This $55 million shared savings revenue recognized in 2023 has been excluded from our adjusted operating income as it represents earnings incremental to what would have been expected in 2023 absent the change. International adjusted operating income was down $18 million quarter-over-quarter. The largest component of this sequential change was driven by an increase in bad debt reserves. Transitioning to capital structure, during the fourth quarter, we repurchased 2.9 million shares, and since the start of 2024, we repurchased an additional 1.5 million shares. We ended 2023 with zero balance on our revolving credit facility and our leverage ratio declined slightly to 3.15 times consolidated EBITDA, below the midpoint of our target leverage range.
The strong free cash flow was partly the result of continued reduction of our US dialysis DSOs, which ended the quarter at 54 days, down three days from last quarter and 12 days below the level at the end of 2022. Turning now to detail on 2024 guidance. Our adjusted operating income guidance for the year is $1.825 billion to $1.975 billion, representing 9.6% year-over-year growth at the midpoint. This is above our long-term expectation of 3% to 7% growth in adjusted operating income, driven by higher revenue per treatment growth in typical as a result of our investments in our revenue cycle management and cost savings in our non-labor patient care costs due to annualization of Mircera and footprint-related cost savings. To give you more detail, let me first cover the three main drivers of US dialysis growth versus 2023.
First, we expect treatment volume growth of 1% to 2%. This is the result of continued new patient admissions growth on par with pre-pandemic averages, partially offset by mortality that is expected to remain slightly higher than pre-COVID levels. Second, we anticipate revenue per treatment growth of 2.5% to 3%. Approximately two-thirds of this growth is due to rate increases. The remaining third of the expected increase is primarily from annualization of the revenue cycle management improvements we saw in 2023. Third, we expect adjusted patient care cost per treatment to increase 2.5% to 3%. We continue to expect wages to increase at rates above pre-COVID levels. Savings to offset this include leverage of fixed costs as treatment volume grows and annualization of cost savings initiatives in 2023, including our conversion to Mercera for anemia management and our center consolidation efforts.
Let me mention a couple of other items to help your thinking with US dialysis. We expect adjusted depreciation and amortization to decline by approximately $10 million to $15 million, a marked change from historical increases of approximately $20 million annually. This is the delayed result of our consistent effort over many years to increase our capital efficiency. As it relates to policy matters, we do not expect to spend the $50 million to $60 million related to ballot measures that would have been typical of past election years. For IKC, our guidance assumes an adjusted operating income loss of approximately $50 million. This reflects our expectation of continued growth in total medical spend and covered lives within our IKC programs, improved shared savings performance, and further fixed cost leverage, as outlined in Javier’s earlier comments.
In our international business, we incorporated in our guidance continued growth in adjusted operating income of approximately $20 million year-over-year. Below the OI line, we expect losses of approximately $60 million, largely as a result of our share of the losses in Mozarc, our co-investment with Medtronic in kidney products. We expect interest expense of $100 million to $110 million per quarter in the first half of the year, and $130 million to $140 million per quarter in the second half of the year. This increase is due to expiration of our 2% interest rate caps at midyear. We expect an adjusted effective income tax rate of 24% to 26%. For free cash flow, we expect $900 million to $1.15 billion, approximately 125% of adjusted net income.
Consistent with our long-term capital strategy, we expect to deploy the vast majority of our free cash flow towards either capital-efficient growth when such opportunities exist or otherwise return capital to shareholders through share repurchases. We anticipate ending the year within our long-term target leverage ratio range of 3 times to 3.5 times. That concludes my prepared remarks for today. Operator, please open the call for Q&A.
Operator: Thank you, sir. [Operator Instructions] Justin Lake with Wolfe Research. You may go ahead, sir.
Dean Rosales: Hi. This is Dean Rosales on for Justin. My question is on your Medicare risk businesses. Wondering what you’re seeing there in terms of trend through 2023. And then specifically on special needs products, how many members do you have there exactly? And how much revenue is in those products? And could you speak to what you’ve seen in terms of costs year-to-date and then specifically Q4? Thank you very much.
