U.S. Renal Care to acquire Ambulatory Services of America

U.S. Renal Care will acquire Ambulatory Services of America under a definitive merger agreement that the Plano, Texas-based dialysis company announced Tuesday.

Though terms of the deal between the two privately held firms were not disclosed, the transaction is expected to close in August, pending antitrust notification and review under the Hart-Scott-Rodino Act by the Federal Trade Commission and the U.S. Department of Justice. The addition of ASA and its Long Beach, Calif.-based dialysis business unit, Innovative Dialysis Systems, will nearly double USRC's current patient volume to about 13,000 patients with operations in more than 200 outpatient, home and specialty hospital dialysis programs and facilities.

“USRC, ASA and Innovative Dialysis share a long-standing commitment to providing high-quality, patient-centered care at each of our facilities,” USRC CEO Chris Brengard said in a news release, calling ASA a “natural fit” for the company.

In addition to the 79 dialysis centers that ASA operates through its subsidiary Innovative Dialysis, the Brentwood, Tenn.-based company also has 17 radiation oncology centers through Radiation Oncology Services of America, which USRC plans to sell in order to continue its focus on providing dialysis care.

“U.S. Renal Care shares our joint venture focus, and we believe they will continue to work closely with Innovative Dialysis' partner physicians to provide high-quality care to patients with End Stage Renal Disease,” ASA president and CEO Timothy Martin said in the release.

USRC, founded in 2000, operates outpatient treatment centers and at-home services for people with End Stage Renal Disease, the only diagnosis for which Medicare eligibility is granted regardless of age or financial need. According to the release, the company's latest move is a step toward becoming more efficient through increased scale as the industry continues to change under healthcare reform.

But even with the merger, the new market share of the combined entities will still be below 10%, according to ASA executive VP and general counsel Doug Chappell. In 2010, the last time that the United States Renal Data System published provider data, the two largest dialysis companies—Fresenius Medical Care and DaVita—treated 127,207 patients in 1,779 units and 118,142 patients in 1,646 units, respectively.

Following Tuesday's announcement, Moody's Investors Services placed USRC's ratings under review for downgrade, attributing the decision to USRC's leverage at 6.1 times as of March 31 and its potential to rise with the acquisition. Moody's review will consider the anticipated performance of the merged entities, the proposed capital structure and deleveraging strategy, timing and magnitude of synergy realization, and the new company's free cash flow capabilities and liquidity.

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