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DaVita HealthCare Partners Inc  (NYSE:DVA)
Q4 2018 Earnings Conference Call
Feb. 14, 2019, 9:00 a.m. ET

Contents:

Prepared Remarks:

Operator

Thank you for standing by. My name is Coleen and I will be your conference facilitator today. At this time I would like to welcome everyone to DaVita Fourth Quarter 2018 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. (Operator Instructions)

Mr. Gustafson, you may begin your conference.

Jim Gustafson -- Vice President, Investor Relations

Thank you Coleen, and welcome everyone to our fourth quarter conference call. We appreciate your continued interest in our company. I'm Jim Gustafson, Vice President of Investor Relations. And with me today in the room are Kent Thiry our CEO; Joe Ackerman our CFO; Javier Rodriguez, CEO of DaVita Kidney Care; Jim Hilger our Chief Accounting Officer; and LeAnne Zumwalt, Group Vice President.

Please note that during this call we may make forward-looking statements within the meaning of the federal securities laws. All of the statements are subject to known and unknown risks and uncertainties that could cause the actual results to differ materially from those described in the forward-looking statements. For further details concerning these risks and uncertainties, please refer to our fourth quarter earnings press release and our SEC filings, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q. Our forward-looking statements are based upon information currently available to us. And we do not intend and undertake no duty to update these statements.

Additionally we like to remind you that during this call, we will discuss some non-GAAP financial measures. A reconciliation of these non-GAAP measures to the most comparable GAAP financial measures is included in our earnings press release submitted to the SEC and available on our website.

I'll now turn the call over to Kent Thiry, our Chief Executive Officer.

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Thank you Jim. As you probably already noted we had solid fourth quarter results that were consistent with prior communications and of course J.R. and Joel will discuss those in greater detail a little bit downstream, but we're first and foremost a caregiving company and so, as usual we will start by talking about the clinical highlights today and about its stewardship.

As many of you know the dialysis patients are highly prone to infections. We have continued to get better at supporting evidence based describing of antibiotics which has a couple of benefits including reducing harmed patients from excess of antibiotic use and also preventing the emergence of antimicrobial resistances is something that all caregivers should be doing across America and Global Health Care. And we're proud that we're getting better. In fact in 2018, among patients with symptoms of biosimilar (ph) infections we actually decreased IV antibiotics drugs by 12% while maintaining all clinical quality. This is important, not only in terms of what we did this year but we continue to collect data to improve our ability to do even better in the future.

Now a quick update on the DMG transaction. We're working closely with Optum to obtain FTC approval which of course is necessary. The timing of the process was very negatively impacted by the government shutdown as it was for so many other transactions. And we cannot speak definitively the timing for all the reasons we haven't been able to do that up to this point and all the same reasons that other companies involved in other transactions cannot, but everybody is working very diligently to move that ball forward.

In addition, some good news is that in 2019 the DMG financial performance will improve as expected to improve significantly. There are number of very tangible reasons for this. One, for example, is significantly better Medicare Advantage rates than in prior years. Number two, the elimination of the health insurer fee is a dollar-for-dollar significant pickup. Number three, the dollar-for-dollar elimination of considerable consulting expenses incurred in 2018 that will be gone in 2019. And fourth, the number of operating improvements, the investments that we made in prior years that are bearing fruit. So the net is in 2019 DMG will be significantly better as expected to be significantly better than 2018.

Now over to Javier for a summary of our Kidney Care business.

Javier J. Rodriguez -- Chief Executive Officer

Thank you Kent and good morning everyone. Today I'll cover two topics. First I'll provide a recap of our financial performance. And second I will discuss the legislation recently introduced in California.

For the fourth quarter of 2018 our results are in line with our guidance. Adjusted operating income was $370 million for the quarter and $1.513 billion for the full year. Our 2018 operating cash flow from continuing operation also came in line with guidance at $1.48 billion. Related to cash flows our 2018 CapEx spend came in better than our guidance and we are guiding to a lower spend in 2019. There are several drivers of this declining CapEx spend, two of which are worth calling out, as they should decrease the CapEx spend our new centers in the next couple of years.

First we continue to focus on driving the right modality for our patients. For many of them dialysing at home may be the best option. Now that we have a most secure supply on PD products we anticipate more patients will be able to choose home dialysis. In fact in 2018 we trained and educated over 13,000 new home patients. As you know home growth has an incremental benefit of being more capital efficient.

Second, as we mentioned earlier this year, some recent data suggest that ESRD industry growth may be slowing. While we don't know whether this is the short-term impact of increased transplantation availability or whether there is a long-term implication in the immediate term we plan to build fewer centers to keep pace with patient demand.

Next, as many of you know, Q4 includes open enrollment decisions for many of our patients. Overall we observe stable results from open enrollment which is consistent with our expectations. In the individual markets in particular, we saw slightly higher reenrollment than we experienced over the last couple of years. We believe that these results set us up to deliver on 2019 guidance we shared last month which Joe will cover later.

Now let me transition to a legislative update in California. A member of the assembly has reintroduced effectively the same legislation as last year's SB 1156, which was vetoed by the governor because of potential harm to patients. This new bill AB 290 seeks to impose rate cuts on dialysis providers tor their support of premium assisting charities and impose restrictions on charitable premium assistance for patients with pre-existing conditions and end-stage renal disease. Our coalition of dialysis patients, physicians and caregivers in California will of course fight to the fit, defeat this ill conceived bill.

Finally let me finish by saying that we continue to build our integrated care capabilities which are helping us care for patients in a more holistic way.

Let me provide a couple of examples. First we have developed a predictive model that incorporates lab data dialysis, treatment data and claims data to determine to which patients are at a highest risk of hospitalization over the following month.

Second, we now have a team of nurse practitioners dedicated to addressing broad range of primary care needs on a more real time basis for our patients. We believe that these capabilities will improve the quality of life of our patients while reducing cost to the system. And of course we look forward to providing this coordinated care to many more patients in the future. So in summary, overall, solid quarter and we continue to focus on delivering high-quality care for our patients.

Now on to Joe for financial details on our results.

Joel Ackerman -- Chief Financial Officer

Thanks Javier. Let me walk you through some components of our U.S. and dialysis -- U.S. dialysis and lab segment. First growth. Our treatment per day growth in Q4 was 3.1% and normalized non-acquired growth was 2.6% as we continue to see a decline in volume growth. We continue to expect non-acquired growth to range between 2.5% and 3.5% in 2019.

