Javier Rodriguez
Chief Executive Officer at DaVita
Thank you, Jim, and thank you all for joining today's call to discuss our fourth quarter performance and our thoughts on 2022. Each quarter for the last few years, I hope it's the last time that the pandemic as a start of my discussions with you. Yet, COVID continued to evolve and have a direct impact on our world, especially on our health care system. Similar to what's been seen in the general population, COVID infections within our patient population spiked significantly in late December through January. At its peak during the second week of January, the new case count was more than twice as high as a peak from last winter. Gratefully, the mortality rate to date with the latest surge has been lower than in prior surges. For the fourth quarter, we estimate that the incremental mortality due to COVID was approximately 1,100 compared to approximately 1,600 during the third quarter.
Despite the challenges associated with COVID, I continue to be in awe at the resilience and dedication of our teammates across the DaVita Village. From our direct patient caregivers to our corporate teammates, all are unrelenting in their commitment to provide high quality care, respond to quickly changing environment, and show incredible compassion and support for our patients. For the balance of my remarks, I will cover five topics, transplant, labor market, our supply chain, Integrated Kidney Care, IKC, and then I will wrap up with our fourth quarter results and our outlook.
First, transplant. At our Capital Markets Day presentation in November, I discussed our focus on innovation to improve the patient experience at every single stage along the patient's kidney care journey, from delaying the progression of kidney disease to transplant and from acute hospital care to dialysis at home or in-center. Transplant is the preferred treatment option for most of our patients and during 2021, despite the challenges posed by the COVID pandemic, we celebrated nearly 8,000 DaVita patients receive their transplants, exceeding our pre-pandemic level.
With that said, the transplant process is long and complicated with an average wait time of between four and five years for an organ. Staying active on the wait list for such a long time is difficult. As a result, patients sometimes miss their window for a transplant. We've been working to address some of these challenges through our industry-leading Transplant Smart education program and our partnership with the NKS to help more patients find living donors. In early January, we announced the acquisition of MedSleuth, whose software-enabled closer partnerships and better coordination between transplant centers, nephrologists, and kidney care providers with all three working together to support our patient transplant's journey.
These efforts can also benefit another meaningful goal of ours, to improve health equity. Many processing outcome results in transplant are quite inequitable, different by race and ethnicity, economic means and insurance coverage. We believe it doesn't have to be this way. We're moving barriers to access, making process as easy as possible, and providing strong care coordination and support through the transplant journey can all contribute to making transplants not just more available, but also more equitable for our patients.
Now, let me shift to an update on the labor market. I've been fortunate enough to be part of DaVita Village for over 20 years, and in all that time across my many roles, I've never experienced a labor market as challenging as we face today. To help deal with the challenge, we have provided incremental pay and benefits to help our frontline caregivers during COVID. We've also accelerated wage increases, with a particular focus on our teammates in the clinics. As previously communicated, we expect higher than usual wage increases in 2022, which will put some additional pressure on our cost structure going forward. We believe this investment in our people will contribute to our ability to attract and retain the talent needed to achieve our long-term objective. That said, the labor markets remain highly dynamic and will continue to be a swing factor for the year.
Over the years and particularly during the pandemic and natural disasters, we have navigated many supply chain challenges. To date, our supply chain has proven very resilient. Currently, we're working through a supply shortage primarily related to dialysate, which is a fluid solution used in hemodialysis to filter toxins and fluid from the blood. The shortage has rippled through the entire kidney care community and as a community, we have once again come together in support of our dialysis patients, and, thus far, have been able to provide uninterrupted, life-sustaining care. We expect that these challenges related to dialysate will remain with us until the second quarter.
Turning to IKC, we now have confirmation on the markets where we will partner with physicians under the federal government's new 5-year demonstration CKCC demonstration. These programs added approximately 12,000 ESKD patients and an additional 12,000 CKD patients across 11 value-based programs in different markets. We are engaging with our nephrologist partners to develop personalized care plan for each covered patient and identify opportunities to improve clinical outcomes and lower cost for each patient. Participating in these and other programs will more than double the number of patients we serve in value-based care arrangement.
In light of our upfront cost of these programs and the lag of shared savings payment, as we discussed in November, we continue to expect that our operating loss in 2022 in our US ancillary segment will increase by approximately $50 million, although this could increase or decrease depending on the number of new arrangements we enter into during the year. We believe that we are well positioned for the future, and, in particular, to deliver positive clinical and financial results in our IKC business over the long term.
Now let me finish with fourth quarter results and our updated outlook. Despite the negative impact of the Omicron surge, our fourth quarter results were slightly above the midpoint of our revised guidance. This resulted in a full year adjusted operating income increase of approximately 3% over 2020. Adjusted EPS from continuing operations grew by approximately 26% year-over-year, and we generated more than $1.1 billion of free cash flow, which we largely deployed to return capital to our shareholders. For 2022, we expect adjusted operating income guidance of $1.525 billion to $1.675 billion. The midpoint of this guidance range is $35 million below our expectation from Capital Markets Day last November, which is primarily driven by our updated views on COVID and labor costs.
As we said previously, while 2022 will be a transition year due to some near-term investment and challenges that we're facing, we continue to believe that we're well positioned to perform across the kidney care continuum in the years to come. We still believe we can deliver the long-term compounded annual growth of adjusted operating income of 3% to 7% that we discussed at Capital Markets Day.
With that, I will turn it over to Joel to discuss our financial performance and outlook in more detail.
