DaVita Inc.

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF DAVITA INC.

ORDER TO MAINTAIN ASSETS The Federal Trade Commission (“Commission”), having initiated an investigation of the proposed acquisition by Davita Inc. of Gambro Healthcare Inc., a subsidiary of Gambro AB, and Davita Inc. (hereafter referred to as “Respondent”) having been furnished thereafter with a copy of a draft of Complaint that the Bureau of Competition proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge Respondent with violations of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45; and Respondent, its attorneys, and counsel for the Commission having thereafter executed an Agreement Containing Consent Orders (“Consent Agreement”), containing an admission by Respondent of all the jurisdictional facts set forth in the aforesaid draft of Complaint, a statement that the signing of said Consent Agreement is for settlement purposes only and does not constitute an admission by Respondent that the law has been violated as alleged in such Complaint, or that the facts as alleged in such Complaint, other than jurisdictional facts, are true, and waivers and other provisions as required by the Commission’s Rules; and The Commission, having thereafter considered the matter and having determined that it had reason to believe that Respondent has violated the said Acts, and that a Complaint should issue stating its charges in that respect, and having accepted the executed Consent Agreement and placed such Consent Agreement on the public record for a period of thirty (30) days for the receipt and consideration of public comments, now in further conformity with the procedure described in Commission Rule 2.34, 16 C.F.R. § 2.34, the Commission hereby issues its Complaint, makes the VOLUME 140 Order following jurisdictional findings, and issues the following Order to Maintain Assets:

1. Respondent Davita Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware with its office and principal place of business located at 601 Hawaii Street, El Segundo, CA 90245.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of Respondent, and the proceeding is in the public interest.

ORDER I.

IT IS ORDERED that, all capitalized terms used in this Order to Maintain Assets, but not defined herein, shall have the meanings attributed to such terms in the Decision and Order contained in the Consent Agreement.

II.

IT IS FURTHER ORDERED that:

A. From the date Davita signs the Consent Agreement until the Time of Divestiture of each Clinic To Be Divested and until all Assets Associated with each Clinic To Be Divested are divested pursuant to the Consent Agreement, Davita shall: 1. Maintain each Clinic To Be Divested and all Assets Associated with it in substantially the same condition (except for normal wear and tear) existing at the time Davita signs the Consent Agreement;

2. Take such actions that are consistent with the past practices of Davita or Gambro, respectively, in VOLUME 140 Order connection with such Clinic To Be Divested and the Assets Associated with it and that are taken in the Ordinary Course Of Business and in the normal day-today operations of Davita or Gambro;

3. Keep available the services of the current officers, employees, and agents of Davita; and maintain the relations and good will with Suppliers, Payors, Physicians, landlords, patients, employees, agents, and others having business relations with the Clinic To Be Divested and the Assets Associated with it in the Ordinary Course Of Business; and 4. Preserve the Clinic To Be Divested and all Assets Associated with it as an ongoing business and not take any affirmative action, or fail to take any action within DaVita’s control, as a result of which the viability, competitiveness, and marketability of the Clinic To Be Divested or all Assets Associated with it would be diminished.

B. From the date Davita signs the Consent Agreement until Davita divests the Owned Real Property pursuant to the Consent Agreement, Davita shall:

1. Maintain the Owned Real Property in substantially the same condition (except for normal wear and tear) existing at the time Davita signs the Consent Agreement; 2. Take such actions that are consistent with the past practices of Davita or Gambro, respectively, in connection with the Owned Real Property and that are taken in the Ordinary Course Of Business and in the normal day-to-day operations of Davita or Gambro; and 3. Take no action Relating To the Owned Real Property that would diminish the viability, competitiveness, or VOLUME 140 Order marketability of any Clinic To Be Divested located on or in the Owned Real Property.

C. From the date Davita signs the Consent Agreement until the date this Order to Maintain Assets terminates pursuant to Paragraph VII, Davita shall do the following: 1. Until sixty (60) days after the Time Of Divestiture of each Clinic To Be Divested, Davita shall not interfere in employment negotiations between each Davita Employee Of A Clinic To Be Divested and the Acquirer of the Clinic; PROVIDED, HOWEVER, this Paragraph II.C.1. does not apply to the South S.F. Clinic, to the Assets Associated with that Clinic, or to the Acquirer of that Clinic.