Next on revenue. Revenue per treatment was down $0.65 from Q3 to Q4. If you exclude the impact of calcimimetics, revenue was up a little more than $1 per treatment sequentially. To give some perspective on this for the full year, commercial RPT for the year was down approximately 1% as we shifted out-of-network business to in-network, which offset commercial rate increases that we've achieved across much of the portfolio. For the year commercial mix was down approximately 10 basis points from 10.5% in 2017 to 10.4% in 2018. We believe that our decline in mix was consistent with the demographic headwinds that we have previously outlined.

Finally on revenue, our strategic initiative revenue was negatively impacted by our previously announced wind down of DaVita Rx. DaVita Rx revenue was down approximately $100 million quarter-over-quarter and Q4 is reflective of the go-forward run rate.

On costs. Patient care cost per treatment was up $1.26 quarter-over-quarter primarily due to an increase in professional fees. Dialysis and lab segment G&A was down quarter-over-quarter approximately $4 per treatment, $2 driven by a decrease in advocacy spends and the remainder due to normal quarterly spending fluctuations.

For international, we achieved a slightly positive adjusted operating profit for the quarter excluding the FX impact of our joint venture in Asia. We expect positive operating income from International operations in 2019 excluding any FX impacts, which is incorporated in our enterprise guidance. For the fourth quarter our effective tax rate on income attributable to DaVita from continuing operations was 24.3% and for the year it was 29.2%. The effective tax rate was unusually low for Q4 as a result of the positive quarterly true-ups for our federal state and international accruals. It's unusual that all of these moved in the same direction in one quarter.

Now on to cash flow. Operating cash flow from continuing operations was $307 million for the quarter and $1.48 billion for the year, in line with our previous guidance.

I will conclude by reiterating our 2019 guidance. We expect operating income to be between $1.54 billion and $1.64 billion. As a reminder, the first quarter has seasonally low operating income as the quarter is shorter with 76.6 treatment days meaning lower treatment volumes and fewer treatments over which to absorb the fixed cost. Also Q1 has higher seasonal payroll taxes.

Our 2019 guidance includes the following expectations: 3% to 4% U.S. total treatment volume growth; 0% to 1% U.S. revenue per treatment growth; and 0.5% or 1.5% U.S. cost per treatment growth. We are initiating 2019 guidance for operating cash flow from continuing operations for the year to be $1.375 billion to $1.575 billion. In 2019, we expect $800 million to $840 million in CapEx from continuing operations. This range includes CapEx for self-developed real estate projects that are offset by proceeds from the subsequent sale leaseback transactions.

We expect approximately $100 million of proceeds from self developed projects in 2019 leading to a net spend of approximately $720 million at the midpoint. For comparison purposes in 2018, our CapEx from continuing operations was $902 million, and we received proceeds from sale-leaseback transactions of $45 million through a net of $857 million. You can see the historical detail in section six of our supplemental financial data in our earnings release.

Finally we expect our effective tax rate on income attributable to DaVita from continuing operations to be 28.5% to 29.5%. As always our guidance captures the majority of probabilistic outcomes, although there are scenarios in which we could end up above or below the estimated -- the estimates provided.

Now I'll turn it over to Kent for some closing remarks.

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

I'd like to just make a few comments four. Number one, please be reminded that the next few years Medicare year-over-year fee for service rate increases will be better than almost zero increases over the last few years. Second, the international business now has a foundation on which we can expect year-over-year OI contributions rather than offsets. Number three, we continue to generate strong cash flows and they are in fact incrementally better in some of the prior years. And four, we are very well positioned to be a differentiated high value-added provider integrated care for these needy and expensive patients.

Operator let's switch to Q&A please.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) The first question comes from Kevin Fischbeck, Bank of America. Your line is now open.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

Thanks. I guess, we want to start of with the DMG as a question. I appreciate that you can't say exactly what is going to close, but I didn't hear a comment from you that you're still confident that it is going to close. Just want to make sure that through your perspective everything is still on track and it's just a matter of timing at this point?

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Yes.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

Okay great. And then I wanted to talk a little bit more about the slowdown in growth that you're seeing and expecting from a treatment perspective. I missed, I think you mentioned something about factors that may or may not be temporary. Can you talk a little bit about what those factors are? And if there's anything else that you're thinking about or thinking about what organic approach (ph) look like?

Javier J. Rodriguez -- Chief Executive Officer

Yes. Thanks Kevin. This is Javier. We started this year a bit of a slow down on new starts in the back end of the year. And that's why when we provided guidance, you saw the number came down to 2.5% to 3.5% of non-acquired growth. Some of the factors that are still in play are what's happening upstream with other (inaudible) conditions and how that is impacting, how many patients have ESRD.

And another dynamic is, how many organs are going into the transplant pool as the number of organs has picked up due to the opioid crisis with many people being young and having healthy kidneys. So there is a lot interplay, many dynamics upstream and so we're trying to see if there is short-term or if they're going to be longer-term.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

Okay. And, but you -- from your perspective the new starts that you're doing over the next year or is that going to be just new for in-line inventory growth, market share gains, market share losses, how are you thinking about that?

Javier J. Rodriguez -- Chief Executive Officer

I'm sorry. Are you asking how we're positioned within that growth? Is that the...

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

Yes. Your guidance of 2.5% to 3.5%, does that mean that you expect to gain share or your growing in line with what you think the market will also be growing?

Javier J. Rodriguez -- Chief Executive Officer

Yes. In the last couple of years, actually not the last couple of years, maybe the last couple of decades, we've outperformed in non-acquired growth. We believe that there is nothing in the data that would say that we would not do that. And so right now we're just looking more at the market dynamics overall.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

Okay. And then maybe last question for now. On the commercial mix I think you said that mix was down 10 basis points year-over-year in line with kind of what you would expect in all of demographic trends to be kind of argues for, but I think your guidance assumes that actually mix will be relatively flat. So I'm not sure if the demographics point a decline each year, how you're thinking about being flat in 2019?

Joel Ackerman -- Chief Financial Officer

So, Kevin It's Joel here. The demographics are certainly a headwind about 10 basis points a year. We see opportunities to offset the headwind through upstream education of patients, as well as helping them with their insurance once they've come on dialysis. So we see opportunities to offset the headwind but we do see the headwind persisting.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

Okay. All right. Great. Thank you.

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Thank you Kevin.

Operator

Thank you. And our next question comes from Justin Lake, Wolfe Research. Your line is now open.

Justin Lake -- Wolfe Research -- Analyst

Thanks. Good morning. First let me follow-up on the Kevin's question around the deal close. I understand the government shutdown delayed everything, but the last thing you had talked about was expecting the deal to close in the first quarter. So with the government shutdown about 30 days, that would take us out to end of April. Is that still kind of where you would expect? Or do you feel like the first quarter even ex the government shutdown things have changed?

