DaVita Rx, and Lifeline Vascular Access. The acquisition of HealthCare Partners (HCP) strategically diversifies and updates DaVita’s operations within healthcare management. This company holds 1,300 team physicians and extenders, and just under one million patients. HCP has 221 clinics and 240 affiliated (in network) hospitals. HCP focuses its strategy in California, Nevada, New Mexico, Arizona, Colorado, Florida, and Pennsylvania. HCP has three types of membership they manage, Medicare Advantage, Commercial, and Medicaid. See Figure 1.0 Corporate Governance and Social Responsibility DaVita’s corporate governance and corporate social responsibility (CSR) are moderately rated overall

• We believe this area of the company remains strong and enhances growth ultimately increasing long term value. The company’s ability to deliver exceptional service within their industry is increasing with further expansion. Their efforts to improve relations with clients, employees and shareholders are making an impact through number of committees, which provide a strong and effective chain of command. DaVita HCP is able to accomplish goals with a strong executive management team. DaVita’s quality of governance was measured in four important facets:

• Shareholder Rights – One vote per share policy; minority shareholders have the ability to have their votes count, while larger shareholders are not able to have a substantial input (Appendix 11)

• Board of Directors – Nine directors to serve one year terms, by majority vote; responsibilities are to establish audit, compensation, nominating and

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Figure 2: 2014 US Dialysis Centers, Top 5 States

Source: Company Data

Figure 3: Historical Cap Structure: Book Value

Source: Company Data Figure 4: US Population Projections (in 000s)

governance compliance, public policy and clinical performance committees. (Appendix 9)

• Audit and Oversight – audit committee is responsible for legal and regulatory risk oversight, while the compliance committee’s primary responsibility is to oversee healthcare legal and regulatory compliance. Committees meet regularly with chief legal officer and chief compliance officer to identify and lessen risk exposure. An audit officer is appointed by audit committee and an independent registered Public Accounting Firm, KPMG LLP. (Appendix 10&12)

• Compensation – reveals compensation polices and beneficial ownership of management. Compensation for executive officers varies depending on base salary as well as company and individual performance. These include cash and stock options. (Appendix 16)

Corporate Social Responsibility (Sustainability) DaVita HCP’s commitment to improving the lives of their patients and the community are of great importance. Their CSR is effective in accomplishing its goals. In order to be a leader in American healthcare, DaVita must involve the corporate community.

• The Trilogy of Care- Caring for their patients, each other and the world- is DVAHCP vision for social responsibility and is used as a philosophy for balance business responsibility. DVA hosts a number of events that raise money and provide dialysis service treatment to people around the world. (Appendix 15)

• Improving health: Integrated care and Empowering patients • Engaging Communities: Sustainability, philanthropy and community

service. Industry Overview Market Drivers Key drivers for dialysis care providers derive from obesity rates along with age. These are major factors in contracting diabetes and necessitate dialysis treatment. The other major force affecting the profitability of dialysis treatment is the reimbursement rates paid to dialysis care providers by the government and commercial payers. New regulation in the healthcare industry depresses the reimbursement rates paid by top payers like Medicare and Medicaid and reduce the profitability of treatment forcing care providers to maximize operating efficiency. Increasing Rates of Diabetes Result in High Incidents of Dialysis Treatment Projections show a 165 percent increase in patients diagnosed with diabetes from approximately 11 million patients in 2000 to approximately 29 million patients in 2050.This startling increase fails to encompass the short-term growth of new diagnosis of diabetes in the immediate term. Annual rates of new diagnosis of diabetes show that for the first time in 25 years, there has been a gradual decline of patients being diagnosed with diabetes from approximately 1.7 million new diagnosed patients in 2009 to only 1.4 million in 2014 within the United States. This captures a trend reflecting healthier lifestyles influenced by proper diet and exercise. Another theory addressing the decline in new patients diagnosed with diabetes is the possible peak in the diabetes population which can be projected to remain stable instead of increase. While the amount of diabetes patients seems to be increasing through 2050, the amount of newly diagnosed patients annually is actually declining. Ageing Population To Produce More Chronic Kidney Disorders The average age of a patient undergoing dialysis treatment is 64 years old.[3] In

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https://word-edit.officeapps.live.com/we/wordeditorframe.aspx?ui=en%2DUS&rs=en%2DUS&WOPISrc=https%3A%2F%2Fbearsunco%2Dmy%2Esharepoint%2Ecom%2Fpersonal%2Fbarr7865%5Fbears%5Funco%5Fedu%2F%5Fvti%5Fbin%2Fwopi%2Eashx%2Ffiles%2F1e1aa3d563bc4309be32bc28f0d43c11&&&wdEnableRoaming=1&wdPid=4E00124&wdModeSwitchTime=1450390534955&wdPreviousSession=49ee2d17-eb0c-4083-8e48-7de7803120da&pdcn=pdc5240

Source: U.S. Census Bureau Figure 5: US Average Obesity Projections

Source: Stateofobesity.org

Figure 6: DVA Countries of Interest 2014 Population (in 000s)

Source: CIA World Fact Book

2014, people of the age of 65 years or older made up approximately 14.5 percent of the total US population. Forward projections show a 112 percent increase in this age category for the domestic population. This could possibly be the most attractive segment for dialysis care providers as an ageing population represents a larger pool of possible patients that could suffer from chronic kidney disorders. Government Reimbursement Policies for Dialysis Procedures Sixty-six percent of DaVita Healthcare’s revenue is derived from Medicare and Medicaid which makes up approximately 90 percent of their treatments. Commercial payers represent more attractive options and prove to be significantly more profitable than Medicare or Medicaid but represent only a small portion of the patients being treated. Regulation has commercial payers make only 30 months of payments before reverting to the less profitable Medicare rates. (I’m sure we’ll have some type of revenue breakdown visual here but it would be good to include something else that shows how vulnerable DaVita is to rate decreases.) Average Rates That Commercial Payers Pay Likely to Decline In the 2nd quarter of 2015, two planned mergers of large commercial payers were announced and if completed would put increased pressure on dialysis rates that DaVita and other dialysis care providers receive. It can be concluded that rates will not likely increase in the future and only show signs of decreasing, forcing major healthcare providers like DaVita to expand operations and further capture economies of scale to reduce operating costs. Consolidation between commercial payers gives them more leverage when negotiating future rates, further depressing margins per treatment for DaVita. Healthcare Partners Acquisition Step in Right Direction but Not Perfect Solution The 2011 strategic acquisition of HCP was a way for DaVita to capitalize on a shifting healthcare system and gain more of a presence in healthcare management. While a step in the right direction, HCP’s business model can be easily replicated and represents a part of the managed healthcare market segment that is still in infancy. In the short term horizon, HCP revenues make up only a small portion of DaVita’s overall revenue and will remain that way for the next three to five years. Competitive Positioning With nearly 70 percent of the dialysis treatment market comprised of only two companies, DaVita and Fresenius, a duopoly practically exists which gives DaVita a favorable market position. By making up nearly a third of the market, DaVita is able to accomplish economies of scale that smaller competitors are unable to achieve. This sets DaVita up for expansion through both the construction of new facilities as well as acquiring smaller ones, further increasing market share. Because the dialysis treatment market is comprised of only two major players, very few options exist domestically when seeking dialysis treatment. By owning a vast number of facilities, operating within a market characterized by razor thin margins and high barriers of entry, DaVita holds a favorable position amongst other competitors. The major factor in remaining profitable for DaVita will be their ability to expand operations domestically and abroad in order to combat declining rates paid to them by payers. Investment Summary We issues a SELL recommendation on DaVita Health Care (DVA) with a target price of $55 using a Free Cash flow Analysis and multiple Relative Valuations, DVA does not pay a dividend so no dividend discount model could be used. This valuation is supported by many concerns surrounding DaVita’s business operational risks as well as a few merits. Concerns

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Figure 7: DVA Countries of Interest Obesity Rates

Source: WorldObesity.org Figure 8: 2014 US Dialysis Revenues by Source

Source: Team Calculations

Facility Growth In the United States while increasing population provides opportunity for new dialysis centers, Obesity rates have started to increase at slower rates. We believe obesity is a key driver to open up new facilities, while this has started to flatten out there will be insufficient patients to fill newly opened and acquired dialysis centers. This is shown by the 75 centers that have been lost in the U.S. in 2015. DVA has started to focus its growth internationally, while this sounds like a good there is a strong competition and saturated markets around Europe and most of Asia. We believe that DaVita has somewhat of an unorganized international growth strategy because of the low correlation between facility growth and country demographics. While HCP does provide a nice future revenue growth of 8%, they only account for 27% of revenue. Litigations DVA has incurred many lawsuits over the past few years, most recently to the Atlanta whistle blowers case that cost them $495 million. While the lawsuits are not substantially harmful for the bottom line, they generate large amounts of negative publicity. DVA is operating in an industry and country where good publicity, such as high quality services and engagement within the community would be ignored by the public, but one single law suit can produce bad publicity for several years. Stability of Revenues Even though dialysis facilities are starting to become saturated across the United States and the world, kidney dialysis centers will always be needed and there is no permanent cure known yet so revenues will always be stable. DaVita carries a prestigious brand name based on ratings received. Excellent Service DVA’s quality of care is strong. 84% of DVA patients are in four or five star facilities. This does two things for DVA, one is people hear about that and they want to get the best quality of care, and in the United States DVA gets a five percent bonus on four or five star ratings centers. Financial Analysis

Financial Condition 2013 2014 2015E 2016E 2017E 2018E 2019E 2020E

Profitability NOI / EBITDA Margin 52.1% 49.4% 47.8% 48.7% 48.7% 48.7% 48.7% 48.6%

Operating Profit Margin 15.8% 14.2% 13.7% 17.8% 17.7% 17.5% 17.3% 17.1%

Net profit margin 5.4% 5.7% 3.6% 5.7% 5.8% 5.8% 5.8% 5.8%

Return on Assets 3.7% 4.0% 3.4% 3.7% 3.8% 3.9% 4.0% 4.1%

Return on Equity 11.9% 11.7% 10.6% 11.5% 10.5% 9.7% 9.0% 8.4%

Liquidity Current Ratio 1.41x 1.86x 1.97x 1.99x 2.x 2.x 2.01x 2.01x

Cash Ratio 0.38x 0.46x 0.43x 0.42x 0.42x 0.42x 0.42x 0.43x

Efficiency Accounts Receivable Turnover

8.08

8.49

11.19

6.99

6.01

6.01

6.01

6.00 Total Asset Turnover 0.69x 0.71x 0.95x 0.64x 0.66x 0.67x 0.69x 0.7x

Fixed Asset Turnover 5.37x 5.18x 6.88x 4.87x 4.87x 4.87x 4.87x 4.87x

Financial Leverage Long-term Debt to Assets 0.55x 0.54x 0.55x 0.56x 0.56x 0.57x 0.57x 0.57x

Long-term Debt to Equity 1.76x 1.56x 1.71x 1.74x 1.56x 1.41x 1.29x 1.19x

Debt to Equity 2.22x 1.9x 2.1x 2.11x 1.89x 1.72x 1.57x 1.45x

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Figure 9: Cash Flow Coverage Ratio, Projected

Source: Team Calculations Figure 10: Long-term Debt to Assets

Source: Team Calculations Figure 11: Profit Margin, Projected


Figure12: YoY Increasing Patient Care Costs

Debt-to-Capitalization Ratio 1.21x 1.22x 1.22x 1.22x 1.22x 1.22x 1.22x 1.22x

Interest Coverage 4.36x 4.43x 4.6x 5.22x 5.29x 5.36x 5.41x 5.47x

Debt Service Coverage 0.75x 0.87x 1.02x 0.96x 0.96x 0.95x 0.95x 0.94x

Cash Flow Cash Flow Coverage Ratio 9.80% 6.95% 5.02% 3.04% 4.77% 4.86% 4.94% 5.04%

Overview The financial condition in the chart above shows DaVita Healthcare Partners’ prospects moving forward. These estimated ratios are derived from forecasted financial statements found in the appendix. Cash Flow Coverage Ratio Cash Flow Coverage Ratio is key for the companies in the healthcare sector because companies are often forced to wait long periods of time before they are paid for their services by government or insurance agencies. Based on our projections, DaVita HCP will have sufficient cash to cover obligations, but projected levels are down from historical values. Debt-to-Capitalization Ratio DaVita HCP’s Debt-to-Capitalization ratio, another key identifier of financial health for companies in this sector, is projected to stay constant at around 1.22 based on financial statement projections. Long-term debt is greater than total capital available, which is demonstrated by a ratio greater than 1. Higher financial risk can be explained by forecasted increasing long-term debt associated with the Kidney Care segment only finding true growth by adding facilities. Profit Margin Profit margin is expected to increase based on financial statement projections. The key assumption here is that we believe DaVita’s costs will grow at 0.25% annually based on the uncertainty of healthcare payment plans. We do not see many areas where the company will be able to cut costs while still providing a high quality service to patients desperately in need. Any drastic changes in the healthcare system unfavorable to DVA will cut into margins even further than what is projected. ROE Decomposition

ROE Decomposition 2013 2014 2015E 2016E 2017E 2018E 2019E 2020E

Net Profit Margin 5.39% 5.66% 3.57% 5.72% 5.75% 5.77% 5.78% 5.79%

Asset Turnover 69% 71% 95% 64% 66% 67% 69% 70%

Equity Multiplier 3.22

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ROE 11.95% 11.68% 10.56% 11.47% 10.47% 9.66% 8.99% 8.41%

DaVita HCP ROE has TTM of 9.7%, much below the industry average at 20.3%. We have forecasted that ROE will decline in 2015 when final reports are published. From here, ROE will increase until 2016, followed by a strong decline. It is also appropriate to compare the company to its major competitor, Fresenius, which has a TTM ROE of 11.0%. The increase in ROE in 2016 is directly related to profit margins returning to levels similar to prior years. The decrease after 2017 is caused by a decreasing equity multiplier from DaVita’s forecasted increasing retained earnings based on their decision to not pay a dividend.

