Bicoastal Deal Forms Third Largest Dialysis Company

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Liberty Dialysis will combine with Renal Advantage to form the third largest U.S. provider of dialysis services.

This is the latest, largest instance of a merger in this bustling industry. In fact, it was just in January 2006 that Fresenius Medical acquired Renal Care Group, what was then known as the third largest U.S. dialysis provider.

Financial terms of the Liberty-Renal Advantage deal weren’t disclosed, and the new company will remain private.

Liberty, which has 112 dialysis clinics, was founded in 2002 by Mark Caputo and Bob Santelli with investment partner Bain Capital. It has received funding from investment firms Bain Capital, KRG Capital Partners, and Ignition Partners. These partners are also contributing to the newly merged company, Liberty Dialysis Holdings, Inc.

Renal Advantage brings to the deal 154 dialysis clinics in 19 states in the Midwest, Southeast, and West.

The dialysis clinics will continue to operate under their pre-merger names.

Together, Liberty, based in Mercer Island, Washington, and Renal Advantage in Brentwood, Tennessee, will employ 5300 people serving more than 19,000 patients in 260 locations in 32 states, according to the Seattle Times.

Liberty CEO Mark Caputo, who will remain as top executive of the holding company, said the deal should be complete by year’s end. The newly combined company is expecting sales of nearly $1 billion next year, he said.

For context, Dow Jones Newswire noted that Fresenius has projected sales above $12 billion this year, while analysts anticipate DaVita will post sales of $6.4 billion. Fresenius Medical Care North America provides dialysis treatment for more than 128,700 patients and has a network of more than 1700 facilities in the United States, according to the company.

The start of a new Medicare bundled payment method in January makes scale more important, at a time when payments for each patient will become similar, rather than tailored to the specific care a patient receives in dialysis, Caputo said. Because of these regulatory changes, performance-based payments by CMS to dialysis companies are expected to decline by 2 percent next year, industry observers say.

A veteran of the dialysis merger world, Joe Cashia sold the dialysis chain National Renal Alliance to Renal Advantage two years ago. Reflecting on the Liberty-Renal Advantage deal, he told Nashville’s newspaper The Tennessean, “You’ve got to be very efficient, and larger providers are certainly able to purchase more efficiently, contract more efficiently, and utilize their labor costs more efficiently.”

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