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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

Commission file number 001-32749

FRESENIUS MEDICAL CARE AG & Co. KGaA
(Exact name of Registrant as specified in its charter)

FRESENIUS MEDICAL CARE AG & Co. KGaA
(Translation of Registrant's name into English)

Germany
(Jurisdiction of incorporation or organization)

Else-Kröner Strasse 1, 61352 Bad Homburg, Germany
(Address of principal executive offices)

Josef Dinger, +49 6172 608 2522, Josef.Dinger@FMC-AG.com,
Else-Kröner Strasse 1, 61352 Bad Homburg, Germany
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

(1)

Not for trading, but only in connection with the registration of American Depositary Shares representing such shares.

           Securities registered or to be registered pursuant to Section 12(g) of the Act:None

           Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:6⁷/8% Senior Notes due 2017

           Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:

Ordinary Shares, no par value: 301,446,779306,221,840

           Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Security Act. ý Yes    o No

           If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. o Yes    ý No

           Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

           Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. ý Yes    o No

           Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ý Yes    o No

           Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

           Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

ý U.S. GAAP        o International Financial Reporting Standards as issued by        o Other
the International Accounting Standards Board

           If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

           o Item 17                o Item 18

           If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes                ý No

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Certain Defined Terms

        In this report, (1) the "Company" refers to both Fresenius Medical Care AG prior to the transformation of legal form discussed in Item 4.A, "Information on the Company – History and Development of the Company – History" below and to Fresenius Medical Care AG & Co. KGaA after the transformation; (2) "we", "us" and "our" refersrefer either to the Company or the Company and its subsidiaries on a consolidated basis both before and after the transformation, as the context requires; (3) "Fresenius Medical Care AG" and "FMC-AG" refersrefer to the Company as a German stock corporation before the transformation of legal form and "FMC-AG & Co. KGaA" refers to the Company as a German partnership limited by shares after the transformation and (4) "FMCH" and "D-GmbH" refer, respectively, to Fresenius Medical Care Holdings, Inc., the holding company for our North American operations and to Fresenius Medical Care Deutschland GmbH, one of our German subsidiaries. In addition, "Fresenius SE" and "Fresenius SE & Co. KGaA" refersrefer to Fresenius SE & Co. KGaA, a German partnership limited by shares resulting from the change of legal form of Fresenius SE (effective as of January 2011), a European Company (Societas Europaea) previously called Fresenius AG, a German stock corporation. Fresenius SE owns 100% of the share capital of our general partner and 94,380,382 of our ordinary shares as of February 18, 2015, 31.1%16, 2017, 30.82% based on 303,636,122306,221,840 outstanding shares, as reported herein (prior to the transformation of our legal form, it held approximately 51.8% of our voting shares).herein. In this report, we use Fresenius SE to refer to that company as a partnership limited by shares, effective on and after January 28, 2011, as well as both before and after the conversion of Fresenius AG from a stock corporation into a European Company on July 13, 2007. The phrase "Fresenius SE and its subsidiaries" refers to Fresenius SE and all of the companies of the Fresenius SE group, other than FMC-AG & Co. KGaA and the subsidiaries of FMC-AG & Co. KGaA. Each of "Management AG", "FMC Management AG" and the "General Partner" refers to Fresenius Medical Care Management AG, FMC-AG & Co. KGaA's general partner and a wholly owned subsidiary of Fresenius SE. "Management Board" and "our Management Board" refer to the members of the management board of Management AG and, except as otherwise specified, "Supervisory Board" and "our Supervisory Board" refer to the supervisory board of FMC-AG & Co. KGaA. "Ordinary shares" refers to the ordinary shares prior to the conversion in 2013 of our preference shares into ordinary shares. Following the conversion, we refer to our ordinary shares as "shares." The term "North America Segment" refers to our North America operating segment. Thesegment; the term "International"EMEA Segment" refers to the Europe, Middle East and Africa operating segment, the term "Asia-Pacific Segment" refers to our combined EMEALA (Europe, Middle East, Africa,Asia-Pacific operating segment, and the term "Latin America Segment" refers to our Latin America) and AP (Asia-Pacific)America operating segments.segment. The term "Corporate" includes certain headquarters' overhead charges, including accounting and finance, centrally managed production, asset management, quality management and procurement within our Global Manufacturing Operations& Quality and research and development.Global Research & Development departments. All references in this report to the notes to our financial statements are to the Notes to Consolidated Financial Statements included in this report.

Forward-looking Statements

        This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). When used in this report, the words "outlook," "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions are generally intended to identify forward looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated, and future events and actual results, financial and otherwise, could differ materially from those set forth in or contemplated by the forward-looking statements contained elsewhere in this report. We have based these forward-looking statements on current estimates and assumptions made to the best of our knowledge. By their nature, such forward-looking statements involve risks, uncertainties, assumptions and other factors which could cause actual results, including our financial condition and profitability, to differ materially positively or negatively relative to the results expressly or implicitly described in or suggested by these statements. Moreover, forward-looking estimates or predictions derived from third parties' studies or information may prove to be inaccurate. Consequently, we cannot give any assurance regarding the future accuracy of the opinions set forth in this report or the actual occurrence of the projected developments described herein. In addition, even if our future results meet the expectations expressed here, those results may not be indicative of our performance in future periods.

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        These risks, uncertainties, assumptions, and other factors that could cause actual results to differ from our projected results include, among others, the following:

•

changes in governmental and commercial insurer reimbursement for our complete products and services portfolio, including the United States ("U.S.") Medicare reimbursement system for dialysis services;and other health care services, including potentially significant changes that could be enacted due to the announced intention of the Trump Administration to repeal the Patient Protection and Affordable Care Act;



•

the outcome of ongoing government and internal investigations;investigations as well as litigation;



•

risks relating to compliance with the myriadcurrent and future government regulations applicable to our business including, in the U.S., the Anti-Kickback Statute, the False Claims Act, the Stark Law, the Health Insurance Portability and Accountability Act, the Health Information Technology for Economic and Clinical Health Act, the Foreign Corrupt Practices Act, the Food, Drug and Cosmetic Act, EU Medical Device Directive and related local legislation as well as other comparable regulatory regimes in many of the more than 120 countries in which we supply health care services and / and/or products;



•

the influence of commercial insurers and managed care organizations;organizations, including efforts by these organizations to manage costs by limiting healthcare benefits, reducing provider reimbursement and/or restricting options for patient funding of health insurance premiums;



•

the impact of health care, reforms;tax and trade law reforms and regulation, including those proposed by the Trump Administration in the U.S.;



•

product liability risks;



•

the outcome of ongoing litigation;



•

risks relating to our ability to continue to make acquisitions;



•

the impact of currency fluctuations;fluctuations, which may increase when we commence use of the euro as our reporting currency in 2017 due to the larger portion of our revenues that will be received in a currency other than the euro;



•

the United Kingdom vote in favor of withdrawal from the European Union and its possible effects on the tax, tax treaty, currency, operational, legal and regulatory regimes to which our businesses in the region are subject, as well as the present uncertainty regarding these and related issues;



•

our ability to protect our information technology systems against cybersecurity attacks or prevent other privacy or data security incidents;



•

changes in utilization patterns for pharmaceuticals and in our costs of purchasing pharmaceuticals;



•

introduction of generic or new pharmaceuticals that compete with our pharmaceutical products;



•

changesincreases in raw material and energy costs or the abilityinability to procure raw materials; as well as



•

collectability of our receivables, which depends primarily due toon the financial stability and liquidity of our governmental and commercial payors.payors;



•

our ability to achieve cost savings in various health care risk management programs in which we participate or intend to participate; and



•

the greater size, market power and experience of certain competitors in certain geographic regions and business lines.

        Important factors that could contribute to such differences are noted in Item 3D, "Key Information – Risk Factors" in Item 4, "Information on the Company," under "Business Overview," in Item 5, "Operating and Financial Review and Prospects" and in Note 2018 of the Notes to Consolidated Financial Statements, "Commitments and Contingencies" included in this report.

        Our business is also subject to other risks and uncertainties that we describe from time to time in our public filings. Developments in any of these areas could cause our results to differ materially from the results that we or others have projected or may project.

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        Our reported financial condition and results of operations are sensitive to accounting methods, assumptions and estimates that are the basis of our financial statements. The actual accounting policies, the judgments made in the selection and application of these policies, and the sensitivities of reported results to changes in accounting policies, assumptions and estimates, are factors to be considered along with our financial statements and the discussion under "Results of Operations" in Item 5 below, "Operating and Financial Review and Prospects." For a discussion of our critical accounting policies, see Item 5, "Operating and Financial Review and Prospects – Critical Accounting Policies" below in this report.

Market and Industry Data

        Except as otherwise specified herein, all patient and market data in this report have been derived using our internal information tool called "Market & Competitor Survey" ("MCS"). See Item 4.B, "Information on the Company – Business Overview – Renal Industry Overview.Major Markets and Competitive Position."

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PART I

Item 1.    Identity of Directors, Senior Management and Advisors

        Not applicable

Item 2.    Other Statistics and Expected Timetable

        Not applicable

Item 3.    Key Information

A.    Selected Financial Data

        The following table summarizes the consolidated financial information for our business for each of the years 2014 through 2010.in the five-year period ended December 31, 2016. We derived the selected financial information from our consolidated financial statements. We prepared our financial statements in accordance with accounting principles generally accepted in the United States of America and KPMG AG Wirtschaftsprüfungsgesellschaft ("KPMG"), an independent registered public accounting firm, audited these financial statements. All American Depositary Share ("ADS") and per ADS data reflect the two-for-one split of the ADSs representing our ordinary sharesOrdinary Shares and the ADSs representing our previously outstanding preference shares, which was effective December 3, 2012. As a result of the split of our ADSs, the ratio of each class of ADSs was changed from one ADS representing one share to two ADSs representing one share. (See Item4.A,Item 4.A, "Information on the Company – History and Development of the Company – History"). All per ADS amounts in the table have been restated to reflect the ADS splits. You should read this information together with our consolidated financial statements and the notes to those statements appearing elsewhere in this report and the information under Item 5, "Operating and Financial Review and Prospects." On December 1, 2016, we announced that commencing with our quarterly report to be filed for the first quarter of 2017, such financial statements and financial information will be prepared in accordance with IFRS, using the euro as our reporting currency. Please refer to our website for the historical financial data prepared in accordance with International Financial Reporting Standards ("IFRS") for the years 2012 through 2015 (http:/ /www.freseniusmedicalcare.com/en/news/details/title/fresenius-medical-care-will-focus-on-ifrs-reporting-and-discontinue-us-gaap-financial-statements/). In furnishing our web site address in this report, however, we do not intend to incorporate this or any other information on our web site into this report, and any information on our web site should not be considered to be part of this report.

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        We conduct our business on a global basis in various currencies, although our operations are located principally in the United States ("U.S")U.S. and Germany. We prepare our consolidated financial statements, from which we derived the selected financial data above, utilizing the U.S. dollar as our reporting currency. We have converted the balance sheets of our non-U.S. dollar denominated operations into U.S. dollars at the exchange rates prevailing at the balance sheet date. Revenues and expenses are translated at the average exchange rates for the respective period, as shown. For information regarding the exchange rates used in preparing our consolidated financial statements, see Item 11, "Quantitative and Qualitative Disclosures About Market Risk – Management of Foreign Exchange and Interest Rate Risks – Foreign Exchange Risks."

D.    Risk Factors

        Before you invest in our securities, you should be aware that the occurrence of any of the events described in the following risk factors or elsewhere in this report, and other events that we have not predicted or assessed could have a material adverse effect on our results of operations, financial condition and business. If the events described below or other unpredicted events occur, then the trading price of our securities could decline and you may lose all or part of your investment.

Risks Relating to Regulatory Matters.

A changeWe operate in a highly regulated industry such that the potential for legislative reform provides uncertainty and potential threats to our operating models and results.

        The delivery of healthcare services and products is highly regulated in most of the countries in which we operate. Proposals for legislative reform in these countries are often introduced to improve access to care, address quality of care issues and manage costs of the healthcare system. In the U.S. government, the Trump Administration and the 115th Congress have publicly announced their intention to pursue, and may enact, significant changes to existing health care programs. Certain health insurance provisions of ACA, if not many more ACA provisions, are likely targets for change. Changes of this nature could have significant effects on our businesses, both positive and negative, but the outcomes are impossible to predict.

Changes in reimbursement and/or governmental regulations for dialysishealth care could materially decrease our revenues and operating profit.

        We receive reimbursement for our healthcare services from both public, government-sponsored payors and private, commercial payors. A large portion of our businesses is reimbursed by government payors, in particular the Medicare and Medicaid program in the U.S. For the year ended December 31, 2014,2016, approximately 31%32% of our consolidated revenues resulted from Medicare and Medicaid reimbursement. Legislative changes or changes in government reimbursement practice may affect the reimbursement rates for the services we provide, as well as the scope ofThe Medicare and Medicaid coverage. A decreaseprograms change their payment methodologies and funding from time to time in ways that are driven by changes in statute, economic conditions, or policy. For example, a 2% reduction to Medicare or Medicaid reimbursement rates or covered services could havepayments due to the Budget Control Act of 2011 ("BCA") and

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subsequent activity in Congress, a material adverse$1.2 trillion sequester (across-the-board spending cuts) in discretionary programs, took effect on April 1, 2013 and continues in force. In addition, options to restructure the Medicare program in the direction of a defined-contribution, "premium support" model and to shift Medicaid funding to a block grant or per capita arrangement, with greater flexibility for the states, are also likely to be considered. Changes in payment methodologies and funding or payment requirements of (without limitation) the End-Stage Renal Disease Prospective Payment System, the Physician Fee Schedule, the Clinical Laboratory Fee Schedule, and the Ambulatory Surgical Center Payment System may have material effects on our business, financial condition and resultsoperating results. We have very little opportunity to influence or predict the magnitude of operations.those changes. For further information regarding Medicare and Medicaid reimbursement, see Item 4B, "Information on the Company – Business Overview – Regulatory and Legal Matters – Reimbursement" and Item 5, "Operating and Financial Review and Prospects – Overview."