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Source: Team Calculations Figure 13: Debt-to-capitalization Ratio

Figure 12: 2014 Revenues by Company Area

Source: Company Data

Investment Risk

Compliance Risk The healthcare industry as a whole faces stringent compliance laws and must operate in the best interest of their patients. We believe cautiousness and assiduity are of utmost importance to enhance and preserve DaVita’s image, while protecting the interests of its shareholders. The kidney care business is subject to a number of investigations by the federal government and two party civil suits, which could result in substantial penalties or awards against them, including exclusions from future participation in the Medicare/Medicaid programs. (Appendix 13-14) DaVita HCP entered into a five-year Corporate Integrity Agreement in 2014, if they fail to comply can result to substantial penalties affecting revenue, earnings and cash flows. Operational Risk The key component to DaVita’s operational risk is continuing to provide a high quality service while future costs due to regulation may increase. This makes it difficult for the company to cut costs because the outcome of poor quality may cost a patient their life. In addition, forecasting the number of dialysis patients is a key part of DaVita’s business. Failure to do so in the future would impact the timing recognition of earnings and eventually affect the bottom line. DaVita is investing in foreign dialysis centers, and while these centers provide opportunity for growth they also may be risky if they are unable to attract clients and also subjects the company to foreign currency risk, specifically fluctuations in the LIBOR interest rate. The kidney care section relies heavily on highly-skilled professionals, and if the company is to experience high turnover this could negatively impact earnings. Economic Risk We believe DaVita HCP is a defensive stock; or less affected by market

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DVA Share Pricing and News Flow

Total Renal Care denies allegationsasserted in class action lawsuits

DaVita plans to buy 25M shares of its CS

Merger with HCP

DaVita opens 1,500 facility

DaVita introduces Village Green DaVita closes

Gambro Healthcare acquisition

Atlanta whistle-blower lawsuit

Table 3: Free Cash Flow Valuation

Source: Team Calculations Table 4: WACC Analysis

WACC Analysis Years 1-2 Years 3-5

Risk Free Rate 2.37% 4.00%

Adjusted Beta 0.78 0.78

Market risk premium 7.00% 7.00%

Cost of Equity 7.83% 9.46%

Risk Free Yield 2.37% 4.00%

BB spread 3.99% 3.99% Cost of Debt (after tax) 2.50% 4.13%

Weight of Stock 63.00% 60.00%

Weight of Debt 37.00% 40.00%

WACC 5.86% 7.33% Source: Team Calculations Figure 15: YoY Revenue Growth


fluctuations. The majority of their business, Kidney Care, is an area where if someone is in need of dialysis, price is going to play a small role. Most people will spend everything they can to receive the highest quality of care to enhance their living situation. HCP is more affected by economic cycles because there may be less opportunities for acquisition. Valuation A number of different valuation methodologies were utilized in deriving a target price for DVA. Included were a free cash flow valuation, and multiple relative valuations. DVA does not pay out a dividend, so no dividend discount model could be used. Free Cash Flow Model The main model used in determining the intrinsic value of DVA’s share price was a free cash flow valuation. The model is forecasted five years out, mainly because with the rapidly changing healthcare laws it would be difficult to forecast growth any more than five years out. The model is driven by free cash flow which was found by cash from operations and adding capital expenditures. This valuation generated a target price of DVA stock at $55.03, an 18.45% discount. (Table 3) The base case for this model was formulated using guidance from industry outlook, DVA’s competitive positioning, historical performance, revenue growth, and earnings growth. The free cash flow valuation is most sensitive to three factors, all of which are explained below: Weighted Average Cost of Capital (WACC) To better estimate an appropriate discount rate, the WACC was split into two tiers. The first tier ranges from 2016-2017 and is structured to more accurately reflect DVA WACC before the expected interest rate hikes. The second tier is adjusted for the normalization of the 10 year treasury rates from 2018-2020. A beta of 0.78 is used, this was found by finding a raw beta and adjusting it upwards due to less expected growth by taking a linear regressions of DVA's stock price against the S&P 500 for 3 years on a weekly basis (Appendix 8). CAPM was used to estimate the Cost of Equity, while a risk free rate plus a BB bond spread was used to calculate Cost of Debt. A capital structure of 63% equity and 37% debt is utilized for the first two years, but a target capital structure of 60% equity and 40% debt is used for years 3-5. (Figure 16) Revenue Growth Revenue growth for Kidney Care will be primarily based on the number of facilities developed and acquired in the United States and internationally. Using data from the U.S. census bureau and the fact that obesity rates are increasing at a decreasing rate a regression of population, obesity rates, type II diabetes, and age of population was run against DVA facility growth and population and obesity rates were the only two variables that were significant in the regression (Appendix 4). Using this regression we forecasted where DVA is focusing facility growth and how many facilities they plan to open up within the next five years. International revenues had no significant variables, so a forecasted of ten to twenty facilities were estimated to open every year. The sum of the forecasted facilities for each year was multiplied by the average number of treatments per year at each facility and average revenue per treatment. HCP’s revenue growth did not have much of a trend to where or when they would acquire facilities, so a historical rate, as well as DVA’s anticipated facility growth of 8% per year was used.

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Figure 16: Capital Structure

Source: Bloomberg

Terminal Growth As DVA continues to try and find unsaturated markets throughout a slowly growing United States population and across a saturated market around the world their growth will steadily decline to a terminal growth rate. The terminal growth of 4.5% was used as it should be a little greater than the expected inflation rate of 3%. Price Multiples While the free cash flow valuation method was the main valuation approach, we also analyzed trailing price relatives of DaVita’s main competitor, Fresenius Medical Care. Fresenius was chosen to compare to because it is one of the only companies that solely focuses on kidney dialysis.

P/E P/B ROE Operating Margin EV/EBITDA

DaVita 30.2 2.8 9.7 10.2 9.2 Fresenius 24.4 2.7 11.0 13.9 12.3

Source: Morning Star When comparing the main key ratios, DVA is at a disadvantage compared to Fresenius health care. DVA’s stock has a very high Price to Earnings (P/E) which means that there upside is very limited and should correct more towards that of Fresenius Medical Care. DVA also has a lower Return on Equity (ROE) than Fresenius which could be deceiving because capital structure is has a lot to do with the ROE, but DVA actually has about 60% equity in their capital structure and Fresenius has about 70% equity in theirs, so even though DVA has less equity they still have a worse of an ROE (Figure 16). Operating Margin and EV/EBITDA were also very low compared to DVA’s main competitor. Price Target and Range The $55 target price was found by adjusting the free cash flow model a little upward due to the fact that DaVita’s multiples were poor to their competitor, but relatively close to most of them. The $55 target price results in a sell recommendation. Because DVA does not pay a dividend, the yield for this would be -16.83%.

0%10%20%30%40%50%60%70%80%

DaVita Fresenius

Capital Structure

Debt Equity

Disclosures: Ownership and material conflicts of interest: The author(s), or a member of their household, of this report does not hold a financial interest in the securities of this company. The author(s), or a member of their household, of this report does not know of the existence of any conflicts of interest that might bias the content or publication of this report. Receipt of compensation: Compensation of the author(s) of this report is not based on investment banking revenue. Position as a officer or director: The author(s), or a member of their household, does not serve as an officer, director or advisory board member of the subject company. Market making: The author(s) does not act as a market maker in the subject company’s securities. Disclaimer: The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness. The information is not intended to be used as the basis of any investment decisions by any person or entity. This information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. This report should not be considered to be a recommendation by any individual affiliated with CFA society Colorado, CFA Institute or the CFA Institute Research Challenge with regard to this company’s stock.

CFA Institute Research Challenge

Appendix 1: Balance Sheet 2012 2013 2014 2015E 2016E 2017E 2018E 2019E 2020E

ASSETS

Cash And Equivalents $533.75 $946.25 $965.24 $1,047.42 $1,125.78 $1,176.21 $1,229.02 $1,284.36 $1,339.46

Short Term Investments $7.14 $6.80 $337.40 $922.85 $141.56 $147.90 $154.54 $161.50 $168.43

Total Cash & ST Investments $540.89 $953.05 $1,302.64 $1,970.27 $1,267.34 $1,324.11 $1,383.56 $1,445.86 $1,507.89

Accounts Receivable $1,424.30 $1,485.16 $1,525.85 $1,699.89 $2,467.99 $2,578.56 $2,694.32 $2,815.64 $2,936.44

Other Receivables $301.15 $338.24 $468.04 $465.90 $508.12 $530.88 $554.71 $579.69 $604.56

Total Receivables $1,725.45 $1,823.40 $1,993.89 $2,165.79 $2,976.11 $3,109.43 $3,249.03 $3,395.34 $3,541.00

Inventory $78.13 $88.81 $136.09 $173.05 $508.12 $530.88 $554.71 $579.69 $604.56

Prepaid Expenses $75.85 $93.88 $102.47 $150.04 $131.86 $137.77 $143.95 $150.43 $156.89

Deferred Tax Assets, Current $324.15 $409.44 $240.63 $253.07 $311.42 $316.09 $320.84 $325.65 $330.53

Other Current Assets $142.59 $103.70 $101.10 $175.72 $178.35 $181.03 $183.74 $186.50 $189.29

Total Current Assets $2,887.05 $3,472.28 $3,876.80 $4,737.89 $5,373.19 $5,599.31 $5,835.82 $6,083.47 $6,330.17

Gross Property, Plant & Equipment $3,394.55 $3,967.67 $4,498.61 $4,927.06 Accumulated Depreciation ($1,522.20) ($1,778.30) ($2,029.50) ($2,305.10)

Net Property, Plant & Equipment $1,872.37 $2,189.41 $2,469.10 $2,621.92 $2,980.25 $3,113.77 $3,253.55 $3,400.07 $3,545.93

Long-term Investments $94.56 $81.51 $114.54 $160.50 $2,980.25 $3,113.77 $3,253.55 $3,400.07 $3,545.93

Goodwill $8,952.75 $9,212.97 $9,415.30 $9,487.58 $9,487.58 $9,487.58 $9,487.58 $9,487.58 $9,487.58

Other Intangibles $2,128.12 $2,024.37 $1,949.50 $1,826.78 $1,826.78 $1,826.78 $1,826.78 $1,826.78 $1,826.78

Other Long-Term Assets $79.79 $118.33 $117.49 $60.17 $60.17 $60.17 $60.17 $60.17 $60.17

Total Assets $16,014.63 $17,098.88 $17,942.72 $18,894.83 $22,708.23 $23,201.37 $23,717.46 $24,258.13 $24,796.56

LIABILITIES

Accounts Payable $414.14 $435.47 $445.45 $487.95 $559.20 $585.37 $612.88 $641.82 $670.66

Accrued Expenses $986.51 $1,070.59 $1,258.75 $1,175.66 $1,399.26 $1,464.75 $1,533.59 $1,606.01 $1,678.19

Current Portion of LT Debt $233.04 $286.77 $111.61 $111.53 $111.53 $111.53 $111.53 $111.53 $111.53

Current Portion of Capital Leases $0.00 $0.00 $10.00 $4.00 $4.00 $4.00 $4.00 $4.00 $4.00

Other Current Liabilities $382.73 $669.22 $262.84 $631.42 $630.74 $644.44 $658.77 $673.79 $688.75

Total Current Liabilities $2,016.43 $2,462.05 $2,088.65 $2,410.55 $2,704.73 $2,810.09 $2,920.77 $3,037.15 $3,153.13

Long-Term Debt $8,345.53 $8,141.23 $8,175.18 $8,830.20 $10,901.12 $11,137.86 $11,385.61 $11,645.16 $11,903.63

