Javier J. Rodriguez
Chief Executive Officer, DaVita Inc. at DaVita
Thank you, Nic, and thank you all for joining the call today. I'm grateful for the incredible effort of our frontline caregivers as we deliver outstanding care for our patients while also navigating recent hurricanes and related supply disruption. Alongside these challenges, we continue to execute on operating efficiencies and innovate across the continuum of care. Today, I will cover our third quarter performance, which was in line with our expectations, provide an update on our supply chain, discuss our expectations for upcoming CMS 2025 final rule and wrap up with some comments about next year.
But first, we will start the call as we always do with a clinical highlight. This quarter, we'll use this opportunity to highlight the remarkable resilience our patients and teammates have demonstrated in the face of recent storms. Over the past month, millions of lives were impacted by the devastation caused by Hurricane Helene and Milton despite hundreds of centers being in the path of these storms, most were open within days of the storm relenting and all but one is fully operational today, providing care in these communities. Many inspirational stories emerged from the dialysis community, which came together to support those in need.
In the immediate aftermath of these storms, our care teams from across the country rallied to support the regions affected. DaVita deployed generators, water tankers, over 20,000 gallons of fuel, and high water crews to conduct wellness checks and search for missing patients and teammates. Local leadership worked tirelessly to account for all patients and teammates and to coordinate transportation for urgent access to the dialysis care many patients needed to survive.
Our Asheville Kidney Center opened on the Sunday immediately after Hurricane Helene, under generated power to provide the care for patients from six nearby facilities. We and others in the kidney care community open our doors to anyone needing treatment, including those who normally treat with other providers. I was proud to see the dialysis community come together in common support of patient care. Combined with the dedication of our local care teams, our successful emergency response has again underscored the importance of scaled resources and operating discipline. Although the storms have since passed, our efforts are ongoing to coordinate humanitarian needs, including food, housing and other assistance. We continue to work with the impacted communities to rebuild.
Thank you all to the teammates who have gone above and beyond to care for one another and our patients. Beyond the community impact, key supply lines were disrupted by Hurricane Helene due to the closing of Baxter's North Cove facility. Baxter supplies us with the majority of our peritoneal dialysis or PD solution we used for home PD therapy and the majority of our saline used during each in-center hemodialysis treatment. Baxter and other manufacturers have been able to provide sufficient supply for all our current PD patients to continue their treatment relatively uninterrupted.
While we have had to temporarily suspend new patient starts, on PD, thanks to the great efforts of our regulators, government officials and Baxter, we expect to resume new PD starts next month, and we expect supply dynamics to normalize in the first quarter. Shifting to saline, Baxter is now able to supply us with approximately 60% of their pre-storm levels as they continue their work to bring the North Cove facility back online. Fortunately, we've been successful in securing alternative supply to ensure continuity of care and safety for our patients. Because these challenges occurred near the end of the quarter, the impact on Q3 financial results was minimal.
For the fourth quarter, we estimate an impact of approximately $10 million to $20 million due to the high supply costs, lower PD patient starts and lower productivity from our home caregivers. This is now included within our 2024 adjusted operating income guidance range, and we expect a portion of this quarterly impact will continue into 2025, depending on the duration of the supply challenges. I'll transition now to our expectations for the ESRD final rule from CMS, which we anticipate will be published shortly. While there are many aspects of the rule, we will be primarily focused on two areas.
First, the market basket update, including how CMS handles the new proposed wage index and the base rate. As a reminder, the proposed rule led to an approximate 2.1% increase. Second is the transition of oral-only drugs into the bundle beginning January 1. As a reminder, this is a statutory mandate by which oral-only drugs which are mostly phosphate binders will transition from the Medicare drug benefit over to Medicare Part B. While CMS made clear, it intends for these drugs to enter the bundle, we are waiting on information such as initial reimbursement and the treatment of unbillable items.
We continue to believe this transition to the bundle will provide more patients with access to these important therapies. We recognize that some pharmaceutical manufacturers continue to advocate for the legislation to delay the implementation of this long-standing rule but urge legislators to put patient access first. We're prepared to implement this transition in support of our patients. Transitioning to our third quarter performance. Adjusted operating income was $535 million and adjusted earnings per share was $2.59.
We view our third quarter results as fairly straightforward, consistent with how we have delivered value through this entire year. Although treatment volume growth remains a challenge, our business continues to demonstrate resilience as we mitigate the volume headwinds with margin expansion, including the momentum of our IKC and international results, all while continuing to invest in our future. Cash flow remains strong, and we continue to deliver on our disciplined capital allocation strategy returning capital to shareholders through share repurchases.
Turning to the full year. We remain on track to deliver results consistent with our 2024 guidance range. We're reconfirming our 2024 adjusted operating income guidance of $1.91 billion to $2.01 billion. This forecast now includes the impact of Baxter supply shortage. It is a bit early to give specific guidance for 2025, although I know that many of you are already looking ahead to next year. Over the next few months, we'll learn more key factors, including open enrollment, oral drugs in the bundle, integrated kidney care and others, so we will provide formal 2025 guidance on the fourth quarter call, consistent with our normal cadence.
That said, some multiyear context may be helpful. After challenging years in 2021 and 2022 during the pandemic, we're now on track to deliver our second consecutive year of double-digit adjusted OI growth despite continuing volume and labor pressures. Looking forward, we expect to return to adjusted OI growth more consistent with our historic pre-pandemic multiyear guidance.
I will now turn it over to Joel to discuss our financial performance and outlook in more detail.
