The last two decades have seen dramatic growth in the size and number of chain organizations in several health care sectors, including hospitals, nursing homes, and outpatient kidney dialysis facilities (Banaszak-Holl et al. 2002; Cuellar and Gertler 2003; U.S. Renal Data System 2008;). In particular, chain-affiliated dialysis centers increased from 14 percent of the market in 1988 to 66 percent in 2006 (U.S. Renal Data System 2005; 2008;). The rationale for this growth includes a variety of potential economic benefits of chain membership (e.g., improved resource allocation, standardization of services, increased market power, and presence) that promote higher quality and lead to economies of scale and scope (Pautler 2003). Nonetheless, concerns have been raised regarding reductions in competition and removal of local control. The financial benefits associated with chain membership may be especially salient in the payment environment faced by dialysis providers. Because almost all dialysis patients become Medicare eligible after their first 90 days of dialysis,1 Medicare pays for the vast majority of dialysis sessions. Medicare uses a mixed payment methodology for dialysis-related services, the majority of which is a prospective payment covering a specified bundle of services with a cap on the number of weekly sessions. The payment rate has received only minor updates since being introduced in 1983.2 The remaining payment covers items that dialysis facilities are allowed to bill on a fee-for-service basis separately from the prospective bundle, primarily injectable medications and laboratory tests. The average Medicare payment per dialysis session was U.S.$202 in 2000, U.S.$125 of which was prospectively paid (Hirth et al. 2003). Acquisition by a chain may yield several direct financial benefits for both the acquired facility and acquiring chain. Facilities gain access to the chain's volume discounts for medications; this is particularly important in the context of Epogen (EPO), a synthetic form of the hormone erythropoietin used to treat anemia (Medicare Payment Advisory Commission 2002), manufactured solely by Amgen (Thamer et al. 2007).3 Facilities also gain access to the chain's centralized clinical laboratories, presenting another opportunity for financial gain relative to performing low volumes of laboratory work or sending such work to nonaffiliated labs. Meanwhile, by spreading fixed costs (e.g., medical records systems) across more patients, the chain may also benefit from new acquisitions if the average cost faced by chain-affiliated facilities falls. With a larger total patient base, the chain may be able to offer additional services (e.g., one chain-affiliated facility may serve all of the chain's peritoneal dialysis patients in the market).4 This joint production of different dialysis modalities translates to economies of scope and more treatment options for the patient. Less direct benefits include accessing the chain's skill at improving care through best practice guidelines and advanced information systems. Conversely, several factors may counter the potential benefits of acquisitions from the chain's perspective. A facility owner may have local capabilities (e.g., long-standing relationships with patients, staff, and area providers) that cannot readily be transferred to outside owners. Independent ownership also may reduce the difficulty in monitoring staff performance, and owner/managers may have stronger incentives for efficiency. From the independent facility owner's perspective, the loss of autonomy might outweigh the benefits of affiliating with a chain. From a broader societal perspective, the primary policy concerns regarding chain growth are increases in market concentration and accompanying decreases in patient choice. In 2006, 60 percent of dialysis patients received care from a facility owned by one of the two largest chains (U.S. Renal Data System 2008). Furthermore, mergers during 2004 through 2006 consolidated the six largest chains into just two (U.S. Renal Data System 2008). Additionally, chains may overcharge if they gain monopoly power. Demand for dialysis-related care is fairly price inelastic because the only alternatives are kidney transplantation or hospice. These monopolies may earn positive economic profits by demanding prices above costs from payers other than Medicare who cannot mandate payment ceilings. In 1999, Gambro, the second largest dialysis provider at the time, was accused of implementing this type of price discrimination after acquiring six dialysis facilities in western Michigan (Taylor 1999). Shortly after the acquisitions, Gambro enacted noncompete clauses and exclusive contracts with area nephrologists, followed by a nearly five-fold increase in prices charged to private insurers. Meanwhile, Gambro facilities in similar geographical areas without monopoly control did not alter their price structures. Even in the Medicare market where prices are fixed, nonprice competition is relevant as dialysis facilities may be able to exploit market power by decreasing services or amenities to increase profits (Held and Pauly 1983), or by reducing choices available to patients regarding both clinical and nonclinical aspects of care. Despite the continued growth of chains in the dialysis industry and their potential effects on cost, quality, and price, little research has examined factors associated with chain acquisition. Therefore, this article attempts to answer the following questions: What characteristics make an independent dialysis facility a more likely target for acquisition by a chain? Do small and large chains target different types of independent dialysis facilities for acquisition? Are predictors of chain acquisition among dialysis providers similar to predictors of chain acquisition in other health care sectors (i.e., nursing homes and hospitals)?