DaVita Inc (NYSE: DVA) Q3 2025 Earnings Call dated Oct. 29, 2025
Corporate Participants:
Nic Eliason — Group Vice President of Investor Relations
Javier J. Rodriguez — Chief Executive Officer
Joel Ackerman — Chief Financial Officer and Treasurer
Analysts:
Kevin Fischbeck — Analyst
Andrew Mok — Analyst
AJ Rice — Analyst
Pito Chickering — Analyst
Justin Lake — Analyst
Ryan Langston — Analyst
Presentation:
Operator
Good evening. My name is Michelle, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the DaVita Third Quarter 2025 Earnings Call. [Operator Instructions] Thank you. Mr. Eliason, you may begin your conference, sir.
Nic Eliason — Group Vice President of Investor Relations
Thank you, and welcome to our third quarter conference call. We appreciate your continued interest in our company. I’m Nic Eliason, Group Vice President of Investor Relations. And joining me today are Javier Rodriguez, our CEO; and Joel Ackerman, our CFO.
Please note that during this call, we may make forward-looking statements within the meaning of the federal securities laws. All of these 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 third quarter earnings press release and our SEC filings, including our most recent annual report on Form 10-K, all subsequent quarterly reports on Form 10-Q and other subsequent filings that we make with the SEC.
Our forward-looking statements are based on information currently available to us, and we do not intend and undertake no duty to update these statements, except as may be required by law.
Additionally, we’d 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, furnished to the SEC and available on our website.
I will now turn the call over to Javier Rodriguez.
Javier J. Rodriguez — Chief Executive Officer
Thank you, Nic. Good afternoon, everyone, and thank you for joining the call today. We are accustomed to operating in a dynamic healthcare environment, and today is no different. The government shutdown is on its 29th day, and key healthcare policy decisions remain in flux. And while these developments have real implications, we remain focused on what matters most: providing excellent care. This focus is not only in the best interest of our patients, but continues to generate consistent financial results.
Our third quarter performance was in line with our expectations and keeps us on track to achieve our full-year guidance. These results also enable continued investment to improve the lives of our patients and enhance the experience of our teammates and physicians. Today, I will share the highlights of our third quarter performance, update our guidance for the full year, and walk through a few swing factors for 2026. But first, as always, we will begin with our clinical highlights.
Today, I will feature our research team, known as DaVita Clinical Research, or DCR, powered by a dedicated team of medical directors and data scientists, and backed by one of the largest patient data sources in the country, DCR has been instrumental in advancing kidney care research.
A few metrics that put this team’s contributions in perspective. DCR maintains more than 250 research sites in the United States and has conducted more than 500 clinical trials. This team of researchers has helped achieve FDA approval for dozens of ESKD drugs, and DCR research and data have fueled more than 700 clinical publications.
With a drive toward innovation and patient safety, DCR has helped to develop new therapies, improve outcomes, and generate benefits to patients and physicians across the kidney care community. This longstanding commitment underscores our position as a leader in clinical research.
Most recently, DCR is evaluating outcomes of middle molecule clearance using middle cutoff dialyzers, which will provide critical U.S.-specific data and has the potential to represent a significant step in advancing patient outcomes. This is just the latest example of how DaVita is advancing the development of new therapies and actively shaping the future of kidney care.
Transitioning now to our financial performance. We delivered the third quarter adjusted operating income of $517 million and adjusted earnings per share of $2.51. These results were consistent with our internal expectations. Joel will provide detail on the quarter, but at the highest level, we continue to manage patient care costs effectively while the U.S. treatment volume was down approximately 1.5% year-over-year.
Before I cover full-year guidance, let me provide a bit of detail on one of the ongoing strategic priorities: investing in technology infrastructure. As a reminder, last year, we completed the rollout of our next-generation clinical platform. We continue to enhance that system and are making other long-term investments to replace our scheduling system and further upgrade our revenue operations technology.