The utilization        Government reimbursement programs generally pay less than private insurance. As a result, the payments we receive from private payors generate a substantial portion of ESAs could materially impactthe profits we report. In 2016, approximately43% of our consolidated Health Care revenues were attributable to private payors and hospitals in the North America Segment. Therefore, if the private payors in the North America Segment reduce their payments for our services, or if we experience a material shift in our revenue mix toward Medicare or Medicaid reimbursement, then our revenue, cash flow and operating profit. An interruption of supply orearnings would materially decrease. Over the last few years, we have generally been able to implement modest annual price increases for private insurers and integrated care organizations, but. there can be no assurance that we can achieve future price increases from private insurers and integrated care organizations offering private insurance coverage to our inability to obtain satisfactory terms for ESAs could reduce our revenues and operating profit.

        Erythropoietin stimulating agents, or ESAs, are sold in the U.S. by Amgen Inc., under the brand names Epogen® (epoeitin alfa) and Aranesp® (darbepoetin alfa). Our current non-exclusive ESA sourcing and supply contract with Amgen covers the period from January 1, 2015 to December 31, 2018. In addition, limited quantities of Mircera® (epoetin beta) are available to us for the purpose of performing a

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commercial pilot of this FDA-approved ESA manufactured by Hoffmann-La Roche. Under the Medicare end stage renal disease ("ESRD") prospective payment system ("ESRD PPS") effective January 1, 2011, payment for ESAs is generally included in the bundled rate; previously, it was reimbursed separately.patients. Any of the following developmentsevents, among others, could materially adversely affecthave a material adverse effect on our operating results:

•

we may be subject to reductions in reimbursement from private payors;



•

we may experience a reduction in our ability to attract commercially insured patients to utilize our health care services relative to historical levels;



•

a portion of our business financial conditionthat is currently reimbursed by private insurers or hospitals may become reimbursed by integrated care organizations, which may use payment methodologies that reduce reimbursement for our services; or



•

a portion of our business that is currently reimbursed by private insurers at rates based on our billed charges may become reimbursed under contracts at lower rates.



•

a portion of our patients who are currently covered by private insurers and resultsrely on charitable assistance to defray their insurance premium costs may be forced to transition to government funded reimbursement programs with lower rates for our services if efforts to restrict or eliminate the charitable funding of operations: (i) a reduction of the current overfill amount in ESA vials that we currently use (liquid medications, such as ESAs, typically include a small overfill amount to ensure that the fill volume can be extracted from the vial as administered to the patient), (ii) an interruption of supply of ESAs, or (iii) material increases in the utilization of or acquisition costs for ESAs.

patient insurance premiums are successful.

If we do not comply with the many governmental regulations applicable to our business, we could be excluded from government healthcare reimbursement programs or our authority to conduct business could be terminated, either of which would result in a material decrease in our revenue.

        Our operations in both our health care services business and our products business are subject to extensive governmental regulation in virtually every country in which we operate. We are also subject to other laws of general applicability, including antitrust laws. The applicable regulations, which differ from country to country, cover areas that include:

•

regulatory approvals for products or product improvements;



•

the quality, safety and efficacy of medical and pharmaceutical products and supplies;



•

the operation of manufacturing facilities, laboratories and dialysis clinics;



•

product labeling, advertising and other promotion;



•

accurate reporting and billing for government and third-party reimbursement;reimbursement, including accurate and complete medical records to support such billing;



•

the discounting of reimbursed drug and medical device products and the reporting of drug prices to government authorities;



•

the collection, dissemination, access, use, security and privacy of protected health information; and

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•

compensation of medical directors and other financial arrangements with physicians and other referral sources.

        Failure to comply with one or more of these laws or regulations may give rise to a number of legal consequences. These include, in particular, loss or suspension of federal certifications, loss or suspension of licenses under the laws of any state or governmental authority from which we generate substantial revenues, monetary and administrative penalties, increased costs for compliance with government orders, complete or partial exclusion from government reimbursement programs, refunds of payments received from government payors and government health care program beneficiaries due to failures to meet applicable requirements or complete or partial curtailment of our authority to conduct business. Any of these consequences could have a material adverse impact on our business, financial condition and results of operations.

        The Company's medical devices and drug products are subject to detailed, rigorous and frequently changing regulation by the U.S. Food and Drug Administration ("FDA"), and numerous other national, supranational, federal and state authorities. These regulations include, among other things, regulations regarding product approvals, manufacturing practices, product labeling and promotion, quality control, quality assurance, and post-marketing safety reporting, including adverse event reporting and reporting of certain field actions. We cannot assure that all necessary regulatory approvals for new products or product improvements will be granted on a timely basis or at all. In addition, the Company's facilities and procedures and those of its suppliers are subject to periodic inspection by the FDA and other regulatory authorities. The FDA and comparable regulatory authorities outside the U.S. may suspend, revoke, or adversely amend the authority necessary for manufacture, marketing, or sale of our products and those of our suppliers. The Company and its suppliers must incur expense and spend time and effort to ensure compliance with these complex regulations, and if such compliance is not maintained, they could be subject to significant adverse administrative and judicial enforcement actions in the future. These possible enforcement actions could include warning letters, injunctions, civil penalties, seizures of the Company's products, and criminal prosecutions as well as dissemination of information to the public about such enforcement actions. These actions could result in, among other things, substantial modifications to the Company's business practices and operations; refunds; a total or partial shutdown of production while the alleged violation is remedied; and withdrawals or suspensions of current products from the market. Any of these events, in combination or alone, could disrupt the Company's business and have a material adverse effect on the Company's business, financial condition and results of operations. For a discussion of open FDA warning letters, see "Regulatory and Legal Matters – Regulatory Overview – Product Regulation – Medical Devices.FDA Warning Letters."

        We rely upon the Company's management structure, regulatory and legal resources and the effective operation of our compliance programs to direct, manage and monitor our operations to comply with government regulations. If employees were to deliberately, recklessly or inadvertently fail to adhere to these regulations, then our authority to conduct business could be terminated and our operations could be

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significantly curtailed. Any such terminations or reductions could materially reduce our sales. If we fail to identify in our diligence process or to promptly remediate any non-compliant business practices in companies that we acquire, we could be subject to penalties, claims for repayment or other sanctions. Any such terminations or reductions could materially reduce our sales, with a resulting material adverse effect on our business, financial condition and results of operations.

        By virtue of this regulatory environment, our business activities and practices are subject to extensive review by regulatory authorities and private parties, and continuing audits, subpoenas, other inquiries, claims and litigation relating to the Company's compliance with applicable laws and regulations. We may not always be aware that an inquiry or action has begun, particularly in the case of "qui tam" or "whistle blower""whistle-blower" actions brought by private plaintiffs under the False Claims Act, which are initially filed under seal. We are the subject of a number of governmental inquiries and civil suits by the federal government and private plaintiffs. For information about certain of these pending investigations and lawsuits, see Note 2018 of the Notes to our Consolidated Financial Statements, "Commitments and Contingencies – Other Litigation and Potential Exposures.Exposures," included in this report.

        In addition, there may be future legislative or regulatory changes that affect FDA procedures or decision making for approving medical device or drug products. Any such legislation or regulations, if enacted or promulgated, could result in a delay or denial of regulatory approval for our products. If any of our products do not receive regulatory approval, or there is a delay in obtaining approval, this also could have a material adverse effect on our business, financial condition and results of operations.

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If we are unable to protect our information technology security systems against cyber-attacks or prevent other privacy or data security incidents that result in security breaches that disrupt our operations or result in the unintended dissemination of sensitive personal information or proprietary or confidential information, we could be exposed to significant regulatory fines or penalties, liability or reputational damage, or experience a material adverse effect on our results of operations, financial position, and cash flows.

        We routinely process, store and transmit large amounts of data in our operations, including sensitive personal information as well as proprietary or confidential information relating to our business or third-parties. We may be subject to breaches of the information technology security systems we use.

        A cyber-attack may penetrate our security controls and misappropriate or compromise sensitive personal information or proprietary or confidential information, including such information which is stored or transmitted on the systems used by certain of our products, to create system disruptions, cause shutdowns, or deploy viruses, worms, and other malicious software programs that attack our systems. Any failure to keep our information technology systems and our patients' and customers' sensitive information secure from attack, damage, loss or unauthorized disclosure or access, whether as a result of our action or inaction or that of our business associates or vendors, could adversely affect our reputation and operations and also expose us to mandatory public disclosure requirements, litigation and governmental enforcement proceedings, material fines, penalties and/or remediation costs, and compensatory, special, punitive and statutory damages, consent orders and other adverse actions, any of which could adversely affect our business, results of operations, financial condition or liquidity.

        As we increase the amount of personal information that we store and share digitally, our exposure to these data security and related cyber-attack risks increases, including the risk of undetected attacks, damage, loss or unauthorized disclosure or access, and the cost of attempting to protect against these risks also increases. We have implemented security technologies, processes and procedures to protect our confidential data; however, there are no assurances that such measures will be effective against all types of breaches.

We operate in many different jurisdictions and we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-corruption laws.

        The U.S. Foreign Corrupt Practices Act ("FCPA") and similar worldwide anti-corruption laws generally prohibit companies and their intermediaries from making improper payments to public officials for the purpose of obtaining or retaining business. Our internal policies mandate compliance with these anti-corruption laws. We operate many facilities throughout the United States and other parts of the world. Our decentralized system has thousands of persons employed by many affiliated companies, and we rely on our management structure, regulatory and legal resources and effective operation of our compliance program to direct, manage and monitor the activities of these employees. Despite our training, oversight and compliance programs, we cannot assure you that our internal control policies and procedures always will protect us from deliberate, reckless or inadvertent acts of our employees or agents that contravene the Company's compliance policies or violate applicable laws. Our continued expansion, including in developing countries, could increase the risk of such violations in the future. Violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our results of operations or financial condition. The Company has received communications alleging conduct in countries outside the U.S. and Germany that may violate the FCPA or other anti-bribery laws. The Audit and Corporate Governance Committee of the Company's Supervisory Board is conducting an investigationinvestigations with the assistance of independent counsel. The Company voluntarily advised the U.S. Securities and Exchange Commission ("SEC") and the U.S. Department of Justice ("DOJ"). The Company's investigationinvestigations and dialogue with the SEC and DOJ are ongoing. The Company has received a subpoena from the SEC requesting additional documents and a request from the DOJ for copies of the documents provided to the SEC. The Company is cooperating with the requests. Conduct has been identified that may result in monetary penalties or other sanctions under the FCPA or other anti-bribery laws. In addition, the Company's ability to conduct business in certain jurisdictions could be negatively impacted. The Company has previously recorded a non-material accrual for an identified matter. Given the current status of the investigations and remediation activities, the Company cannot reasonably estimate the range of possible loss that may result from identified matters or from the final outcome of the investigations or remediation activities. See "Item 15B. Management's annual report on internal control over financial reporting" and Note 2018 of the Notes to our Consolidated Financial Statements, "Commitments and Contingencies – Other Litigation and Potential Exposures.Exposures," included in this report.

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If our joint ventures violate the law, our business could be adversely affected.

        A number of the dialysis clinics and health care centers that we operate are owned, or managed, by joint ventures in which one or more hospitals, physicians or physician practice groups hold an interest. Physician owners, who are usually nephrologists, may also provide medical director services and physician owners may refer patients to those centers or other centers we own and operate or to other physicians who refer patients to those centers or other centers we own and operate. WhileBecause our relationships with physicians are governed by the federal and state anti-kickback statutes, we have structured our joint venturesventure arrangements to comply with many of the criteria for safe harbor protection under the U.S. Federal Anti- Kickback Statute,Anti-Kickback Statute; however, our investments in these joint venture arrangements do not satisfy all elements of such safe harbor. While we have established comprehensive compliance policies, procedures and programs to ensure ethical and compliant joint venture business operations, if one or more of our joint ventures were found to be in violation of the Anti-Kickback Statute, the Stark Law or other similar laws worldwide, we could be required to restructure or terminate them. We also could be required to repay to Medicare amounts received by the joint ventures pursuant to any prohibited referrals, and we could be subject to criminal and monetary penalties and exclusion from Medicare, Medicaid and other U.S. federal and state healthcare programs. Imposition of any of these penalties could have a material adverse effect on our business, financial condition and results of operations. In 2015, we received subpoenas from the U.S. Attorneys for Colorado and New York requesting information pertaining to certain of our joint venture dialysis facilities. See Note 18 of the Notes to our Consolidated Financial Statements, "Commitments and Contingencies – Other Litigation and Potential Exposures," included in this report.

Table of ContentsRisks Relating to Our Business

ProposalsThe utilization of ESAs could materially impact our operating profit. An interruption of supply or our inability to obtain satisfactory terms for healthcare reform, or relating to regulatory approvals,ESAs could decreasereduce our revenues and operating profit.

        ManyErythropoietin stimulating agents ("ESAs") are synthetically engineered hormones that stimulate the production of the countriesred blood cells used to treat anemia in which we operate have been considering proposals to modify their current healthcare systems to improve access to health care and to control costs. Policymakersdialysis patients. ESAs are manufactured for sale in the U.S. by Amgen Inc., under the brand names Epogen® (epoeitin alfa) and elsewhere are also considering reforms thatAranesp® (darbepoetin alfa) and Hoffmann-La Roche under the brand name Mircera®.