Capital Leases $0.00 $0.00 $208.10 $251.90 $275.00 $300.00 $325.00 $350.00 $375.00

Deferred Tax Liability, Non-Current $715.66 $812.42 $890.70 $906.81 $982.27 $1,064.01 $1,152.55 $1,248.46 $1,352.35

Other Non-Current Liabilities $439.41 $380.34 $389.81 $406.04 $527.37 $538.83 $550.81 $563.37 $575.87

Total Liabilities $11,517.02 $11,796.04 $11,752.44 $12,805.49 $15,390.49 $15,850.78 $16,334.74 $16,844.13 $17,359.98

Common Stock $0.27 $0.21 $0.22 $0.22 $0.22 $0.22 $0.22 $0.22 $0.22

Additional Paid In Capital $1,208.67 $1,070.92 $1,108.21 $1,106.34 $1,100.00 $1,100.00 $1,100.00 $1,100.00 $1,100.00

Retained Earnings $3,731.84 $3,363.99 $4,087.10 $4,362.84 $5,183.40 $6,045.75 $6,950.65 $7,898.95 $8,890.12

Treasury Stock ($1,162.30) $0.00 $0.00 ($424.70) ($200.00) ($200.00) ($200.00) ($200.00) ($200.00)

Comprehensive Inc. and Other ($15.30) ($2.60) ($25.00) ($54.30) ($30.00) ($30.00) ($30.00) ($30.00) ($30.00)

Total Common Equity $3,763.14 $4,432.48 $5,170.51 $4,990.35 $6,053.62 $6,915.97 $7,820.87 $8,769.17 $9,760.34

Minority Interest $734.48 $870.36 $1,019.76 $1,098.98 $1,240.06 $1,446.37 $1,662.85 $1,889.72 $2,126.84

Total Equity $4,497.62 $5,302.84 $6,190.28 $6,089.34 $7,293.68 $8,362.34 $9,483.72 $10,658.89 $11,887.18

Total Liabilities And Equity $16,014.63 $17,098.88 $17,942.72 $18,894.83 $22,684.18 $24,213.11 $25,818.46 $27,503.02 $29,247.16

Assumptions: Each historical balance sheet item was found as a percentage of its given factor in the given year. These percentages were averaged and then multiplied by the forecasted factor. They are broken down by factor below.

1) Items that fluctuate with sales (historical averages in parentheses) a. Cash & ST Investments (8%) b. Accounts Receivable (14%) c. Other Receivables (4%) d. Inventory (1%) e. Prepaid Expenses (1%) f. Net Property, Plant, and Equipment (1%) g. Long-term Investments (1%)

2) Items that fluctuate with expenses (historical averages in parentheses) a. Accounts Payable (5%) b. Accrued Expenses (12%)

3) Items that fluctuate with Total Assets (historical averages in parentheses) a. Other current liabilities (2%) b. Long-term Debt (48%) c. Other Non-current Liabilities (2%)

4) Items with steady growth (numerical growth in parentheses) a. Capital leases ($25)

5) Items that grow with inflation projections (2.5%) a. Deferred Tax Assets b. Other Current Assets

6) Items left unchanged a. Goodwill b. Other Intangibles c. Other Long-term assets d. Current Portion of Long-term debt e. Current Portion of Capital Leases f. Common Stock

7) Items set to flat rate a. Additional Paid-in Capital b. Treasury Stock c. Comprehensive Income

8) Minority Interest: historical average of 24%, multiplied by projected retained earnings

Appendix 2: Income Statement 2012 2013 2014 2015E 2016E 2017E 2018E 2019E 2020E

Revenue $7,593.68 $10,996.11 $11,748.29 $16,519.57 $13,219.45 $13,830.00 $14,470.63 $15,143.52 $15,812.77

Other Revenue $588.26 $763.09 $1,032.36 $1,521.87 $1,298.15 $1,337.97 $1,378.28 $1,419.09 $1,460.40

Total Revenue $8,181.94 $11,759.20 $12,780.65 $18,041.44 $14,517.60 $15,167.97 $15,848.91 $16,562.62 $17,273.17

Cost Of Goods Sold $5,583.55 $8,198.38 $9,119.31 $12,869.30 $9,215.06 $9,678.29 $10,165.57 $10,678.60 $11,190.04

Gross Profit $2,598.39 $3,560.82 $3,661.35 $5,172.15 $5,302.54 $5,489.68 $5,683.34 $5,884.02 $6,083.14

Selling General & Admin Expense $859.13 $1,176.49 $1,261.51 $1,866.40 $1,477.91 $1,544.12 $1,613.44 $1,686.10 $1,758.43

R & D Expense $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Depreciation & Amortization $341.97 $528.74 $590.94 $835.17 $672.77 $702.91 $734.46 $767.54 $800.47

Other Operating Expense/(Income) $0.00 $0.00 $0.00 $0.00 $577.15 $576.53 $575.90 $575.27 $574.62

Other Operating Expense, Total $1,201.10 $1,705.22 $1,852.44 $2,701.57 $2,727.83 $2,823.56 $2,923.81 $3,028.90 $3,133.52

Operating Income $1,397.30 $1,855.60 $1,808.91 $2,470.58 $2,574.71 $2,666.12 $2,759.53 $2,855.12 $2,949.62

Interest Expense ($288.60) ($429.90) ($410.30) ($539.71) ($500.17) ($511.04) ($522.40) ($534.31) ($546.17)

Interest and Investment Income $3.61 $3.99 $2.03 $2.71 $2.50 $2.50 $2.50 $2.50 $2.50

Net Interest Expense ($284.90) ($426.00) ($408.30) ($537.01) ($497.67) ($508.54) ($519.90) ($531.81) ($543.67)

Income/(Loss) from Affiliates $16.38 $34.56 $23.23 $20.30 $23.84 $24.20 $24.56 $24.93 $25.31

Other Non-Operating Income (Expense) - - - $6.03 $6.00 $6.00 $6.00 $6.00 $6.00

EBT Excluding Unusual Items $1,128.73 $1,464.20 $1,423.88 $1,959.90 $2,106.88 $2,187.79 $2,270.19 $2,354.24 $2,437.25

Merger & Related Restructure Charges ($30.80) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Impairment of Goodwill $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Gain (Loss) On Sale Of Investment $0.12 $0.80 $0.34 $0.82 $0.80 $0.80 $0.80 $0.80 $0.80

Legal Settlements ($85.80) ($397.00) ($17.00) ($658.35) ($500.00) ($500.00) ($500.00) ($500.00) ($500.00)

Other Unusual Items ($11.00) $56.98 ($97.50) ($63.97) ($25.28) ($25.66) ($26.04) ($26.43) ($26.83)

EBT Including Unusual Items $1,001.30 $1,124.98 $1,309.67 $1,238.40 $1,581.60 $1,662.13 $1,744.15 $1,827.80 $1,910.42

Income Tax Expense $359.85 $381.01 $446.34 $382.87 $490.30 $515.26 $540.69 $566.62 $592.23

Earnings from Continued Operations $641.46 $743.97 $863.33 $855.53 $1,091.30 $1,146.87 $1,203.46 $1,261.18 $1,318.19

Earnings of Discontinued Operations ($0.20) $13.24 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Extraordinary Item & Account Change $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Net Income to Company $641.24 $757.20 $863.33 $855.53 $1,091.30 $1,146.87 $1,203.46 $1,261.18 $1,318.19

Minority Interest in Earnings ($105.20) ($123.80) ($140.20) ($212.27) ($270.74) ($284.52) ($298.56) ($312.88) ($327.03)

Net Income $536.02 $633.45 $723.11 $643.27 $820.57 $862.35 $904.90 $948.30 $991.17

Assumptions: Most historical income statement items was found as a percentage of its given factor in the given year. These percentages were averaged and then multiplied by the forecasted factor. They are broken down by factor below. Alternate forms of estimation are discussed under their own bullet.

1) Revenue, the sum of three components: a. US Kidney Care: comprised of forecasted facilities found in Appendix F multiplied by the average revenue

per facility b. International Kidney Care: comprised of forecasted facilities found in Appendix H multiplied by the average

revenue per facility c. Healthcare Partners: historic revenues grown at 8%

2) Other Revenue: Q3 2015 revenue annulized and grown at same rate as US Kidney Care revenues 3) Cost of Goods Sold, sum of two components:

a. US Kidney Care: comprised of historical average (64.01%) of forecasted US sales; grown at 0.25% annually due to projected increasing costs

b. International Kidney Care: comprised of historical average (64.01%) of forecasted sales; grown at 0.25% annually due to projected increasing costs

4) Items that fluctuate with sales (historical averages in parentheses) a. Selling General & Admin Expense (10%) b. Other Operating Expense

5) Items that fluctuate with Net PPE a. Depreciation (23%)

6) Items that fluctuate with Long-term debt a. Interest expense (4.6%)

7) Other Operating expense: sum of equity investment income (-0.2% of sales), and Healthcare partners historic Equity Investment Income grown at inflation projection

8) Items fixed at flat rate a. Interest and Investment Income ($2.50) b. Other Non-operating Income ($6) c. Gain/Loss sale of Investment ($0.80) d. Legal Settlements ($500)

9) Items grown with inflation a. Income/Loss from Affiliates b. Other Unusual Items

10) Income Tax Expense: EBT multiplied by 31% tax rate 11) Minority Interest: Net Income to company multiplied by historical minority interest average (25%)