2. With respect to each Davita Employee Of A Clinic To Be Divested who receives, within sixty (60) days of the Time Of Divestiture of any Clinic at which he or she is employed, an offer of employment from the Acquirer of that Clinic, Davita shall not prevent, prohibit or restrict or threaten to prevent, prohibit or restrict the Davita Employee Of The Clinic To Be Divested from being employed by the Acquirer of the Clinic, and shall not offer any incentive to the Davita Employee Of The Clinic To Be Divested to decline employment with the Acquirer of the Clinic; PROVIDED, HOWEVER, this Paragraph II.C.2. does not apply to the South S.F. Clinic, to the Assets Associated with that Clinic, or to the Acquirer of that Clinic.

3. For a period of two (2) years following the Time Of Divestiture of each Clinic To Be Divested, Davita shall not, directly or indirectly, solicit, induce, or attempt to solicit or induce any Employee Of A Clinic To Be Divested who is employed by the Acquirer to terminate his or her employment relationship with the Acquirer, unless that employment relationship has already been VOLUME 140 Order terminated by the Acquirer; PROVIDED, HOWEVER, Davita may make general advertisements for employees including, but not limited to, in newspapers, trade publications, websites, or other media not targeted specifically at Acquirer’s employees; PROVIDED, FURTHER, HOWEVER, Davita may hire employees who apply for employment with Davita, as long as such employees were not solicited by Davita in violation of this Paragraph II.C.3.; PROVIDED, FURTHER, HOWEVER, Davita may offer employment to an Employee Of A Clinic To Be Divested who is employed by the Acquirer in only a part-time capacity, if the employment offered by Davita would not, in any way, interfere with the employee’s ability to fulfill his or her employment responsibilities to the Acquirer. 4. For a period of not less than forty-five (45) days, which period may begin prior to the signing of the Consent Agreement and which shall end no earlier than ten (10) days after the Time Of Divestiture of each Clinic To Be Divested (“Forty-Five Day Hiring Period”), Davita shall not interfere in employment negotiations between each Regional Manager Of A Clinic To Be Divested and the Acquirer of the Clinic; PROVIDED, HOWEVER, the terms of this Paragraph II.C.4. shall not apply after Acquirers have hired six (6) Regional Managers who were each previously employed by Davita or Gambro at any time since June 1, 2005; PROVIDED, FURTHER, HOWEVER, the terms of this Paragraph II.C.4. shall not apply to the Westside Clinic, the Colton Clinic, and the South S.F. Clinic, to the Assets Associated with those Clinics, or to the Acquirers of those Clinics. 5. With respect to each Regional Manager Of A Clinic To Be Divested who receives, within the Forty-Five Day Hiring Period required by Paragraph II.C.4. of this Order to Maintain Assets an offer of employment from the Acquirer of that Clinic, for a period of two (2) years VOLUME 140 Order following the Time Of Divestiture of the Clinic To Be Divested, Davita shall not, directly or indirectly, solicit, induce, or attempt to solicit or induce any Regional Manager of the Acquirer who was previously a Regional Manager of A Clinic To Be Divested to terminate his or her employment relationship with the Acquirer unless the individual has been terminated by the Acquirer; PROVIDED, HOWEVER, Davita may make general advertisements for Regional Managers including, but not limited to, in newspapers, trade publications, websites, or other media not targeted specifically at Acquirer’s Regional Managers; PROVIDED, FURTHER, HOWEVER, Davita may hire Regional Managers who apply for employment with Davita, as long as such Regional Managers were not solicited by Davita in violation of this Paragraph II.C.5.; PROVIDED, HOWEVER, after Acquirers have hired six (6) Regional Managers who were each previously employed by Davita or Gambro at any time since June 1, 2005, the terms of this Paragraph II.C.5. shall apply only to those six (6) Regional Managers hired by the Acquirers; PROVIDED, FURTHER, HOWEVER, the terms of this Paragraph II.C.5. shall not apply to the Westside Clinic, the Colton Clinic, and the South S.F. Clinic, to the Assets Associated with those Clinics, or to the Acquirers of those Clinics. 6. With respect to each Physician who has provided services to a Clinic To Be Divested pursuant to any of the Clinic’s Physician Contracts in effect at any time during the four (4) months preceding the Time Of Divestiture of the Clinic (“Contract Physician”):