Joel Ackerman -- Chief Financial Officer

Yes. So Kevin, it's Joel here. We're certainly still trying for Q1, that is a real possibility. But the government shutdown has certainly lowered the odds of that happening.

Justin Lake -- Wolfe Research -- Analyst

Is there anything new besides the shutdown that would change that trajectory?

Javier J. Rodriguez -- Chief Executive Officer

Justin there's always lot going on in one of the (Technical Difficulty). Nothing new which suggests that nobody's doing any work, nobody's asking any questions. But Joe's answer is still applies. We're hired with a goal that he cited.

Justin Lake -- Wolfe Research -- Analyst

Okay. And then on the California legislation, just given us the second time they're coming and they've got a governor that might be more likely to actually sign this legislation if it gets passed. Curious if you can help us put a range around the potential financial impact that we should think about for 2020 if this legislation does pass?

Javier J. Rodriguez -- Chief Executive Officer

Yes. Justin as you can imagine the legislation moves and there is different ways to interpret and of course you can never predict how it will play out, but to try and be constructive and give you a range. I think it would be useful to have somewhere in that $25 million to $40 million as a range.

Justin Lake -- Wolfe Research -- Analyst

That is -- that is helpful. I will jump back in the queue. Thanks guys.

Javier J. Rodriguez -- Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Steve Tanal, Goldman Sachs. Your line is now open.

Stephen Tanal -- Goldman Sachs & Company -- Analyst

Thank you guys. Good morning. I guess, just on the slower normalized non-acquired treatment growth in the quarter at 2.6%, is any of that attributable to pick up in home dialysis? Or is that capturing that?

Joel Ackerman -- Chief Financial Officer

That is captured in there. The home growth is in the 2.6%.

Stephen Tanal -- Goldman Sachs & Company -- Analyst

Got it. Okay. And how are you thinking about home hemo. Just the comments on sort of growing in the home and making that more available. Is that -- with some of the newest sort of technologies in the market, are you guys planning for growth in that business or how should we think about that?

Javier J. Rodriguez -- Chief Executive Officer

We've been leading in home for as long as I can remember. And we will continue to do what's appropriate for the patient in the right modality for each patient. So we of course assess technologies. There is a lot of talk of innovation, but if you really look carefully, there is a lot of smoke in that innovation. Really is a lot of the same and people are just trying to talk of their products. But we of course love it when there is something that is good for the patients and we will pursue whatever is best for them.

Stephen Tanal -- Goldman Sachs & Company -- Analyst

Okay got it. And then just on the slower de novos. Can you give us a sense for what you're planning for '19? And how are you thinking about sort of the number of openings for longer term at this point?

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Sure. So I'll prefice the answer by highlighting the fact that there is a lag between the slowing of growth and the slowing of the de novo. De novos that are coming on now are decisions that were made, their leases that were signed a year or two ago. So with that said we are looking at a significant slowdown in de novos in 2019 and we think that will continue going forward. I'll highlight that it's a function of two things. One it's a function of the slowing meg, it's also function of the growing home. And as more and more patients are dialysing at home, our need for the traditional in-center dialysis de novos comes down.

Stephen Tanal -- Goldman Sachs & Company -- Analyst

Understood. Okay. Got it. And just lastly for me, just on RPT side in calcimimetics. I think you had mentioned that was a $1 sort of headwind sequentially to that. So calcimimetics in total added about $17 I think it was $18 in Q3 if I recall correctly?

Joel Ackerman -- Chief Financial Officer

Yes. That's about right.

Stephen Tanal -- Goldman Sachs & Company -- Analyst

Got it. Okay. Thank you.

Operator

Thank you Steve. And our next question comes from Pito Chickering, Deutsche Bank. Your line is now open.

Pito Chickering -- Deutsche Bank -- Analyst

Good morning guys. And thanks for taking my question. Two questions. First one on the revenue per treatment. You talked about bringing more revenues from in-network. We sure estimated about 3.4% of revenues now at network for the book of business. Is that in a ballpark, could you talk about that?

Joel Ackerman -- Chief Financial Officer

I think that question has been asked for many years and I think we're not going to change our stance today to give more clarity on that. We try to be as useful as we could in January to provide some of the trends over the long haul and Kent talked about sort of a nine-year trajectory of that number coming down. And I think that's as much as we can do right now.

Pito Chickering -- Deutsche Bank -- Analyst

All right. Fair enough. And on the weaker growth in the quarter, can you also talk about an impact from wildfires or weather? And then because it sort of it varied so much in the fourth quarter versus what we saw through the rest of the year, is there anyway giving us any sort of monthly numbers, just we can get a better feel for sure what was the core growth rate? And also because exited January?

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Yes. So nothing to point out relating to wildfires or any sort of one-time stuff like that. In terms of monthly numbers I don't think we're going to go to that level of granularity.

Pito Chickering -- Deutsche Bank -- Analyst

Okay. Fair enough. And then last question from a leverage perspective, as the DMG business hope they get sort of think about the next three years what's is right leverage ratio we should be thinking about you guys running?

Joel Ackerman -- Chief Financial Officer

No real change to our thinking around that 3 times to 3.5 times is the range we expect to generally be in all though we have gone above that for a variety of reasons. Obviously we are well about that right now. But I think the 3 times to 3.5 times is still the range to think about.

Pito Chickering -- Deutsche Bank -- Analyst

Great. Thank you so much.

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Thank you.

Operator

Thank you. Our next question comes from Patrick Feeley, Barclays. Your line is now open.

Patrick Feeley -- Barclays -- Analyst

Hey. Good morning. Thanks for taking the question. You've mentioned in the past as an industry you would be looking to introduce some proactive legislation in California. Can you just provide some color on what that legislation might look to do?

Javier J. Rodriguez -- Chief Executive Officer

Yes. Thank you Patrick. Of course, we are trying to make sure that we educate the legislators to understand all the dynamics that are going on in an ecosystem that is not something that they normally are discussing. And so in our legislation what we want to make sure is that whatever guide are needed so that everybody understands that the right patient that have continuity of care are getting access to charitable premium assistance. And so it's clarity on that is what we're trying to do as opposed to the bill now which goes beyond that.

Patrick Feeley -- Barclays -- Analyst

Got it. And the other thing is Kent I've heard you speak recently about desire to get more involved with the pre-dialysis CKD population. Any color on what kind of investment you may look to make there? Why you think there's opportunity for DaVita? And just something that could better enable to provide integrated care once patients are transitioning onto dialysis and better address the cost of the patients outside the clinic? Just any color around that would be helpful. Thanks.