Simultaneously, we’re adopting AI solutions across our platform. This includes internally developed use cases, opportunities with commercially viable applications, and working with external providers. While these projects result in higher G&A growth, we believe that these investments are critical to advancing clinical care, improving the experience of our patients and teammates, and driving long-term cost efficiencies.
Let me now transition to our full-year outlook. We’re reaffirming the midpoint of our guidance ranges for adjusted operating income and adjusted earnings per share, while narrowing each range.
We now anticipate full-year adjusted operating income between $2.035 billion and $2.135 billion and adjusted earnings per share of $10.35 to $11.15.
I recognize that many of you are already looking ahead to 2026. While it’s too early to provide formal guidance, let me walk through several key variables that will influence our perspective on next year. First is volume. We faced several headwinds in 2025 that we don’t expect to recur, including Hurricane Helene, the severe flu season, and the cyber incident. Beyond those discrete events, and as I talked about last quarter, we will continue our efforts to drive clinical progress to improve mortality and support treatment growth.
Second is payer mix, where there’s active policy debate right now. We’re among the many who are closely monitoring the impact of enhanced premium tax credits on commercial mix.
We’ll also be assessing the ongoing recalibration of Medicare Advantage landscape, as evolving market dynamics from government policy and payer behavior affect Medicare Advantage enrollment and insurance mix.
Third is Integrated Kidney Care, or IKC. We’re awaiting the release of final 2024 performance year results from the government CKCC program. The timing of the release and the recognition of the associated operating income could shift between 2025 versus 2026. We feel good about our progress in 2025, and it’s an important reminder that the timing of operating income remains difficult to predict.
In short, there remains a range of potential outcomes for 2026 and we expect to learn more about each of these factors over the coming months. And as customary, we’ll provide formal guidance during our fourth quarter earnings call in February.
To wrap up my comments, we remain on track to achieve our full year goals. Meanwhile, our long-term investment in IT and clinical innovation strengthen our ability to deliver superior patient care and create sustainable value. As we look to 2026, we’re monitoring a number of variables that will shape the coming year, and we remain confident in our ability to navigate them effectively.
I will now turn it over to Joel to discuss our financial performance in more detail.
Joel Ackerman — Chief Financial Officer and Treasurer
Thank you, Javier. Third quarter adjusted operating income was $517 million, adjusted earnings per share was $2.51, and free cash flow was $604 million. I’ll provide detail on the individual components of our results, beginning with U.S. dialysis.
First, on treatment volume,. U.S. treatments per day declined 1.5% versus the third quarter of 2024, in line with our expectations. The decline is primarily the result of two factors. First, the mix of days, as this quarter was slightly skewed towards Tuesdays, Thursdays, and Saturdays as compared to Q3 last year. Second was the negative impact of the census trends from higher mortality from a severe flu season and lost admissions opportunities as the result of Hurricane Helene and the cyber incident.
Next, revenue per treatment increased approximately $6 versus the second quarter. This was primarily driven by rate increases, higher revenue from phosphate binders, and the negative impact of the cyber incident on Q2 RPT. These improvements were offset by a slight decline in payer mix and normal variability. We continue to expect full-year RPT growth will be at the low end of our original 4.5% to 5.5% guidance. Achieving this will require some acceleration of RPT in Q4, which we expect from vaccines, normal rate increases, and higher than typical impact from the resolution of aged claim balances.
Now moving to patient care costs. PCCs per treatment increased by approximately $5 sequentially. The majority of the change was the result of typical increases in wages and higher pharmaceutical expense due to higher dispensing volumes of phosphate binders relative to the second quarter.
Excluding the impact of phosphate binders, patient care costs continue to outperform our expectations from the beginning of the year. We continue to expect full-year PCCs per treatment to increase between 5% and 6% versus 2024.
International adjusted operating income was $27 million. This was down $9 million versus the second quarter, primarily due to the onetime benefit that we called out last quarter.
In IKC, our value-based care business, our Q3 adjusted operating loss was $21 million. As I have mentioned in the past, the quarterly phasing of IKC is hard to forecast. That said, we feel good about achieving flat or better IKC adjusted operating results in 2025 as compared to last year, consistent with our guidance from the beginning of the year.