a. Davita shall not offer any incentive to the Contract Physician, the Contract Physician’s practice group, or other members of the Contract Physician’s practice group to decline to provide services to the Clinic To Be Divested, and shall eliminate any confidentiality restrictions that would prevent the Contract VOLUME 140 Order Physician, the Contract Physician’s practice group, or other members of the Contract Physician’s practice group from using or transferring to the Acquirer of the Clinic To Be Divested any information Relating To the Operation Of The Clinic; PROVIDED, HOWEVER, this Paragraph II.C.6.a. does not apply to the South S.F. Clinic, to the Assets Associated with that Clinic, or to the Acquirer of that Clinic; and b. For a period of three (3) years following the Time Of Divestiture of each Clinic To Be Divested, Davita shall not contract for the services of the Contract Physician, the Contract Physician’s practice group, or other members of the Contract Physician’s practice group for the provision of Contract Services to be performed in any of the areas that correspond to such Clinic as listed in Appendix B to the Decision and Order contained in the Consent Agreement. PROVIDED, HOWEVER, if the Contract Physician, or the Contract Physician’s practice group, or other members of the Contract Physician’s practice group were providing services to a Clinic pursuant to a contract with Davita or Gambro in effect as of June 1, 2005, then Davita may contract with such Contract Physicians, or the Contract Physician’s practice group, or other members of the Contract Physician’s practice group for services to be provided to that particular Clinic; PROVIDED, FURTHER, HOWEVER, the terms of this Paragraph II.C.6.b. shall not apply to the Westside Clinic, the Colton Clinic, and the South S.F. Clinic, to the Assets Associated with those Clinics, or to the Acquirers of those Clinics; PROVIDED, FURTHER, HOWEVER, the terms of this Paragraph II.C.6.b. shall not apply, in Kent County, Michigan, to Renal Associates of Grand Rapids if, prior to the date the Appendix A Clinic Assets are divested pursuant to the Consent Agreement, Davita terminates, in writing, any VOLUME 140 Order contractual rights Davita has with Renal Associates of Grand Rapids that prevent or hinder, in any way, the ability of Renal Associates of Grand Rapids, to contract with, or offer services to, any Person other than Davita.

7. With respect to Material Confidential Information relating exclusively to any of the Clinics To Be Divested, Davita shall:

a. not disclose such information to any Person other than the Acquirer of such Clinic;

b. after the Time Of Divestiture of such Clinic: (1) not use such information for any purpose other than complying with the terms of the Consent Agreement or with any law; and (2) destroy all records of such information, except to the extent that: (1) Davita is required by law to retain such information, and (2) DaVita’s inside or outside attorneys may keep one copy solely for archival purposes, but may not disclose such copy to the rest of Davita. 8. For two (2) years following the Time Of Divestiture of each Clinic To Be Divested, Davita shall not solicit the business of any patients that received any goods or services from such Clinic between May 1, 2005, and the date of such divestiture, PROVIDED, HOWEVER, Davita may (i) make general advertisements for the business of such patients including, but not limited to, in newspapers, trade publications, websites, or other media not targeted specifically at such patients, and (ii) provide advertising and promotions directly to any patient that initiates discussions with, or makes a request to, any Davita employee.

VOLUME 140 Order 9. Davita shall do nothing to prevent or discourage Suppliers that, prior to the Time Of Divestiture of any Clinic To Be Divested, supplied goods and services for use in any Clinic To Be Divested from continuing to supply goods and services for use in such Clinic. D. The purpose of Paragraph II of this Order to Maintain Assets is:

1. to preserve the Clinics To Be Divested and the Assets To Be Divested as viable, competitive, and ongoing businesses, to prevent their destruction, removal, wasting, deterioration, or impairment, and to prevent interim harm to competition, pending the relevant divestitures and other relief;

2. to preserve the good will of the employees and Regional Managers of the Clinics To Be Divested and of the Physicians, Suppliers, and patients that do business with those Clinics; and 3. to prevent Material Confidential Information relating exclusively to the Clinics To Be Divested from being exchanged with DaVita’s retained dialysis businesses. III.