        Any of the following developments could change the methodology used to reimburse providers of health care services. We cannot predict whether and when these reform proposals will be adopted in countries in which we operate or what impact they might have on us. In the U.S., automatic across-the-board spending cuts over nine fiscal years (2013-2021), projected to total $1.2 trillion for all Federal government programs went into effect on March 1, 2013. Medicare payments to providers and suppliers are subject to these reductions, but these reductions are limited to one adjustment of no more than 2 percent through 2021. Any decrease in spending or other significant changes in state funding in countries in which we operate, particularly significant changes in the U.S. Medicare and Medicaid programs, could reduce our sales and profitability and have a material adverse effect onmaterially adversely affect our business, financial condition and results of operations.operations: (i) a reduction of the current overfill amount in ESA vials that we currently use (liquid medications, including certain ESAs in vial containers, typically include a small overfill amount to ensure that the fill volume can be extracted from the vial as administered to the patient), (ii) an interruption of supply of ESAs, or (iii) material increases in the utilization of ESAs for patients for whom the cost of EPO is included in a bundled reimbursement rate.

If we fail to estimate, price for and manage our medical costs in an effective manner, the profitability of our value-based products and services could decline and could materially and adversely affect our results of operations, financial position and cash flows.

        Through our value-based agreements and health insurance products, we assume the risk of both medical and administrative costs for certain patients in return for fixed periodic payments from governmental and commercial insurers. We currently participate in various value-based programs, including (i) CMS's Bundled Payments for Care Improvement ("BPCI") program and Comprehensive End-Stage Renal Disease ("ESRD") Care initiative, (ii) Medicare Advantage chronic special needs plans and (iii) capitation agreements with commercial insurers in which FMCH receives a fixed fee to cover all or a defined portion of the medical costs of a defined population of patients. See Item 4, "Information on the Company – Business Overview – Regulatory and Legal Matters – Reimbursement" and "– Healthcare reform:" and Item 5, "Operating and Financial Review and Prospects – Financial Condition and Results of Operations – Overview" for information regardingadditional information.

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BPCI is a CMS three-year pilot initiative with bundled payments for the impactindividual services furnished to Medicare beneficiaries during a single episode of illness or course of treatment, including acute inpatient hospital services, physician services, and post-acute services. Our majority-owned subsidiary, Sound Inpatient Physicians, Inc. ("Sound"), commenced participation under BPCI in April 2015 in several markets. Under the ESRD PPSBPCI, we have the ability to receive additional payments if we are able to deliver quality care at a cost that is lower than certain established benchmarks, but also have the risk of incurring financial penalties if we are unsuccessful in doing so. Should we fail to perform as required under the BPCI initiative and our agreement with CMS, CMS may, among other remedies, terminate our right to participate in the

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BPCI program, in whole or in part. CMS relied on our business, our efforts to mitigate some of its effects, and the anticipated effects ofauthority granted by the Patient Protection and Affordable Care Act (Pub.L. 111-148), as amended by the Health Care and Education Reconciliation Act (Pub.L. 111-152) (collectively, "ACA") to implement this project. Congress is expected to consider repeal or revision of ACA, and the posture of CMS in the Trump Administration toward projects of this sort may differ from that of the Obama Administration. Such changes may affect the project's future prospects in ways which we currently cannot quantify or predict.

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Under CMS's Comprehensive ESRD Care Model (the "Model"), dialysis providers and physicians can form entities known as ESRD Seamless Care Organizations, or "ESCOs," as part of a new payment and care delivery model that seeks to deliver better health outcomes for ESRD patients while lowering CMS' costs. ESCOs that achieve the program's minimum quality thresholds and generate reductions in CMS' cost of care above certain thresholds for the ESRD patients covered by the ESCO will receive a share of the cost savings. ESCOs that include dialysis chains with more than 200 facilities are required to share in the risk of cost increases and to reimburse CMS a share of any such increases if actual costs rise above set thresholds. The Model commenced on October 1, 2015 with 13 ESCOs across the country, six of which were organized with our dialysis facilities. As of January 1, 2017, we added eighteen additional ESCOs organized with our dialysis facilities. The initial agreement period for all ESCOs participating in the Model lasts through 2018. As originally specified, CMS and each ESCO would then have the option of extending this agreement for an additional two years based on the ESCO's performance. This project was also implemented under ACA authority and is subject to the same caveats and uncertainties noted above with respect to the BPCI.



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We are providing Medicare Advantage ESRD Chronic Conditions Special Needs Plan ("ACA"MA-CSNP") products in five states as of January 1, 2017. MA-CSNPs are Medicare health plans offered by private companies that contract with Medicare to provide patients with Medicare benefits. Membership is limited to special needs individuals with specific severe or disabling chronic conditions such as ESRD. MA-CSNPs focus on improving the coordination of care by monitoring health status, managing chronic diseases, avoiding inappropriate hospitalizations and helping beneficiaries manage their condition more effectively on the care continuum. As a MA-CSNP, we will provide health care services and receive set payments from CMS for the complete care of ESRD patients who have enrolled in our MA-CSNP. For each MA-CSNP, we manage medical costs through underwriting criteria, product design, negotiation of favorable provider contracts and care management programs. Total medical costs are affected by the number of individual services rendered, the cost of each service and the type of service rendered. Our revenue on Medicare Advantage policies is based on CMS' premiums set for ESRD beneficiaries, based on the average cost of similar beneficiaries in the Medicare program. The benefits, and projected medical costs, of these plans are submitted to CMS in June the year before the contract year ("Bid"). Although we base the premiums we charge and our Bids on our business,estimates of future medical costs over the fixed contract period, many factors may cause actual costs to exceed those estimated and reflected in premiums or Bids. These factors may include medical cost inflation, increased use of services, increased cost of individual services, natural catastrophes or other large-scale medical emergencies, epidemics, the introduction of new or costly drugs, treatments and technology, new mandated benefits (such as well as additional information regarding the legislationexpansion of essential benefits coverage) or other regulatory changes and other matters discussed above.

        In addition, there may be legislative or regulatory proposals that could affect FDA procedures or decision-making for approving medical device or drug products. Any such legislation or regulations, if enacted or promulgated, could result in a delay or denial of regulatory approval for our products. If any ofinsured population characteristics. Failure to adequately price our products do not receive regulatory approval, or there is a delayestimate the costs of providing benefits to our beneficiaries, or effectively manage our operating expenses, may result in obtaining approval, this also could have a material adverse effect on our results of operations, financial position, and cash flows. There is also the possibility that Medicare Advantage Special Needs plans will not be re-authorized by Congress. Without Congressional action, these plans will expire on December 31, 2018. If the Special Needs plans are not re-authorized, our insurance business financial condition and results of operations.

        In the United States, the ACA authorized state and federal health care exchanges to provide greater access to private health insurance coverage. These exchanges went into effect in 2014, and it is not yet known how the insurance coverage available through the exchanges will impact reimbursement for health care services, if at all. There cancould be no assurance that we can achieve future price increases from private insurers and managed care organizations offering coverage through the federal and state health care exchanges that are comparable to those we have historically received. Any reductions in reimbursement from private insurers and managed care organizations could materially and adversely impact our operating results.

        Moreover, further changes in the U.S. healthcare reforms may be debated by Congress. Whether significant changes in policy will resultimpacted.



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We have also entered into sub-capitation and other risk-based and value-based arrangements with certain payors to provide care to Medicare Advantage ESRD patients. Under these arrangements, a baseline per patient per month amount is unknown. Changes, if any, that may result from these events could, depending on the details, have positive or adverse effects, possibly material, on our businesses and results of operations. Any significant healthcare reforms that substantially change the financing and regulation of the healthcare industry in countries in which we operate could reduce our sales and profitability and have a material adverse effect on our business, financial condition and results of operations.

Risks Relating to Our Business


A significant portion of our North America Segment profits is dependent on the servicesestablished. If we provide to a minority of our patients who are covered by private insurance.

        Government reimbursement programs generally paycomplete care for less than private insurance. Medicare only pays us 80%the baseline, we retain the difference. If the cost of complete care exceeds the Medicare allowable amount (the patient, Medicaid or secondary insurance being responsible forbaseline, we owe the remaining 20%), and Medicaid rates are comparable. As a result,payor the payments we receive from private payors generate a substantial portion of the profits we report. We estimate that Medicare and Medicaid are the primary payors for approximately 77% of the patients to whom we provide care in North America but that for 2014, we derived 51% of our North America Segment Health Care net revenues (amounting to 31% of our worldwide revenue) from Medicare and Medicaid. Therefore, if the private payors who pay for the care of the other 23% of our North America segment's patients reduce their payments for our services, or if we experience a material shift in our revenue mix toward Medicare or Medicaid reimbursement, then our revenue, cash flow and earnings would materially decrease.

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        Over the last few years, we have generally been able to implement modest annual price increases for private insurers and managed care organizations, but government reimbursement has remained flat or has been increased at rates below typical consumer price index ("CPI") increases. On November 6, 2014 the Centers for Medicare and Medicaid Service ("CMS") issued the final rule updating the ESRD PPS for 2015, pursuant to which the base rate was revised from $239.02 for 2014 to $239.43 for 2015. This change reflects a wage index budget-neutrality adjustment factor of 1.001729. See "Item 4. Information on the Company – Regulatory and Legal Matters – Reimbursement – U.S. – Budget Control Act and American Taxpayer Relief Act". There can be no assuranceThe reserves that we can achieve future price increases from private insurersestablish for health insurance policy benefits and managed care organizations comparable to those we have historically received. With increased governmental reformother contractual rights and regulatory activity, reimbursement from private insurers may be subject to downward pressurebenefits are based upon assumptions and judgments concerning a number of factors, including trends in the coming years. The advent of the federal and state health care exchanges may also negatively impact reimbursement from private insurance. Any reductionscosts, expenses, general economic conditions and other factors. To the extent the actual claims experience is less favorable than estimated based on our underlying assumptions, our incurred losses would increase and future earnings could be adversely affected.

        Our profitability is dependent in reimbursement from private insurers and managed care organizations could materially and adversely impact our operating results. Any reduction inpart upon our ability to attract private pay patients to utilize ourcontract on favorable terms with hospitals, physicians and other health care services relativeproviders. The failure to historical levelsmaintain or to secure cost-effective health care provider contracts may result in a loss of beneficiaries or higher medical costs, which could adversely impactaffect our operating results. Any of the following events, among others, could have a material adverse effect on our operating results:business.

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a portion of our business that is currently reimbursed by private insurers or hospitals may become reimbursed by managed care organizations, which generally have lower rates for our services; or



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a portion of our business that is currently reimbursed by private insurers at rates based on our billed charges may become reimbursed under contracts at lower rates.

We are exposed to product liability, patent infringement and other claims which could result in significant costs and liability which we may not be able to insure on acceptable terms in the future.

        Healthcare companies are typically subject to claims alleging negligence, product liability, breach of warranty, malpractice and other legal theories that may involve large claims and significant defense costs whether or not liability is ultimately imposed. Healthcare products may also be subject to recalls and patent infringement claims which, in addition to monetary penalties, may restrict our ability to sell or use our products. We cannot assure that such claims will not be asserted against us; for example, that significant adverse verdicts will not be reached against us for patent infringements or that large scale recalls of our products will not become necessary. In addition, the laws of some of the countries in which we operate provide legal rights to users of pharmaceutical products that could increase the risk of product liability claims. Product liability and patent infringement claims, other actions for negligence or breach of contract and product recalls or related sanctions could result in significant costs. These costs could have a material adverse effect on our business, financial condition and results of operations. See Note 2018 of the Notes to Consolidated Financial Statements, "Commitments and Contingencies.Contingencies," included in this report.

        While we have been able to obtain liability insurance in the past to partially cover our business risks, we cannot assure that such insurance will be available in the future either on acceptable terms or at all.all, or that our insurance carriers will not dispute their coverage obligations. In addition, FMCH, our largest subsidiary, is partially self-insured for professional, product and general liability, auto liability and worker's compensation claims, up to pre-determined levels above which our third-party insurance applies. A successful claim in excess of the limits of our insurance coverage could have a material adverse effect on our business, results of operations and financial condition. Liability claims, regardless of their merit or eventual outcome, also may have a material adverse effect on our business and reputation, which could in turn reduce our sales and profitability.

        The Company is vigorously defending a patent infringement lawsuit and certain wrongful death and personal injury lawsuits alleging inadequate labeling and warnings for certain of our dialysate concentrate products. See Note 20 of the Notes to Consolidated Financial Statements, "Legal and Regulatory Matters – Commercial Litigation". While we believe we have valid defenses to these claims, an adverse determination in any of these matters could have a material adverse effect on the Company's business, financial condition and results of operations.

Our growth depends, in part, on our ability to continue to make acquisitions.

        The healthcare industry has experienced significant consolidation in recent years, particularly in the dialysis services sector. Our ability to make future acquisitions depends, in part, on our available financial resources and could be limited by restrictions imposed by the United States or other countries' competition laws or under our credit documents. If we make future acquisitions, we may need to incur additional debt or assume significant liabilities, either of which might increase our financial leverage and cause the prices

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of our debt securities to decline. In addition, any financing that we might need for future acquisitions might be available to us only on terms that restrict our business. Acquisitions that we complete are also subject to risks relating to, among other matters, integration of the acquired businesses (including combining the acquired company's infrastructure and management information systems with ours, harmonization of its marketing, patient service and logistical procedures with ours and, potentially, reconciling divergent corporate and management cultures), possible non-realization of anticipated synergies from the combination, potential loss of key personnel or customers of the acquired companies, and the risk of assuming unknown liabilities not disclosed by the seller or not uncovered during due diligence. If we are not able to effect acquisitions on reasonable terms, there could be an adverse effect on our business, financial condition and results of operations.

