Javier J. Rodriguez
Chief Executive Officer at DaVita
Thank you, Nic, and thank you all for joining the call today. We started 2023 with a mix of optimism and uncertainty about the year ahead, and with continued conviction in our long-term capabilities and strategy. We're grateful for getting through the winter without a surge of COVID-related mortality, and like bunch of society wondering whether the worst of the COVID pandemic is finally behind us.
I'm encouraged by the progress we've made in the recent months to improve that which is within our control, while we continue to invest in our future. That said, we're cautious in our optimism today because we're still experiencing the impact on volume and labor.
For today, I'll spend a few minutes on fourth quarter results, and then focus on the future with a summary of our 2023 strategic priorities, and then -- and with our 2023 outlook. Before I dive into these topics, I'll start, as I always do, with a clinical highlight. Our most impactful clinical initiatives by those that directly improve the quality of life, and vitality of our patients. There are many measures serving that important purpose and today, I'll take a moment to recognize the successful efforts, to decrease infection rate amongst our vulnerable patient population.
One way we measure success is by tracking blood stream infection, and I am proud to share that we achieved an all-time low blood stream infection rate for our patients as of the third quarter last year. This reflects a 20% improvement within the last year alone. These results represent just one of many efforts we have undertaken to reduce hospitalizations and mortality, which is a tremendous gap for our patients and their family.
I will now pivot to our results. Our full year 2022 adjusted operating income came in at the top end of our revised guidance at $1.45 billion. Adjusted earnings per share from continuing operations for the full year 2022 was $6.60 and we generated $817 million of free cash flow. The primary driver of our fourth quarter performance, coming in at the high end of our range was improvement in labor cost. The labor environment continues to be challenging across many dimensions with fourth quarter was certainly better than third quarter.
One particular highlight, our focus on reducing contract labor produced results earlier than expected. We still expect contract labor will be higher than pre-COVID levels in 2023, by $20 million to $40 million, but that will be significant improvement for 2022. We continue to make progress in hiring team mates during the quarter, as we work to stabilize center staffing levels, and increase retention.
Off note, this increase in labor capacity will continue to drive higher than typical training and onboarding costs in 2023, until retention normalizes to historical levels. We continue to expect wage pressure above historical norms in 2023, but anticipate wage growth at levels below 2022. Despite early optimism for improvement in 2023, the labor markets remain highly dynamic, and will remain a key swing factor in our performance. Our fourth quarter results give us increased confidence in achieving the improvement we discussed last quarter.
Now at the volume, overall results for Q4 were in line with our guidance from last quarter. COVID infection and mortality rates in December and January were lower than in prior years, which is a welcome relief for our patients and our caregivers. Because the winter surge has historically occurred late in December, the lack of a surge did not result in material improvement in our treatment volumes in Q4 relative to our expectation, but have to reduce our expectations for total excess mortality in 2023 by approximately 1,000 patients, as compared to our expectations in the range provided last quarter.
Last quarter, we also highlighted that patient admissions in mid-treatment rates as a key variable to our volume. We continue to see pressure on both of the metrics, but at the levels in line with our most recent expectation.
For 2023, we continue to use a wide range of possible volume outcomes in our guidance, given the uncertainty of the virus. We have shifted the range up to account for the lack of a meaningful winter surge so far, but have not fully discounted the possibility of a COVID surge later in the year.
Our 2023 volume guidance includes a treatment range of down 3% the flat relative to 2022. All else equal, the lack of COVID event over the remainder of the year would move us toward a better end of our volume range.
Looking forward to 2023, we kicked off the year with a robust and exciting set of priorities. We remain resolute in our commitment to pursue strategic goals, they create a strong future for our patients and our company. I will highlight five of these priorities today, beginning with innovation.
First, we're approaching a key milestone in our journey toward digital modernization. After years of development, this year we're deploying our next-generation clinical IT platform. This new cloud-based system is designed to provide seamless access to patient record, across location, supporting integrated kidney care and enhancing data reporting and analytics. Roll out is well underway and we expect this system will be live in our centers across the country in 2023. This platform will provide a superior experience for our team mates and physician partners, while enhancing clinical care for our patients.
Second, on policy, the kidney care community remains active working with CMMI to enhance innovative model that improves care coordination in advanced initiatives around transplant, home and health equity. At the same time, we're advocating for an update to the industry bundle payment system to better reflect year-over-year cost increases.
And finally, we continue working with a broader kidney community to restore benefit protections for our patients through legislative and regulatory efforts.
Third, operationally, we remain committed to educating our patient and our physicians, to increase adoption of home modalities, where clinically appropriate. In support of our over 1,700 existing home programs, we are launching transitional care programs across the country, to educate new dialysis patients on their modality options.
We're also working toward a full integration of our technology platform to create a holistic informational ecosystem for a better home patient management.
Fourth, our integrated kidney care business is expected to deliver another year of significant patient growth, with the benefit of increased scale, it will be important year for us to continue building on our capabilities for IKC, to achieve its purpose of driving better outcome for our patients, better collaborations with physicians and an economic alignment with our payer partners, particularly within the growing Medicare Advantage segment.
And finally, to fuel these initiatives, we're maintaining a disciplined approach with our cost structure. For example, this includes our ongoing transition on ESA therapy, and the ongoing consolidation of our facility's footprint to align capacity with treatment volume. This discipline is particularly important in the context of Medicare fee-for-service rate, which as you know have not kept pace with our increasing patient care costs.
As you can see, 2023 will be a dynamic year across many of these efforts, and we remain firmly focused on the key operating drivers I previously mentioned.
Now, shifting out to outlook. For 2023, we're initiating guidance for adjusted operating income of $1.4 billion to $1.6 billion, and adjusted earnings per share of $5.45 to $6.95. This reflects our latest view on continued but moderating labor headwinds over the balance of the year, persisting volume pressures, offset by the positive impact of avoiding a winter surge, and the benefit of the cost saving initiatives we have previously outlined.
Looking longer term, if we continue to see diminished impact from COVID and moderating the labor pressure, we would expect to return to a more normal adjusted OI growth trajectory of 3% to 7%.
I will now turn it over to Joel, to discuss our financial performance, and our outlook in more detail.