IT IS FURTHER ORDERED that:

A. John Strack and Mitch S. Nielson, CPA, of Focal Point Medical Consulting Group, shall be appointed Monitors to assure that Davita expeditiously complies with all of its obligations and performs all of its responsibilities as required by the Consent Agreement and by this Order to Maintain Assets.

VOLUME 140 Order B. No later than one (1) day after this Order to Maintain Assets is made final, Davita shall, pursuant to the Monitor Agreement and to this Order to Maintain Assets, transfer to the Monitors all the rights, powers, and authorities necessary to permit the Monitors to perform their duties and responsibilities in a manner consistent with the purposes of the Consent Agreement and this Order to Maintain Assets. C. In the event a substitute Monitor is required, the Commission shall select the Monitor, subject to the consent of Davita, which consent shall not be unreasonably withheld. If Davita has not opposed, in writing, including the reasons for opposing, the selection of a proposed Monitor within ten (10) days after notice by the staff of the Commission to Davita of the identity of any proposed Monitor, Davita shall be deemed to have consented to the selection of the proposed Monitor. Not later than ten (10) days after appointment of a substitute Monitor, Davita shall execute an agreement that, subject to the prior approval of the Commission, confers on the Monitor all the rights and powers necessary to permit the Monitors to monitor DaVita’s compliance with the terms of the Consent Agreement and this Order to Maintain Assets in a manner consistent with the purposes of this Order to Maintain Assets. D. Davita shall consent to the following terms and conditions regarding the powers, duties, authorities, and responsibilities of the Monitors:

1. The Monitors shall have the power and authority to monitor DaVita’s compliance with the terms of the Consent Agreement and this Order to Maintain Assets, and shall exercise such power and authority and carry out the duties and responsibilities of the Monitors in a manner consistent with the purposes of the Consent Agreement and this Order to Maintain Assets and in consultation with the Commission, including, but not limited to:

VOLUME 140 Order a. Assuring that Davita expeditiously complies with all of its obligations and performs all of its responsibilities as required by the Consent Agreement and this Order to Maintain Assets; b. Monitoring any transition services agreements; c. Assuring that Material Confidential Information is not received or used by Davita or the Acquirers, except as allowed in the Consent Agreement and in this Order to Maintain Assets, in this matter. 2. The Monitors shall act in a fiduciary capacity for the benefit of the Commission.

3. The Monitors shall serve for such time as is necessary to monitor DaVita’s compliance with the provisions of the Consent Agreement and this Order to Maintain Assets. 4. Subject to any demonstrated legally recognized privilege, the Monitors shall have full and complete access to DaVita’s personnel, books, documents, records kept in the Ordinary Course Of Business, facilities and technical information, and such other relevant information as the Monitors may reasonably request, related to DaVita’s compliance with its obligations under the Consent Agreement and this Order to Maintain Assets. Davita shall cooperate with any reasonable request of the Monitors and shall take no action to interfere with or impede the Monitors’ ability to monitor DaVita’s compliance with the Consent Agreement and this Order to Maintain Assets.

5. The Monitors shall serve, without bond or other security, at the expense of Davita on such reasonable and customary terms and conditions as the Commission may set. The Monitors shall have authority to employ, at the expense of Davita, such consultants, accountants, VOLUME 140 Order attorneys and other representatives and assistants as are reasonably necessary to carry out the Monitors’ duties and responsibilities. The Monitors shall account for all expenses incurred, including fees for services rendered, subject to the approval of the Commission. 6. Davita shall indemnify the Monitors and hold the Monitors harmless against any losses, claims, damages, liabilities, or expenses arising out of, or in connection with, the performance of the Monitors’ duties, including all reasonable fees of counsel and other reasonable expenses incurred in connection with the preparations for, or defense of, any claim, whether or not resulting in any liability, except to the extent that such losses, claims, damages, liabilities, or expenses result from misfeasance, gross negligence, willful or wanton acts, or bad faith by the Monitors.