        We also compete with other health care companies in seeking suitable acquisition targets. The continuing consolidation of dialysis providers and combinations of dialysis providers with dialysis product manufacturers and other consolidation in the health care industry generally could affect future growth, including growth of our product sales. If we are not able to continue to effect acquisitions on reasonable terms, especially in the international area, this could have an adverse effect on our business, financial condition and results of operations.

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We face specific risks from international operations.

        We operate dialysis clinics in more than 45 countries and sell a range of products and services to customers in more than 120 countries. Our international operations are subject to a number of risks, including but not limited to the following:

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the economic situation in developing or othercertain countries could deteriorate;



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fluctuations in exchange rates could adversely affect profitability;profitability, a risk which may increase with the use of the euro as our reporting currency;



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we could face difficulties in enforcing and collecting accounts receivable under some countries' legal systems;



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we could be negatively impacted by the ability of certain European Union member states and other countries to service their sovereign debt obligations;



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local regulations could restrict our ability to obtain a direct ownership interest in dialysis clinics or other operations;



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political, social or economic instability, especially in developing and newly industrializing countries, could disrupt our operations;



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the United Kingdom vote in favor of withdrawal from the European Union and its possible effects on the tax, tax treaty, currency, operational, legal and regulatory regimes to which our businesses in the region are subject, as well as the present uncertainty regarding other EU member countries pursuing and achieving similar votes;



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some customers and governments could increase their payment cycles, with resulting adverse effects on our cash flow;



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some countries could impose additional or higher taxes or fees or restrict the import of our products;



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we could fail to receive or could lose required licenses, certifications or other regulatory approvals for the operation of subsidiaries or dialysis clinics, sale of products and services or acquisitions;



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civil unrest, turmoil, or outbreak of disease in one or more countries in which we have material operations or material product revenue;



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differing labor regulations and difficulty in staffing and managing geographically widespread operations;



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different or less robust regulatory regimes controlling the protection of our intellectual property; and



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transportation delays or interruptions.

        International growth and expansion into emerging markets such as China, Eastern Europe, the Middle East and Africa, could cause us difficulty due to greater regulatory barriers than in the United States or Western Europe, the necessity of adapting to new regulatory systems, and problems related to entering new markets with different economic, social, legal and political systems and conditions. For example, unstable political conditions or civil unrest could negatively impact our operations and sales in a region or our ability to collect receivables or reimbursements or operate or execute projects in a region.

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        Any one or more of these or other factors could increase our costs, reduce our revenues, or disrupt our operations, with possible material adverse effects on our business, financial condition and results of operations.

We could be adversely affected if we experience shortages of components or material price increases from our suppliers.

        The Company'sOur purchasing strategy is aimed at developing partnerships with strategic suppliers through long-term contracts and at the same time ensuring, where reasonably practicable, that it haswe have at least two sources for all supply and price-critical primary products (dual sourcing, multiple sourcing). To prevent loss of suppliers, we monitor our supplier relationships on a regular basis. Suppliers which are integral to our procurement functions are subject to performance and risk analyses. Through constant market analyses, a

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demands-based design of supplier relationships and contracts, as well as the use of financial instruments, we seek to mitigate disruptive component shortages and potential price increases. If the Company is unable to counteract the risk of bottleneck situations at times of limited availability of components and other materials in spite of its purchasing strategy in combination with ongoing monitoring of market developments, this could result in delays in production and hence have an adverse effect on the Company's results of operations. Similarly, material price increases by suppliers could also adversely affect the Company's result of operations.

If physicians and other referral sources cease referring patients to our dialysishealth care service businesses and clinics or cease purchasing or prescribing our dialysis products, our revenues would decrease.

        In providing dialysis services within our health care business, we depend upon patientspatients' choosing our clinicshealth care facilities as the location for their treatments.care. Patients may select a clinic based, in whole or in part, on the recommendation of their physician. We believe that physicians and other clinicians typically consider a number of factors when recommending a particular dialysis facility, pharmacy, physician practice, vascular surgery center or vascular accessurgent care center to an ESRD patient, including, but not limited to, the quality of care at a clinic, the competency of a clinic's staff, convenient scheduling, and a clinic's location and physical condition. Physicians may change their facility recommendations at any time, which may result in the movement of new or existing patients to competing clinics, including clinics established by the physicians themselves. At most of our clinics, a relatively small number of physicians often account for the referral of all or a significant portion of the patient base. Our dialysis business also depends on recommendations by hospitals, managed care plans and other healthcare institutions. If a significant number of physicians, hospitals or other healthcare institutions cease referring their patients to our clinics;clinics, this would reduce our health care revenue and could materially adversely affect our overall operations.

        The decision to purchase or prescribe our dialysis products and other services or competing dialysis products and other services will be made in some instances by medical directors and other referring physicians at our dialysis clinics and by the managing medical personnel and referring physicians at other dialysis clinics, subject to applicable regulatory requirements. A decline in physician recommendations or recommendations from other sources for purchases of our products or ancillary services would reduce our dialysis product and other services revenue, and would materially adversely affect our business, financial condition and results of operations.

Our pharmaceutical product business could lose sales to generic drug manufacturers or new branded drugs.

        Our branded pharmaceutical product business is subject to significant risk as a result of competition from manufacturers of generic drugs and other new competing medicines or therapies. Through the end of 2013, we were obligated to make certain minimum annual royalty payments under certain of our pharmaceutical product license agreements, regardless of our annual sales of the licensed products. Thereafter, the Company is required to determine their minimum purchase requirements for the subsequent year on a yearly basis. Any of the expiration or loss of patent protection for one of our products, the "at-risk" launch by a generic manufacturer of a generic version of one of our branded pharmaceutical products or the launch of new branded drugs that compete with one or more of our products could result in the loss of a major portion of sales of that branded pharmaceutical product in a very short time period, which could materially and adversely affect our business, financial condition and results of operations.

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Our competitors could develop superior technology or otherwise impact our sales.

        We face numerous competitors in both our health care services business and our dialysis products business, some of which may possess substantial financial, marketing or research and development resources. Competition and especially new competitive developments could materially adversely affect the future pricing and sale of our products and services. In particular, technological innovation has historically been a significant competitive factor in the dialysis products business. The introduction of new products by competitors could render one or more of our products or services less competitive or even obsolete.

Global economic conditions as well as further disruptions in financial markets may have an adverse effect on our businesses.

        Although there has been some improvement in the global economyCurrent and financial markets since the market deterioration of the global economy and tightening of the financial markets, the overall global economic outlook remains uncertain and currentfuture economic conditions could adversely affect our business and our profitability. Among other things, the potential decline in federal and state revenues that may result from such conditions may create additional pressures to contain or reduce reimbursements for our services from public payors around the world, including Medicare, Medicaid in the United States and other government sponsored programs in the United States and other countries around the world.

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        Job losses or slow improvement in the unemployment rate in the United States may result in a smaller percentage of our patients being covered by an employer group health plan and a larger percentage being covered by lower paying Medicare and Medicaid programs. Employers and individuals who obtain insurance through exchanges established under the ACA might also begin to select more restrictive commercial plans with lower reimbursement rates. To the extent that payors are negatively impacted by a decline in the economy, we may experience further pressure on commercial rates, a further slowdown in collections and a reduction in the amounts we expect to collect.

        We depend on the financial markets for access to capital, as do our renal product customers and commercial healthcare insurers. Limited or expensive access to capital could make it more difficult for these customers to do business with us, or to do business generally, which could adversely affect our businesses.

        In addition, uncertainty in the financial markets could adversely affect the variable interest rates payable under our credit facilities or could make it more difficult to obtain or renew such facilities or to obtain other forms of financing in the future. Any or all of these factors, or other consequences of the continuation, or worsening, of domestic and global economic conditions which cannot currently be predicted, could continue to adversely affect our businesses and results of operations.

Any material disruption in federal government operations and funding could have a material adverse effect on our revenues, earnings, cash flows and financial condition.

        A substantial portion of our revenues is dependent on federal healthcare program reimbursement, and any disruptions in federal government operations could have a material adverse effect on our revenues, earnings and cash flows. If the U.S. government defaults on its debt, there could be broad macroeconomic effects that could raise our cost of borrowing funds, and delay or prevent our future growth and expansion. Any future federal government shutdown, U.S. government default on its debt and/or failure of the U.S. government to enact annual appropriations could have a material adverse effect on our revenues, earnings and cash flows. Additionally, disruptions in federal government operations may negatively impact regulatory approvals and guidance that are important to our operations, and create uncertainty about the pace of upcoming health care regulatory developments.

If we are unable to attract and retain skilled medical, technical and engineering personnel, we may be unable to manage our growth or continue our technological development.

        Our continued growth in the health care business will depend upon our ability to attract and retain skilled employees, such as highly skilled nurses and other medical personnel. Competition for those employees is intense. Moreover, we believe that future success in the provider business will be significantly dependent on our ability to attract and retain qualified physicians to serve as employees of or consultants to our health care services businesses. If we are unable to achieve that goal or if doing so requires us to bear increased costs this could adversely impact our growth and results of operations.

        Our dialysis products business depends on the development of new products, technologies and treatment concepts to be competitive. Competition is also intense for skilled engineers and other technical research and development personnel. If we are unable to obtain and retain the services of key personnel, the ability of our officers and key employees to manage our growth would suffer and our operations could suffer in other respects. These factors could preclude us from integrating acquired companies into our operations, which could increase our costs and prevent us from realizing synergies from acquisitions. Lack of skilled research and development personnel could impair our technological development, which would increase our costs and impair our reputation for production of technologically advanced products.

Diverging views of fiscal authorities could require us to make additional tax payments.

        We are subject to ongoing tax audits in the U.S., Germany and other jurisdictions. We could potentially receive notices of unfavorable adjustments and disallowances in connection with certain of these audits. If we are unsuccessful in contesting unfavorable determinations we could be required to make additional tax payments, which could have a material adverse impact on our results of operations and

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operating cash flow in the relevant reporting period. See Item 5, "Operating and Financial Review and Prospects – B.IV. Liquidity and Capital Resources – Liquidity" as well as Note 20 of the Notes to Consolidated Financial Statements, "Commitments and Contingencies – Legal and Regulatory Matters.Resources."

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Risks Relating to our Securities

Our indebtedness may limit our ability to pay dividends or implement certain elements of our business strategy.

        At December 31, 2014,2016, we had consolidated debt of $9,532$8,572 million and consolidated total shareholders' equity of $10,028$11,457 million. Our debt could have significant consequences to our operations and our financial condition. For example, it could require us to dedicate a substantial portion of our cash flow from operations, as well as the proceeds of certain financings and asset dispositions, to payments on our indebtedness, thereby reducing the availability of our cash flow and such proceeds to fund working capital, capital expenditures and for other general corporate purposes.

        In October 2012, we entered into a syndicated Credit Agreement, which was amended in November 2014 (the "Amended 2012 Credit Agreement"). Our Amended 2012 Credit Agreement, the indentures relating to our senior notes ("Senior NotesNotes") and our accounts receivable securitization program (the "A/R Facility") include covenants that require us to maintain certain financial ratios or meet other financial tests. Under our Amended 2012 Credit Agreement and the A/R Facility, we are obligated to maintain a maximumour consolidated leverage at or below an established maximum ratio (ratio of consolidated net funded debt to consolidated EBITDA) as these terms are defined in the respective financing agreements.

        Our Amended 2012 Credit Agreement and the indentures related to our Senior Notes include other covenants which, among other things, restrict or could have the effect of restricting our ability to dispose of assets, incur debt, pay dividends and other restricted payments, create liens or make investments or acquisitions. These covenants may otherwise limit our activities. The breach of any of the covenants could result in a default and acceleration of the indebtedness under the credit agreement or the indentures, which could, in turn, create additional defaults and acceleration of the indebtedness under the agreements relating to our other long-term indebtedness which would have an adverse effect on our business, financial condition and results of operations.

Fresenius SE owns 100% of the shares in the General Partner of our Company and is able to exercise management control of FMC-AG & Co. KGaA.

        Fresenius SE owns approximately 31.1%30.82% of our outstanding ordinary shares, excluding treasury shares we held, as of February 18, 2015.16, 2017. Fresenius SE also owns 100% of the outstanding shares of Management AG, the General Partner of the Company. As the sole shareholder of the General Partner, Fresenius SE has the sole right to elect the supervisory board of the General Partner which, in turn, appoints the General Partner's Management Board. The Management Board of the General Partner is responsible for the management of the Company. Through its ownership of the General Partner, Fresenius SE is able to exercise de facto management control of FMC-AG & Co. KGaA, even though it owns less than a majority of our outstanding voting shares. Such de facto control limits public shareholder influence on management of the Company and precludes a takeover or change of control of the Company without Fresenius SE's consent, either or both of which could adversely affect the price of our shares.

Because we are not organized under U.S. law, we are subject to certain less detailed disclosure requirements under U.S. federal securities laws.

        Under the pooling agreement that we have entered into for the benefit of non-relatedpublic holders of our Ordinary shares (including, in each case, holders of American Depositary Receipts representing beneficial ownership of such shares), we have agreed to file quarterly reports with the SEC to prepare annual and quarterly financial statements in accordance with U.S. generally accepted accounting principles ("G.A.A.P."), and to file information with the SEC with respect to annual and general meetings of our shareholders. The pooling agreement originally required that we prepare our annual and quarterly financial statements filed with the SEC in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). It was amended in June 2016 to provide that we may prepare such financial statements in accordance with U.S. GAAP or IFRS and, commencing with our report for the first quarter of 2017, we will prepare such financial statements in accordance with IFRS with the euro as our reporting currency. The pooling agreement also requires that the supervisory board of Management AG, our General Partner, include at least two members who do not have any substantial business or professional relationship with Fresenius SE, Management AG or FMC-AG & Co. KGaA and its affiliates and requires the consent of those independent directors to certain transactions between us and Fresenius SE and its affiliates.

