Normalized for Tricare contribution, our margin in the fourth quarter would have been 7.8%. Earnings development was supported by accelerated FME25 savings of €114 million in the quarter, as well as net proceeds from the Tricare settlement of €181 million. From an operational perspective, the fourth quarter developed in line with our expectations, as we had previously flagged. Nothing fundamentally changed in our operating performance in the quarter as we continue to execute in our turnaround and transformation initiatives. However, we did face much tougher comparables given one-off favorable development in the fourth quarter of 2022. As we already outlined in our Q3 earnings call, this included around €40 million in NCB deconsolidation gains and around €40 million in leadership bonus plan favorability, given weaker company performance in 2022 and outperformance in 2023.
Next on Slide 16. From the left, you can see how we get to the starting point of our outlook basis, and then the quarterly margin contribution by segment, resulting in a margin increase from 9.8% to 11.1%. The €127 million in special items on the fourth quarter, which you see on the right, comprise €75 million in legacy portfolio optimization costs, primarily relating to the divestiture of Argentina and NCP. It also includes FME25 costs of €52 million, as well as €17 million in costs associated with the legal form conversion. With that, turning to Slide 17. Care Delivery revenue increased by 8% on a constant currency basis, supported by a 2% organic development and €191 million in top-line Tricare proceeds. Operating income development for Care Delivery faced a meaningful headwind from currency translation effect in the quarter.
Operating income growth was largely supported by the €181 million in additional operating income from Tricare. Normalized for the Tricare contribution on margin in the fourth quarter, we would have been at 10.3%. As I described earlier, we faced a tough fourth quarter comparable with NCP deconsolidation gains and bonus favorability benefiting 2022 performance. This negatively offset our business development in the quarter. In addition, the negative EBIT contribution from value-based care was in the fourth quarter driven by retrospective CKCC model trend adjustments. FME25 savings were a strong tailwind in the quarter, as we continue to drive clinical operational efficiencies. From the start of our US clinic consolidation initiative at the beginning of the fourth quarter 2022, we closed net 72 clinics in line with the 50 to 100 we initially indicated.
While labor costs were mainly offset by continued labor productivity initiatives, Care Delivery faced another inflationary cost increase for things such as medical supplies. Turning to Slide 18. Care Enablement revenue in the fourth quarter grew 5% in constant currency, with 6% organic growth driven by higher product sales as well as higher average sales prices. Looking at the main buckets for operating income improvement, within business growth, improved volumes and pricing were muted by a €20 million in negative foreign currency transaction effect alone in the quarter. FME25 contributed with a strong savings of €27 million. Inflation continued to be a headwind in the quarter, in particular due to higher material prices. Turning to Slide 19.
We continued to deliver cash flow improvement through the fourth quarter, and for the full year 2023, we realized an operating cash flow improvement of 21%. This was the result of positive change in certain working capital items and the Tricare settlement proceeds. Supported by our disciplined capital allocation policy, free cash flow conversion accelerated in line with operating cash flow. We have been very transparent about capital allocation priorities with deleveraging as one of our number one priorities. In line with our commitment to deleverage, we used the Tricare settlement proceeds, as well as the €135 million in divestment proceeds, to reduce our debt. Like net financial debt, our total debt including these liabilities was meaningfully reduced by €1 billion to around €12 billion in 2023.
And our leverage ratio decreased from 3.4 times to 3.2 times, putting us closer to the lower end of our self-imposed target range of 3 times to 3.5 times. Looking ahead to 2024, we are confident in our ability continue to improve our cash flow and further strengthen our financial position. Our stringent approach to capital allocation remains a key priority and area of focus. With that, I hand it back over to Helen for our review of the outlook.
Helen Giza: Thank you Martin. On Slide 21, you can see our FME25-related savings and costs since the program’s initiation. As I discussed earlier, our FME25 transformation has successfully delivered sustainable savings through 2023. We are fully on track to deliver our savings target of €650 million by 2025. Looking ahead to 2024 specifically, we anticipate €100 million to €150 million in incremental sustainable savings from FME25 by year-end. We expect also €100 million to €150 million of one-time costs for the execution during 2024. This leaves us with €150 million to €200 million in incremental sustainable savings until the end of 2025 with investments of €80 million to €100 million in the same year. Turning to Slide 22.