In aggregate, third quarter operating results were in line with our expectations. At the midpoint of our tightened adjusted operating income range, the implied guidance for the fourth quarter represents an approximately $60 million sequential increase. We expect this fourth quarter improvement to be primarily driven by higher treatment volume due to better treatment day mix, sequentially higher revenue per treatment, and timing of IKC revenue, offset by typical seasonal increases in patient care costs and G&A.
Switching to capital allocation. During the third quarter, we repurchased 3.3 million shares, and we have repurchased an additional 400,000 shares since the end of the quarter. Year-to-date, through today’s earnings call, we have repurchased approximately 10 million shares, representing approximately $1.5 billion.
As a reminder, the 400,000 shares we repurchased in October were pursuant to our publicly filed repurchase agreement with Berkshire Hathaway.
According to that agreement, just prior to each DaVita earnings call, we buy from Berkshire the number of shares necessary to return its ownership to 45%. This transaction is contractual and formulaic.
We finished the quarter with leverage at 3.37 times consolidated EBITDA within our target leverage ratio of 3 to 3.5 times. As we look to the remainder of 2025, as Javier mentioned, we are reaffirming our guidance for full-year adjusted operating income with a midpoint of $2.85 billion and adjusted earnings per share with a midpoint of $10.75, while narrowing the band of each range. We look forward to sharing full-year results and providing 2026 guidance when we speak again in February.
That concludes my prepared remarks for today. Operator, please open the call for Q&A.
Questions and Answers:
Operator
[Operator Instructions] Our first caller is Kevin Fischbeck with Bank of America. Your line is open.
Kevin Fischbeck
Great. Thanks. I guess a couple of things came out from your prepared remarks. I guess the first thing, you talked about the volume number for next year. I guess I understand the onetime items that you highlighted this year. How do you think volumes would have played out this year ex those three — I guess it was four items that you — or three items that you mentioned, the hurricane, the cyber, and flu? What would that number look like this year?
Joel Ackerman
Yeah, Kevin, I’ll take that. I think the number is probably about a 75 basis points to 100 basis point headwind on ’25 volume from those three things combined, and that’s a combination of census and mistreatment rate.
Kevin Fischbeck
Okay. And the other thing that jumped out on our volumes was that you just mentioned working to improve mortality. Is there anything that you can provide color on there?
I assume that’s not something that necessarily shows up in a given quarter, but maybe there’s optimism that that can improve next year? Or is that a slow, steady improvement over time?
Javier J. Rodriguez
Yeah, Kevin, as you called it out, it’s a steady over time. We are looking at all our clinical protocols, looking at time on therapy, fluid, other protocols, GLP-1s, and other medications to try and see what the best way to go after this because we really have to lower our mortality. Of course, over time, we will talk about the molecule clearance and — but back to your point, that will take time.
Kevin Fischbeck
Yeah. Okay. And then last question for me. On the MA enrollment point about that being, it sounds like it’s a bigger swing factor than I might have thought it would have been for 2026. I understand that it is in flux. Are you — when you say a swing factor, does it — are you talking about just shifts in membership between payers that, that could have a meaningful impact, as in your rate with different payers are significant enough to move the needle? Or are you worried about declines in MA enrollment, broadly speaking, back into traditional Medicare or Medicare plus supplemental?
Javier J. Rodriguez
At the end of the day, you highlighted two variables, which is mix. And within that mix, there’s a different revenue within each payer. We’re agnostic on that because we don’t know which way it’s going to go. On the other hand, you do have different enrollment, and you’re seeing a lot of payers talk about their volatility in their enrollment. So we’re just highlighting that we don’t have any particular insight, but rather, it feels like the marketplace is more dynamic at this juncture.
Kevin Fischbeck
Okay. But that is a potentially big enough swing factor that you felt necessary to call out. Is it — I guess in my mind, I don’t think about it as being that big of a variable, but it is.