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

We will be able to add significant, really impressive clinical and economic value if we're allowed to move upstream and help, take care of people who have kidney disease, but if not get experienced kidney failure. And by intervening with those patients in different ways, we'll be able to -- to lay the onset of dialysis in some cases prevented and not only delaying it but also having people be healthier and have a healthier start to their dialysis. All of these improvements have big clinical and economic implications. But there's a bunch of regulatory work to be done as well as contracting work to get there and we're making some nice incremental progress, nothing to bake into any forecast yet, but we are working on it.

Patrick Feeley -- Barclays -- Analyst

Got it. Thank you.

Operator

Thank you. And our next question comes from John Ransom, Raymond James. Your line is now open.

John Ransom -- Raymond James & Associates -- Analyst

Hi. Good morning. I went back and looked at some of the qualitative comments about commercial contracting all of last year. And it seems like we ended up in a place in 2019 was a bit below at least to what I was expecting. So was the thought that you would always end up here or did we get some late-breaking news that caused the needle to move?

Javier J. Rodriguez -- Chief Executive Officer

John, obviously I don't know what's in your assumptions, but it came in line with what we were seeing. And of course on any given time there's pluses and minuses that for the year it was in line with what we expected.

John Ransom -- Raymond James & Associates -- Analyst

I was specifically talking about the five to six large contracts being redone and you're pleased with the increases. And I guess I was thinking zero to one wouldn't be what you be hitting for. But that's what I was referring too. Okay that's it from me. Thank you.

Javier J. Rodriguez -- Chief Executive Officer

Thank you.

Operator

Our next question comes from Gary Taylor of JP Morgan. Your line is now open.

Gary Taylor -- JPMorgan Securities LLC -- Analyst

Good morning. Just a few quick ones. For 2019 is the expected advocacy spend still in the $30 million range?

Joel Ackerman -- Chief Financial Officer

Gary that is the additional spend from our regular advocacy spend. Yes.

Gary Taylor -- JPMorgan Securities LLC -- Analyst

Okay. As compared to like the 93 extra last year right?

Joel Ackerman -- Chief Financial Officer

Correct.

Gary Taylor -- JPMorgan Securities LLC -- Analyst

And then I just want to make sure I understood in response to Justin's question, on the California legislation equivalent of 1156. So you're saying if every CPA patient in California move to the Medicare rate it would be a $25 million to $40 million revenue in OI hit or there are some offsets between revenue and OI?

Javier J. Rodriguez -- Chief Executive Officer

I'm glad you're asking Gary, because basically we didn't provide much detail because there are so many assumptions that go into it, around a lot of dynamics. And so what we're trying to do is just be useful and give you the top line which is basically, there is a range of $25 million to $40 million but we're not going into the specific dynamics.

Gary Taylor -- JPMorgan Securities LLC -- Analyst

And that would be every CPA patient going to Medicare rate?

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Like I said patients in the way the system will work is yet to be seen. So it's probably not good to assume anything rather be constructive and give you a range of all of the dynamics going in there.

Gary Taylor -- JPMorgan Securities LLC -- Analyst

Okay. Last one is for CapEx, can you tell us and I apologize if it is on that last page, but CapEx for new centers in 2018 and what you think that looks like for 2019 and '20? Or just could you talk about fewer new center openings, I was just trying to get a sense of the impact on annual CapEx spend?

Joel Ackerman -- Chief Financial Officer

Gary so we can't give you a specific number. There is a range built into that as we watch over the course of the year exactly how many de novos get built, where they get built, what's the cost per de novo is, but it is safe to assume part of that significant decline from 2018 to '19 will be the result of fewer de novos getting built. But, let me jump in and just correct something I said before, there was a question about calcimimetics RPT, and I think what I confirmed was a number of $17. Just to be clear $17 was the number for the year. The number in Q4 was about $16 of RPT.

Gary Taylor -- JPMorgan Securities LLC -- Analyst

That's it from me. Thank you.

Javier J. Rodriguez -- Chief Executive Officer

Thank you.

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Thank you Gary.

Operator

And our next question comes from Whit Mayo, UBS. Your line is now open.

Whit Mayo -- UBS -- Analyst

Hey, thanks. On the commercial book, how much of your contract or how much of your book is set to reset in 2019? I guess I'm just trying to get a sense of what your expectation is for renewals in 2019 and what the expectation is for revenue per treatment? Thanks.

Javier J. Rodriguez -- Chief Executive Officer

Thanks Whit. We don't disclose how many contracts are up on any given year. And so can't give you that. What we guided to at JPM was that the commercial book would be down 1% to up 0.5%.

Whit Mayo -- UBS -- Analyst

For 2019?

Javier J. Rodriguez -- Chief Executive Officer

Correct.

Whit Mayo -- UBS -- Analyst

Okay. Looking at the deceleration in treatment growth, I know that we're all even speculating and guessing on a lot of the contributing factors whether it's better insurance management transplants or whatever, but have you been able to size maybe internally what you think some of these contributing headwinds are just to maybe help -- frame up for us how to get from point A to point B?

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Yes we spent a lot of time on that. It's challenging because the data bounces around, then a lot of the data we're using comes on a really long lag. So how to assess kind of current numbers is more challenging than we like. So I don't think we can be particularly helpful in trying to break down how this -- how the deceleration comes about from the different components.

Whit Mayo -- UBS -- Analyst

I think we're all trying to do the same exercise. Looking at G&A in the fourth quarter, if we exclude the $30 million of advocacy cost in California would it be around $180 million? And I know that they are quarter-to-quarter fluctuations but it still stands up a little bit lower than I would have expected. And I guess I'm just trying to think about the starting point in the 2019 is this the new run rate? Just any color to put the G&A trends to this year-end too perspective?

Joel Ackerman -- Chief Financial Officer

Yes. It does bounce around as you pointed out. I don't think there's anything major that we would call out for Q4 or in the year-over-year numbers. So roughly flattish would be a reasonable expectation for 2019. And just to be clear that's on a per treatment basis.

Whit Mayo -- UBS -- Analyst

On a per treatment. Maybe two other quick ones. I don't know if you've disclosed this metric before, but any idea how much of your total treatment mix is Medicare Advantage today or there may be another way to give a more responsive answer as like I think CMS is sized the industry around 20% of total treatments. Any reason that you would be different one way or the other? And I guess I'm trying to sort of gain some insight into 2021 and maybe where you think that mix can go over time?

Javier J. Rodriguez -- Chief Executive Officer

Yes. Thank you. We have not disclosed our MA mix and we're not going to disclose our MA mix. But as you try and look out what happens into the future it's difficult to predict because as you could imagine individuals will make their own decisions. But may be one reasonable assumption could be that it's in line with the overall market which is around 35%. But as you know individual decisions there's going to be a consideration on co-pays and the deductive (ph) wholes and out-of-pockets and coordination of care. They're going to try to see if the physicians are in their network et cetera. So to try and guess that on a total population is hard. So we of course have done some modeling, and right now a reasonable assumption that will be in line with the overall market.

