FTC Requires Kidney Dialysis Chain U.S. Renal Care to Divest Assets as a Condition of Acquiring Competitor DSI Renal

The Federal Trade Commission will require the national kidney-dialysis chain U.S. Renal Care, Inc., for which Rangers Renal Holdings LP is the parent company, to divest its ownership interest in three outpatient dialysis clinics in Laredo, Texas, as part of a settlement resolving charges that its $640 million acquisition of competitor DSI Renal, from DSI Renal’s ultimate parent company, Dialysis Parent, LLC, would be anticompetitive.

U.S. Renal Care is the third-largest provider of outpatient dialysis services in the United States and DSI Renal is the sixth-largest. Hemodialysis – the filtering of a person’s blood to replace the functions of a kidney – is a therapy that most patients with end-stage renal disease need to stay alive. Most patients must visit a clinic as often as three times per week for treatment, for three to five hours at a time, to obtain the life-sustaining therapy.

According to the complaint, the acquisition would lead to a significant increase in market concentration and anticompetitive effects in one local market—Laredo, Texas—by reducing the number of providers from three to two. The likely result would be elimination of direct competition between U.S. Renal Care and DSI Renal, reduced incentives to improve service or quality for dialysis patients, and increased ability for the merged company to unilaterally increase prices, the Commission alleges.

The Commission also alleges that if the merger takes place as proposed, the Laredo area does not have sufficient available kidney specialists to support new competition in this market.

Under the terms of the proposed settlement, Rangers Renal and Dialysis Parent agree to divest the three DSI Renal outpatient dialysis clinics in Laredo to Satellite Healthcare, Inc., which has been in the outpatient dialysis business since 1973 and is well positioned to replace the competition that otherwise would have been lost due to the proposed transaction. U.S. Renal Care will transfer to Satellite the medical director agreement and leases for the divested clinics and provide Satellite with transitional financial, information technology, and purchasing services to ensure continuity of patient care. Firewalls and confidentiality agreements will ensure that U.S. Renal and Satellite do not exchange competitively sensitive information during the transition. The FTC may appoint a monitor to oversee the transition.

Details about the case are set forth in the analysis to aid public comment for this matter. The Commission vote to issue the complaint and accept the proposed consent order for public comment was 4-0.

The FTC will publish the consent package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through January 29, 2016, after which the Commission will decide whether to make the proposed consent order final. Comments can be filed electronically or in paper form by following the instructions in the “Supplementary Information” section of the Federal Register notice.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000 per day.

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