DaVita (NYSE: DVA) is the second largest provider of dialysis services in the United States with about 1/3 of the market. The company has more than 1,300 outpatient dialysis facilities and 800 acute units hospitals.^[1]

DaVita is heavily dependent on both Medicare and private insurance programs. Over 87% of its patients are covered by Medicare, making the government program the single largest source of revenue for the company. Any changes to Medicare reimbursement policy for dialysis or related services could have a substantial impact on the company's performance - and dialysis has been a frequent target of Medicare budget cuts, most of which have been successfuly parried by coalitions dialysis companies, drug manufacturers, doctors and patient groups. Although only 13% of DaVita's clients pay using private insurance, DaVita charges these patients 2 to 3 times more than those affiliated with Medicare, and most of the company's margin comes from these patients. DaVita is facing pressure from insurance companies to lower its rates for privately insured patients. If the insurance companies are able to negotiate better rates, it could have a disproportionate impact on the company's earnings.

(Read more at Wikinvest )