Whit Mayo -- UBS -- Analyst

Okay. And just one last one. Joel you said it increased professional fees any more color there? Thanks.

Joel Ackerman -- Chief Financial Officer

Really nothing interesting there. Some legal stuff is probably the biggest component of that, but really, just kind of normal fluctuations up and down.

Whit Mayo -- UBS -- Analyst

And that's in -- is your professional fees is that flowing through G&A?

Joel Ackerman -- Chief Financial Officer

No.

Whit Mayo -- UBS -- Analyst

It's in your -- it's in the cost number?

Joel Ackerman -- Chief Financial Officer

It's in both. I think my recollection and I'll get an answer for you in a second is that most of the swing up is in the patient care side.

Whit Mayo -- UBS -- Analyst

Okay. So nothing in the ancillary segment that will be allocated?

Joel Ackerman -- Chief Financial Officer

No.

Whit Mayo -- UBS -- Analyst

Okay. Thanks guys.

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Thanks.

Joel Ackerman -- Chief Financial Officer

Thank you.

Operator

And our next question comes from Jeff Gates, Gates Capital. Your line is now open.

Jeff Gates -- Gates Capital Management -- Analyst

I'm looking at the U.S. dialysis segment margin. And if I exclude the so called incremental advocacy cost and if I exclude the calcimimetics revenue. And then if I move $25 million per quarter out of 2017 numbers, if I added back because of the removing the 401(k) benefit, I'm showing that underlying comparable U.S. dialysis margin was actually up for the year. And I just wanted to confirm that that math was approximately correct?

Joel Ackerman -- Chief Financial Officer

Yes. I'd suggest we kind of take this offline. I'd be happy to walk it through with you. I'm not a 100% following your math. So why don't you reach out to Jim Gustafson and we'll follow-up on this.

Jeff Gates -- Gates Capital Management -- Analyst

Sure.

Operator

Thank you. And our next question comes from Justin Lake, Wolfe Research. Your line is now open.

Justin Lake -- Wolfe Research -- Analyst

Thanks for taking another question. I just got a few more here. Commercial price, so just trying to cover this in another way. You said 60% of the outlier rates have normalized over nine years. Maybe you could tell us how much more normalization you're kind of assuming for 2019 kind of where we would end this year at?

Javier J. Rodriguez -- Chief Executive Officer

Justin I think talking about it a year-by-year is just not reflective of reality, but -- which is why we give you the long-term data. We pledged many years ago to work down the outlier part of the book in a constructive way. And in some cases that can be easy because you got a payers that's got some really high rates and similar really lower rates. So you move everything to the middle and sort of a net neutrality basis. In other cases it is not so simple. But that's what we said in the historical data so that people know that over a period of many years it is not led to any material disruptions although there have been good quarters and bad quarters and good years and bad years. And it's quite unpredictable. And so once again we give you an empirical data so you can see that is relatively predictable over the long-term but not over the short-term.

So guessing and giving you a guess on a single year, we just think could be a lot more noise than data. We do however commit to our belief that over the next five, six, seven years there is trend toward fewer outliers will continue. And there will be some bumps that are positive and some bumps that are negative along the way, but it shouldn't be anything fundamental.

Justin Lake -- Wolfe Research -- Analyst

Right. I guess, I'm sure you can understand investors are trying to figure out the potential impact. And this year there was -- you have zero kind of built-in for commercial rate growth give or take. So given you normally get increases in contracts as you said, just trying to figure out is this what we should consider a normal year over the next five to six that you talked about? Or is this a bigger year of these outlier rates moving to normal?

Javier J. Rodriguez -- Chief Executive Officer

Yes. I don't think we can say. We put a lot of work into giving the guidance for this year. We're going to put a lot of work into providing the three-year outlook at our upcoming Capital Markets in 2019. But I just spontaneously trying to figure out whether or not the word normal applies to that particular number in the particular year of 2019. I don't think I want to say -- we don't want to say either yes or no to what exactly is normal. Hopefully we've really helped you understand that clearly there is some offsets in '19 that are offsetting the fact that in a lot of our book we're giving nice rate increases. So that is going on. And we've done our best job of calibrating it for you. But I wouldn't mind to characterize that it is the normal or abnormal. If you look over the next -- the last eight, nine years it's not an outlier, it's just a tough year.

Justin Lake -- Wolfe Research -- Analyst

Okay. And then just switching over to volume. Obviously you got a ton of medical directors and nephrologists and I assume they are seeing the upstream to create ESRD patients. And so I'm curious what they're telling you in terms of this slowdown in patient growth? Are they saying that people are sticking -- are taking longer to -- they're able to prevent the kidneys from fully failing, so that's why it's slowing or are they seeing an actual slowdown in growth in pre-ESRD. I'd assume that there's something that you would be able to see coming from a pretty long distance?

Javier J. Rodriguez -- Chief Executive Officer

It's a fair question. And as you know there is a wide distribution of sophistication of the way that their practices are ran from very small practices to large practices. With the people that I'm talking to Justin, they have not seen the CKD practice slowdown in any significant way. But one can never put too much stake in that, because the reality is that many of these practitioners are not that sophisticated that their practice is busy and they don't segment as well as they sort of a Fortune 500 would. But at the end of the day there's nothing that they're picking out.

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

And Justin it's worth throwing out a few numbers to help explain why JR's answer is the appropriate one. You just take a typical nephrology group and say there's three doctors, and say they've got 100 dialysis patients each that's 300. And then there is a 13% mortality rate let's say. So that's 39 patients to replace the ones that passed away. And then you have 3% growth, and so you add another nine patients on. So you're talking about 48 new patients per year spread across three doctors.

When you have a 1% change in the organic population, you're talking about two patients difference over the course of an entire year. And so whether or not a group has 48 new patients or whatever number spread across 12 months or 50 or 46 that's not something a practice can notice because year-by-year they're going to have those fluctuations. It's not going to have anything to do with aggregate CKD incidents or advancement. And so that's why JR's answer, that the practice wouldn't pick up on this, unless it was way, way, way more than 1%.

For us in aggregate and for you we pay a lot of attention to one person, because there is some incremental EPS math attached to it. But it's highly, highly incremental and not discernible at the practice level with various (ph) exceptions.

Justin Lake -- Wolfe Research -- Analyst

Okay. Just a few other numbers questions here. You mentioned international as getting to profitability. Can you give us any kind of trajectory there, maybe a margin kind of target over the next few years that we think -- that you think would be a reasonable range to think about where this business can operate?