7. Davita shall report to the Monitors in accordance with the requirements of this Order to Maintain Assets and/or as otherwise provided in any agreement approved by the Commission. The Monitors shall evaluate the reports submitted to the Monitors by Davita, and any reports submitted by the Acquirer with respect to the performance of DaVita’s obligations under the Consent Agreement and this Order to Maintain Assets. 8. Within one (1) month from the date the Monitors are appointed pursuant to this paragraph, every sixty (60) days thereafter, and otherwise as requested by the Commission, the Monitor shall report in writing to the Commission concerning performance by Davita of its obligations under the Consent Agreement and this Order to Maintain Assets.

9. Davita may require the Monitors and each of the Monitors’ consultants, accountants, attorneys, and other representatives and assistants to sign a customary VOLUME 140 Order confidentiality agreement; PROVIDED, HOWEVER, such agreement shall not restrict the Monitors from providing any information to the Commission.

E. The Commission may, among other things, require the Monitors and each of the Monitors’ consultants, accountants, attorneys, and other representatives and assistants to sign an appropriate confidentiality agreement Relating To Commission materials and information received in connection with the performance of the Monitors’ duties. F. If the Commission determines that the Monitors have ceased to act or failed to act diligently, the Commission may appoint a substitute Monitor in the same manner as provided in this Paragraph III.

G. The Commission may on its own initiative, or at the request of the Monitors, issue such additional orders or directions as may be necessary or appropriate to assure compliance with the requirements of the Consent Agreement and this Order to Maintain Assets IV.

IT IS FURTHER ORDERED that, beginning fifteen (15) days after the date on which Davita signs the Consent Agreement and every thirty (30) days thereafter until this Order to Maintain Assets terminates pursuant to Paragraph VII, Davita shall submit to the Commission a verified written report setting forth in detail the manner and form in which it intends to comply, is complying, and has complied with the terms of this Order to Maintain Assets. Davita shall submit at the same time a copy of these reports to the Monitors, if any Monitors have been appointed. VOLUME 140 Order V.

IT IS FURTHER ORDERED that Davita shall notify the Commission at least thirty (30) days prior to: A. Any proposed dissolution of Davita, B. Any proposed acquisition, merger or consolidation of Davita, or C. Any other change in Davita that may affect compliance obligations arising out of this Order to Maintain Assets, including but not limited to assignment, the creation or dissolution of subsidiaries, or any other change in Davita. VI.

IT IS FURTHER ORDERED that, for the purpose of determining or securing compliance with this Order to Maintain Assets, and subject to any legally recognized privilege, and upon written request with reasonable notice to Davita, Davita shall permit any duly authorized representative of the Commission: A. Access, during office hours of Davita and in the presence of counsel, to all facilities and access to inspect and copy all books, ledgers, accounts, correspondence, memoranda, and all other records and documents in the possession or under the control of Davita related to compliance with this Order to Maintain Assets; and B. Upon five (5) days’ notice to Davita and without restraint or interference from Davita, to interview officers, directors, or employees of Davita, who may have counsel present, regarding such matters.

VOLUME 140 Order VII.

IT IS FURTHER ORDERED that this Order to Maintain Assets shall terminate at the earlier of: A. three (3) business days after the Commission withdraws its acceptance of the Consent Agreement pursuant to the provisions of Commission Rule 2.34, 16 C.F.R. § 2.34; or B. such time as (1) all Assets To Be Divested have been divested, and all Management Contracts have been terminated, pursuant to the terms of the Consent Agreement, and (2) the Decision and Order has been made final. VOLUME 140 Analysis Analysis of Agreement Containing Consent Orders to Aid Public Comment I. Introduction The Federal Trade Commission (“Commission”) has accepted, subject to final approval, an Agreement Containing Consent Orders (“Consent Agreement”) from Davita Inc. (“Davita”). The purpose of the Consent Agreement is to remedy the anticompetitive effects resulting from DaVita’s purchase of Gambro Healthcare Inc. (“Gambro”) from Gambro AB. Under the terms of the Consent Agreement, Davita is required to divest 69 dialysis clinics and terminate 2 management services contracts in 35 markets across the United States. The Consent Agreement has been placed on the public record for 30 days to solicit comments from interested persons. Comments received during this period will become part of the public record. After 30 days, the Commission will again review the Consent Agreement and the comments received, and will decide whether it should withdraw from the Consent Agreement or make it final.