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        We are a "foreign private issuer," as defined in the SEC's regulations, and consequently we are not subject to all of the same disclosure requirements applicable to domestic companies. We are exempt from the SEC's proxy rules, and our annual reports contain less detailed disclosure than reports of domestic

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issuers regarding such matters as management, executive compensation and outstanding options, beneficial ownership of our securities and certain related party transactions. Also, our officers, directors and beneficial owners of more than 10% of our equity securities are exempt from the reporting requirements and short – swing profit recovery provisions of Section 16 of the Exchange Act. We are also generally exempt from most of the governance rules applicable to companies listed on the New York Stock Exchange (including("NYSE"), including the obligation to maintain a compensation committee of independent directors),directors, other than the obligation to maintain an audit committee in accordance with Rule 10A – 3 under the Exchange Act and to provide an annual affirmation(and, if required, quarterly) affirmations of our compliance. These limits on available information about our company and exemptionsWe must, however, disclose the significant ways in which the governance standards that we follow differ from those applicable to U.S. companies under the NYSE governance rules. Exemptions from many governance rules applicable to U.S. domestic issuers may adversely affect the market prices for our securities. See Item 16G, "Corporate Governance."

Item 4.    Information on the Company

A.    History and Development of the Company

General

        Fresenius Medical Care AG & Co. KGaA, ("FMC-AG & Co. KGaA" or the "Company"), is a partnership limited by shares (Kommanditgesellschaft auf Aktien or "KGaA"), formerly known as Fresenius Medical Care AG, ("FMC-AG"), a German stock corporation (Aktiengesellschaft or "AG") organized under the laws of Germany.

        The Company was originally incorporated on August 5, 1996 as a stock corporation and transformed into a partnership limited by shares upon registration on February 10, 2006. FMC-AG & Co. KGaA is registered with the commercial register of the local court (Amtsgericht) of Hof an der Saale, Germany, under the registration number HRB 4019. Our registered office (Sitz)(Sitz) is Hof an der Saale, Germany. Our registered business address is Else-Kröner-Strasse 1, 61352 Bad Homburg, Germany, telephone +49-6172-609-0.

History

        On September 30, 1996, we completed a series of transactions to consummate an Agreement and Plan of Reorganization entered into on February 4, 1996 by Fresenius SE (then Fresenius AG) and W.R. Grace & Co. which we refer to as the "Merger" elsewhere in this report. Pursuant to that agreement, Fresenius SE contributed Fresenius Worldwide Dialysis, its global dialysis business, including its controlling interest in Fresenius USA, Inc., in exchange for 105,630,000 FMC-AG Ordinary shares.Shares. Thereafter, we acquired:

•

all of the outstanding common stock of W.R. Grace & Co., whose sole business at the time of the transaction consisted of National Medical Care, Inc., its global dialysis business, in exchange for 94,080,000 Ordinary shares;Shares; and



•

the publicly-held minority interest in Fresenius USA, Inc., in exchange for 10,290,000 Ordinary shares.Shares.

        On February 10, 2006, the Company completed the transformation of its legal form under German law as approved by its shareholders during the Extraordinary General Meeting ("EGM") held on August 30, 2005. Upon registration of the transformation of legal form in the commercial register of the local court in Hof an der Saale, on February 10, 2006, Fresenius Medical Care AG's legal form was changed from a German AG to a KGaA with the name Fresenius Medical Care AG & Co. KGaA. The Company as a KGaA is the same legal entity under German law, rather than a successor to the stock corporation. Management AG, a subsidiary of Fresenius SE, which was the majority voting shareholder of FMC-AG prior to the transformation, is the general partner of FMC-AG & Co. KGaA. Shareholders in FMC-AG & Co. KGaA participated in all economic respects, including profits and capital, to the same extent and (except as modified by the first share conversion described below) with the same number of shares in FMC-AG & Co. KGaA as they held in FMC-AG prior to the transformation. Upon effectiveness of the transformation of legal form, the share capital of FMC-AG became the share capital of FMC-AG & Co. KGaA, and persons who were shareholders of FMC-AG became shareholders of the Company in its new legal form.

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        Prior to the effectiveness of the transformation, and as approved by the EGM and by a separate vote of FMC-AG's former preference shareholders, the Company offered holders of its non-voting Preference shares (including preference shares represented by American Depositary Shares (ADSs)) the opportunity to convert their shares into Ordinary shares, which was accepted by the holders of approximately 96% of the outstanding Preference shares. Preference shares that were not converted remained outstanding and became Preference shares of FMC-AG & Co. KGaA in the transformation.

        Effective December 3, 2012,In March, 2006, we completed a two-for-one split of the ADSs representing our Ordinary shares and the ADSs representing our Preference shares. As a result of the ADSs split, the ratio of our ADSs to our Ordinary shares and Preference shares was changed from one ADS representing one share to one ADS representing one-half of a share. All ADS and per ADS amounts in the consolidated financial statements, the related notes and elsewhere in this report have been restated to reflect the ADS splits.

        On May 16, 2013, the Company's annual general meeting ("AGM") and a separate Preference shareholder meeting adopted resolutions for the mandatory conversion of our Preference shares into Ordinary shares. The amendments to the Company's articles of association ("Articles of Association") effecting the conversion were registered with the commercial register at the local court in Hof an der Saale on June 28, 2013. All outstanding Preference shares were converted on a 1:1 basis to Ordinary shares and all remaining options to acquire Preference shares were converted into options to acquire Ordinary shares. On July 5, 2013, the Company received a €27.0 million ($34.8 million) premium from the largest former preference shareholder, a financial institution located outside the United States, for the conversion of their preference shares to ordinary shares. In connection with the Preference share conversion, the listing of the Preference shares at the Frankfurt Stock Exchange was terminated and the New York Stock Exchange delisted the ADSs representing our Preference shares.

        On May 20, 2013 we commenced and on August 14, 2013, we completed a share buy-back program. We purchased a total of 7,548,951 Ordinary shares on the Frankfurt Stock Exchange at a total cost of approximately €350 million (approximately US $500 million). The program was financed from cash flow and existing credit facilities. The repurchased shares have either been cancelled, thereby reducing our registered share capital, or used to satisfy our share delivery obligations upon exercise of stock options.

        Part of the Company's stated strategy is to expand and complement its existing business through acquisitions. See Item 4B, "Information on the Company – Business Overview – Our Strategy and Competitive Strengths." On March 31, 2006, the Company completed the acquisition of Renal Care Group, Inc. ("the RCG Acquisition"RCG"), a Delaware corporation with principal offices in Nashville, Tennessee, for an all cash purchase price, netTennessee. RCG was the fourth largest dialysis care

Table of cash acquired, of approximately $4.2 billion including the concurrent repayment of approximately $657.8 million of indebtedness of RCG.Contents

        We have also expanded the renal pharmaceuticals portion of our product business starting in 2006provider when we acquired Phoslo®,purchased it. RCG added additional clinics and services to our operations and continues to operate as a phosphate binder.subsidiary. Please see Item 4C, "Information on the Company – Organizational Structure."

        In 2008, we entered into two separate and independent license and distribution agreements, one for certain countries in Europe and the Middle East (with Galenica AG and Vifor (International) AG) and one for the U.S. (with Luitpold Pharmaceuticals Inc. and American Regent, Inc.), to market and distribute intravenous iron products, such as Venofer® (iron sucrose) and Ferinject® (ferric carboxymaltose) (outside of the U.S.) for dialysis treatment.. In December 2010, we formedannounced the expansion of our agreements with Galenica by forming a new renal pharmaceutical company, with one of the licensors, Galenica Ltd. "Galenica", named Vifor Fresenius Medical Care Renal Pharma, Ltd. ("VFMCRP"), with the intention to develop and distribute products to treat iron deficiency anemia and bone mineral metabolism for pre-dialysis and dialysis patients. We ownFMC-AG & Co. KGaA owns 45% of the shares of VFMCRP. Seecompany which is headquartered in Switzerland. With VFMCRP, we have licenses for:

•

Venofer® Ferinject®



•

Velphoro®



•

OsvaRen® and Phosphosorb®

        For more information on our pharmaceutical licenses and distribution agreements. Please see Item 4B, "Information on the discussion of "Renal Pharmaceuticals" below.Company – Business Overview – Renal Pharmaceuticals."

        In 2010, we acquired Asia Renal Care Ltd, a largeLtd., the second largest dialysis and related services provider in ourthe Asia-Pacific region,Region with more than 80 clinics treating about 5,300 patients, Kraevoy Nefrologocheskiy Centr, a private operator of dialysis clinics in Russia's Krasnodar region treating approximately 1,000 patients in 5 clinics, and Gambro AB's worldwide peritoneal dialysis business.business, serving over 4,000 patients in more than 25 countries.

        In 2011, we acquired IDC,International Dialysis Centers, the dialysis service business of Euromedic International, with over 8,200 hemodialysis patients and 70 clinics in nine countries, principally in Central and Eastern Europe and, American Access Centers, which operates 28 free-standing vascular access centers, in the U.S., which provided us with critical mass in our vascular access business.

        In 2012, we acquired 100% of the equity of Liberty Dialysis Holdings, Inc. ("Liberty Dialysis"), a Delaware corporation with principal offices in Mercer Island, Washington and the owner of all of the business ofWashington. Liberty Dialysis Inc. and 51% of Renal Advantage, Inc., for total cash consideration of $2,182 million consisting of $1,697 million cash, net of cash acquired and $485 million non-cash consideration (the "Liberty Acquisition"). Prior to entering into the merger agreement for the Liberty Acquisition, we owned 49% of Renal Advantage, Inc., and we also had a loan receivable from Renal Advantage Partners, LLC of $280 million which was retired as part of the transaction. Liberty Dialysis

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mainly provided dialysis services in the United States through the 263 clinics it operated (the "Acquired Clinics"). Liberty Dialysis's results have been includedoperated.

        In 2013, Spectra, our laboratory testing for others in the Company's Consolidated Statement of Income since February 29, 2012.U.S., acquired Shiel Laboratories ("Shiel"). In addition to providing blood, urine and other bodily fluid testing services to determine the appropriate individual dialysis therapy for a patient and to assist physicians in determining whether a dialysis patient's therapy regimen, diet and medicines remain optimal, Shiel expanded our laboratory services to include clinical anatomic pathology and molecular testing in the New York region.

        OnIn July 1, 2014, we made an investment for a majority interest in Sound, Inpatient Physicians, Inc. ("Sound"), a physician services organization focused on hospitalist and post-acute care services, furthering our strategic investments and expanding the health care services we offer,offer. In May 2014, the Company acquired MedSpring Urgent Care Centers ("MedSpring") with operations in Illinois and in November 2014, Sound acquired Cogent Healthcare ("Cogent"), expanding Sound to serve over 180 hospitals in 35 states with more than 1,750 providers. OnTexas. MedSpring's 14 urgent care centers provide convenient, consistent, high-quality primary care and customer service. In October 21, 2014 we acquired Laurus Healthcare L.P., which does business under the trade name National Cardiovascular Partners ("NCP"). NCP is the leading operator of outpatient cardiac catheterization and vascular laboratories in the U.S. In November 2014, Sound acquired Cogent Healthcare Cogent, expanding Sound to serve over 180 hospitals in 35 states with more than 1,750 providers.

        ForIn November 2016, we acquired Xenios AG, a medical technology company focusing on minimally invasive treatment of lung and cardiac failure.

        The consolidated financial statements and other financial information regardingcontained in this report have been prepared and are presented in accordance with U.S. GAAP, as required by our capital expenditures duringpooling agreement, using the past three years, see 4B, "Information onU.S. dollar as our reporting currency. In accordance with the Company – Business Overview – Capital Expenditures.authorization provided by our shareholders at our AGM held May 12, 2016, in June 2016, we amended the pooling agreement to permit us to prepare the financial statements and other financial information in our reports filed with or furnished to the SEC in accordance with IFRS. See Item 16G, Corporate Governance, "Description of the Pooling Arrangements." On December 1, 2016, we announced that commencing with our quarterly report to be filed for the first quarter of 2017, such financial statements and financial information will be prepared in accordance with IFRS, using the euro as our reporting currency.

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B.    Business Overview

Our Business

        We are the world's largest kidney dialysis company.company, based on publicly reported sales and number of patients treated. We provide dialysis care and related services related to the dialysis treatment a patient with end-stage renal disease ("ESRD") receivespersons who suffer from ESRD as well as other health care services. We describe our other health care services as "Care Coordination." Care Coordination services include pharmacy services, vascular, cardiovascular and endovascular specialty services, non-dialysis laboratory testing services, physician services, hospitalist and intensivist services, health plan services and urgent care services, which, together with dialysis care services represent our health care services. We also develop and manufacture a full range of dialysis machines, systems and disposable products, which we sell to customers in more than 120 countries.countries and also use in our internal health care service operations. Our dialysis business is therefore vertically integrated. We describe our other health care services as Care Coordination. Care Coordination currently includes coordinated delivery of pharmacy services, vascular, cardiovascular and endovascular specialty services, non-dialysis laboratory testing services, physician services, hospitalist and intensivist services, health plan services, ambulatory surgery center services and urgent care services, which, together with dialysis care services represent our health care services. A visualsummary representation of our services and products is as followsfollows:

        Our dialysis business is vertically integrated, providing dialysis treatment at our own dialysis clinics and supplying these clinics with a broad range of products. In addition, we sell dialysis products to other dialysis service providers. Based on publicly reported sales and number of patients treated, our health care operations in dialysis services and dialysis products make us the world's largest kidney dialysis company. At December 31, 2014, we provided dialysis treatment to 286,312 patients in 3,361 clinics worldwide, located in more than 45 countries. In the U.S. we also provide inpatient dialysis services and other services under contract to hospitals. In 2014, we provided 42,744,977 million dialysis treatments, an increase of approximately 6% compared to 2013. For further discussion of revenues relating to Care Coordination, see Item 5.A, "Operating and Financial Review and Prospects – Results of Operations – Year ended

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December 31, 2014 Compared to Year Ended December 31, 2013." For further discussion of the Company's services, see Item 4, "Information on the Company – Business Overview – Health Care"). For the year ended December 31, 2014,2016, we had net revenues of $15.8$17.9 billion, an 8%a 7% increase (10%(8% in constant currency, see itemItem 5, "Operating and Financial Review and Prospects – Non U.S. GAAP Measures for Presentation – Constant Currency") over 20132015 revenues. WeIn 2016, we derived 66%72% of our revenues in 2014 from our North America Segment, and 34%15% from our InternationalEMEA Segment, which include9% from our operations in Europe (20%),Asia-Pacific Segment and 4% from our Latin America (5%) and Asia-Pacific (9%).Segment.