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Yes. Justin we're not going to -- we no longer going to call out specific guidance for international. We will continue to report on it every quarter. But given the magnitude in the context of the whole company we don't think guiding on it as a specific number something we're going to do.

Joel Ackerman -- Chief Financial Officer

But we will add just to try to be a little responsible without going into misleading detail that we've had three consecutive years of improving the EBITDA margin by 2% per year. So just to give you a sense of the incremental operating improvements and mix improvements. So things are moving in the right direction, we can say that right now.

Justin Lake -- Wolfe Research -- Analyst

Okay. No even target margin?

Joel Ackerman -- Chief Financial Officer

I don't think that will be a good idea right now given the different country mix. It's heavily influenced by which countries grow the most and sometimes you have a lower-margin country but in fact it's got higher return on capital. And so I don't think it wouldn't yet be a useful number for you Justin.

Justin Lake -- Wolfe Research -- Analyst

Okay. And then two more here. The CapEx, it was asked before where your CapEx can go? And Joel you said CapEx could materially decline over some period of time if your de novos moderate. Can you give us an idea of what kind of -- if you had to look today and obviously this takes years to kind of play out because of how far you have to plan them ahead. But two or three years from now given the growth you're seeing in the business what kind of CapEx moderation do you think can happen here from that net seven and change number that you're reporting for this year?

Joel Ackerman -- Chief Financial Officer

It's hard to predict Justin. We're just not in a position right now to give kind of multiyear guidance on this. It will depend on a bunch of things including growth. And depending on what happens to the growth whether this decline is temporary or not as well as what happens to home penetration and other things, there can be some real impact on that number. But we are not in a position to give longer term guidance.

Justin Lake -- Wolfe Research -- Analyst

No, I apologize. But I thought you had said it was material. It could be a material decline if the growth continues and you continue moving toward home which sounds like I'm just trying too, so I'm just trying to get some order of magnitude. I understand if it were to reaccelerate you have to spend more money, but just at this growth rate in both of those factors where do you -- what would you call material?

Joel Ackerman -- Chief Financial Officer

Yes. I don't -- we're not in a position to quantify what exactly that would mean right now.

Justin Lake -- Wolfe Research -- Analyst

Okay. Last one on Medicare Advantage. I know to which question, you -- the -- it was helpful to say that that you think you can get to industry average over time in Medicare Advantage penetration. But obviously the starting point is pretty important. And I just recollect you guys having said 10% to 15%. It was kind of the range of where you were today. Am I wrong in thinking that number up?

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

We're looking it on the table Justin. No one remembers ever having shared that number which is not to say it didn't happen, but there is too much of blanks there across the table.

Justin Lake -- Wolfe Research -- Analyst

Okay. Then I'll come at in a different way. Obviously, we've talked about this being a potential meaningful positive. If but to get and getting the 35% 40% where the industry is going to be a few years from now is obviously -- could be significant, but not understanding where the starting point is. There is no way to say whether that's even going to be a benefit or not, unless we understand the starting point. Is there anyway you can give us even a round number 10%, 20%, 30% of where you are today?

Joel Ackerman -- Chief Financial Officer

Justin I would -- this, because we weren't prepared to do that for today which you're making a fair point. So this is obviously a multiyear issue. And we do expect our MA to grow in a nontrivial way. And it's going to be great for patients, and we think that for the system, because we've also bring down total cost. But none of that is responsive to this specific starting point question. So we just -- let us not make a spontaneous decision here instead think about it and then maybe next quarter we'll provide that number.

Justin Lake -- Wolfe Research -- Analyst

Appreciate it. Thanks for all the questions.

Joel Ackerman -- Chief Financial Officer

Yes. Thanks Justin.

Operator

Thank you. Our next question comes from John Ransom, Raymond James. Your line is now open.

John Ransom -- Raymond James & Associates -- Analyst

Hi. Let me just go back one more time on something. So you mentioned you wanted to get more involved in pre-ESRD and it would involve some contracting. The commercial payers only being on the hook for 18 months and then Medicare being kind of slow. Are we talking probably the Medicare Advantage payers would be more receptive to some different types of contracting that would actually incentivize you to keep people from crashing in the dialysis? Or is it -- am I thinking about that wrong?

Javier J. Rodriguez -- Chief Executive Officer

No you're right thinking about it correctly. We're already doing that work with some payers. And both they and we believe we are having quite an impact clinically and economically. And so we would expect that to increase over time. However, right now there is not math associated with it that's exciting enough for you to bake it into any near term forecast. Hopefully, as the future rolls on and we get better and better at it, and have more data to prove, how good we are at it, it will be more relevant to your model.

John Ransom -- Raymond James & Associates -- Analyst

And is this part of the tuition from DMG or is this accelerate your learning curve on some of risk based type of contracts?

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Yes there was some very good learning in both directions where DaVita Kidney Care was able to help DaVita Medical Group do better on Kidney Care patients both dialysis and pre-dialysis. And similarly the DMG was able to help the Kidney Care do better in managing down the total cost and managing economics of our dialysis patients. So it was a good mutual and it continues to be a good mutual learning highway.

John Ransom -- Raymond James & Associates -- Analyst

The other question I had is our D.C. folks think that CMMI might do some different payment structures for home dialysis. So two questions. One are you hearing any of that? Number one. And then number two, let's just waiver one, for example, and say three years from now you've got sort of 12% of your patients to home, let's say it's 25%. How do you think about that as a high-level from a return on capital or contribution margin total economic to the enterprise? Thanks.

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Yes. I'll take a stab at it. Number one CMMI is looking at a bunch of Kidney Care stuff including eliminating some of the obstacles to home NPD growth. And we are supporters of that and we're in regular constructive conversations for them about the best way to do it. We have had a series of meetings. They have also talked with other people. And so we applaud a bunch of this stuff that they're looking at and hope that they go ahead and put it down and think there is a good chance that they will.

And then second, if you wave that wand, that is a good world in a couple of different ways. One, it just significantly reduces the capital intensity of our business. Number two, there are some patients in America who would be happier or healthier on home that are not on it today, because of local practice patterns, nephrology group references, et cetera. And we've been growing home steadily Javier referred to the fact that we've been the leader for a long time in this and intend to remain the leader. But that doesn't mean that every single patient that should be on home or might be happier on home, is on it now and so implication number one is that, outside of capital intensity, excuse me, would be happier and in some cases healthier patients.

Having said all that, right now, when people walk around saying that home is almost uniformly a better form of care for dialysis patients, it's factually incorrect. And so for a lot of patients it leads to a better life. For a subset of patients it leads to better clinical outcomes, but not for everyone. And what you tend to have is that the type of people who take the initiative and have the desire to dialyse at home are fundamentally different type of patient on average than those who stay in the center. So it's very, very difficult to do an apples-to-apples clinical comparison because of the type of population you have, that is willing to take on the burden and responsibility and risk of dialysing home.