We want to continue to be very transparent about the assumptions we are making in our annual outlook. In 2023, both our revenue and operating income were supported by the Tricare settlement and divestments that we have closed in the meantime. As these will not repeat in 2024, we are excluding them from our outlook base. We have been asked why the Tricare settlement is not being treated as a special item. I want to clarify that as the initial write-off and the constrained revenues and earnings were part of operational business and never classified as a special item in the past, this required us to leave it as an operational item. To define our outlook, we have made certain assumptions. We are assuming positive US same market treatment growth of 0.5% to 2% over the course of the year.
This excludes annualization effects from exited acute contracts. Based on this and the CE volume growth, as well as positive support from pricing in both segments, we expect business growth contributions of €400 million to €500 million, the FME25 savings contributions I mentioned on the previous slide. For headwinds, we assume an overall 3% merit increase for the group, specifically with an overall CD labor cost increase of around 3% net. Net of labor productivity, we assume a €150 million to €200 million labor cost headwind for the group. We expect a headwind of €100 million to €150 million for other cost inflation in both Care Delivery and Care Enablement. And we project around a €50 million currency transaction loss, also primarily from Care Enablement.
To help with your modeling for 2024, we’re assuming a tax rate of 27% to 29%, and a net financial result of €320 million to €340 million. For corporate costs, we expect €40 million to €60 million, all at constant rates and excluding special items. While GLP-1s are not relevant for the business development in 2024, I wanted to reconfirm that after having spent even more time and having modeled the different factors and corresponding effects in many different scenarios, with the data available, we continue to assume a balanced impact on the future patient growth. Moving to the outlook on Slide 23. Based on the outlook base and assumptions I just described, we expect revenue to continue to grow by a low- to mid-single digit percent rate and operating income to grow by a mid- to high-teens percent rate in 2024.
As always, these expected growth rates are in constant currency and exclude special items. While we do not provide quarterly outlook, from a phasing perspective, we do expect a low point in our operating income development in the first quarter. The first quarter is expected to provide only a high-teens percentage share of the 2024 operating income. We are also confirming our group margin target of 10% to 14% by 2025. As we only announced this target 10 months ago and are working through a significant transformation, I would like at least a couple more quarters of progress before we consider tightening our midterm outlook. When I look back at everything we accomplished in 2023 and the foundation we laid, I’m very optimistic about what we will be able to achieve this year and beyond.
With that, I’ll hand back to Dominik to begin the Q&A.
Dominik Heger: Thank you, Helen, thank you, Martin, for your presentation. Before I start the Q&A, I would like to remind everyone to please limit it to two questions. And with that, I hand over to Andrea to give you the instructions.
Operator: We will now begin the question-and-answer session. [Operator Instructions]
Dominik Heger: And the first question comes from Victoria from Berenberg.
Victoria Lambert: Thanks for taking my question.
Dominik Heger: Hi, Victoria.
Victoria Lambert: Hi. So, my first question is just on the — if you could give us an indication of Q1, like-for-like growth, just so we can get a sense of how you are coming to the 0.5% to 2% guidance for the year? And then, the second question is just, you guys have closed 72 clinics in 2023. What is the outlook for clinic closures in 2024? And how is this helping your utilization rates?
Dominik Heger: Thank you.
Helen Giza: Thanks, Victoria. I’ll take both of those. Regarding the volume question and maybe the sizing of how we see the guidance, like the competition I think we’re encouraged by the market volume trends. We did see a tick-up in mistreatments in Q4, kind of weather and kind of flu and COVID effects in Q4, which really unfortunately impacted our respective volume. While we’ve made tremendous strides in controlling our labor and improving our efficiencies in 2023, we still have some markets and some metro areas that are constrained and are impacting our growth. Growth truly is a top priority for our CD US team. And I think with a different approach by a new leader, we’re really encouraged by some of the early actions that are being taken there.
Obviously, some of that mistreatment flu in Q1. We didn’t have a flu season last year. We have a mild one this year. So obviously, with Q1, we always expect that to be a bit lower. But that will ramp up over the year and are really optimistic by what we are seeing on the new patient start numbers. Oh, I’m sorry, second question. The 72 clinics for 2023, when we put this plan out there, we sized between 50 and 100, and perhaps, as you’ve come to expect from me, we’ve landed somewhere in the middle there. We don’t have another ongoing major clinic closure plan, but obviously, as we are looking at our clinic portfolio and underperforming clinics, we will constantly keep a keen eye on those. But I think they will be in the small single digits, not a major program like we’ve seen in ’23.