        Our Ordinary shares are listed on the Frankfurt Stock Exchange and American Depositary Receipts evidencing our Ordinary shares on the New York Stock Exchange, and on February 18, 2015,At December 31, 2016, we had a market capitalization of $22.2 billion.

        We use the insight we gain when treatingprovided dialysis treatment to 308,471 patients in developing new and improved products. We believe that our size, our activities3,624 clinics worldwide, located in both health care services andmore than 45 countries. In 2016, we provided 46,529,154 dialysis products as well as our concentration in specific geographic areas allow us to operate more cost-effectively than many of our competitors.

        We estimate the volume of the global dialysis market was approximately $77 billion for 2014,treatments, an increase of 1%4% compared to the previous year (4% increase in constant currency terms). Approximately $63 billion represents dialysis services, including the administration2015.

Table of dialysis drugs, and approximately $14 billion represents sales of dialysis products.Contents

        The following table summarizes net revenues for our North America Segment, EMEA Segment, Asia-Pacific Segment and our InternationalLatin America Segment in our major categories of activity, health care services and dialysis products for the three years ended December 31, 2014, 20132016, 2015 and 2012.2014.

        We receive a substantial portion of our North America segment revenue from the U.S. Medicare program and other government sources. The following table provides information for the years ended December 31, 2016, 2015 and 2014 regarding the percentage of our U.S. patient service revenue (net of contractual allowance and discounts but before patient service bad debt provision), included in our Health Care Services – Renal Industry Overview
revenue from: (a) the Medicare program, (b) private/alternative payors, such as commercial insurance and private funds, (c) Medicaid and other government sources and (d) hospitals.

        We offer life-maintaining and life-savingUnder the Medicare program, Medicare reimburses dialysis services and dialysis products in a market which is characterized by favorable demographic development. As a global market leader in dialysis products and dialysis care services, FMC-AG & Co. KGaA considers it important to possess accurate and current information on the status and development of the global, regional and national markets.

        To obtain and manage this information, FMC-AG & Co. KGaA has developed an internal information tool called Market & Competitor Survey ("MCS"). The MCS is used within the Company as a tool to collect, analyze and communicate current and essential information on the dialysis market, developing trends, the market position of FMC-AG & Co. KGaA and those of its competitors. Country – by – country surveys are performed at the end of each calendar year which focus on the total number of patients treatedproviders for ESRD, the treatment modality selected, products used, treatment location and the structure of ESRD patient care providers. The survey has been refined over the years to facilitate access to more detailed information and to reflect changes in the development of therapies and products as well as changes to the structure of our competitive environment. The questionnaires are distributed to professionals in the field of dialysiscertain individuals who are in a position to provide ESRD-relevant country specific information themselvesdiagnosed as having ESRD, regardless of age or who can coordinate appropriate input from contacts with the relevant know-how in each country. The surveys are then centrally validatedfinancial circumstances. See "Regulatory and checked for consistency by cross-referencing them with the most recent sources of national ESRD information (e.g. registry data or publications if available) and with the results of surveys performed in previous years. All information received is consolidated at a global and regional level and analyzed and reported together with publicly available information published by our competitors. While we believe the information contained in our surveys and competitor publications to be reliable, we have not independently verified the data or any assumptions from which our MCS is derived or on which the estimates they contain are based, and we do not make any representation as to the accuracy of such information.

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        Except as otherwise specified below, all patient and market data in this report have been derived using our MCS.Legal Matters – Reimbursement."

End-Stage Renal DiseaseOur Services, Products and Business Processes

        ESRD is the stage of advanced chronic kidney disease characterized by the irreversible loss of kidney function and requires regular dialysis treatment or kidney transplantation to sustain life. A normally functioning human kidney removes waste products and excess water from the blood, which prevents toxin buildup, water overload and the eventual poisoning of the body. Most patients suffering from ESRD must rely on dialysis, which is the removal of toxic waste products and excess fluids from the body by artificial means. A number of conditions – diabetes, hypertension, glomerulonephritis and inherited diseases – can cause chronic kidney disease. The majority of people with ESRD acquire the disease as a complication of one or more of these primary conditions.

        There are currently only two methods for treating ESRD: dialysis and kidney transplantation. ScarcityDue to the scarcity of compatible kidneys limits transplants. Therefore,for transplant, most patients suffering from ESRD rely on dialysis.

        We estimate that atAt the end of 2014, there were approximately 3.372016, about 3.0 million ESRD patients worldwide, of which approximately 706,000 were living with a transplanted kidney.regularly underwent dialysis worldwide. For many years the number of donated organs worldwide has continued to be significantly lower than the number of patients on transplant waiting lists. Despite ongoing efforts by many regional initiatives to increase awareness of and willingness for kidney donation, the distribution of patientsdialysis treatment, we distinguish between the various treatment modes has remained nearly unchanged over the past ten years. In the U.S., approximately 32% of all ESRD patients live with a functioning kidney transplant and in Germany approximately 29% of all ESRD patients live with a functioning kidney transplant.

        There are two major dialysis methods commonly used today,types: hemodialysis ("HD") and peritoneal dialysis ("PD"). These are described below under "Dialysis Treatment Options for ESRD." OfIn HD, a hemodialysis machine controls the estimated 2.67 million dialysis patients treated in 2014, approximately 2.38 million received HD and about 289,000 received PD. Generally, an ESRD patient's physician, in consultation withflow of blood from the patient, chooses the patient treatment method, whichblood is based on the patient's medical conditions and needs. The numbercleansed by means of dialysis patients grew by approximately 6% in 2014.a

        The present annual patient growth rate in North America, the largest dialysis market, is approximately 4% per year, while in the International Segment we see average annual growth rates of approximately 6%. We believe that worldwide patient growth will continue at around 6% per year. At the end of 2014, there were approximately 596,000 patients in North America (including Mexico), approximately 666,000 patients in Europe, the Middle East and Africa, approximately 265,000 patients in Latin America (excluding Mexico), and approximately 1,138,000 patients in Asia.

        In recent years, the gap between patient numbers and patient number growth rates reported by the two leading U.S. data sources has widened, accompanied by a significant time lag in reporting this data. The Company is currently analyzing this situation to determine if its methods for accumulating current U.S. market patient number estimates and projections should be refined. This could lead to a restatement of both reported patient numbers as well as growth rates for the North American market in the future. This will not impact the patients treated in the Company's facilities or the number of treatments performed by the Company.

        Dialysis patient growth rates vary significantly from region to region. The U.S. and parts of Asia, as well as Western and Central Europe, where patients with terminal kidney failure have had readily available access to treatment, usually dialysis, for many years, all experience below average increases in the number of patients. In contrast, growth rates in the economically weaker regions were above average, reaching double digit figures in some cases. This indicates that accessibility to treatment is still somewhat limited in these countries, but is gradually improving.

        We estimate that about 22% of worldwide patients are treated in North America and around 25% in Europe, the Middle East and Africa, approximately 10% in Latin America and approximately 43% in Asia-Pacific.

        We believe that the continuing growth in the number of dialysis patients is principally attributable to:

•

increased general life expectancy and the overall aging of the general population;



•

the continuing shortage of donor organs for kidney transplants;

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specially designed filter known as a dialyzer and then pumped back into the body. With PD, the patient introduces a dialysis solution into his or her abdominal cavity and the patient's peritoneum is used as a dialyzing membrane. We provide dialysis services and products for both therapy methods. As a leading global healthcare company, we offer health care services and products in more than 120 countries around the world with a focus on the following areas:

•

improved dialysis technology that makes life-prolonging dialysis available to a larger patient population;Hemodialysis – treatment in specialized clinics



•

greater access to treatment in developing countries; andPeritoneal dialysis – treatments largely administered by patients



•

lifestyle choices such as obesity, lackHome hemodialysis – a niche market



•

Acute dialysis – in case of exercise and poor diet, causing increased prevalencea sudden loss of hypertension, diabetes and other illnesses that lead to ESRD, combined with better treatment and survival of patients with these conditions.renal function, typically in a hospital inpatient setting



•

Dialysis drugs – expanding our product range



•

Additional services under Care Coordination

Dialysis Treatment Options for ESRD

        Hemodialysis.    Hemodialysis removes toxins and excess fluids from the blood in a process in which the blood flows outside the body through plastic tubes known as bloodlines into a specially designed filter, called a dialyzer. The dialyzer separates waste products and excess water from the blood. Dialysis solution flowing through the dialyzer carries away the waste products and excess water, and supplements the blood with solutes which must be added due to renal failure. The treated blood is returned to the patient. The hemodialysis machine pumps blood, adds anti-coagulants, regulates the purification process and controls the mixing of dialysis solution and the rate of its flow through the system. This machine can also monitor and record the patient's vital signs.

        The majority of hemodialysis patients receive treatment at outpatient dialysis clinics, such as ours, where hemodialysis treatments are performed with the assistance of a nurse or dialysis technician under the general supervision of a physician. Hemodialysis patients generally receive treatment three times per week, typically for three to five hours per treatment.

        Patients can receive treatment at a clinic run by (1) a public center (government or government subsidiary owned/run), (2) a healthcare organization (non-profit organizations for public benefit purposes), (3) a private center (owned or run by individual doctors or a group of doctors) or (4) a company-owned clinic, including multi-clinic providers (owned or run by a company such as FMC-AG & Co. KGaA). The organization of the centers also differs significantly depending on whether the healthcare system in the relevant country is mainly state-run or privately operated. There were approximately 6,900 clinics in North America in 2014 with approximately 18% of patients receiving care in public centers. In 2014, there were approximately 10,600 dialysis clinics in Europe, the Middle East and Africa treating dialysis patients, where approximately 60% of dialysis patients received care through public centers, approximately 23% through private centers and approximately 17% through company-owned clinics, such as ours. In Latin America, there were 2,400 clinics where approximately 16% of all dialysis patients received care through public centers, 22% received care through company owned clinics and 62% received care through private centers. In Asia-Pacific, there were approximately 16,800 clinics where approximately 51% of all dialysis patients received care through public centers, 6% received care through company owned clinics and 43% received care through private centers.

        Among company-owned clinics, the two largest providers are FMC-AG & Co. KGaA, caring for approximately 285,000 patients and DaVita, caring for approximately 178,000 patients at the end of 2014. All other company-owned clinics care for approximately 30,000 or less patients each.

        Of the approximately 2.67 million patients who received dialysis care in 2014, more than 89% were treated with hemodialysis. Hemodialysis patients represented about 92% of all dialysis patients in the U.S., 92% in the E.U. and 88% in the rest of the world. Based on these data, it is clear that hemodialysis is the dominant therapy method worldwide.

        Peritoneal Dialysis.    Peritoneal dialysis removes toxins from the blood using the peritoneum, the membrane lining covering the internal organs located in the abdominal area, as a filter. Most peritoneal dialysis patients administer their own treatments in their own homes and workplaces, either by a treatment known as continuous ambulatory peritoneal dialysis ("CAPD") or automated peritoneal dialysis ("APD"), or by a treatment known as continuous cycling peritoneal dialysis ("CCPD"), also called automated peritoneal dialysis ("APD"). In both of these treatments, a surgically implanted catheter provides access to the peritoneal cavity. Using this catheter, the patient introduces a sterile dialysis solution from a solution bag through a tube into the peritoneal cavity. The peritoneum operates as the filtering membrane and, after a specified dwell time, the solution is drained and disposed. A typical CAPD peritoneal dialysis program involves the introduction and disposal of dialysis solution four times a day. With CCPD, a machine pumps or "cycles" solution to and from the patient's peritoneal cavity while the patient sleeps. During the day, one and a half to two liters of dialysis solution remain in the abdominal cavity of the patient. The human peritoneum can be used as a dialyzer only for a limited period of time, ideally only if the kidneys are still functioning to some extent.

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Our Strategy and Competitive Strengths

Company Strategy

        We focus our business activities on our patients' health and hence on the quality of treatment and our products with the objective of improving their quality of life and raising their life expectancy. Our aim is to maintain our position as the world's leading provider of dialysis treatment and products and to use that position as a basis for sustainable, profitable growth. In this way, we seek to continuously increase the enterprise value of the Company and create added value for patients, healthcare systems and investors worldwide.

        Our strategy takes into account concrete, measurable growth targets as well as long-term trend forecasts in the dialysis market. The Management Board uses a number of different tools and indicators to evaluate our business performance, develop our strategy and make investment decisions. See Item 5, "Operating and Financial Review and Prospects." We expect not only the number of patients to increase but also the quality of services provided and of the products available to become even more important in the future with improved access to medical care. We believe comprehensive care, a more holistic approach to address the needs of our kidney patients, is another area that will continue to grow in the future. In response to this, we will not only focus our business on individual services or dialysis products, but also on combining the different areas of application related to dialysis, such as combining treatment concepts with dialysis drugs.