John Ransom -- Raymond James & Associates -- Analyst

So, thanks for that. And last one from me. Just at a very high level for home how much of the relatively minor mix in your opinion is qualitative factors around physician practice patterns versus quantitative in clinical practice?

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Could you say the question again please?

John Ransom -- Raymond James & Associates -- Analyst

Probably not, but I'll try. So what we have been told is some of the shortfall and the growth has been kind of tiny 20 bps, 30 bps a year. What we've been told is some of that is physicians not being trained, physicians not being at the rhythm of thinking about home and it's the default answer is the clinic. And where as others is some patients belong at home as you mentioned. So if you have to guess -- if we normalize physician practice patterns across the country and everybody was thinking about it like this is the first option let's send the patient home if we can. Where can the mix go to just with the qualitative physician decision making versus some of the other factors around the payment structures and clinical obstacles (ph)?

Javier J. Rodriguez -- Chief Executive Officer

John this is Javier. I think when we look around and we see the most -- let's call it home champions, the most dedicated physicians that have a good education program, and are really trying to champion the right modality for the right patient. You get into a low 20 or so mix, maybe you get it up to 25 if they are really, really good but that's on the high-end. And as you look around the world that's probably also a good number to use.

John Ransom -- Raymond James & Associates -- Analyst

Thanks. That's great. That's all from me.

Javier J. Rodriguez -- Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Kevin Fischbeck, Bank of America. Your line is now open.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

Just a few more from me. I guess I might have missed it. But did you say that the guidance for 2019 includes additional advocacy cost or is that included in the normal run rate spend?

Javier J. Rodriguez -- Chief Executive Officer

No. It includes this $30 million which is consistent with what we've said before. And think of it as $60 million-ish less than the $90 million-something that we had in 2018.

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

The point I think Javier was trying to make is that we've always had advocacy cost built into our cost structure. It went up significantly in 2018 as a result of the California stuff. So this $30 million is kind of the remnant of that California piece that will grow through. There's other stuff there is always been there and that hasn't changed.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

Okay great. And then some of the home health commentary. Obviously home health you guys have talked about from time to time and been supportive of -- but this is -- this feels a little bit more of the discussion than I'm used to hearing from you guys. Is there anything, its obviously lower capital intensive is good, its good for some subset of the patients so that's good, probably better for commercial patients so that's good. But is there anything that you have to worry about as you move to home hemo because one of the things that structurally I would think that you Fresenius have there is some barrier to entry and did you guys have bricks-and-mortar across the country. Do you stem that we create and push toward a less capital intensive model probably speaking? Does that create the potential for disruption or more competition? Are you worried about a, am I off base on that concern and b, is there any other -- is there any downside that you can think of it after that toward home hemo getting bigger?

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Yes. So one of the most important things to remember is that our patients are big consumers of the entire healthcare system. And by definition when your kidneys fail you're fragile and you're quite sick. And so one of the things that's not discussed when discussing home is that the peritoneal cavity a, there is an high infection. And two, that sometimes it doesn't last. And sometimes it's probably not the right word. And most times it actually gives within two years or so. And so if you were to look at patient of ours, they are a, hospitalized -- home patients that are hospitalized. And of course DaVita and Fresenius serve in acute setting.

And the number two, is approximately 85% of patients that treat at home will have to use an in-center at some point in their care. And so having the entire suite meaning the hospital, the clinic, and the home service is a very important part of the value proposition for a patient, because they want the continuity of care, they want their doctor to go from the hospital to the center to the clinic and then of course home. So is that responsive to your answer?

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

Yes. No. So that presence of the brick-and-motor is always going to have an important role even if home hemo becomes a bit big bigger than what it is now. All right. And then the another question I want to understand a little bit more about the sale-leaseback dynamic. Are you signaling that you plan on owning your sites as a percentage going forward through these sale leasebacks? Or this more just a method of financing that construction and that you wouldn't expect to be leasing a higher percentage of it going forward?

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

So Kevin there is no real change in the amount of real estate we're planning on owning which is extremely low. What the dynamic here is that we have found rather than having someone else build the center for us and us leasing it. It is more cost effective for us both in terms of the capital and the ultimate lease expense for us to build the center and then sell the already constructed center. So the impact on our cash flow is that we are -- we have an increase in CapEx as a result of this, which flows through the normal CapEx line. There's a net benefit which doesn't flow through the CapEx line but is effectively economically an offset to our CapEx when we sell the center.

So, no real change in how the ultimate ownership of the center, but it does create a little noise on our cash flow that we wanted to really clarify. And that's why we've added over the last few quarters how this plays out in Table 6. What the net kind of bring back against the CapEx is. We understand it's a little bit confusing, but we thought it was important to lay it out to make sure everyone has the clearest view of what the real CapEx and cash flow of the business is.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

Okay. Thanks.

Operator

Our next question comes from Whit Mayo, UBS. Your line is now open.

Whit Mayo -- UBS -- Analyst

Thanks. Just a couple of quick ones on these numbers kind of moving around versus my notes. So just want to make sure I've got the correct headwinds and tailwinds written down. On the tailwinds side for this year I've got DaVita Rx losses reversing to be a $25 million tailwind. I think Joe you cited net to $60 million-ish tailwind in California on advocacy and then may be a $35 million pick up on Medicare rates. Are those the big buckets, or those the right numbers, are we missing anything?

Joel Ackerman -- Chief Financial Officer

I think the sizes are about right. The Medicare is actually a headwind. I'm getting puzzled.

Whit Mayo -- UBS -- Analyst

I guess was taking more just on the rate update?

Joel Ackerman -- Chief Financial Officer

On the rate update. Yes. I thought you were talking about the Medicare bad debt issue.

Whit Mayo -- UBS -- Analyst

No. I'm going to get to that.

Joel Ackerman -- Chief Financial Officer

Positive revenue.

Whit Mayo -- UBS -- Analyst

Yes. Okay. Is that in the ballpark now $35 million just net incremental tailwind from the rate update?

Joel Ackerman -- Chief Financial Officer

That's about right.

Whit Mayo -- UBS -- Analyst

Okay. And then on the headwinds as you mentioned you've got $36 million headwind from the Medicare bad debt recoveries and may be a $17 million reversal from DaVita Health Solutions. Any other major headwinds and are those the right numbers?

Joel Ackerman -- Chief Financial Officer

Those are about right. DHS I wouldn't call it a reversal in an accounting standpoint. It's -- it was a...