Appendix 3: Historical Centers, Population, Obesity Rates by US State 2012

State Centers Population Obesity

Alabama 47 4,817,484 33.0%

Arizona 25 6,556,236 26.0%

Arkansas 32 2,949,300 34.5%

California 228 38,062,780 25.0%

Colorado 35 5,191,709 20.5%

Connecticut 23 3,594,362 25.6%

District of Columbia 10 635,040 21.9%

Florida 149 19,355,257 25.2%

Georgia 110 9,919,000 29.1%

Hawaii 0 1,392,766 23.6%

Idaho 9 1,595,590 26.8%

Illinois 74 12,873,763 28.1%

Indiana 50 6,537,632 31.4%

Iowa 22 3,075,935 30.4%

Kansas 24 2,885,966 29.9%

Kentucky 34 4,383,465 31.3%

Louisiana 27 4,604,744 34.7%

Maine 3 1,328,592 28.4%

Maryland 54 5,891,819 27.6%

Massachusetts 13 6,655,829 22.9%

Michigan 69 9,884,781 31.1%

Minnesota 39 5,380,615 25.7%

Mississippi 11 2,986,137 34.6%

2013 State Centers Population Obesity

Alabama 53 4,833,996 32.4%

Arizona 25 6,634,997 26.8%

Arkansas 32 2,958,765 34.6%

California 244 38,431,393 24.1%

Colorado 37 5,272,086 21.3%

Connecticut 23 3,599,341 25.0%


Florida 156 19,600,311 26.4%

Georgia 116 9,994,759 30.3%

Hawaii 0 1,408,987 21.8%

Idaho 9 1,612,843 29.6%

Illinois 81 12,890,552 29.4%

Indiana 54 6,570,713 31.8%

Iowa 22 3,092,341 31.3%

Kansas 26 2,895,801 30.0%

Kentucky 34 4,399,583 33.2%

Louisiana 28 4,629,284 33.1%

Maine 3 1,328,702 28.9%

Maryland 54 5,938,737 28.3%


Michigan 72 9,898,193 31.5%

Minnesota 44 5,422,060 25.5%

Mississippi 11 2,992,206 35.1%

Missouri 50 6,025,281 29.6%

Montana 0 1,005,163 24.3%

Nebraska 15 1,855,487 28.6%

Nevada 20 2,755,245 26.2%

New Hampshire 2 1,321,297 27.3%

New Jersey 38 8,876,000 24.6%

New Mexico 4 2,084,594 27.1%

New York 41 19,607,140 23.6%

North Carolina 65 9,748,181 29.6%

North Dakota 2 701,705 29.7%

Ohio 89 11,550,901 30.1%

Oklahoma 32 3,817,059 32.2%

Oregon 20 3,898,684 27.3%

Pennsylvania 84 12,770,043 29.1%

Rhode Island 1 1,052,637 25.7%

South Carolina 27 4,722,621 31.6%

South Dakota 3 834,504 28.1%

Tennessee 55 6,455,177 31.1%

Texas 164 26,094,422 29.2%

Utah 4 2,855,194 24.3%

Virginia 57 8,193,422 27.4%

Washington 27 6,896,325 26.8%

West Virginia 4 1,856,313 33.8%

Wisconsin 37 5,724,888 29.7%

Other 25 311,261,085 28.2%

1954 2014


Alabama 55 4,849,377 33.50%

Arizona 25 6,731,484 28.90%

Arkansas 33 2,966,369 35.90%

California 257 38,802,500 24.70%

Colorado 38 5,355,866 21.30%

Connecticut 23 3,596,677 26.30%

Missouri 52 6,044,917 30.4%

Montana 1 1,014,864 24.6%

Nebraska 15 1,868,969 29.6%

Nevada 20 2,791,494 26.2%

New Hampshire 3 1,322,616 26.7%

New Jersey 39 8,911,502 26.3%

New Mexico 4 2,086,895 26.4%

New York 42 19,695,680 25.4%

North Carolina 65 9,848,917 29.4%

North Dakota 2 723,857 31.0%

Ohio 106 11,572,005 30.4%

Oklahoma 35 3,853,118 32.5%

Oregon 21 3,928,068 26.5%

Pennsylvania 92 12,781,296 30.0%

Rhode Island 1 1,053,354 27.3%

South Carolina 30 4,771,929 31.7%

South Dakota 3 845,510 29.9%

Tennessee 55 6,497,269 33.7%

Texas 176 26,505,637 30.9%

Utah 4 2,902,787 24.1%

Virginia 60 8,270,345 27.2%

Washington 29 6,973,742 27.2%

West Virginia 5 1,853,595 35.1%

Wisconsin 38 5,742,953 29.8%

Other 29 313,624,954 28.7%

2074 Q3 2015


Alabama 28 4,833,722 33.5%

Arizona 31 6,626,624 28.9%

Arkansas 25 2,959,373 35.9%

California 266 38,332,521 24.7%

Colorado 36 5,268,367 21.3%

Connecticut 24 3,596,080 26.3%


Florida 164 19,893,297 26.20%

Georgia 122 10,097,343 30.50%

Hawaii 0 1,419,561 22.10%

Idaho 9 1,634,464 28.90%

Illinois 84 12,880,580 29.30%

Indiana 58 6,596,855 32.70%

Iowa 25 3,107,126 30.90%

Kansas 25 2,904,021 31.30%

Kentucky 34 4,413,457 31.60%

Louisiana 29 4,649,676 34.90%

Maine 3 1,330,089 28.20%

Maryland 57 5,976,407 29.60%

Massachusetts 13 6,745,408 23.30%

Michigan 75 9,909,877 30.70%

Minnesota 47 5,457,173 27.60%

Mississippi 11 2,994,079 35.50%

Missouri 54 6,063,589 30.20%

Montana 1 1,023,579 26.40%

Nebraska 15 1,881,503 30.20%

Nevada 20 2,839,099 27.70%

New Hampshire 4 1,326,813 27.40%

New Jersey 47 8,938,175 26.90%

New Mexico 4 2,085,572 28.40%

New York 49 19,746,227 27.00%

North Carolina 66 9,943,964 29.70%

North Dakota 2 739,482 32.20%

Ohio 112 11,594,163 32.60%

Oklahoma 35 3,878,051 33.00%

Oregon 23 3,970,239 27.90%

Pennsylvania 96 12,787,209 30.20%

Rhode Island 1 1,055,173 27.00%

South Carolina 33 4,832,482 32.10%

South Dakota 3 853,175 29.80%

Tennessee 54 6,549,352 31.20%

Texas 195 26,956,958 31.90%

Utah 4 25.70%


Florida 135 19,552,860 26.2%

Georgia 128 9,992,167 30.5%

Hawaii 1 1,404,054 22.1%

Idaho 9 1,612,136 28.9%

Illinois 93 12,882,135 29.3%

Indiana 51 6,570,902 32.7%

Iowa 25 3,090,416 30.9%

Kansas 25 2,893,957 31.3%

Kentucky 38 4,395,295 31.6%

Louisiana 25 4,625,470 34.9%

Maine 3 1,328,302 28.2%

Maryland 57 5,928,814 29.6%


Michigan 76 9,895,622 30.7%

Minnesota 50 5,420,380 27.6%

Mississippi 0 2,991,207 35.5%

Missouri 57 6,044,171 30.2%

Montana 1 1,015,165 26.4%

Nebraska 16 1,868,516 30.2%

Nevada 21 2,790,136 27.7%

New Hampshire 4 1,323,459 27.4%

New Jersey 43 8,899,339 26.9%

New Mexico 3 2,085,287 28.4%

New York 49 19,651,127 27.0%

North Carolina 66 9,848,060 29.7%

North Dakota 2 723,393 32.2%

Ohio 123 11,570,808 32.6%

Oklahoma 35 3,850,568 33.0%

Oregon 21 3,930,065 27.9%

Pennsylvania 102 12,773,801 30.2%

Rhode Island 1 1,051,511 27.0%

South Carolina 38 4,774,839 32.1%

South Dakota 3 844,877 29.8%

Tennessee 38 6,495,978 31.2%

Texas 167 26,448,193 31.9%

Utah 5 25.7%

2,942,902

Virginia 60 8,326,289 28.50%

Washington 30 7,061,530 27.30%

West Virginia 7 1,850,326 35.70%

Wisconsin 38 5,757,564 31.20%

Other 29 315,973,995 29.3%

2179

2,900,872

Virginia 60 8,260,405 28.5%

Washington 30 6,971,406 27.3%

West Virginia 4 1,854,304 35.7%

Wisconsin 40 5,742,713 31.2%

Other 29 313,288,343 29.3%

2104

Appendix 4: US Dialysis Center Regression Results A linear regression was ran on each year, 2012-Q3 2015. Originally, the dependent variable (number of centers), was hypothesized to be impacted by four variables: population, average age, obesity rate, and Type-II diabetes rate. Average age and Type-II diabetes proved to be strongly insignificant and were omitted from the equation. Population and obesity rate by state remained as the two explanatory variables for number of centers. The regression results are shown below:

2012

Regression Statistics Multiple R 0.93

R Square 0.87 Adjusted R Square 0.87 Standard Error 16.63 Observations 47.00

ANOVA df SS MS F Significance F

Regression 2.00 84088.10 42044.05 151.94 0.00 Residual 44.00 12175.82 276.72

Total 46.00 96263.91

Coefficients Standard Error t Stat

P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%

Intercept -49.60 21.06 -2.36 0.02 -92.05 -7.16 -92.05 -7.16

Population 0.00 0.00 17.43 0.00 0.00 0.00 0.00 0.00

Obesity 178.65 72.74 2.46 0.02 32.05 325.25 32.05 325.25

2013




Regression 2.00 96488.86 48244.43 147.61 0.00

Residual 44.00 14380.88 326.84 Total 46.00 110869.74



Intercept -50.51 22.50 -2.24 0.03 -95.86 -5.16 -95.86 -5.16

Population 0.00 0.00 17.18 0.00 0.00 0.00 0.00 0.00

Obesity 177.81 76.38 2.33 0.02 23.87 331.75 23.87 331.75

2014




Regression 2.00 110350.79 55175.40 159.97 0.00 Population 44.00 15176.15 344.91

Obesity 46.00 125526.94



Intercept -49.65 23.63 -2.10 0.04 -97.26 -2.03 -97.26 -2.03

Population 0.00 0.00 17.88 0.00 0.00 0.00 0.00 0.00

Obesity 169.48 78.80 2.15 0.04 10.67 328.28 10.67 328.28

2015




Regression 2.00 104493.01 52246.51 138.48 0.00 Residual 44.00 16600.94 377.29

Total 46.00 121093.96



Intercept -34.81 24.46 -1.42 0.16 -84.11 14.49 -84.11 14.49

X Variable 1 0.00 0.00 16.64 0.00 0.00 0.00 0.00 0.00

X Variable 2 117.02 81.64 1.43 0.16 -47.51 281.55 -47.51 281.55

The individual regression coefficients each year were averaged and summarized below:

Regression Summary

2012 2013 2014 2015 Average

Intercept -49.60 -50.51 -49.65 -34.81 -46.14

Population 0.00001 0.00001 0.00001 0.00001 0.00001

Obesity 178.65 177.81 169.48 117.02 160.74

The regression equation utilized in Appendix F is shown below (derived from the averages):

𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁 𝑜𝑜𝑜𝑜 𝑐𝑐𝑁𝑁𝑐𝑐𝑐𝑐𝑁𝑁𝑁𝑁𝑐𝑐 = −46.14 + 0.00001𝑃𝑃𝑜𝑜𝑃𝑃𝑁𝑁𝑃𝑃𝑃𝑃𝑐𝑐𝑃𝑃𝑜𝑜𝑐𝑐 + 160.74𝑂𝑂𝑁𝑁𝑁𝑁𝑐𝑐𝑃𝑃𝑐𝑐𝑂𝑂 Appendix 5: US Dialysis Centers Projected Assumptions:

1) US Population: the percentage of US population was found for each state 2012-2015. Percentages were averaged to and multiplied by projected national population increases from 2016-2020. National population projections are according to the US Census Bureua. The regression coefficient was multiplied by each state’s estimated population.

2) Obesity Rates: Obesity rates are increased by historical trends, 2011-2015, but an additional 0.06% was subtracted from the projected growth per state each year because of the belief that obesity rates are increasing at a decreasing rate. These forecased rates are multiplied by individual state obesity rate projections.

The following summarizes number of dialysis centers by state and total for US, 2016-2020: 2016E


