Javier Rodriguez
Chief Executive Officer at DaVita
Thank you, Jim, and good afternoon. We are excited to talk to you today about our strong Q2 performance. Our 2021 financial outlook and recent development on our effort to transform kidney care. First, let me start the conversation with the clinical highlights. Kidney transplant is the best treatment option for eligible patients with kidney failure. DaVita has worked hard over the years to help our patients gain access to transplant through education and direct support for patients to get on and stay on the transplantation waitlist. The cumulative impact is meaningful. Last December, we announced a milestone of 100,000 DaVita patients who have received transplant since the year 2000.
Further advance the cause of transplantation are collaborating on a yearlong pilot aim at improving health equity in kidney transplantation with a focus on living donors. Increasing living donor transplant expands access to transplantation by increasing the availability of organ, which has been the limiting factor in the number of transplants performed annually. This pilot provides high touch and customized information to patients and families seeking a kidney transplantation from a living donor. We look forward to learning more from this pilot, improving the health equity of kidney transplant and continuing to be the leader in supporting our patients to receive kidney transplant.
Shifting to the latest update on COVID, we have made incredible progress in our efforts to combat the COVID 19 pandemic over the past several months. New COVID infections among our patients continue to drop significantly through the last week of June down more than 90% from the peak in early January. However, similar to the rest of the country, we have started to see an uptick over the last few weeks. As of last week on a rolling seven day average basis new infection, they're still down more than 90% from the peak. Thus far, mortality continues to remain low on an absolute basis as we believe that are vaccinated patient are more protected from severe cases of COVID.
We continue to educate our patients about the benefits of vaccine to reduce vaccine hesitancy and we remain confident in our policies and procedures designed to keep our patients and our teammates safe while they're in our care. Now let me turn to our financial performance in the second quarter, we delivered strong results in both operating income and earnings per share, our margin expanded as we continue to manage cost while delivering quality care. As a result, we delivered 6% year-over-year growth in adjusted operating income and 35% year-over-year growth in our adjusted earnings per share. Our free cash flow was particularly strong this quarter, we continue to return cash to our shareholders through our stock buyback.
With the first half of the year behind us. We are now increasing the midpoint of guidance for the full year. Let me transition to update our progress in our integrated Kidney Care efforts, otherwise known as by IKC. Value-based care for our patients with kidney disease is gaining momentum and appears to have reached an inflection point. We have always believed the core name dialysis care with the broader health care needs of KB and SKG patients with simultaneously improve outcomes and reduce total health care costs. For years, we've been participating in a variety of small programs and pilots to build our integrated care capability and better understand the economics we believe we are at that point now where we are ready to shift to the next stage of the evolution of integrated care.
You might be wondering why now, the trend towards value-based care is not new either in kidney care or other segments of healthcare so what's changed to make the development of scale business viable today. There's a couple of reasons. First with the growth of Medicare Advantage payers are looking for innovative ways to manage the increasing number of ESKs patients choosing MA plans these patients tend to be more complex and most of them MA patient and should benefit from tailored care management. Second, CMS recently initiated the payment models and kidney modern in kidney care. We are preparing to partner with nephrologists and up to 12 markets beginning in January of next year to participate in CKCC voluntary program.
Our participation and CKPKC model will also provide us with operational scale in more geographies to enter into other value based arrangements, we've increased our confidence in our capabilities to deliver clinical and economic value at scale and have lean in on our willingness to take risk. We believe we're well positioned to win an integrated care because of our strong partnership with nephrologists, our regular and consistent interactions with patients, a broad Kidney Care platform that spans various modalities and care setting. And a clinical data set and analytics that we used to create develop clinical interventions to support our patients holistically.
We have a demonstrated track record of improving patient outcome care, and lowering costs for patients in risk arrangement for example, in our FCOS [Phonetic], we were able to generate non-dialysis cost savings in the high single digits which translated into more than double the average savings rates compared to the rest of the industry over the life of the program. With our special needs plan we have been able to lower mortality by 23% relative to other patients within the same-center and county.
To give you a better sense of the scale of the business. As of today, approximately 10% of our US dialysis patients are in value-based care arrangements in which Tervita is responsible for managing the total cost of care. This represents almost $2 billion of annual medical cost under management. In addition, we have various other forms of value based care arrangements with payers in. We have economic incentives for improving quality and lowering costs. In 2022, we expect our integrated Kidney Care business to double inside both the number of patients in risk arrangement and the dollars under management. We also expect to see a dramatic increase in the number of CKB Live we have under risk in 2022.
To prepare for this growth. We are currently scaling up our clinical team and furthering building out our support. Because of the investment as well as the delays and cost savings impact of our model of care and revenue recognition. We expect to incur a net operating loss of $120 million in 2021 in our US ancillary segment this outcome is consistent with the OII headwinds from ITC growth, we called out at the beginning of the year and is of course included in our full year guidance. The doubling of the business next year could result and an incremental operating loss in our ancillary segment of $50 million in 2022. We expect significant improvement in our financial performance beginning in 2023 as we begin to recognize savings from the new contracts that we entered in 2021 and 2022.
Over the five-plus-year horizon, we believe that our IKC business could become a sustainable driver of significant operating income growth. Currently we serve approximately 200,000 dialysis patients across the country, we utilize over $12 billion in health services outside of the dialysis facility, including the cost of hospitalization, our patient procedures and physician services. In addition, we see an opportunity to manage the care of up streams CKD patients who currently do not dialyzed in our centers. Assuming that we are managing the total cost of care for more than half of our dialysis patients as well as others CKD patients at low-to-single digit margin, we believe that this could be meaningful financial opportunity.
In summary all of healthcare has been talking about value based for years. We are excited for DaVita to lead the way.
With that I will turn the call over to Joel.