Whit Mayo -- UBS -- Analyst

Lack of Tier (ph).

Joel Ackerman -- Chief Financial Officer

Yes. it's the lack of, yes.

Whit Mayo -- UBS -- Analyst

Yes. Okay. And so that implies...

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

The one other thing I would point to was the retirement cost that we had in Q3. The number was roughly $25 million -- $23 million precisely.

Whit Mayo -- UBS -- Analyst

Got it. Okay.

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Add that to the tailwind category.

Whit Mayo -- UBS -- Analyst

Yes. Got it. Okay. And then one last one just the calcimimetics landscape is like fairly fluid right now, some drugs on and off on the market. Just what's the expectation for 2019 and I'll get off next?

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Yes. So I think you're exactly right it is a very fluid situation. It is one of the largest components of the swing in our $100 million of OI guidance given the different ways it could play out. But roughly speaking kind of if you think about the middle of the range it's not a big change year-over-year. But again a lot of variability in terms of how it plays out.

Whit Mayo -- UBS -- Analyst

So what would be the scenarios that would play out that would get you toward the low end versus the high end. Is there any way to share what would have to happen with calcimimetics to be within that range?

Javier J. Rodriguez -- Chief Executive Officer

The couple of dynamics that you have to consider are one, prescription patterns. And there you have the oral (ph) come down or go up or do physicians prefer IV or oral, so there is a mix in there. In addition then you have to consider whether more generics come in the market. So if it's one player versus five players and what happens to pricing. And so then of course you have a calculation on ASP that has got a lag. And has got a six-month lag in that. So those are the dynamics in play.

Whit Mayo -- UBS -- Analyst

Okay. One last one just on ASP. Can you comment how ASP has trended the last 6 to 12 months? And what that implies for the next six months. And I promise I'm off now.

Joel Ackerman -- Chief Financial Officer

ASP has trended down. And then as it relates to prediction you can't have one because all the things I just went through.

Operator

Thank you. And the next question comes from Gary Taylor, JP Morgan. Your line is now open.

Gary Taylor -- JPMorgan Securities LLC -- Analyst

See what happens when you move your call to the morning. Nobody knows how to get off the phone. Everybody is double dipping. I just had a quick one. I just want to go back to -- while I had you kind of this question about slower growth in the industry. And looking at the U.S. RDF state and maybe there's a good reason why it's not good or comprehensive, but if you look at prevalent population growth before 2000 it was in the 5s from 2010 it was in the 4s. Since 2010 it's been in the 3s. A couple of years lag but it looks like it is poised to drop into the 2s. So when you look at kind of that bigger picture the industry maturing, you're saying you're seeing something that looks more step function-ish then sort of that that long decline we've seen over the last 30 years?

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

No. I would say the opposite probably, that the data is quite clear that nothing dramatic happens quickly. And yet the trend is the trend. And we're not predicting any significant change in either direction of the trend. But recognize that there is an awful lot of dynamism underneath that number. On the one hand treatment for diabetes and hypertension some of the primary causes of kidney failure are getting better. So you could argue that that would lead to a reduction in dialysis patients. On the other hand the African-American and Hispanic populations are growing significantly in America, and they are far more likely to have kidney disease and kidney failure so that pushes exactly the opposite direction. And I could cite two or three or four other variables.

So under the surface of that long-term trend which we think may very well continue without any significant discontinuity up or down. But underneath that are a lot of basic fundamental forces in American healthcare and American demographics. And so it's very difficult to get too confident, because if any of those underlying trends change, that would in fact create some sort of discontinuity in the trend. It just hasn't for the past 25 years.

Gary Taylor -- JPMorgan Securities LLC -- Analyst

Got you. I just thought the opioids transplant commentary was perhaps suggesting you thought you were seeing something more owners or steeper. So I appreciate the clarification. Thanks.

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Let's stay on that for one second, because that's a perfect example of a new discontinuity. But we would also predict probably relatively temporary one and that we would say that five years from now the incidence of opioid abuse and people getting to the point where their kidneys fail because of a lack of treatment is going to be reduced dramatically because already the leading indicators for that things like prescription patterns, prescription limitations, prescription oversight, clinic availability to help these people all of that is fundamentally changing throughout America. And is quite well-funded in many cases.

So that's a classic example of a new thing that has had a negative impact in some ways on us in the short term, but will probably on a relative basis become an incremental positive one over the next five, six, seven, eight years. But it's once again very difficult to quantify and calibrate because it has do with fundamental demographic issues and fundamental healthcare system issues.

Gary Taylor -- JPMorgan Securities LLC -- Analyst

Understood. Thank you.

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Thanks.

Operator

Our next question comes from Pito Chickering, Deutsche Bank. Your line is open.

Pito Chickering -- Deutsche Bank -- Analyst

Thanks and thanks for taking extra questions here. I want to take another crack at the organic treatment growth that you guys are -- where you guys have guided to we did in fourth quarter. 2.6% in the fourth quarter guidance of 2.5% to 3.5 %for 2019. So new point of guidance implying upside what is disappointing. And in fact calling fourth quarter as the bottom what the range can be. Can you give any additional color in terms of so why this is improved to midpoint of your guidance for '19?

Joel Ackerman -- Chief Financial Officer

I'll take a crack at that. I don't think I got much to add. The number does bounce around a bit. And we tend to look at things -- somethings purely on a quarterly basis other with a little bit of blending over time. So I'd say we're not -- we're blending the Q4 data point with some prior data and our go-forward model, so we come up with something that's in the 2.5% to 3.5% range.

Pito Chickering -- Deutsche Bank -- Analyst

All right. It is worth a try. Thanks so much.

Operator

And speakers we show no further questions at this time.

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

All right. Thank you all very much for your interest in DaVita. We look forward to talking to you again next quarter.

Operator

Thank you speakers. And that concludes today's conference. Thank you all for joining. You may disconnect at this time.

Duration: 73 minutes

Call participants:

Jim Gustafson -- Vice President, Investor Relations

Kent J. Thiry -- Chairman and Chief Executive Officer, and Chief Executive Officer, DaVita Medical Group

Javier J. Rodriguez -- Chief Executive Officer

Joel Ackerman -- Chief Financial Officer

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

Justin Lake -- Wolfe Research -- Analyst

Stephen Tanal -- Goldman Sachs & Company -- Analyst

Pito Chickering -- Deutsche Bank -- Analyst

Patrick Feeley -- Barclays -- Analyst

John Ransom -- Raymond James & Associates -- Analyst

Gary Taylor -- JPMorgan Securities LLC -- Analyst

Whit Mayo -- UBS -- Analyst

Jeff Gates -- Gates Capital Management -- Analyst

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