HealthCare Partners, based in Torrance, California, runs medical groups and physician networks in Southern California, Central Florida, and Southern Nevada. Its revenues in 2011 were about $2.4 billion.

The company provides its services to more than 667,000 patients and has total care dollars under management of about $3.3 billion, DaVita said.

The deal follows changes to the way healthcare companies are reimbursed by U.S. state-run health insurer Medicare which could put pressure on revenues across the industry.

Medicare changed its reimbursement model last year to encourage clinic operators to reduce costs and use drugs more sparingly. It n o longer pays for individual services and drugs but instead makes a lump-sum payment per dialysis session, as long as patients are kept in good health.

Analysts have said this favors large players such as DaVita and its biggest rival FMC, the U.S. arm of Germany's Fresenius Medical Care (FMEG.DE), because they are better placed to cut costs, but it also creates revenue pressures.

DaVita Chief Executive Kent Thiry said DaVita was currently focused on integrated care for specialized kidney care services. "HealthCare Partners executes on that same mission across a full and deep array of healthcare services in three geographic markets."

The purchase price consists of $3.66 billion in cash and about 9.38 million shares of DaVita common stock, DaVita said.

The company, whose shareholders include Warren Buffett's Berkshire Hathaway Inc (BRKa.N), expects to fund the cash portion of the deal through a combination of available cash, borrowings and debt financing.

The transaction is expected to close in early fourth quarter, and the combined company will be named DaVita HealthCare Partners Inc, DaVita said.

JP Morgan Securities LLC (JPM.N) served as financial advisor for the deal.

DaVita shares closed at $80.81 on Friday on the New York Stock Exchange.

(Reporting by Bijoy Koyitty & Sakthi Prasad in Bangalore; Editing by Mark Potter and Jane Merriman)

• A Permanent Economic Emergency