Pursuant to an Agreement dated December 6, 2004, Davita proposes to acquire Gambro from Gambro AB for approximately $3.1 billion. The Commission’s complaint alleges that the proposed acquisition, if consummated, would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45, by lessening competition in the market for the provision of outpatient dialysis services in 35 markets.

II. The Parties Headquartered in El Segundo, California, Davita is the second largest provider of outpatient dialysis services in the United States. Davita operates 665 outpatient dialysis clinics in 37 states and the District of Columbia at which approximately 55,000 end VOLUME 140 Analysis stage renal disease (“ESRD”) patients receive treatment. In 2003, DaVita’s revenues were approximately $2.1 billion. Gambro AB is a publicly-traded Swedish corporation with worldwide operations focused in three business fields: operating dialysis centers, manufacturing dialysis equipment, and providing technology and products to blood centers and hospital blood banks. Gambro is Gambro AB’s entire U.S. dialysis services business. Gambro, headquartered in Denver, Colorado, is the third largest provider of outpatient dialysis services in the United States, with 565 outpatient dialysis clinics serving approximately 43,200 ESRD patients in 33 states and the District of Columbia. In 2003, Gambro’s revenues were approximately $1.8 billion. III. Outpatient Dialysis Services Outpatient dialysis services is the appropriate relevant product market in which to assess the effects of the proposed transaction. For patients suffering from ESRD, dialysis treatments are a lifesustaining therapy that replaces the function of the kidneys by removing toxins and excess fluid from the blood. Most ESRD patients receive dialysis treatments three times per week in sessions lasting between three and five hours. Kidney transplantation is the only alternative to dialysis for ESRD patients. However, the wait-time for donor kidneys -- during which ESRD patients must receive dialysis treatments -- can exceed five years. Additionally, many ESRD patients are not viable transplant candidates. As a result, many ESRD patients have no alternative to ongoing dialysis treatments. The relevant geographic markets for the provision of dialysis services are local in nature. They are limited by the distance ESRD patients are willing and/or able to travel to receive dialysis treatments. Most ESRD patients are quite ill and suffer from multiple health problems. As such, it is difficult for ESRD patients to travel long distances for dialysis treatment. Generally, ESRD patients are unwilling and/or unable to travel further than 30 miles or 30 minutes to receive dialysis treatments, depending VOLUME 140 Analysis on traffic patterns, local geography, and the patient’s proximity to the nearest center. As a result, competition among dialysis clinics occurs at a local level, corresponding to metropolitan areas or subsets thereof.

Entry into the outpatient dialysis services markets addressed by the Consent Agreement on a level sufficient to deter or counteract the likely anticompetitive effects of the proposed transaction is not likely to occur in a timely manner. The primary barrier to entry is the difficulty associated with locating nephrologists with established patient pools to serve as medical directors. By law, each dialysis clinic must have a nephrologist medical director. As a practical matter, medical directors are essential to the success of a clinic because they are the primary source of referrals. The lack of available nephrologists with an established referral stream is a significant barrier to entry into each of the relevant markets. Beyond that, entry is also inhibited where certain attributes (such as a rapidly growing ESRD population, a favorable regulatory environment, average or below nursing and labor costs, and a low penetration of managed care) are not present, as is the case in many of the geographic markets identified in the Commission’s complaint.

