Javier J. Rodriguez
Chief Executive Officer at DaVita
Thank you, Nick, and thank you all for joining the call today. As we reflect on the past year, our 2023 financial performance highlighted the resilience of our business and reveals some of the early benefits of our multiyear investment in strengthening our platform. External challenges over the past few years ultimately made us stronger and with continued investment in our teammates systems and capabilities, we believe that we're well positioned for the years ahead.
We begin 2024 with great momentum and a reduction in the risk and uncertainties that characterize the recent years. Today, I will cover our 2023 results and our 2024 guidance, provide an annual update on Integrated Kidney Care, and briefly continue our discussion on GLP-1 drugs.
First, however, I will begin the call, as we always do, with a clinical highlight. For more than 20 years, we have strived to be a community first and a company second. This means that we're committed not only to providing outstanding care, but also to give back. In 2023, our teammates logged over 42,000 hours of service to their communities, which marks our highest year ever and a step toward achieving our cumulative goal of 125,000 hours by 2025. And some of our special teammates donated their personal time to advance our goal of raising awareness for kidney disease. We recently wrapped our 2023 Health Tour, a mobile health screening and kidney care education program supporting local communities across the country.
Today, 15% of our U.S. population has kidney disease, which often goes undiagnosed and untreated until symptoms become severe. Our mobile health tour was designed to help identify risk factors that may lead to chronic kidney disease, including screening for obesity, diabetes, high blood pressure and family history of kidney disease. After two months on the road, our bus travels 17,000 miles to offer free screenings in 48 communities across eight states.
Power this tour, more than 300 of our teammates volunteer 1200 hours in service to their local communities. This effort is a wonderful example of combining our dedication to service with our ongoing commitment to raising awareness for early detection and prevention of kidney disease.
Transitioning to our performance full year 2023 adjusted operating income, adjusted EPS and free cash flow all came in well above our guidance from the beginning of the year. As context, I think it's helpful to reflect back on our progress over the year.
We began 2023 in an uncertain environment and shared the assumptions in our guidance that volume and labor challenges would continue throughout 2023. We're simultaneously developing and executing on a number of initiatives focused on offsetting some of those financial headwinds we were facing. As the year progressed, we saw encouraging data points early in the year, which ultimately turned into consistent positive trends. These improved trends, combined with the strong operating performance and the positive impact on the initiatives we implemented, resulted in a 20% year-over-year growth in adjusted operating income, 28% growth in adjusted EPS, and a return of our leverage ratio back to the target range.
I'll share three points for additional color. First on volume, we entered 2023 with a 2% growth headwind due to the annualization of excess mortality from prior year. Since then, successive COVID surges have been weaker in magnitude with lower mortality. At the same time, we were able to produce four consecutive quarters with year over year growth in new patient admits. Adding these factors together, 2023 saw increased patient census for the first time since COVID started and volume that was approximately flat year over year, landing at the top of our guidance range.
Second, our labor performance in 2023 was better than 2022. We cut our reliance on contract labor more quickly than anticipated and improved staffing in our centers. On the other side of the ledger, teammate turnover has remained elevated in line with the strong healthcare labor markets. Looking forward, improved retention and training costs represent an opportunity for improvement in the years ahead.
Third, independent of these trends, we drove strong operating performance through our differentiated platform and capabilities. Most notably, we invested in our revenue operations to achieve sustainable improvement in our collections -- resulted in an additional $3.50 in revenue per treatment for the full year, while reducing more than 12 days from our U.S. day sales outstanding. Adding to this, we executed against our cost saving initiatives related to pharmaceutical spend and further consolidated our facility footprint.
Finally, we exceeded our annual profitability targets for Integrated Kidney Care, which I will cover more in detail in a moment. Summarize, we entered 2024 with more visibility and confidence that we have had since the start of COVID in 2020. Our ability to invest in our people, process and systems, despite the operational and financial challenges of the last few years, has positioned us well for the years ahead.
On that note, let me transition to our value-based care business, which we will call Integrated Kidney Care or IKC. We have consistently urged our investors to assess this business on an annual basis rather than focusing on our quarterly results. Now is a good time to pause and reflect on our performance and outlook of IKC. At a high level, we assess IKC performance based on three primary metrics. One, total medical expense and patients in our IKC programs, which represents growth. Two, our clinical performance or effectiveness of reducing total medical costs and three per member per month spend on our model of care and GNA, which indicates cost management.
I'll walk through each in a bit more detail. First, total medical expense of patients in our IKC programs grew to $4.6 billion, reflecting approximately 30% growth year-over-year represents care for 58,000 patients as of year end, a 38% increase from 2022. Within our traditional value-based care programs, we continue to be disciplined, prioritizing profitable growth. For 2024, we expect growth in excess of 25% for total medical expense and covered lives.
Second, our model of care has proven effective in helping our patients lead healthier lives and reducing medical costs, reflecting in a net savings rate that is slightly ahead of our expectations. Largest driver is year over year reduction in hospitalizations, especially readmission rates. This relies on a collaboration efforts between our care teams and physician partners to prevent rising acuity and address the needs of our most complex and vulnerable patients.
Finally, our per member per month costs continue to trend down as a result of the program growth and improved fixed cost leverage. In 2023, our per member per month costs declined by 7%. We expect per member per month costs to further decline by approximately 15% in 2024. The result of these efforts is that we outperformed our 2023 adjusted operating loss forecast, and we believe we remain on track to deliver breakeven or better performance by 2026.
Beyond the core metrics, we can further break down our performance based on three primary components of our IKC business; special need plans, our value-based care portfolio focused primarily on Medicare advantage patients, and the CKCC demonstration project for our Medicare fee for service patients. Within that portfolio after many years of investment and consistent year over year improvements in cost savings, our MA contracts and special need plans have now reached profitability. Keep in mind that the third component, CKCC, represents approximately 50% of our value-based care census. We adjust the changes from CMS and further optimize our model of care, we expect this program to become profitable in 2026 time frame.
Before we get into 2024, I'll offer quick comments on GLP-1s. To be clear, none of our thinking has changed since our last earnings call. Shortly after our call, results for the select clinical trial were released. As expected, the trial confirmed certain cardiovascular benefits in people with obesity and cardiovascular disease, including a 20% reduction in all-cause mortality. Next on the near-term horizon will be the flow study, which we anticipate will demonstrate efficacy on multiple endpoints, including slowing the progression of chronic kidney disease. As a reminder, such efficacy that may be demonstrated in the flow study is already incorporated into our GLP-1 base case. Flex [Phonetic], a net neutral impact to dialysis volume growth as adoption ramps up over the next decade.
Shifting to 2024 were sudden guidance for adjusted operating income growth of 10% and adjusted EPS growth of 9%, reflecting the midpoint of our respective guidance range. For each metric. This incorporates our expectations of a more predictable operating environment, continued returns from our revenue cycle investment, and further progress in IKC. This guidance demonstrates the resilience of our business and our ability, despite external challenges, to provide high quality care while delivering strong financial results.
Let me touch on a few drivers of our forecast. First 2024 adjusted operating income will benefit from the full year impact of positive development in 2023, including the annualization of revenue cycle improvement, our transition to Mircera, and savings related to our center -consolidation.
Second, as noted, we're demonstrating progress in our IKC business and continue to expect breakeven by 2026.
And finally, adjusted earnings per share will benefit from our share repurchase program offset by other factors below the OI line, including other losses, higher interest expense and higher effective tax rate. As we turn the page to 2024, we have a great opportunity to drive operating advancements that further differentiate DaVita within kidney care.
We'll now turn it over to Joel to discuss our financial performance and outlook in more detail.