Alabama 41 5,003,252 33.9%

Arizona 47 6,844,727 30.1%

Arkansas 34 3,062,167 37.3%

California 252 39,659,476 24.9%

Colorado 24 5,432,146 21.4%

Connecticut 21 3,726,561 26.8%


Florida 127 20,211,401 26.1%

Georgia 71 10,326,068 31.1%

Hawaii 1 1,451,718 22.2%

Idaho 12 1,666,288 29.4%

Illinois 89 13,346,915 29.9%

Indiana 53 6,797,603 34.3%

Iowa 25 3,198,630 31.4%

Kansas 24 2,995,293 31.7%

Kentucky 35 4,552,510 31.9%

2017E State Centers Population Obesity

Alabama 42 5,043,865 34.3%

Arizona 49 6,900,289 31.2%

Arkansas 36 3,087,023 38.7%

California 255 39,981,408 25.2%

Colorado 24 5,476,241 21.6%

Connecticut 22 3,756,811 27.2%


Florida 128 20,375,464 26.0%

Georgia 73 10,409,889 31.8%

Hawaii 1 1,463,503 22.3%

Idaho 13 1,679,814 29.9%

Illinois 90 13,455,257 30.5%

Indiana 56 6,852,782 36.0%

Iowa 26 3,224,595 31.9%

Kansas 25 3,019,607 32.2%

Kentucky 36 4,589,464 32.2%

Louisiana 42 4,785,287 35.3%

Maine 8 1,377,198 28.3%

Maryland 42 6,131,413 29.9%


Michigan 70 10,253,697 30.5%

Minnesota 36 5,602,585 28.1%

Mississippi 31 3,097,410 35.6%

Missouri 43 6,257,847 30.2%

Montana 4 1,048,113 26.9%

Nebraska 16 1,931,221 30.7%

Nevada 19 2,879,985 28.6%

New Hampshire 7 1,370,688 27.7%

New Jersey 58 9,217,757 27.8%

New Mexico 14 2,160,173 29.0%

New York 131 20,360,522 27.7%

North Carolina 68 10,165,192 29.8%

North Dakota 12 740,664 33.4%

Ohio 86 11,988,405 33.4%

Oklahoma 34 3,976,811 33.5%

Oregon 26 4,061,655 28.2%

Pennsylvania 89 13,237,126 30.6%

Rhode Island 5 1,091,349 27.4%

South Carolina 38 4,928,050 32.4%

South Dakota 8 871,032 30.2%

Tennessee 49 6,715,235 31.8%

Texas 183 27,289,857 32.3%

Utah 15 2,988,272 26.0%

Virginia 55 8,531,900 28.3%

Washington 45 7,197,779 27.5%

West Virginia 25 1,921,558 36.6%

Wisconsin 44 5,944,507 32.1%

Other 30 323,996,000

2233


Alabama 43 5,084,479 34.6%

Arizona 51 6,955,850 32.5%

Louisiana 43 4,824,131 35.7%

Maine 9 1,388,377 28.4%

Maryland 43 6,181,184 30.3%


Michigan 70 10,336,930 30.4%

Minnesota 37 5,648,063 28.6%

Mississippi 32 3,122,553 35.8%

Missouri 43 6,308,644 30.1%

Montana 5 1,056,621 27.3%

Nebraska 17 1,946,897 31.1%

Nevada 20 2,903,363 29.4%

New Hampshire 8 1,381,814 28.0%

New Jersey 60 9,292,581 28.6%

New Mexico 15 2,177,708 29.5%

New York 133 20,525,796 28.4%

North Carolina 69 10,247,707 30.0%

North Dakota 14 746,676 34.6%

Ohio 88 12,085,719 34.2%

Oklahoma 35 4,009,093 34.0%

Oregon 26 4,094,625 28.5%

Pennsylvania 91 13,344,576 31.0%

Rhode Island 6 1,100,208 27.8%

South Carolina 39 4,968,052 32.7%

South Dakota 9 878,103 30.7%

Tennessee 50 6,769,745 32.3%

Texas 186 27,511,379 32.7%

Utah 16 3,012,529 26.4%

Virginia 55 8,601,157 28.2%

Washington 46 7,256,206 27.7%

West Virginia 27 1,937,156 37.4%

Wisconsin 46 5,992,761 33.1%

Other 30 326,626,000

2285


Alabama 44 5,125,061 35.0%

Arizona 54 7,011,369 33.8%

Arkansas 39 3,111,880 40.2%

California 257 40,303,339 25.4%

Colorado 25 5,520,335 21.7%

Connecticut 23 3,787,061 27.7%


Florida 129 20,539,528 25.9%

Georgia 74 10,493,710 32.5%

Hawaii 1 1,475,287 22.4%

Idaho 14 1,693,340 30.5%

Illinois 92 13,563,599 31.1%

Indiana 60 6,907,961 37.8%

Iowa 27 3,250,559 32.4%

Kansas 26 3,043,921 32.6%

Kentucky 36 4,626,419 32.6%

Louisiana 44 4,862,975 36.1%

Maine 9 1,399,556 28.5%

Maryland 44 6,230,955 30.6%


Michigan 70 10,420,163 30.2%

Minnesota 38 5,693,541 29.1%

Mississippi 32 3,147,696 35.9%

Missouri 44 6,359,441 30.1%

Montana 6 1,065,129 27.8%

Nebraska 17 1,962,574 31.6%

Nevada 22 2,926,741 30.4%

New Hampshire 8 1,392,940 28.3%

New Jersey 62 9,367,405 29.6%

New Mexico 17 2,195,243 30.1%

New York 135 20,691,070 29.1%

North Carolina 70 10,330,222 30.1%

North Dakota 16 752,688 35.9%

Ohio 89 12,183,034 35.0%

Oklahoma 36 4,041,374 34.4%

Oregon 27 4,127,595 28.8%

Pennsylvania 92 13,452,027 31.4%

Rhode Island 6 1,109,067 28.2%

South Carolina 40 33.1%

Arkansas 41 3,136,718 41.8%

California 260 40,625,025 25.6%

Colorado 25 5,564,397 21.9%

Connecticut 24 3,817,288 28.2%


Florida 130 20,703,467 25.8%

Georgia 76 10,577,466 33.2%

Hawaii 1 1,487,062 22.5%

Idaho 15 1,706,855 31.0%

Illinois 94 13,671,859 31.8%

Indiana 63 6,963,098 39.6%

Iowa 28 3,276,504 32.9%

Kansas 27 3,068,217 33.0%

Kentucky 37 4,663,345 32.9%

Louisiana 44 4,901,790 36.5%

Maine 9 1,410,727 28.6%

Maryland 44 6,280,688 30.9%


Michigan 71 10,503,333 30.1%

Minnesota 39 5,738,985 29.6%

Mississippi 32 3,172,820 36.0%

Missouri 44 6,410,200 30.0%

Montana 6 1,073,631 28.3%

Nebraska 18 1,978,238 32.0%

Nevada 23 2,950,101 31.3%

New Hampshire 9 1,404,058 28.6%

New Jersey 64 9,442,172 30.5%

New Mexico 18 2,212,765 30.7%

New York 138 20,856,219 29.8%

North Carolina 70 10,412,674 30.2%

North Dakota 19 758,696 37.3%

Ohio 91 12,280,274 35.9%

Oklahoma 37 4,073,631 34.9%

Oregon 28 4,160,540 29.1%

Pennsylvania 93 13,559,396 31.8%

Rhode Island 7 1,117,919 28.7%

South Carolina 40 33.4%

5,008,055

South Dakota 10 885,173 31.1%

Tennessee 51 6,824,255 32.9%

Texas 188 27,732,901 33.1%

Utah 17 3,036,786 26.7%

Virginia 55 8,670,414 28.0%

Washington 46 7,314,633 27.9%

West Virginia 28 1,952,754 38.3%

Wisconsin 48 6,041,015 34.1%

Other 30 329,256,000

2338


Alabama 44 5,165,504 35.4%

Arizona 56 7,066,698 35.1%

Arkansas 44 3,161,471 43.4%

California 262 40,945,610 25.9%

Colorado 26 5,608,307 22.0%

Connecticut 25 3,847,411 28.7%


Florida 131 20,866,844 25.7%

Georgia 78 10,660,937 33.9%

Hawaii 1 1,498,797 22.6%

Idaho 16 1,720,325 31.6%

Illinois 96 13,779,748 32.4%

Indiana 66 7,018,046 41.6%

Iowa 29 3,302,360 33.4%

Kansas 28 3,092,429 33.5%

Kentucky 38 4,700,145 33.2%

Louisiana 45 4,940,471 36.9%

Maine 9 1,421,859 28.6%

Maryland 45 6,330,251 31.3%


Michigan 71 10,586,218 29.9%

Minnesota 40 5,784,273 30.2%

Mississippi 33 3,197,857 36.2%

Missouri 44 6,460,785 30.0%

5,048,028

South Dakota 10 892,238 31.6%

Tennessee 53 6,878,724 33.5%

Texas 190 27,954,255 33.5%

Utah 17 3,061,025 27.1%

Virginia 56 8,739,618 27.8%

Washington 47 7,373,016 28.1%

West Virginia 30 1,968,340 39.3%

Wisconsin 50 6,089,232 35.1%

Other 30 331,884,000

2392

Montana 7 1,082,103 28.8%

Nebraska 19 1,993,849 32.5%

Nevada 25 2,973,381 32.3%

New Hampshire 10 1,415,138 28.9%

New Jersey 66 9,516,683 31.5%

New Mexico 19 2,230,226 31.3%

New York 140 21,020,802 30.6%

North Carolina 71 10,494,843 30.4%

North Dakota 21 764,683 38.6%

Ohio 94 12,377,182 36.7%

Oklahoma 38 4,105,777 35.4%

Oregon 29 4,193,372 29.5%

Pennsylvania 95 13,666,398 32.2%

Rhode Island 8 1,126,741 29.1%

South Carolina 41 5,087,863 33.7%

South Dakota 11 899,279 32.0%

Tennessee 54 6,933,006 34.1%

Texas 192 28,174,851 33.9%

Utah 18 3,085,180 27.4%

Virginia 56 8,808,585 27.7%

Washington 48 7,431,199 28.3%

West Virginia 31 1,983,873 40.2%

Wisconsin 52 6,137,284 36.2%

Other 30 334,503,000

2447

Appendix 6: Historical International Dialysis Centers by Country 2012 2013 2014

Centers Population Centers Population Centers Population

Malaysia 3 29,240,000 21 29,720,000 24 30,073,353

Colombia 0 47,700,000 7 48,320,000 15 46,245,297

Germany 4 80,430,000 10 80,620,000 14 82,652,256

India 13 1,237,000,000 13 1,252,000,000 13 1,267,401,849

Poland 5 38,540,000 8 38,530,000 8 38,020,000

Portugal 4 10,487,289 4 10,427,301 5 10,394,000

Taiwan 0 23,316,000 4 23,374,000 4 23,434,000

Saudi Arabia 3 28,290,000 2 28,830,000 4 27,345,986

China 2 1,354,040,000 2 1,360,720,000 2 1,367,820,000

Singapore 2 5,312,000 2

5,399,000 2 5,470,000

36 73 91

Appendix 7: International Dialysis Centers by Country, Projected Projections based on historical trends by country. 2015E 2016E 2017E 2018E 2019E 2020E

Malaysia 28 34 39 45 50 56

Colombia 18 22 25 29 32 36

Germany 18 21 24 28 31 34

India 13 14 16 17 19 20

Poland 8 10 11 13 14 16

Portugal 6 7 8 10 11 12

Taiwan 4 5 6 6 7 8 Saudi Arabia 5 6 7 8 9 10

China 2 2 3 3 4 4

Singapore 2 2 3 3 4 4

104 123 142 162 181 200

Appendix 8: Beta Analysis

Assumptions to Beta calculation-

• 3 year weekly regression was run against S&P 500 • Did not go back further than three years because of the merger with HCP • As DVA and HCP move closer to maturity the beta will get closer to one so an adjusted beta was used and biased

upward to 0.78

Appendix 9 Corporate Officers

Officer Position Affiliates and Description Kent J. Thiry Chairman & CEO • Chairman and CEO of DaVita HealthCare Partners, CEO,

HealthCare Partners

Javier J. Rodriguez CEO, Kidney Care • Served as president from February 2012-March 2014

Michael D. Staffieri COO, Kidney Care • Became chief operating officer, Kidney Care, in February 2014.

• From July 2011 to February 2014, he served as a senior vice president, Kidney Care.

Dennis L. Kogod President, HealthCare Partners • Became president, HealthCare Partners, in January 2015. • Mr. Kogod served as chief operating officer, HealthCare

Partners from March 2014 to December 2014.

Joseph C. Mello COO, HealthCare Partners • Became the chief operating officer, HealthCare Partners, in January 2015 after two years as a private investor and consultant.

• From 2009 through 2012, he served as a consultant to DaVita. From 2000 to 2009, he served as DaVita’s chief operating officer.

James K. Hilger Interim CFO and CAO of DaVita

HealthCare Partners Inc. • Became interim chief financial officer in March 2015. • Mr. Hilger continues to serve as the chief accounting

officer, a position he has held since April 2010. • Prior to April 2010, Mr. Hilger served as the vice president

and controller since May 2006, after having served as our vice president, finance beginning in September 2005.

Jeanine M. Jiganti CPO of DaVita HealthCare Partners Inc

• Became the chief compliance officer in March 2013. • From July 2012 to March 2013, she served as the vice

president, international chief compliance officer and deputy chief compliance officer.

LeAnne M. Zumwalt Group Vice President, Purchasing and Public Affairs of DaVita HealthCare Partners Inc.

• Became the group vice president-purchasing and government affairs in July 2011.

• From January 2000 to July 2011, Ms. Zumwalt served as the vice president in many capacities. From January 2000 to October 2009, she served as our vice president, investor relations while having other responsibilities.

Laura A. Mildenberger

Chief People Officer, Kidney Care

• Became the chief people officer, Kidney Care, in March 2014.

• From July 2008 to March 2014, she served as chief people officer.

• Ms. Mildenberger joined DaVita in October 2001 as vice president of operations.

Dr. Allen R. Nissenson Chief Medical Officer, Kidney Care

• Became chief medical officer, Kidney Care, in March 2014. • From August 2008 to March 2014, he served as DaVita’s

chief medical officer. • He is an emeritus professor of medicine at the David

Geffen School of Medicine at UCLA, where he served as director of the dialysis program from 1977 to 2008 and associate dean from 2005 to 2008.

Source: DaVita Investor Relations Management Board of Directors

Director Position Held Since Affiliates/Other Work Pamela M. Arway Director May 2009 • From 2005 to 2007 served as the

president of American Express International.

• Served as advisor to the American Express Company's chairman and chief executive officer.

• On board of the Hershey Company, since May 2010.

• currently serves as the Chair of the Governance Committee and as a member of the Audit and Executive Committees of Hershey Company's board

Charles G. Berg Director March 2007

Former Non-Executive Chairman of WellCare Health Plans, Inc.

• Served as executive chairman and as a member of the board of directors of WellCare Health Plans, Inc. from January 2008 to December 2010.

• Served as non-executive chairman of the board of directors of WellCare from January 2011 to May 2013.

• From January 2007 to April 2009, Mr. Berg was a senior advisor to Welsh, Carson, Anderson & Stowe, a private equity firm.

• From April 1998 to July 2004, Mr. Berg held various executive positions with Oxford Health Plans, Inc. ("Oxford"), a health benefit plan provider, which included chief executive officer from November 2002 to July 2004 when Oxford was acquired by UnitedHealth Group, president and chief operating officer from March 2001 to November 2002 and executive vice president, medical delivery from April 1998 to March 2001.

Carol Anthony "John" Davidson

Director

December 2010

• Served as the senior vice president,

controller and chief accounting officer of Tyco International Ltd.

• Prior to joining Tyco in January 2004, he spent six years at Dell Inc., where he held various leadership roles, including vice president, audit, risk and compliance, and vice president, corporate controller.

• He is also a director of Legg Mason Inc., a global asset management firm.

• Mr. Davidson is a member of the Board of Trustees of the Financial Accounting Foundation which oversees financial accounting and reporting standards setting processes for the United States.

• Mr. Davidson is a CPA with more than 30 years of leadership experience across multiple industries

• previously spent 16 years at Eastman Kodak Company, in a variety of accounting and financial leadership roles

Barbara J. Desoer Director April 2015 • Has been the Chief Executive Officer and a member of the board of directors of Citibank, N.A., a wholly owned subsidiary of Citigroup Inc. a diversified global financial services company, since April 2014.