Javier J. Rodriguez
Well, significance, obviously, is in the eyes of the beholder. But at the end of the day, there’s enough dynamics and enough membership in there that you could see a scenario where it could swing in one direction or another. So we wanted to call it out. I mean if you were going to talk about revenue per treatment next year, you have that dynamic. And then, of course, you have open enrollment, which has the dynamic of the tax premium credits that’s being discussed right now with the federal government. And so those two are just a little more in the air as we speak than in normal years.
Kevin Fischbeck
All right. That was fair. Thank you.
Joel Ackerman
That said, Kevin, I think I agree with Javier. We’re trying to highlight where there might be variability. That said, I think it is safe to say that commercial mix is a more significant financial swing factor than MA mix.
Kevin Fischbeck
Okay. Perfect. Thanks.
Javier J. Rodriguez
Thank you.
Operator
Thank you. Our next caller is Andrew Mok with Barclays. Your line is open, sir.
Andrew Mok
Hi. Good afternoon. Appreciate all the color on 2026. Maybe just back on the volume side. You called out the 75 basis points to 100 basis points of discrete items that are not going to recur next year. So I guess is it fair to think of that as a reasonable starting point as we contemplate potential growth for next year?
And Javier, I think you noted investments in technology, infrastructure, schedule and systems. Are any of those items expected to have a meaningful impact on treatment growth? Or is there anything else that you can do in your control to influence the volume environment? Thanks.
Joel Ackerman
Yeah, Andrew, I’ll take the first one. So if you were to translate that 75 bps to 100 bps from ’24 to ’25, I think ’26 over ’25, again, if you’re comparing year-over-year growth rates, you’re probably looking at a 50 basis point to 75 basis point structural improvement in ’26 growth relative to ’25 growth. And that comes largely from the flu and the cyber incident. The hurricane is kind of annualizing out and is offset the kind of — the benefits of that is offset by the fact that there’s a small headwind in ’26 over ’25 from day mix. Just as a reminder, ’25 over ’24 had a 20 basis point day mix headwind. And then ’26 over ’25 has an additional 10 basis point headwind. ’27 will be a tailwind.
Javier J. Rodriguez
And when you do all that math and you net it all out?
Joel Ackerman
When you do all that math and you net it out, if you start with 2025, where we’ve guided to 75 basis point to 100 basis point decline in volume, and I would say from where I’m sitting now, that probably looks like it’s going to be closer to 100 basis points. Mistreatment rate is really the culprit around that. So let me use negative 100 basis points as the math for 2025 growth, you would say structurally, you would adjust that to say before all the other dynamics. So I’m not giving guidance here. I’m just trying to bridge how to think about the starting point for building ’26, you’d improve that negative 100 basis points in ’25 by 50 basis point to 75 basis points. So you’d start with kind of an adjusted growth in ’25 of negative 25 to negative 50, off of which to build the ’26 number.
Andrew Mok
Got it. And do you want to comment on —
Javier J. Rodriguez
Thank you, Andrew. And for your second question, we are investing in a lot of things. You asked specifically, will it impact volume? The short answer is we don’t know specifically volume, but if you were to expand that question to the P&L, I would say that we are optimistic and we’re working hard. Some of the models that we’re working on could impact volume. For example, we are working on something that would risk stratify hospitalization. And if we can make an intervention, it changes hospitalization, that would, of course, impact volume.
On the other side, we’re doing models to affect the cost structure, things like administrative things in the call centers and revenue operations that can do authorizations in a much more rapid way and more reliable way that would likely get you a higher collection. So those are a couple of the examples of the things that I highlighted in the opening.
Andrew Mok
Great. And on the premium tax credits, I think the last estimate of the headwind you gave was $120 million over three years. Is that still a good number to think about? And can you comment on your growth in the exchanges and how that’s played out throughout the year? Thanks.
Javier J. Rodriguez
Sure. I think that number is still a good number. The reality is, as you know, you have to think about what happens with these extended premium tax credits. And the way that we have it thought out is that if they go away, we would lose that $120 million roughly over a three-year period, but it’s not evenly spread out. We would have something — our estimates are somewhere like $40 million in year one, $70 million in year two and $10 million in year three.