Pillars for Strategic Growth

        We rely upon four strategic operational pillars that govern the Company's primary strategy and activities and position us to achieve our growth and profitability objectives. Our four strategic pillars are described below:

(1)    Continuous Growth and Expansion

        We are committed to shaping the development of the dialysis industry by giving more people access to life-saving dialysis treatment, as well as developing innovative products and therapies that improve our patients' quality of life. This includes our execution of strategic alliances with various healthcare institutions, which help to shape the development of the industry, while benefitting from the global growth of the market. To strengthen our market position, we have developed various approaches ranging from organic growth to the continuous assessment of acquisitions and partnerships that create synergies with our existing products and services.

        To accomplish lasting, profitable growth we are also steering our business activities towards attractive future markets. This includes expanding our presence through public private partnerships ("PPP") in the dialysis business. We are already involved in several PPP initiatives in Europe, Africa, Asia and Australia with the intent to further expand these strategic alliances in the future.

(2)    Development of New Business Areas

        Our main focus continues to be on comprehensive care for dialysis patients and dialysis-related treatments. In many regions, in addition to our products and dialysis treatments, we offer an increasing amount of additional health care services which have been aligned in 2014 under the title Care Coordination, as described above. We continue to develop other services to meet the growing demand for the care of patients with chronic kidney disease. Care Coordination will also allow us to expand into new business areas and meet the growing demand for quality health care services, in general.

(3)    Enhancing Products and Services

        Our sustainable growth strategy includes the development of innovative products and continuous improvement for dialysis treatments. We benefit from the vertically-integrated structure of our Company, which enables our Research & Development division to apply our experience as the world's largest provider of dialysis treatments to product development, and our technical department benefits from our daily practical experience as a provider of dialysis treatment and being directly in-touch with doctors, nurses and patients to keep track of and meet customer and patient needs.

        Chronic kidney failure is a global problem, with demand for improved, high-quality yet cost-efficient products growing worldwide. Our Global Research and Development department was reorganized in 2013.

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The reorganization has leveraged synergies for product development that will allow us to address this global need. Our research also focuses on the vital aspects of the quality and safety of our products and services. This continued focus on quality makes us a reliable partner for patients, doctors, and care staff alike. We continue to operate local research and development sites in our global network which provides us with an advantage to familiarize ourselves with local requirements and respond to them quickly.

(4)    Fostering Operational Excellence

        In a challenging economic environment, we also place importance on enhancing our profitability in the long term, while positioning and managing the Company more efficiently. We consider this as we optimize and modernize our administrative structures and processes and make greater use of synergies, building on the benefits realized through the establishment of our Global Manufacturing Operations and Global Research & Development divisions. This will enable us to meet the increased demand for our products and services and create a flexible environment which fosters rapid response to changes in the dialysis market. At the same time, we have benefited, and will continue to benefit, from our decentralized structure, allowing us to remain a reliable local partner in patient treatment by providing quick responses to customer specific needs, and changes to local market and regulatory environment. We believe this flexibility coupled with our localized decision making structure helps us to gain access to new markets. Additionally, we launched a global efficiency program in 2013 with the aim of gaining Company-wide cost reductions. We expect these efficiencies to result in $300 million per year of sustained savings before tax beginning in 2017.

Vision 2020

        Based on this strategic focus, we set new long-term targets in April 2014 and announced our growth strategy for 2020. This strategy aims to increase the Company's revenues to $28 billion by fiscal year 2020, corresponding to an average annual growth rate of approximately 10%. In addition to the growth of our core ESRD business, we expect this growth in revenue to be driven by Care Coordination. The percentage share of the Company's total net revenue attributable to Care Coordination is expected to rise from 7% in 2014 to approximately 18% in 2020. Overall growth in net revenue will be driven by both organic growth and through acquisitions.

Health Care Services – Dialysis Care

Dialysis Services

        We provide dialysis treatment and related laboratory and diagnostic services through our global network of 3,361more than 3,600 outpatient dialysis clinics, 2,162 of which are in the North America Segment (including Mexico) and 1,199 of which are in more than 45 countries outside of North America. Our operations within the North America Segment generated 79% of our 2014 health care revenue and our operations outside the North America Segment generated 21%. Our dialysis clinics are generally concentrated in areas of high population density. In 2014, we acquired a total of 95 existing clinics, opened 79 new clinics and sold or consolidated 63 clinics. The number of patients we treat at our clinics worldwide increased by about 6%, from 270,122 at December 31, 2013 to 286,312 at December 31, 2014. For 2014, health care services accounted for 77% of our total revenue.

        With our large patient population, we have developed proprietary patient statistical databases which enable us to improve dialysis treatment outcomes, and further improve the quality and effectiveness of dialysis products. We believe that local physicians, hospitals and managed care plans refer their ESRD patients to our clinics for treatment due to:

•

our reputation for quality patient care and treatment;



•

our extensive network of dialysis clinics, which enables physicians to refer their patients to conveniently located clinics; and



•

our reputation for technologically advanced products for dialysis treatment.

At our clinics, we provide hemodialysis treatments at individual stations through the use of dialysis machines and disposable products. AIn hemodialysis treatment, a nurse attachesconnects the patient to the dialysis machine with the necessary tubing, to the patient and the dialysis machineknown as bloodlines, and monitors the dialysis equipment and the patient's vital signs. The capacity of a clinic is a function of the number of stations and additional factors such factors as type of treatment, patient requirements, length of time per treatment, and local operating practices and ordinances regulating hours of operation.

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        Each of our dialysis clinics is under the general supervision of a physician medical director. (See "Patients, Physician and Other Relationships.") Each dialysis clinic also has an administrator or clinical manager who supervises the day-to-day operations of the facility and the staff. The staff typically consists of registered nurses and licensed practical nurses. Our North America Segment clinics also employ patient care technicians, a social worker, a registered dietician, a unit clerk and biomedical technicians, while in some countries within our International Segment, the staff also includes technicians, social workers and dieticians.

        As part of the dialysis therapy, we provide a variety of services to ESRD patients at our dialysis clinics in the U.S. These services include administering erythropoietin stimulating agents, or ESAs, which are synthetic engineered hormones that stimulate the production of red blood cells. ESAs are used to treat anemia, a medical complication that ESRD patients frequently experience. We administer ESAs to most of our patients in the U.S. Any interruption in supply of ESAs could materially adversely affect our business, financial condition and results of operations. A material increase in our utilization or acquisition cost for EPOESAs without an increase in the Medicare ESRD PPSprospective payment system ("ESRD PPS") bundled reimbursement rate, could materially adversely affect our financial condition and results of operations.

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        Our clinics also offer services for home dialysis patients, the majority of whom receive peritonealPD dialysis treatment. For thosethese patients, we provide materials, training and patient support services, including clinical monitoring, follow-up assistance and arranging for delivery of the supplies to the patient's residence. (See "– Regulatory and Legal Matters – Reimbursement – U.S." for a discussion of the ESRD PPS and billing for these products and services.)

        We also provide dialysis services under contract to hospitals in the U.S. on an "as needed" basis for hospitalized ESRD patients and for patients suffering from acute kidney failure. Acute kidney failure can result from trauma, or similar causes, and requires dialysis until the patient's kidneys recover their normal function. We serviceprovide services to these patients either at their bedside, using portable dialysis equipment, or at the hospital's dialysis site. Contracts with hospitals provide for payment at negotiated rates that are generally higher than the Medicare reimbursement rates for chronic in-clinic outpatient treatments.

Dialysis Products

        Based on internal estimates prepared using our MCS (see "Major Markets and Competitive Position," below), publicly available market data and our data of significant competitors, we are the world's largest manufacturer and distributor of equipment and related products for hemodialysis and the second largest manufacturer and distributer of peritoneal dialysis products, measured by publicly reported revenues. We employsupply dialysis products to our dialysis clinics and we also sell our dialysis products directly and through distributors in more than 120 countries. Most of our customers are dialysis clinics. For the year 2016, dialysis products accounted for 19% of our total revenue.

        We produce and distribute a centralized approachwide range of machines and disposables for HD, PD and acute dialysis. The following table shows the breakdown of our dialysis product revenues into sales of HD products, PD dialysis products and other dialysis products. The following amounts exclude intercompany product sales:

Hemodialysis Products

        Our advanced line of hemodialysis machines includes three series. We developed the 4008 and 5008 Series for our markets outside of North America and the 2008 Series for the North American market. In 2016, we introduced the series 6008 with the launch of our 6008 CAREsystem (see Item 5.VII, "Operating and Financial Review and Prospects – Research and Development"). Our various models of these machine series utilize our latest research and development efforts to improve the dialysis process for our patients. Examples of these improvements include the addition of Clinical Data eXchange™ (CDX), which allows the clinician to access MIS (Medical Information System) data directly from the dialysis station. In addition, the 2008K@home Wet Alert option provides a wireless wetness detector for the identification of blood leakage during dialysis.

        Other features of our dialysis machines include:

•

Volumetric dialysate balancing and ultrafiltration control system



•

Compatibility with all manufacturers' dialyzers and a variety of bloodlines and dialysis solutions



•

Modular design



•

Sophisticated microprocessor controls, touch screen interfaces, displays and/or readout panels that are adaptable to local language requirements



•

Auto Flow and Idle mode enable dialysate savings

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•

Battery backup which continues operations of the blood circuit and all protective systems up to 20 minutes following a power failure



•

Online clearance, measurement of dialyzer clearance for quality assurance with On-Line Clearance monitoring



•

Eliminates the loss of valuable treatment space allocated to MIS systems and carts



•

bibag® Online Dry Bicarbonate Concentrate system, which produces bicarbonate concentrate directly in the machine eliminating the need for liquid bicarbonate jugs or a central bicarbonate system



•

Online data collection capabilities and computer interfacing with our Therapy Data Management System and/or medical information systems



•

Monitor and assess prescribed therapy



•

Connect a large number of hemodialysis machines and peripheral devices, such as patient scales, blood chemistry analyzers and blood pressure monitors, to a computer network



•

Enter nursing records automatically at bedside



•

Adapt to new data processing devices and trends



•

Perform home hemodialysis with remote monitoring by a staff caregiver



•

Record and analyze trends in medical outcome factors in hemodialysis patients.

Dialyzers

        Dialyzers are specialized filters that remove waste products, toxins and excess water from the blood during dialysis. We estimate that we are the leading worldwide producer of polysulfone dialyzers. We manufacture our F-Series and premium FX class® series of dialyzers and our Optiflux® polysulfone single-use dialyzer using hollow fiber Fresenius Polysulfone® and Helixone® membranes from synthetic materials. Our FX CorDiax dialyzer contains the Helixone®plus high performance membrane. The Helixone®plus membrane selectively filters out toxins such as phosphates to reduce the risk of cardiovascular disease.

Peritoneal Dialysis Products

        We offer a full line of peritoneal dialysis systems and solutions for both CAPD and APD treatments.

        CAPD Therapy: The stay·safe® system has been specifically designed to help patients with their daily self-care CAPD treatment in a safe and convenient way. Our CAPD products have a number of advantages for patients including:

•

Fewer possibilities for touch contamination.  Our unique PIN and DISC technology simplifies the fluid exchange and minimizes the risk of infection, particularly in the disconnection step in which the stay·safe® patient connector is closed automatically without any direct touch intervention.



•

Optimal biocompatibility.  Outside of the North America Segment, our PD stay·safe® balance and stay·safe® bicaVera® solutions are pH neutral and have ultra-low glucose degradation product contents reducing the advanced glycation end product ("AGE") formation and aiming for better preservation of the peritoneal membrane and allowing for the protection of residual renal function of PD patients.



•

Environmentally friendly material:  Outside of the North America Segment, our stay·safe® system is made of Biofine®, a material developed by Fresenius, which upon combustion is reduced to carbon dioxide and is PVC and plasticizer free. Biofine® requires less energy to manufacture, generates less waste and is easy to recycle.

        APD Therapy: The effectiveness of APD therapy depends on the solution dwell time in the abdomen, the composition of the solution used, the volume of solution and the duration of the treatment, usually 8 - 10 hours. APD using our product line, which includes oursleep·safe cycler, sleep·safe harmony cycler and Liberty® cycler, offers a number of benefits to PD patients:

•

Improved quality of life.  The patient is treated at night and can lead a more normal life during the day without fluid exchange every few hours.

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•

Improved adequacy of dialysis.  By adjusting the parameters of treatment, it is possible to provide more dialysis to the patient compared to CAPD therapy. This therapy offers important options to physicians such as improving the delivered dose of dialysis for certain patients.



•

Personalized adapted APD.sleep·safe cycler andsleep·safe harmony cyclers allow patients to be treated using a modified version of APD where short dwell times with small fill volumes are used first to promote ultrafiltration and subsequently longer dwell times and larger fill volumes promote the removal of uremic toxins from the blood.



•

Patient Management Software:  We have developed specific patient management software tools to support both CAPD and APD therapies in the different regions of the world. These include: PatientOnLine, IQsystem® and Pack-PD®. These tools can be used by physicians and nurses to design and monitor treatment protocols thus ensuring that therapy is optimized and that patient care is maximized.

Renal Pharmaceuticals

        We continue to develop, acquire and in-license renal pharmaceuticals to improve dialysis treatment for our patients. Below are the primary renal pharmaceuticals we have developed or for which we have obtained licenses for use:

PhosLo®

        In November 2006, we acquired PhosLo®, a calcium-based phosphate binder. We have received approval of PhosLo® in selected European countries. In October 2008, a competitive generic phosphate binder was introduced in the U.S. with respectmarket, which reduced our PhosLo® sales in 2009. In October 2009, we launched an authorized generic version of PhosLo® to certain administrative functions commoncompete in the generic calcium acetate market. In April 2011, the FDA approved our New Drug Application (NDA) for Phoslyra®, a liquid formulation of PhosLo®, and we continue to our operations. For example, each dialysis clinic uses our proprietary manuals containing our standardized operatingcommercialize this product in the U.S. market.