Javier Rodriguez: Thanks, Dean. So, what I’d highlight on the risk side of Medicare Advantage is, I think it’s important to realize that the ESRD population is different than the broader MA population. And some of the trends you might be seeing with other payers, which we certainly watch very carefully, don’t necessarily apply to our population. I’d highlight three things. First, the needs of these patients and the medical costs that they bear are very different than a population given the high acuity of these patients. So that’s one. Second, I would also note the reimbursement for this population runs differently, and it’s a separate reimbursement rate that comes out in both the preliminary and the final rule. And third, that the coding changes that apply to the broader MA population do not apply to the ESRD population.
So, with that, I think it’s early for us to really have a full view on what 2023 is. That said, we’re feeling pretty good about where our net savings came in, both on the SNP side and on the Medicare Advantage population within our value-based care. In terms of just some of the cleanup, we have about 3,000 members in our SNP products. And in terms of revenue, it’s somewhere north of $300 million.
Dean Rosales: Thank you.
Operator: Thank you. Our next caller is Pito Chickering with Deutsche. You may go ahead, sir.
Pito Chickering: Hey, good afternoon, guys. Looking at 2024 guidance, you’re assuming a loss of $50 million in IKC. Can you refresh us what that was in 2023? And then in the script, I think you talked about 25% growth in revenues of IKC and a 15% reduction of PMPM. I would have assumed that would have shifted from a loss to gain in 2024 those metrics. So, if you can sort of help bridge that? And then, I think you’re shifting from a cash accounting to an accrual accounting. That seems like a pretty big shift for you guys. I guess, what’s giving us comfort that, that accrual makes sense at this point?
Joel Ackerman: Yeah. So, a lot in there, Pito. Let me try and take this in the logical order. So, first, on revenue accounting, what — historically, we did not record revenue until we were comfortable that we could reasonably estimate what our share of the shared savings would be. And that was true for both our MA population and our Medicare fee-for-service population, the CKCC program. The SNP product, we’ve always accounted for in — I’ll use your words, in an accrual method. The change we’re talking about is about the change in the timing of when we get comfortable with those estimates. And you asked why. It’s really three things. One is we’ve made some changes to the contractual language that gives us earlier clarity on attributed lives.
So that’s one. Second, we’re getting our data earlier, which obviously helps us do some of the calculations earlier. And then third, just with the experience we’ve had, we’ve got better actuarial models. And putting those three things together, we’re comfortable now that we can reasonably predict our share of the shared savings revenue, which ultimately turns into revenue in the plan year. So that’s on the change in the estimates. In terms of — you asked about 2023. So, we’re guiding to a loss of $50 million for 2024. Our non-GAAP number for 2023 is a loss of $94 million. The thing to realize about that $94 million is it includes the revenue from the value-based care products from plan year ’23, which is the result of this estimate change that I mentioned as well as the revenue from that product line for 2022.
So, I think the way to think about 2023 to make it a little bit more apples-to-apples with ’24 would be to back out somewhere around $25 million, maybe $30 million to make it a bit more apples-to-apples. And then, what was your other question? There was a PMPM question in there.
Pito Chickering: So, you’re taking a loss of $94 million after you back out the $25 million to $30 million. I think you guided to in the script sort of growth on IKC of 25%, and then a 15% reduction of PMPM in ’24. So, I would assume that, that growth and those reductions would have resulted in a higher — in operating income versus operating loss. So, kind of how can we sort of take those growth metrics and those cost reduction metrics and still get to a $50 million loss?
Joel Ackerman: Yeah. So, a few things. First, just to clarify that estimate change I referred to only is true of the Medicare Advantage business. The CKCC business is still new enough that we’re not comfortable estimating the savings in the plan year. So that part hasn’t changed. In terms of your question, so the cost savings we’re referring to is only related to our model of care in our G&A. It’s not what you’d call the MLR in a health plan business. It’s not that equivalent for us. Second, there are some — there was a significant amount of positive period development in 2023, in particular in the SNP business that we’re not forecasting to recur. So that would be another adjustment, which I think would help bridge the question of why aren’t we getting to profitability next year or this year in ’24.