And the reason why it’s a little lumpy is because our models divide the population. And so we assume that our existing patients because they are in high need of insurance and understand the need for coverage would be more likely to retain that coverage. And also, in many cases, it is the most affordable option.
That math changes when you grab the second group, which is those patients that yet don’t know that their kidneys are going to fail, so they’re CKD patients, and they might let their insurance lapse. And in that case, when their kidneys fail, they would become Medicare patients.
And of course, there’s a spectrum in there because some of these people in CKD 4 are already pretty ill. And so they might opt up for an exchange. So when you do all that math, and as you can see, it’s full of assumptions, you get into that sort of lumpy ’26, ’27 and ’28. And then, of course, we’re watching with Congress because there’s a lot of conversations going on, conversations about some kind of off-ramp, meaning that they change the enhanced tax credits over time. There’s also talk about lowering the poverty level to different levels. And then, of course, there’s conversations about doing nothing. And so all these assumptions will change depending on what happens.
Joel Ackerman
And Andrew, just on your question on private pay mix, mix is down about 15 basis points in the quarter, which I would call normal variability and year-over-year, it’s flat.
Andrew Mok
Great. Thanks for all the color.
Operator
[Operator Instructions] Our next caller is AJ Rice with UBS. Your line is open, sir.
AJ Rice
Thanks. Hi, everybody. Maybe there’s an obvious answer to this, but the headline number looks like your operating income for the quarter was about $50 million below the consensus. I know you’re saying it was in line with your expectation, and you’ve not changed the midpoint for the year as to where you think. Is it just a matter of people were mismodeling given the day counts you’re referencing for the third and fourth quarter relative to what you were internally thinking? Or what is going on there if you have any view?
Joel Ackerman
Yeah. So we don’t give quarterly guidance, and we appreciate this can lead to a little bit of a mismatch with the Street. Let me — I think the best way to explain it is how we’re thinking about it, which is if you look at Q4 over Q3, to hit the midpoint of our guide, we’d need about a $60 million uplift in OI.
And the way we think we get there, and these numbers are all approximate. First, there’s the typical headwind from seasonal costs, and we see that both in patient care costs and G&A. I’ll call that out as roughly a $30 million headwind. That’s offset by three things. First is volume, which is really about a day mix issue. Q3 had a 60 basis point headwind on day mix year-over-year. Q4 has a 60 basis point tailwind on day mix, and that’s worth about $15 million.
Second is IKC, which is, call it, plus $25 million from Q3 to Q4 to hit the IKC guide we gave at the beginning of the year. And the last would be revenue per treatment of, call it, a $50 million pickup. There’s some seasonality in that from vaccines and normal rate increases. There’s also, I’d say, more than typical variability from resolution of older claims with payers. These happen virtually every quarter. They’re hard to predict, both in terms of size and timing. They, I’d say, more often than not are weighted towards Q4, although not every year. And for Q4 of ’25, we just expect these to be more favorable than usual.
AJ Rice
Okay. Well, that’s helpful to explain it, I think. On the cyber attack, and you’re taking this charge for the Mozarc relationship, do they have impact on the adjusted earnings? Maybe cyber attack, what was the earnings and volume impact in the quarter that you estimate specifically to that event? And then the Mozarc charge, it looks like there’s some — you are expecting it to be a drag somewhat for next year or two, and now you’re taking the charge. Does that eliminate the drag? And is that meaningful in operating earnings?
Joel Ackerman
Yeah. So let me take these one at a time. So first on Mozarc, the answer is the charge will largely eliminate the Mozarc drag on the P&L next year. It doesn’t hit the operating income line. It hits the other income line. So it’s not in our adjusted operating income, but it is in our pretax. And that’s been a significant drag, both last year and this year, and it’ll get pretty close to 0 for next year.