• Previously served as the Chief Operating Officer of Citibank, N.A. from October 2013 to April 2014.

• leads Citigroup's comprehensive capital analysis and review process

• Spent 35 years at Bank of America, most recently as President, Bank of America Home Loans, where she led the integration of Countrywide, the largest mortgage originator and servicer in the United States.

Paul J. Diaz

Director

July 2007

• serves as the executive vice chairman of Kindred Healthcare, Inc. a position he has held since March 2015

• He served as chief executive officer of Kindred from January 2004 to March 2015, as well as president from January 2002 to May 2012 and as Chief Operating Officer from January 2002 to December 2003.

• Prior to joining Kindred, Mr. Diaz was the managing member of Falcon

Capital Partners, LLC • Mr. Diaz serves on the board of

Kindred and the board of visitors of Georgetown University Law Center and previously served on the board of PharMerica Corporation

Peter T. Grauer Independent

Director August 1994 and lead Independent director since 2003

• Mr. Grauer has been chairman of the board of Bloomberg, Inc., since April 2001, treasurer since March 2001 and was its chief executive officer from March 2002 until July 2011.

• Mr. Grauer has also served as a non-executive director of Glencore plc, a global mining and commodities firm listed on the London Stock Exchange, since June 2013.

• Mr. Grauer was a managing director of Credit Suisse First Boston, a financial services firm

John M. Nehra Director November 2000 • From 1989 until his retirement in August 2014, Mr. Nehra was affiliated with New Enterprise Associates ("NEA"), including, from 1993 until his retirement, as general partner of several of its affiliated venture capital limited partnerships.

• Mr. Nehra also served as managing general partner of Catalyst Ventures from 1989 to 2013.

• Mr. Nehra served on the boards of a number of NEA's portfolio companies until his retirement in August 2014 and remains a retired special partner of NEA.

• Mr. Nehra is an experienced business leader with approximately 44 years of experience in investment banking, research and capital markets.

Dr. William L. Roper Director May 2001 • Dr. Roper has been chief executive officer of the University of North Carolina ("UNC") Health Care System, dean of the UNC School of Medicine and vice chancellor for medical affairs of UNC since March 2004.

• Dr. Roper also continues to serve as a professor of health policy and administration in the UNC School of Public Health and a professor of pediatrics and of social medicine in the UNC School of Medicine

• From 1997 until March 2004, he was dean of the UNC School of Public Health.

• Before joining UNC in 1997, Dr. Roper served as senior vice president of Prudential Health Care.

• He also served as director of the Centers for Disease Control and Prevention from 1990 to 1993, on the senior White House staff in 1989 and 1990 and as the administrator of Centers for Medicare & Medicaid Services from 1986 to 1989.

Kent J. Thiry

Chairman & CEO

CEO: October 1999, Co-Chairman: 2012-2015 Chairman: 2015

• From June 1997 until he joined DaVita in October 1999, Mr. Thiry was chairman of the board and chief executive officer of Vivra Holdings, Inc., which was formed to operate the non-dialysis business of Vivra Incorporated (“Vivra”) after Gambro AB acquired the dialysis services business of Vivra in June 1997

• From April 1992 to August 1992, Mr. Thiry was president and co-chief executive officer of Vivra, and from September 1991 to March 1992, he was president and chief operating officer of Vivra.

• From 1983 to 1991, Mr. Thiry was associated with Bain & Company, first as a consultant, and then as vice president. Mr. Thiry previously served on the board of Varian Medical Systems, Inc. from August 2005 to February 2009 and served as the non-executive chairman of Oxford Health Plans, Inc. until it was sold to UnitedHealth Group in July 2004

Roger J. Valine Director July 2006 • From 1993 to his retirement in July 2006, Mr. Valine served as the chief executive officer of Vision Service Plan (“VSP”), the nation’s largest provider of eyecare wellness benefits.

• From January 1991 to February 2006, Mr. Valine served as both the president and chief executive officer of VSP.

• Upon his retirement, Mr. Valine had worked for VSP for 33 years and provided consulting services to VSP through January 2008.

• Mr. Valine previously served on the boards of American Specialty Health Incorporated and SureWest Communications.

Source: DaVita Investor Relations, Board of Directors

Appendix 10: Committees of the Board

Committees of the Board The following chart sets out the current members of DaVita HealthCare Partners Inc.’s Board Committees and describes the principal functions of each committee of the Board. The charter for each committee is available under the Corporate Governance section of the company website, located at http://www.DaVita.com/about/corporate-governance.

Name of Committee and Members

Principal Functions of the Committee

Meetings in 2014

Audit1

Carol Anthony ("John") Davidson Chair Charles G. Berg Roger J. Valine

• Assists the Board with oversight of the integrity of our financial

statements including the financial reporting and disclosure processes and the integrity and effectiveness of our system of internal control over financial reporting.

• Assists the Board with oversight of the independence, qualifications and

performance of our independent registered public accounting firm, including a review of the scope and results of their audit, as well as our internal audit function.

• Together with the Compliance Committee, assists the Board with

oversight of compliance with legal and regulatory requirements, including those that may have a material impact on the Company's financial statements.

• Appoints and engages our independent registered public accounting firm,

and pre-approves the firm's annual audit services (including related fees), audit-related services, and all other services in accordance with our pre-approval policy.

• Monitors our disclosure controls and procedures and compliance with

ethical standards.

11

Compensation2

Pamela M. Arway Chair Paul J. Diaz Peter T. Grauer Roger J. Valine

• Reviews the performance of our chief executive officer and other

executives and makes decisions regarding their compensation.

• Establishes policies relating to the compensation of our executive officers and other key employees that further the goal of ensuring that our compensation system for our chief executive officer and our other executives, as well as our philosophy for compensation for all employees and the Board, is aligned with the long-term interests of our stockholders.

• Conducts an evaluation of our chief executive officer's performance and

the Company's performance and considers a self-assessment prepared by our chief executive officer. Periodically, the Compensation Committee engages an outside consultant to conduct an in-depth analysis of our chief executive officer's performance as a manager during the year.

• Has sole authority and discretion to retain or replace its independent

compensation consultant.

• Annually determines and approves the compensation package for our chief executive officer subject to ratification by the independent members of the Board.

• Works closely with and considers the recommendations of our chief

executive officer to determine the compensation of our other executive officers.

• When determining the compensation of the other executive officers,

considers the recommendations of the chief executive officer who conducts a performance and compensation review of each other executive officer and reviews his detailed assessments of the performance of each of the other executive officers with the Compensation Committee.

• Reviews the results of advisory stockholder votes and other stockholder

feedback on the compensation of our executive officers and considers whether to make adjustments to our compensation policies and practices

5

as a result of such votes.

Name of Committee and Members

Principal Functions of the Committee

Meetings in 2014

Nominating and Governance 3

Peter T. Grauer Chair Pamela M. Arway Carol Anthony ("John") Davidson Roger J. Valine

• Reviews and makes recommendations to the Board

about our governance processes.

• Assists in identifying and recruiting candidates for the Board.

• Annually reviews the performance of the individual

members of the Board.

• Proposes a slate of nominees for election at the annual meeting of stockholders.

• Makes recommendations to the Board regarding the

membership and chairs of the committees of the Board.

3

Compliance Committee4

Charles G. Berg Chair Paul J. Diaz John M. Nehra Dr. William L. Roper

• Reviews and oversees compliance with Federal health

care program requirements and the five-year Corporate Integrity Agreement entered into with the Office of the Inspector General.

• Oversees and monitors the effectiveness of our

healthcare regulatory compliance program, reviews significant healthcare regulatory compliance risk areas, and reviews the steps management is taking to monitor, control and report these risk exposures.

• Together with the Audit Committee, assists the Board

with oversight of compliance with healthcare regulatory requirements.

• Has primary responsibility for oversight of healthcare

regulatory requirements and for directing the Company's response to certain pending governmental investigations.

• Meets regularly with our chief compliance officer.

8

Public Policy5

John M. Nehra Chair Pamela M. Arway Paul J. Diaz Dr. Robert J. Margolis

• Advises the Board on public policy and makes

recommendations to the Board as to policies and procedures relating to issues of public policy and government relations.

• Oversees the Company's government affairs activity and

political spending.

2

Clinical Performance6

Dr. William L. Roper Chair Carol Anthony ("John") Davidson Dr. Robert J. Margolis

• Advises the Board on clinical performance issues facing

the Company.

• Makes recommendations to management and to the Board as to policies and procedures relating to issues of clinical performance.

2

1

Ms. Arway served on the Audit Committee until March 6, 2014. 2 Mr. Nehra served as the Chair of the Compensation Committee until January 14, 2014. Ms. Arway was appointed to the Compensation Committee on January 14, 2014, and was appointed Chair of the Compensation Committee on January 14, 2014. Mr. Diaz was appointed to the Compensation Committee on March 6, 2014. 3 Messrs. Berg, Diaz and Nehra and Dr. Roper served on the Nominating and Governance Committee until March 6, 2014. 4 Mr. Roper served as the Chair of the Compliance Committee until October 9, 2014. Ms. Arway and Mr. Grauer served on the Compliance Committee until October 9, 2014. Messrs. Diaz and Nehra were appointed to the Compliance Committee on October 9, 2014. Mr. Berg was appointed Chair of the Compliance Committee on October 9, 2014. 5 Mr. Diaz served as the Chair of the Public Policy Committee until March 6, 2014. Dr. Roper served on the Public Policy Committee until March 6, 2014. Ms. Arway, Mr. Nehra, and Dr. Margolis were appointed to the Public Policy Committee on March 6, 2014, and Mr. Nehra was appointed Chair of the Public Policy Committee on March 6, 2014. 6 Ms. Arway and Mr. Nehra served on the Clinical Performance Committee until March 6, 2014. Mr. Davidson was appointed to the Clinical Performance Committee on March 6, 2014. 14

SOURCE: DaVita HealthCare Partners Inc. Proxy Statement 2015

APPENDIX 11: Shareholder Rights

Voting Information Our only voting securities are the outstanding shares of our common stock. At the record date, we had approximately 214,941,142 shares of common stock outstanding. Each stockholder is entitled to one vote per share on each matter that we will consider at this meeting. Stockholders are not entitled to cumulate votes. Under the rules of the New York Stock Exchange, your bank, broker, or other nominee may not vote your uninstructed shares in the election of directors and certain other matters on a discretionary basis. Accordingly, brokers holding shares of record for their customers generally are not entitled to vote on these matters unless their customers give them specific voting instructions. If the broker does not receive specific instructions, the broker will note this on the proxy form or otherwise advise us that it lacks voting authority. Thus, if you hold your shares in "street name," meaning that your shares are registered in the name of your bank, broker, or other nominee, and you do not instruct your bank, broker, or other nominee how to vote in the election of directors, the proposal regarding the advisory vote on executive compensation, or on the stockholder proposal, if properly brought before the annual meeting, no votes will be cast on your behalf. The votes that the brokers would have cast if their customers had given them specific instructions are commonly called "broker non-votes." If the stockholders of record present in person or represented by their proxies and entitled to vote at the annual meeting hold at least a majority of our shares of common stock outstanding as of the record date, a quorum will exist for the transaction of business at the annual meeting. Stockholders attending the annual meeting in person or represented by proxy at the annual meeting who abstain from voting and broker non-votes are counted as present for quorum purposes.

Votes Required for Proposals Directors are elected by a majority of votes cast, which means that the number of shares voted "for" each of the nine nominees for election to the Board must exceed 50% of the number of votes cast with respect to each nominee's election. Abstentions and broker non-votes will not be counted as votes cast and will have no effect on the election of directors. In the event that the number of nominees exceeds the number of directors to be elected, which is a situation that we do not anticipate, directors will be elected by a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors. The ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2015, the approval of the proposal regarding the advisory vote on executive compensation, and the stockholder proposal, if properly brought before the annual meeting, each require the affirmative vote of a majority of the shares of common stock present at the annual meeting in person or by proxy and entitled to vote thereon. Because your vote on executive compensation and the stockholder proposal is advisory, the results of those votes will not be binding on the Company or the Board. However, the Board and any applicable Board committee will consider the voting results as appropriate when making future decisions regarding executive compensation and the topic of the stockholder proposal. Abstentions are considered present and entitled to vote with respect to these proposals and will, therefore, have the same effect as votes against these proposals. Broker non-votes with respect to the approval of the proposal regarding the advisory vote on executive compensation, and the stockholder proposal will not be considered as present and entitled to vote on these proposals, and will therefore have no effect on the number of affirmative votes needed to approve these proposals.