Each of the geographic markets addressed by the Consent Agreement is highly concentrated. The proposed acquisition represents a merger to monopoly in 11 markets and would cause the number of providers to drop from 3 to 2 in 13 other markets. Additionally, concentration increases significantly in the remaining 11 markets addressed by the Consent Agreement. In each of these markets, the post-acquisition HHI exceeds 4,000, and the change in HHI is at least 800. The high post-acquisition concentration levels, along with evidence of Davita and Gambro’s head-to-head competition in these markets, indicates that the combined firm would be able to exercise unilateral market power. The evidence shows that health insurance companies and other private payors who pay for dialysis services used by their members benefit from direct competition between Davita and Gambro when negotiating the rates to be charged by the dialysis VOLUME 140 Analysis provider. As a result, the proposed combination likely would result in higher prices and diminished service and quality for outpatient dialysis services in many geographic markets. IV. The Consent Agreement The Consent Agreement effectively remedies the proposed acquisition’s anticompetitive effects in 35 markets where both Davita and Gambro operate dialysis clinics by requiring Davita to divest -- prior to acquiring Gambro -- 68 outpatient dialysis clinics to Renal Advantage and one outpatient dialysis clinic to its medical directors and their partners. The Consent Agreement also requires Davita to terminate two management services agreements pursuant to which it manages outpatient dialysis clinics on behalf of third-party owners. As with the divestitures, termination of these management services agreements will ensure that these clinics remain viable independent competitors. As part of these divestitures, Davita is required to obtain the agreement of the medical directors affiliated with the divested clinics to continue providing physician services after the transfer of ownership to Renal Advantage. Similarly, the Consent Agreement requires Davita to obtain the consent of all lessors necessary to assign the leases for the real property associated with the divested clinics to Renal Advantage. These provisions ensure that Renal Advantage will have the assets necessary to operate the divested clinics in a competitive manner. The Consent Agreement contains several additional provisions designed to ensure that the divestitures are successful. First, the Consent Agreement provides Renal Advantage with the opportunity to interview and hire employees affiliated with the divested clinics and prevents Davita from offering these employees incentives to decline Renal Advantage’s offer of employment. This will ensure that Renal Advantage has access to patient care and supervisory staff who are familiar with the clinics’ patients and the local physicians. Second, the Consent Agreement prevents Davita from contracting with the medical VOLUME 140 Analysis directors (or their practice groups) affiliated with the divested clinics for three years. This provides Renal Advantage with sufficient time to build goodwill and a working relationship with its medical directors before Davita can attempt to capitalize on its prior relationships in soliciting their services. Third, to ensure continuity of patient care and records as Renal Advantage implements its quality care, billing, and supply systems, the Consent Agreement allows Davita to provide transition services for a period of 12 months. Firewalls and confidentiality agreements have been established to ensure that competitively sensitive information is not exchanged. Fourth, the Consent Agreement requires Davita to provide Renal Advantage with a license to use DaVita’s policies and procedures, as well as the option to obtain DaVita’s medical protocols, which will further enhance Renal Advantage’s ability to provide continuity of care to patients. Finally, the Consent Agreement requires Davita to provide prior notice to the Commission of its planned acquisitions of dialysis clinics located in the 35 markets addressed by the Consent Agreement. This provision ensures that subsequent acquisitions do not adversely impact competition in the markets at issue and undermine the remedial goals of the proposed order. The Commission is satisfied that Renal Advantage is a qualified acquirer of the divested assets. Renal Advantage is a newly-formed company whose management has extensive experience operating, acquiring, and developing outpatient dialysis clinics. The company has received a substantial equity investment from Welsh, Carson, Anderson, and Stowe, which is the largest healthcare-focused private equity firm in the United States.

The Commission has appointed Mitch Nielson and John Strack of FocalPoint Medical Consulting Group (“FocalPoint”) as Monitors to oversee the transition service agreements, and the implementation of, and compliance with, the Consent Agreement. Messrs. Nielson and Strack are the principles of FocalPoint, which provides consulting services to the healthcare industry. VOLUME 140 Analysis The purpose of this analysis is to facilitate public comment on the Consent Agreement, and it is not intended to constitute an official interpretation of the proposed Decision and Order or the Order to Maintain Assets, or to modify their terms in any way. VOLUME 140 Commission Opinion