In terms of cyber, the big impact was last quarter through both RPT and volume. As we play it forward in Q3 and Q4, the impact goes way down, and it’s primarily volume. The cost side of it has been non-GAAP, both last quarter and this quarter.
AJ Rice
Okay, I’ll leave it at that. Thanks a lot.
Operator
Thank you. Our next caller is Pito Chickering with Deutsche Bank. Your line is open, sir.
Pito Chickering
Good afternoon, guys. So one more question on treatment growth. I feel a little bit like a broken record here, so I apologize. But can you talk specifically about new patient starts in 3Q and how that changed year-over-year? And also on mortality, how is mortality trending in the third quarter versus the first half of the year? And then finally, any impact from IOTA on treatment — or on new patient starts or treatment growth?
Joel Ackerman
Pito, the last part of your question, any impact from what? What was — I missed that?
Pito Chickering
It’s IOTA, the new bundled system for kidney transplants.
Joel Ackerman
Oh, okay. Yeah. No impact from that. Going back to the original part of your question, I’d say volume for the quarter came in largely as expected, with a little bit more pressure on mistreatments than we expected. Remember, we called mistreatment rate out as elevated in Q2 as a result of the cyber attack. They came down off that peak, but still running higher than in Q3 of 2025.
In terms of both admissions and mortality, there’s really not a lot new to call out there. Admissions continue to run within the normal band that we’ve seen post COVID, and mortality, again, down versus Q1, but that’s largely a flu phenomenon. There’s really no pattern or trend to call out about mortality either quarter-over-quarter or year-over-year.
Pito Chickering
Okay. And then can you talk about the timing of the IKC funds? I mean typically they close at the end of the third quarter for the previous calendar year. Is there any changes to the timing of those contracts? And have you already settled some of those funds in October for calendar ’24?
Joel Ackerman
Yeah. So the big change on IKC timing for the year was moving some of the revenue from plan year ’24 from what we would have thought would have been the back half of the year, and some of which would have hit in Q3 into Q2. And that’s why IKC was so strong in Q2, and we called it out as timing. So that’s really the big thing I would call out.
Look, I think timing on IKC will continue to be difficult to predict. A lot of it is a function of when we get information from payers as well as the federal government, and our ability to recognize revenue is really subject to the timing of that, which we don’t have control over.
Pito Chickering
Okay. And then last one for me. The implied fourth quarter guidance range is pretty wide. I think it’s like $0.80. What would have to happen in order for you to be at the low end versus the high end of guidance? And if you are thinking about the midpoint, I know you talked about treatment growth and the tailwind coming from the day mix. But what treatment growth should we be modeling to get to the midpoint of the guidance?
Joel Ackerman
So in terms of what’s driving the range, I would point to both RPT and IKC as the things that probably have the most potential mix there. In terms of treatment volume growth, what you should expect for Q4 is year-over-year volume growth that is positive. Nothing to write home about 20, 30 bps, somewhere in that range, but positive — for the same reason it was so negative this quarter, which is the day mix being a headwind. Next quarter, it’s a tailwind, which is why it will drive it positive.
Pito Chickering
Okay. And then last one here, does market share — what do you think the market share has done in ’25 if we exclude this cyber incidents? Thanks.
Joel Ackerman
Yeah. Look, it’s a really tough question. The best way to answer that question is USRDS data. But the latest USRDS data is for Q1 of ’25. It just came out, both Q4 of ’24 and Q1 of ’25. And the reality with the quarterly USRDS data, is we think the incidence data is more reliable. The prevalence data is less reliable. So you put that all together, there is no — there’s almost no USRDS data to use to really try and predict what’s going on with market share.
Javier J. Rodriguez
But if you grab that data as imperfect as it is, and you grab the intelligence that we have in the field, and you make the adjustments for roughly the 1,600 patients that are both impacted by the PD and the cyber outage, we have no reason to see any meaningful shifts in market share.
Pito Chickering
Great, thanks so much.
Javier J. Rodriguez
Thank you.
Operator
Thank you. Our next caller is Justin Lake with Wolfe Research. Your line is open, sir.