Proxy Solicitation Costs We will pay for the cost of preparing, assembling, printing and mailing of the Notice of Internet Availability of Proxy Materials, this Proxy Statement and the accompanying Notice of Meeting, Proxy Card, and Annual Report to Stockholders to our stockholders, as well as the cost of our solicitation of proxies relating to the annual meeting. We may request banks and brokers to solicit their customers who beneficially own our common stock listed of record in names of nominees. We will reimburse these banks and brokers for their reasonable out-of-pocket expenses regarding these solicitations. We have also retained MacKenzie Partners, Inc. ("MacKenzie") to assist in the distribution and solicitation of proxies and to verify records related to the solicitation at a fee of $15,000 plus reimbursement for all reasonable out-of-pocket expenses incurred during the solicitation.

MacKenzie and our officers, directors and employees may supplement the original solicitation by mail of proxies, by telephone,

facsimile, e-mail and personal solicitation. We will pay no additional compensation to our officers, directors and employees for these activities. We have agreed to indemnify MacKenzie against liabilities and expenses arising in connection with the proxy solicitation unless caused by MacKenzie's negligence or intentional misconduct.

SOURCE: DaVita HealthCare Partners Inc. Proxy Statement 2015

Appendix 12: Risk & Oversight The Board's involvement in risk oversight involves the Audit Committee, the Compliance Committee and the full Board. Each of the Audit Committee and Compliance Committee are comprised of independent non-executive directors. The Audit Committee is responsible for legal and regulatory risk oversight and the Compliance Committee has primary responsibility for oversight of healthcare legal and regulatory compliance requirements. The Audit Committee and the Compliance Committee meet regularly with our chief legal officer and chief compliance officer, and work together to assist the Board with oversight of legal and compliance enterprise risk management and to ensure that management identifies, monitors, controls and reports such compliance risk exposures. The Compliance Committee reviews significant healthcare legal and regulatory compliance risk areas, and meets on a regular basis and reports directly to the Board on its findings. The Audit Committee receives materials on enterprise risk management on an annual basis. These materials include identification of top

enterprise risks for the Company, the alignment of management's accountability and reporting for these risks, and mapping of the Board's and Audit Committee's oversight responsibilities for key risks. In addition, the Audit Committee and the full Board periodically receive materials to address the identification and status of major risks to the Company. The Audit Committee discusses significant risk areas and the actions management has taken to monitor, control, and report such exposures. The Audit Committee also reviews with the Company's chief legal officer legal matters that may have a material impact on the Company's financial statements, the Company's compliance with applicable laws and regulations, and material reports or inquiries received from governmental agencies, including such matters identified by the Compliance Committee or the chief compliance officer. At each meeting of the full Board, the chairman of the Audit Committee reports on the activities of the Audit Committee, including risks identified and risk oversight.

Independent Registered Public Accounting Firm The Audit Committee has appointed KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2015. Representatives of KPMG LLP are expected to attend the annual meeting in person and will be available to respond to appropriate questions and to make a statement if they so desire. If KPMG LLP should decline to act or otherwise become incapable of acting, or if KPMG LLP's engagement is discontinued for any reason, the Audit Committee will appoint another independent registered public accounting firm to serve as our independent registered public accounting firm for 2015. Although we are not required to seek stockholder ratification of this appointment, the Board believes that doing so is consistent with corporate governance best practices. If the appointment is not ratified, the Audit Committee will explore the reasons for stockholder rejection and will reconsider the appointment. The following table sets forth the aggregate professional fees billed to us for the years ended December 31, 2014 and 2013 by KPMG LLP, our independent registered public accounting firm:

2014

2013

Audit fees1 $4,760,714 $4,253,918

Audit-related fees2 487,185 1,158,435

Tax fees3 445,429 300,482

All other fees — —

$5,693,328 $5,712,835

1 Includes aggregate fees for the audit of our consolidated financial statements and the effectiveness of our internal control over financial reporting and the three quarterly reviews of our consolidated financial statements included in our Form 10-Q and other SEC filings. In addition, audit fees include statutory audits in several international countries. 2 Includes fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported as "Audit Fees." The audit-related fees in 2014 and 2013 include fees for audits of our employee benefit plans, audits of one and two of our majority-owned entities, respectively, audits of HCP's risk bearing organizations, and fees of $264,297 and $627,253, respectively, for due diligence services relating to potential acquisitions. 3 Includes fees for professional services rendered for tax advice and tax planning as well as $260,583 in 2013 for tax due diligence services. None of these fees were for tax compliance or tax preparation services.

Pre-approval Policies and Procedures The Audit Committee is required to pre-approve the audit, audit-related, tax and all other services provided by our independent registered public accounting firm in order to assure that the provision of such services does not impair the auditor's independence. The Audit Committee's pre-approval policy provides for pre-approval of all audit, audit-related, tax and all other services provided by the independent registered public accounting firm, KPMG LLP. The Audit Committee pre-approved all such services in 2014 and concluded that such services performed by KPMG LLP were compatible with the maintenance of that firm's independence in the conduct of its auditing functions. The Board recommends a vote FOR the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2015.

Source: DaVita HealthCare Partners Inc. Proxy Statement 2014; Risk Oversight

Appendix 13: Kidney Care Compliance risk

If we fail to adhere to all of the complex government regulations that apply to our business, we could suffer severe consequences that would substantially reduce our revenues, earnings, cash flows and stock price. Our dialysis operations are subject to extensive federal, state and local government regulations, including Medicare and Medicaid payment rules and regulations, federal and state anti-kickback laws, the physician self-referral law (Stark Law) and analogous state self-referral prohibition statutes, Federal Acquisition Regulations, the FCA and federal and state laws regarding the collection, use and disclosure of patient health information and the storage, handling and administration of pharmaceuticals. The Medicare and Medicaid reimbursement rules related to claims submission, enrollment and licensing requirements, cost reporting, and payment processes impose complex and extensive requirements upon dialysis providers as well. A violation or departure from any of these legal requirements may result in government audits, lower reimbursements, significant fines and penalties, the potential loss of certification, recoupment efforts or voluntary repayments. We endeavor to comply with all legal requirements, however, there is no guarantee that we will be able to adhere to all of the complex government regulations that apply to our business. We further endeavor to structure all of our relationships with physicians to comply with state and federal anti-kickback and physician self-referral laws. We utilize considerable resources to monitor the laws and implement necessary changes. However, the laws and regulations in these areas are complex and often subject to varying interpretations. For example, if an enforcement agency were to challenge the level of compensation that we pay our medical directors or the number of medical directors whom we engage, we could be required to change our practices, face criminal or civil penalties, pay substantial fines or otherwise experience a material adverse effect as a result of a challenge to these arrangements. In addition, amendments to the FCA impose severe penalties for the knowing and improper retention of overpayments collected from government payors. These amendments could subject our procedures for identifying and processing overpayments to greater scrutiny. We have made significant investments in new resources to decrease the time it takes to identify and process overpayments and we may be required to make additional investments in the future. An acceleration in our ability to identify and process overpayments could result in us refunding overpayments to government and other payors more rapidly than we have in the past which could have a material adverse effect on our operating cash flows. Additionally, amendments to the federal anti-kickback statute in the health reform law make anti-kickback violations subject to FCA prosecution, including qui tam or whistleblower suits. If any of our operations are found to violate these or other government regulations, we could suffer severe consequences that would have a material adverse effect on our revenues, earnings, cash flows and stock price, including:

• Suspension or termination of our participation in government payment programs; • Refunds of amounts received in violation of law or applicable payment program requirements; • Loss of required government certifications or exclusion from government payment programs; • Loss of licenses required to operate health care facilities or administer pharmaceuticals in some of the states in which we operate; • Reductions in payment rates or coverage for dialysis and ancillary services and related pharmaceuticals; • Fines, damages or monetary penalties for anti-kickback law violations, Stark Law violations, FCA violations, civil or criminal

liability based on violations of law, or other failures to meet regulatory requirements;

• Enforcement actions by governmental agencies and/or state claims for monetary damages by patients who believe their protected health information has been used, disclosed or not properly safeguarded in violation of federal or state patient privacy laws, including Health Insurance Portability and Accountability Act (HIPAA) of 1996;

• Mandated changes to our practices or procedures that significantly increase operating expenses; • Imposition of and compliance with corporate integrity agreements that could subject us to ongoing audits and

reporting requirements as well as increased scrutiny of our billing and business practices which could lead to potential fines;

• Termination of relationships with medical directors; and • Harm to our reputation which could impact our business relationships, affect our ability to obtain financing

and decrease access to new business opportunities.

We are the subject of a number of investigations by the federal government and two private civil suits, any of which could result in substantial penalties or awards against us, the imposition of certain obligations on our practices and procedures, exclusion from future participation in the Medicare and Medicaid programs and possible criminal penalties. We are the subject of a number of investigations by the federal government. We have received subpoenas or other requests for documents from the federal government in connection with the Vainer private civil suit, the Swoben private civil suit, the 2011 U.S. Attorney Medicaid investigation and the 2015 U.S. Attorney Transportation Investigation. In each of the Vainer and Swoben private civil suits, a relator filed a complaint against us in federal court under the qui tam provisions of the False Claims Act (FCA) (and in the Swoben matter, provisions of the California False Claims Act, as well) and pursued the claims independently after the government declined to intervene. With regard to the Vanier private civil suit, the parties are engaged in active litigation, and in August 2014, the court reopened fact discovery. With regard to the Swoben private civil suit, in July 2013, the court granted HCP’s motion and dismissed with prejudice all of the claims in the Third Amended Complaint, and in October 2013 the plaintiff filed an appeal of the dismissal, which is currently pending. (See Note 17 to the consolidated financial statements of this report for additional details regarding these matters).

If we fail to comply with our Corporate Integrity Agreement, we could be subject to substantial penalties and exclusion from participation in federal health care programs that may adversely impact our revenues, earnings and cash flows. In October 2014, we entered into the Settlement Agreement with the United States and relator David Barbetta to resolve the pending 2010 and 2011 U.S. Attorney Physician Relationship Investigations. In connection with the resolution of these matters, and in exchange for the OIG’s agreement not to exclude us from participating in the federal health care programs, we have entered into the five-year Corporate Integrity Agreement (CIA) with the OIG. The CIA (i) requires that we maintain certain elements of our compliance programs, (ii) imposes certain expanded compliance-related requirements during the term of the CIA,

(iv) requires ongoing monitoring, reporting, certification, records retention and training obligations, the formal allocation of certain oversight responsibility to the Board’s Compliance Committee, the creation of a Management Compliance Committee and the retention of an independent compliance advisor to the Board, and (iv) contains certain business restrictions related to a subset of our joint venture arrangements, including our agreeing to: (1) unwind 11 joint venture transactions that were created through partial divestitures to or partial acquisitions from nephrologists and that cover 26 of our 2,119 clinics that existed at the time we entered into the Settlement Agreement; (2) not enter into certain types of partial divestiture joint venture transactions with nephrologists during the term of the CIA; and (3) certain other restrictions. The costs associated with compliance with the CIA could be substantial and may be greater than we currently anticipate. In addition, in the event of a breach of the CIA, we could become liable for payment of

certain stipulated penalties, or could be excluded from participation in federal health care programs. The costs associated with compliance with the CIA, or any liability or consequences associated with its breach, could have an adverse effect on our revenues, earnings and cash flows.

(v) Source: DaVita Annual Report 2014

Appendix 14: HCP Compliance Risk

HCP is subject to many of the same risks to which our dialysis business is subject.

As a participant in the healthcare industry, HCP is subject to many of the same risks to which our dialysis business is subject to as described in the risk factors set forth above, any of which could materially and adversely affect HCP’s revenues, earnings or cash flows. Among these risks are the following:

• The healthcare business is heavily regulated and changes in laws, regulations, or government programs could have a material impact on HCP;

• Failure to comply with complex governmental regulations could have severe consequences to HCP, including, without limitation, exclusion from governmental payor programs like Medicare and Medicaid;

• HCP could become the subject of governmental investigations, claims, and litigation;

• HCP may be unable to continue to explore potential acquisition candidates, make acquisitions or successfully integrate such acquisitions into its business, and such acquisitions may include liabilities of which HCP was not aware; and

• As a result of the broad scope of HCP’s medical practice, HCP is exposed to medical malpractice claims, as well as claims for damages and other expenses, that may not be covered by insurance or for which adequate limits of insurance coverage may not be available.

Laws regulating the corporate practice of medicine could restrict the manner in which HCP is permitted to conduct its business and the failure to comply with such laws could subject HCP to penalties or require a restructuring of HCP.

Some states have laws that prohibit business entities, such as HCP, from practicing medicine, employing physicians to practice medicine, exercising control over medical decisions by physicians (also known collectively as the corporate practice of medicine) or engaging in certain arrangements, such as fee-splitting, with physicians. In some states these prohibitions are expressly stated in a statute or regulation, while in other states the prohibition is a matter of judicial or regulatory interpretation. Of the states in which HCP currently operates, California and Nevada prohibit the corporate practice of medicine.