Victoria Lambert: Great. Thank you.
Dominik Heger: Thank you. The next question comes from Richard Felton from Goldman Sachs.
Richard Felton: Yeah, thank you. So, my first question is on the CE margin. So, it seems like transactional FX was a pretty big headwind to the business in FY ’23 and is going to be a headwind again in 2024. So, my question is, do you still feel confident about achieving the 2025 margin bands for Care Enablement that you outlined at your CMD, or has transactional FX moved against you so much that that’s going to be hard to achieve? And then, my second question, I know you don’t guide specifically on revenue per treatment for US dialysis, but could you help us think about some of the key moving parts, whether it’s payor mix, reimbursement, or commercial negotiations as we think about revenue per treatment into 2024? Thank you.
Helen Giza: Thanks, Richard. Martin, do you want to take the transaction piece and our confirmation of our CE margin bands, and then I’ll take the revenue per treatment one?
Martin Fischer: Yes, sure will. So, thanks, Richard. On the transactional FX, you saw that we included another €50 million in our ’24 outlook. You also saw that this is coming down year-over-year, and yes, we are hedging against those topics. Certain topics we cannot hedge. Others, we do absolutely hedge, but there’s uncertainties like in things like Russia. We are confident that we will come into our margin band in 2025 and we are offsetting those transactional headwinds with our performance improvement and the transformation program.
Helen Giza: Thanks, Martin. And Richard, on RPT, I mean maybe just unpacking that a little bit, we obviously know we’ve seen from a PPS reimbursement rate at 2%, we are assuming moderate increases on the rest of the book of business. We are continuing to see an increasing Medicare Advantage book of business sitting at around 40% now, which is really encouraging. And our commercial mix has stayed quite sticky throughout. So, we’re sitting at around 11% on our commercial mix there. So, I think the moving parts there, and we’re seeing nice trends, quite consistent. I think you all know we’re disappointed with the reimbursement rate on PPS. We continue to work that. And then, in terms of major, no major contracts up for renewal, a couple of smaller regional ones towards the end of 2024. But I think we have a nice line of sight into that RPT and it’s developing quite nicely.
Richard Felton: Great. Thank you very much.
Dominik Heger: Thank you. Next question comes from James from [indiscernible].
Unidentified Analyst: Hi. Thanks for taking my questions. Two, if I may, please. Firstly, perhaps it would be great if you could have just sort of comment on the margin improvement on an adjusted basis in 2023. And can you help me understand the impact from depreciation and amortization? Because it looks as a percentage of revenues, that was around a 50 basis points improvement as that was lower by around €100 million, which seems to be about half the adjusted margin gains. So, I was just kind of wondering if you expect further margin gains, some lower D&A in 2024 disposals and how that differs by segment. And then my second question is just on GLP-1. Just kind of curious what your thoughts are on what the industry impact could be from the FLOW study, which I think is due in the first half. Thank you.
Helen Giza: Yeah. Why don’t I take the second one on GLPs, and I’ll give Martin perhaps some time to pull what he can here on the depreciation question if we have something of that level of detail. So look, on GLP-1, I think, as you heard in the closing comments there, we’ve got no new data. We continue to unpack all the different scenarios and analysis, and still keep coming back to this balanced overall or neutral and with this kind of decade to kind of see the full effect. And I think we are seeing it exactly the same as the industry is seeing it. We keep breaking it down into our three buckets of medical effectiveness, prescription rates, and patient adherence. And obviously, the bigger part of that is the medical effectiveness where we do think that these drugs will slow the progression to ESRD, but that will be countered by the cardiovascular protection where we should get more CKD patients coming in.
Obviously, there’s unknowns on prescription rates. While we think pricing and access will normalize over time, we still don’t understand the side effect profile on this patient population. And we — like with SGLT2s, they’ve been on the market a decade, we have a very slow, a small uptick — kind of uptake, with it being around 8% there. For what we can see in our patient population, we have about 5% of our patients taking GLP-1s, but what we also see is a high drop-off rate of those patients taking GLP-1s as well. And then of course, for patient adherence, we know these patients are taking, with their comorbidities already taking a lot of other prescriptions. We’re still not sure — we don’t think that they’ll be at 100% adherence, which obviously for this, where they have to take it for the rest of their lives.