Justin Lake
Thanks. Good morning. Joel —
Joel Ackerman
Good morning, Justin.
Justin Lake
[Indecipherable] growth sounds like it’s got to be about $10 sequentially of improvement. Is that the right ballpark?
Joel Ackerman
I think it’s more like $8.
Justin Lake
Okay. And how much of that do you think is this collection that we would think of as maybe nonrecurring in the same magnitude?
Joel Ackerman
I would — it is — I called out $50 million of RPT improvement, and that’s about $7 of RPT. It is the biggest component of that. So I don’t want to give an exact size there. This is ranges upon ranges, but it would be more than half, I’d say, is probably a reasonable estimate.
Justin Lake
Perfect. And then the fourth quarter volume assumption, I apologize if I missed it, but did you give a number there in terms of what you’re assuming for volume?
Joel Ackerman
Look, you can back into it more or less. And on treatment volume, it would be growth of somewhere around 20 or 30 bps. And remember, that’s treatment volume, it’s not treatments per day., it’s not NAG. That would be an absolute year-over-year growth of about 20 or 30 bps.
Justin Lake
Okay, thanks, guys.
Operator
Thank you. Our next caller is Ryan Langston with TD Cowen. Your line is open, sir.
Ryan Langston
Thanks. Good afternoon. You mentioned changes in payer mix driving RPT down a bit. Can you give us what the commercial treatment mix was in the quarter, or at least the proportion from — or the change from second quarter? And Joel, I heard you mention the sequential components in RPT. Appreciate that. But does the 4Q guide assume any sort of positive move in that payer mix?
Joel Ackerman
I don’t think it will be a significant component of it. In terms of where mix is today, it’s right around 11%. It was down 11% — I’m sorry, it was down 15 bps from Q2 to Q3. It went from just above 11% to just below 11%.
Ryan Langston
Okay. And last thing, I guess, over the past year or two, we’ve seen nice growth in RPT, the binders, of course, but focus on the revenue cycle improvements. I guess where are we at in the lifecycle of those or seeing at least some outsized benefit from those? Javier, I heard you mention some initiatives in your prepared remarks. But just anything on revenue cycle initiatives and improvements would be helpful. Thanks.
Joel Ackerman
Yeah. I would say some people would ask what inning of the game we’re in. I think that’s the wrong metaphor. This is a continuous process that I don’t think we — kind of we finish and then we move on. I think there’ll be a continuous process for years and years to continue to get better at it. Remember, a 1% improvement in in ROPs collections is equal to about $120 million of OI. So even if we can just get 10 or 20 basis points a year, year in, year out, there’s real value there.
The cyber incident definitely slowed things down there, and — but we’re continuing to invest there. As Javier said, AI is an opportunity, just old-fashioned automation is an opportunity there as well. So I would say we’re not — there’s more to be had there. It’s not going to feel like it did in ’23 and ’24, where it was really moving the needle in a big way, but I think there will be — continue to be opportunity there year in and year out.
Ryan Langston
Okay, thank you.
Operator
Thank you. At this time, I’m showing no further questions. Speakers, I’ll turn the call back over to you for closing comments.
Javier J. Rodriguez
Okay. Thank you, Michelle, and thank you for all of your questions. As we wrap up today, I will leave you with four thoughts. First, early in the year, we faced two unexpected challenges with a meaningful economic impact. We navigated through those issues, delivered clinical excellence for our patients, and remain on track to achieve our annual guidance. All the while, we continue to invest, creating long-term capabilities.
Second, we will continue our disciplined capital allocation strategy, including share repurchases. Third, we provided a few forward-looking thoughts on next year. Although the current dialogue is focused on enhanced premium tax credits, more broadly, we’ll be monitoring open enrollment, which is perhaps the biggest variable heading into 2026.
And finally, the clinical and operational processes behind middle molecule clearance will take approximately three years to see results. Yet, the potential to enhance patient lives is meaningful and exciting. Thank you all for joining the call and be well.
Operator
[Operator Closing Remarks]