In California and Nevada, HCP operates by maintaining long-term contracts with its associated physician groups which are each owned and operated by physicians and which employ or contract with additional physicians to provide physician services. Under these arrangements, HCP provides management services and, receives a management fee for providing non-medical management services; however, HCP does not represent that it offers medical services, and does not exercise influence or control over the practice of medicine by the physicians or the associated physician groups.

In addition to the above management arrangements, HCP has certain contractual rights relating to the orderly transfer of equity interests in certain of its associated California and Nevada physician groups through succession agreements and other arrangements with their physician equity holders. However, such equity interests cannot be transferred to or held by HCP or by any non-professional organization. Accordingly, neither HCP nor HCP’s subsidiaries directly own any equity interests in any physician groups in California and Nevada. In the event that any of these associated physician groups fails to comply with the management arrangement or any management arrangement is terminated and/or HCP is unable to enforce its contractual rights over the orderly transfer of equity interests in its associated

physician groups, such events could have a material adverse effect on HCP’s business, financial condition or results of operations.

It is possible that a state regulatory agency or a court could determine that HCP’s agreements with physician equity holders of certain managed California and Nevada associated physician groups as described above, either independently or coupled with the management services agreements with such associated physician groups, are in violation of the corporate practice of medicine doctrine. As a result, these arrangements could be deemed invalid, potentially resulting in a loss of revenues and an adverse effect on results of operations derived from such associated physician groups. Such a determination could force a restructuring of HCP’s management arrangements with associated physician groups in California and/or Nevada, which might include revisions of the management services agreements, including a modification of the management fee and/or establishing an alternative structure, which would permit HCP to contract with a physician network without violating the corporate practice of medicine prohibition. There can be no assurance that such a restructuring would be feasible, or that it could be accomplished within a reasonable time frame without a material adverse effect on HCP’s operations and financial results. In December 2013, DaVita HealthCare Partners Plan obtained a restricted Knox-Keene license in California pursuant to the California Knox-Keene Health Care Service Plan Act of 1975 (the Knox-Keene Act), which permits DaVita HealthCare Partners Plan to contract with health plans in California to accept global risk without violating the corporate practice of medicine prohibition. However, HCP’s Nevada associated physician groups and HCP, as well as those physician equity holders of associated physician groups who are subject to succession agreements with HCP, could be subject to criminal or civil penalties or an injunction for practicing medicine without a license or aiding and abetting the unlicensed practice of medicine.

Source: DaVita Annual Report 2014

Appendix 15: Corporate Social Responsibility

Being a leader in American healthcare means being a responsible corporate community. The Trilogy of Care—Caring for our patients, each other, and the world—is DaVita HealthCare Partners’ vision for social responsibility and is our philosophy for balancing our business responsibilities with our social, economic and environmental ones. For more than a decade, we have had a vision for creating a true community—one that cares for our teammates as well as our patients. This investment in creating a community has inspired our teammates to realize their full potential and to deliver ever-improving quality care to our patients.

• Through DaVita Way of Giving teammates in our centers chose more than 950 nonprofits and community organizations to receive over $1.6 million in 2014. The program has donated a total of $4 million since it began.

• DaVita Village Trust completed 21 medical missions in 7 countries, bringing life-saving dialysis treatment to more than 250 patients around the world. Through its first primary care medical mission, it provided care and health education to more than 70 kidney donors and individuals. It provided free chronic kidney disease (CKD) rapid-screenings for over 8,500 people through 38 domestic and two international CKD screening events.

• At Tour DaVita, an annual 250-mile bike ride, 500 riders raised money and awareness to support kidney disease education and testing. Since 2007 teammates have raised more than $6 million and collectively ridden 638,377 miles to fight kidney disease.

• Approximately 12,000 teammates and friends reached out to support underprivileged communities at home through more than 500 Village Service Days community service projects.

• DaVita’s Village Green program supports environmental sustainability through a number of projects throughout the DaVita Village. The average DaVita center used 20% fewer gallons of water in 2014 compared to 2013, and we are working towards our goal to reduce energy consumption by 15 percent across our footprint.

We invite you to review our work and be inspired to help change your community. Our 2014 Community Care social responsibility report will be available on DaVitaHealthCarePartners.com later this year.

Source: DaVita Corporate Social Responsibility

Appendix 16: Beneficial Ownership

Security Ownership of Certain Beneficial Owners and Management The following table sets forth information regarding the ownership of our common stock as of March 31, 2015 by (a) all persons known by us to own beneficially more than 5% of our common stock, (b) each of our directors and named executive officers, and (c) all of our directors and executive officers as a group. We know of no agreements among our stockholders which relate to voting or investment power over our common stock or any arrangement the operation of which may at a subsequent date result in a change of control of the Company.

Name and address of beneficial owner1

Number of shares

beneficially owned

Percentage of shares

beneficially owned

Warren E. Buffett2 Berkshire Hathaway Inc. 2 1440 Kiewit Plaza Omaha, Nebraska 68131

38,565,570 17.9%

The Vanguard Group, Inc.3 100 Vanguard Blvd. Malvern, PA 19355

14,374,912 6.7%

Kent J. Thiry4 1,820,014 *

Dr. Robert J. Margolis5 2,578,820 1.2%

Javier J. Rodriguez6 470,313 *

Dennis L. Kogod7 383,590 *

Dr. Garry E. Menzel — *

Michael D. Staffieri8 122,928 *

Pamela M. Arway9 83,102 *

Charles G. Berg10 94,731 *

Carol Anthony ("John") Davidson11 50,491 *

Paul J. Diaz 9,521 *

Peter T. Grauer12 158,777 *

John M. Nehra13 206,531 *

Dr. William L. Roper14 78,600 *

Roger J. Valine15 95,136 *

All directors and executive officers as a group (20 persons) 16

6,345,489 2.9%

*

Amount represents less than 1% of our common stock. 1 Unless otherwise set forth in the following table, the address of each beneficial owner is 2000 16th Street, Denver, Colorado, 80202. 2 Based solely on information contained in a Schedule 13G/A No. 4 filed on February 17, 2015 with the SEC by Berkshire Hathaway Inc., a diversified holding company which Mr. Buffett may be deemed to control. Mr. Buffett and Berkshire Hathaway Inc. share voting and dispositive power over 38,565,570 shares of the Company's common stock, which include shares beneficially owned by certain subsidiaries of Berkshire Hathaway Inc. as a result of being a parent holding company or control person. 3 Based solely upon information contained in Amendment No. 4 to Schedule 13G filed with the SEC on February 10, 2015, The Vanguard Group, Inc., an investment adviser, has sole voting power with respect to 299,641 shares, sole dispositive power with respect to 14,093,365 shares and shared dispositive power with respect to 281,547 shares. 4 Includes 247,950 shares held in a family trust and 1,500,000 shares issuable upon the exercise of SSARs and 72,064 restricted stock units, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2015. 5 Includes 2,578,528 shares held in family trusts. 6 Includes 369,583 shares issuable upon the exercise of SSARs and 36,466 restricted stock units, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2015. 7 Includes 306,250 shares issuable upon the exercise of SSARs and 36,466 restricted stock units, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2015. 8 Includes 117,600 shares issuable upon the exercise of SSARs and 4,934 restricted stock units, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2015. 9 Includes 72,000 shares issuable upon the exercise of SSARs, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2015. 10 Includes 72,000 shares issuable upon the exercise of SSARs, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2015. 11 Includes 43,500 shares issuable upon the exercise of SSARs, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2015.

12 Includes 144,000 shares issuable upon the exercise of SSARs, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2015. 13 Includes 62,531 shares held in a family trust and 144,000 shares issuable upon the exercise of SSARs, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2015. 14 Includes 72,000 shares issuable upon the exercise of SSARs, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2015. 15 Includes 78,000 shares issuable upon the exercise of SSARs, which are exercisable as of, or will become exercisable within 60 days after, March 31, 2015. 16 Includes 3,083,070 shares issuable upon the exercise of SSARs and 170,801 restricted stock units, which are exercisable as

Source: DaVita Proxy Statement 2014

Key Features of Our Executive Compensation Program

We Do

We Do Not

Have double trigger change in control provisions for acceleration of equity award vesting

Provide excise tax gross-ups on change in control payments for new or materially amended agreements entered into since 2008 1

Limit severance payments to not more than three times base salary and bonus

Re-price or replace underwater stock options or stock appreciation rights

Provide for multi-year vesting periods for equity award grants to reinforce a culture in which the Company's long-term success takes precedence over volatile short-term results

Have our Compensation Committee's independent compensation consultant provide any other services to the Company

Use an independent compensation consultant Have a defined benefit pension plan

Have a clawback policy that permits recovery of bonuses, incentive and equity-based compensation from executives

Seek stockholder feedback on our executive compensation program

Apply meaningful stock ownership guidelines to strengthen alignment of executives' and stockholders' interests

Have policies related to the hedging and pledging of Company's securities

1 We have not provided for tax gross-ups in any employment agreements or amended employment agreements entered into after July 2008. Our CEO has the only remaining legacy agreement that contains a tax gross-up; however, no gross-up would have been payable under his agreement in any of the prior five years if a change of control had occurred. See "Potential Payments Upon Termination or Change of Control" on pages 54 to 60. Top executive officer compensation

NEO Base

Salary 1

Annual Cash

Award

Annual LTI

Award 2

Kent J. Thiry $1,200,000 $2,610,000 $9,463,889

Javier J. Rodriguez $800,000 $2,000,000 $5,405,698

Dennis L. Kogod $800,000 $200,000 3 $2,528,218

Dr. Garry E. Menzel $510,000 — —

Michael D. Staffieri $515,385 $1,100,000 $2,969,152

Base Salary

We compensate our NEOs with a base salary because we believe it is appropriate that some portion of compensation be provided in a form that is liquid and assured. Base salaries are initially established at levels necessary to enable us to attract and retain highly qualified executives with reference to comparative pay within the Company for executives with similar levels of responsibility, the prior experience of the executive, and expected contributions to Company performance. We do not guarantee salary adjustments on an annual basis. During March of each year, the Compensation Committee considers adjustments to base salary as part of the overall annual compensation assessment for our NEOs. Our CEO typically provides the Compensation Committee with his recommendation regarding merit-based increases for each NEO other than himself. The CEO's base salary is determined by the Compensation Committee with input from Compensia, the Compensation Committee's independent compensation consultant, and Compensia's analysis of CEO compensation of our comparator peer group. Consistent with our emphasis on performance-based compensation and the Compensation Committee's decision to limit increases to fixed compensation amounts in 2014, the Compensation Committee maintained the base salaries of Mr. Thiry, Mr. Rodriguez, Mr. Kogod and Dr. Menzel at 2013 levels. Mr. Staffieri's base salary was increased in 2014 in connection with his promotion from Senior Vice President to Chief Operating Officer of the Company's Kidney Care division. The base salaries for 2013 and 2014 for our NEOs are shown in the table below.

Name

2013 Base Salary 1

2014 Base Salary 2

Kent J. Thiry $1,200,000 $1,200,000

Javier J. Rodriguez $800,000 $800,000

Dennis L. Kogod $800,000 $800,000

Dr. Garry E. Menzel $510,000 $510,000

Michael D. Staffieri $450,000 $550,000

1 The amounts reported reflect the annual base salaries approved in March 2013. 2 The amounts reported reflect the annual base salaries approved in March 2014. Short-Term Incentive Program (STI Program) for 2014 The 2014 STI program awards are granted pursuant to the DaVita HealthCare Partners Inc. 2011 Incentive Award Plan, as amended and restated (the "2011 Plan"), which permits the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock units, equity and cash-based performance awards, as well as other forms of equity awards. Under the 2014 STI program, each NEO was eligible for a maximum annual performance-based bonus potential calculated as a multiple of the annual salary approved in March 2014 by the Compensation Committee, and with respect to the CEO, the Board, as summarized in the table below:

Name 2014 Base

Salary

Multiple of 2014 Base

Salary

2014 STI Maximum

Bonus Potential Kent. J. Thiry $1,200,000 3.0x $3,600,000

Javier J. Rodriguez $800,000 2.5x $2,000,000

Dennis L. Kogod $800,000 2.5x $2,000,000

Dr. Garry E. Menzel $510,000 2.0x $1,020,000

Michael D. Staffieri $550,000 2.0x $1,100,000

Each performance metric under our STI program was assigned a relative weight to determine the percentage of the maximum bonus potential for which each executive was eligible. The percentage of the maximum bonus potential was determined based on results achieved in 2014, and the Compensation Committee then exercised negative discretion to reduce the annual bonus payment based on changed or special circumstances, or factors that may not have been anticipated when the criteria range for the metrics were established. With respect to the 2014 STI, the Compensation Committee reduced the 2014 bonus for Dr. Menzel. Source: DaVita Proxy Statement 2014

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