Venofer® and billing procedures. We believe that centralizing and standardizing these functions enhance our ability to perform services on a cost-effective basis.Ferinject®

        The mannerIn 2008, we entered into two separate and independent license and distribution agreements, one for certain countries in which each clinic conducts its business depends, in large part, upon applicable laws, rulesEurope and regulationsthe Middle East (with Galenica AG and Vifor (International) AG) and one for the U.S. (with Luitpold Pharmaceuticals Inc. and American Regent, Inc.), to market and distribute intravenous iron products, such as Venofer® (iron sucrose) and Ferinject® (ferric carboxymaltose) (outside of the jurisdiction in which the clinic is located,U.S.). Both drugs are used to treat iron deficiency anemia experienced by non-dialysis CKD (chronic kidney disease) patients as well as dialysis patients. Venofer® is the leading intravenous iron product worldwide. The first agreement concerns all commercialization activities for these intravenous iron products in the field of dialysis and became effective on January 1, 2009. In North America, a separate license agreement effective November 1, 2008 provides our clinical policies. However,subsidiary Fresenius USA Manufacturing Inc. ("FUSA") with exclusive rights to manufacture and distribute Venofer® to freestanding (non-hospital based) U.S. dialysis facilities and, in addition, grants FUSA similar rights for certain new formulations of the drug. The U.S. license agreement has a patient's attending physician, who may be the clinic's medical director or an unaffiliated physician with staff privileges at the clinic,term of ten years and includes FUSA extension options. The international agreement has medical discretion to prescribe the particular treatment modality and medications for that patient. Similarly, the attending physician has discretion in prescribing particular medical products, although the clinic typically purchases equipment, regardlessa term of brand, in consultation with its medical director.20 years.

        In December 2010, we announced the more than 45 countriesexpansion of our agreements with Galenica by forming a new renal pharmaceutical company, VFMCRP, with the intention to develop and distribute products to treat iron deficiency anemia and bone mineral metabolism for pre-dialysis and dialysis patients. FMC-AG & Co. KGaA owns 45% of the company which is headquartered in Switzerland. Galenica contributed licenses (or the commercial benefit in the U.S.) to its Venofer® and Ferinject® products for use in the dialysis and pre-dialysis market (CKD stages III to V). Vifor Pharma, the pharmaceutical division of Galenica and its existing key affiliates or partners retain the responsibility for commercialization of both of these products outside the renal field.

Velphoro®

        As part of the agreement to create VFMCRP, Galenica also contributed to the new company the asset (excluding Japan) Velphoro®, a novel iron-based phosphate binder. Fresenius Medical Care North America ("FMCNA") markets the product on behalf of VFMCRP in which we currently operate or manage dialysis clinics we face legal, regulatorythe U.S. and economic environments varying significantly from country to country. These individual environments can affect all aspectscommercial sales of providing dialysis services including our legal status,Velphoro® commenced in the extent to which we can provide dialysis services,first quarter of 2014 in the way we have to organize these servicesU.S. market. The product for the U.S. market is supplied by an FDA approved, Vifor manufacturing facility in Switzerland and the system under which we are reimbursed. (See "– Regulatory and Legal Matters – Reimbursement – International (Including Germany and Other Non-U.S.)" for further discussion of reimbursement.) Our approach to managing this complexity utilizes local management to ensure the strict adherence to the individual country rules and regulations and international functional departments supporting country management with processes and guidelines enabling the delivery of the highest possible quality level of dialysis treatment. We believe that with this bi-dimensional organization we will be able to provide superior care to dialysis patients under the varying local frameworks leading to improved patient well-being and to lower social cost.an FDA approved contract

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manufacturer also located in Switzerland. Velphoro has also been approved in Europe via the central approval process and has been commercially launched in Germany, the United Kingdom, Sweden, Denmark, the Netherlands, Belgium and Switzerland. Velphoro has also been approved in France, Italy and Spain. The VFMCRP partner Kissei also received approval from the Ministry of Health, Labour and Welfare in Japan during 2015 for the product which is marketed in Japan under the brand name P-TOL.

OsvaRen® and Phosphosorb®

        In June 2015, we further developed our joint venture, VFMCRP, with Galenica. In addition to the iron replacement products Ferinject® and Venofer® for use in nephrology indications as well as the phosphate binder Velphoro® in our shared product portfolio, VFMCRP acquired nephrology medicines commercialized by us, including the phosphate binders OsvaRen® and Phosphosorb®. The transfer of the marketing rights was largely completed during the fourth quarter of 2015, allowing the joint venture to further develop its sales and marketing in key European markets.Other Health For more information on the transfer please see Note 2 in the Notes to the Consolidated Financial Statements, "Related Party Transactions," included in this report.

Care ServicesCoordination

Laboratory Services

        Through Spectra Laboratories ("Spectra") and Shiel Laboratories ("Shiel") weWe provide full service laboratories that support the needs of our patients in the U.S. and we also provide laboratory testing for others in the U.S. Spectra provides blood, urine and other bodily fluid testing services to determine the appropriate individual dialysis therapy for a patient and to assist physicians in determining whether a dialysis patient's therapy regimen, diet and medicines remain optimal. Shiel expands our laboratory services to include general testing, clinical anatomic pathology and molecular testing for health care providers in the New York region.

Pharmacy Services

        We offer pharmacy services, mainly in the U.S. These services include deliveringproviding renal medications and supplies to the homes of patients or to their dialysis clinic directly from renal pharmacists who are specially trained in treating and counseling patients living with kidney disease. We also actively support education and compliance with phosphate binders and other medications for bone and mineral metabolism.

Vascular, Cardiovascular and Endovascular Specialty Services

        We haveoperate vascular access centers mainly in the U.S. but we also operate clinics in Portugal and Taiwan. Dialysis requires access to the bloodstream, which is accomplished by catheters, grafts, or arteriovenous fistulas. Patients receiving hemodialysis need to have a vascular access site put inimplanted before their dialysis therapy starts in order forto enable their blood to exit their bodies to our dialysis machines for cleansing and to filter their blood and return the newly cleaned blood into their bodies. Vascular access is necessary because human veins are too small; the surgery usually joins together an artery and a vein to create a vein strong enough to receive the hemodialysis needles. In addition, the vascular access centers provide services to address peripheral artery disease, which is common in dialysis patients. As a result of an acquisition in 2014, we expandedAdditionally, our vascular access services toinclude both cardiovascular and endovascular specialty services. Cardiovascular procedures are similar to the vascular access procedures discussed above with a focus on treatment for heart disease, while endovascular surgical procedures are minimally invasive and designed to access many regions of the body via major blood vessels and assist in both the maintenance of hemodialysis accesses and other non-dialysis medical operations.

HospitalistDialysis Products

        Based on internal estimates prepared using our MCS (see "Major Markets and Intensivist ServicesCompetitive Position," below), publicly available market data and our data of significant competitors, we are the world's largest manufacturer and distributor of equipment and related products for hemodialysis and the second largest manufacturer and distributer of peritoneal dialysis products, measured by publicly reported revenues. We supply dialysis products to our dialysis clinics and we also sell our dialysis products directly and through distributors in more than 120 countries. Most of our customers are dialysis clinics. For the year 2016, dialysis products accounted for 19% of our total revenue.

        We produce and distribute a wide range of machines and disposables for HD, PD and acute dialysis. The following table shows the breakdown of our dialysis product revenues into sales of HD products, PD dialysis products and other dialysis products. The following amounts exclude intercompany product sales:

Hemodialysis Products

        Our advanced line of hemodialysis machines includes three series. We developed the 4008 and 5008 Series for our markets outside of North America and the 2008 Series for the North American market. In 2016, we introduced the series 6008 with the launch of our 6008 CAREsystem (see Item 5.VII, "Operating and Financial Review and Prospects – Research and Development"). Our various models of these machine series utilize our latest research and development efforts to improve the dialysis process for our patients. Examples of these improvements include the addition of Clinical Data eXchange™ (CDX), which allows the clinician to access MIS (Medical Information System) data directly from the dialysis station. In addition, the 2008K@home Wet Alert option provides a wireless wetness detector for the identification of blood leakage during dialysis.

        Other features of our dialysis machines include:

•

Volumetric dialysate balancing and ultrafiltration control system



•

Compatibility with all manufacturers' dialyzers and a variety of bloodlines and dialysis solutions



•

Modular design



•

Sophisticated microprocessor controls, touch screen interfaces, displays and/or readout panels that are adaptable to local language requirements



•

Auto Flow and Idle mode enable dialysate savings

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•

Battery backup which continues operations of the blood circuit and all protective systems up to 20 minutes following a power failure



•

Online clearance, measurement of dialyzer clearance for quality assurance with On-Line Clearance monitoring



•

Eliminates the loss of valuable treatment space allocated to MIS systems and carts



•

bibag® Online Dry Bicarbonate Concentrate system, which produces bicarbonate concentrate directly in the machine eliminating the need for liquid bicarbonate jugs or a central bicarbonate system



•

Online data collection capabilities and computer interfacing with our Therapy Data Management System and/or medical information systems



•

Monitor and assess prescribed therapy



•

Connect a large number of hemodialysis machines and peripheral devices, such as patient scales, blood chemistry analyzers and blood pressure monitors, to a computer network



•

Enter nursing records automatically at bedside



•

Adapt to new data processing devices and trends



•

Perform home hemodialysis with remote monitoring by a staff caregiver



•

Record and analyze trends in medical outcome factors in hemodialysis patients.

Dialyzers

        Dialyzers are specialized filters that remove waste products, toxins and excess water from the blood during dialysis. We estimate that we are the leading worldwide producer of polysulfone dialyzers. We manufacture our F-Series and premium FX class® series of dialyzers and our Optiflux® polysulfone single-use dialyzer using hollow fiber Fresenius Polysulfone® and Helixone® membranes from synthetic materials. Our FX CorDiax dialyzer contains the Helixone®plus high performance membrane. The Helixone®plus membrane selectively filters out toxins such as phosphates to reduce the risk of cardiovascular disease.

Peritoneal Dialysis Products

        We offer a full line of peritoneal dialysis systems and solutions for both CAPD and APD treatments.

        CAPD Therapy: The stay·safe® system has been specifically designed to help patients with their daily self-care CAPD treatment in a safe and convenient way. Our CAPD products have a number of advantages for patients including:

•

Fewer possibilities for touch contamination.  Our unique PIN and DISC technology simplifies the fluid exchange and minimizes the risk of infection, particularly in the disconnection step in which the stay·safe® patient connector is closed automatically without any direct touch intervention.



•

Optimal biocompatibility.  Outside of the North America Segment, our PD stay·safe® balance and stay·safe® bicaVera® solutions are pH neutral and have ultra-low glucose degradation product contents reducing the advanced glycation end product ("AGE") formation and aiming for better preservation of the peritoneal membrane and allowing for the protection of residual renal function of PD patients.



•

Environmentally friendly material:  Outside of the North America Segment, our stay·safe® system is made of Biofine®, a material developed by Fresenius, which upon combustion is reduced to carbon dioxide and is PVC and plasticizer free. Biofine® requires less energy to manufacture, generates less waste and is easy to recycle.

        APD Therapy: The effectiveness of APD therapy depends on the solution dwell time in the abdomen, the composition of the solution used, the volume of solution and the duration of the treatment, usually 8 - 10 hours. APD using our product line, which includes oursleep·safe cycler, sleep·safe harmony cycler and Liberty® cycler, offers a number of benefits to PD patients:

•

Improved quality of life.  The patient is treated at night and can lead a more normal life during the day without fluid exchange every few hours.

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•

Improved adequacy of dialysis.  By adjusting the parameters of treatment, it is possible to provide hospitalistmore dialysis to the patient compared to CAPD therapy. This therapy offers important options to physicians such as improving the delivered dose of dialysis for certain patients.



•

Personalized adapted APD.sleep·safe cycler and intensivist servicessleep·safe harmony cyclers allow patients to be treated using a modified version of APD where short dwell times with small fill volumes are used first to promote ultrafiltration and subsequently longer dwell times and larger fill volumes promote the removal of uremic toxins from the blood.



•

Patient Management Software:  We have developed specific patient management software tools to support both CAPD and APD therapies in the different regions of the world. These include: PatientOnLine, IQsystem® and Pack-PD®. These tools can be used by physicians and nurses to design and monitor treatment protocols thus ensuring that therapy is optimized and that patient care is maximized.

Renal Pharmaceuticals

        We continue to develop, acquire and in-license renal pharmaceuticals to improve dialysis treatment for our patients. Below are the primary renal pharmaceuticals we have developed or for which we have obtained licenses for use:

PhosLo®

        In November 2006, we acquired PhosLo®, a calcium-based phosphate binder. We have received approval of PhosLo® in selected European countries. In October 2008, a competitive generic phosphate binder was introduced in the U.S. through acquisitions mademarket, which reduced our PhosLo® sales in 2014, including2009. In October 2009, we launched an authorized generic version of PhosLo® to compete in the generic calcium acetate market. In April 2011, the FDA approved our acquisitionNew Drug Application (NDA) for Phoslyra®, a liquid formulation of PhosLo®, and we continue to commercialize this product in the U.S. market.

Venofer® and Ferinject®

        In 2008, we entered into two separate and independent license and distribution agreements, one for certain countries in Europe and the Middle East (with Galenica AG and Vifor (International) AG) and one for the U.S. (with Luitpold Pharmaceuticals Inc. and American Regent, Inc.), to market and distribute intravenous iron products, such as Venofer® (iron sucrose) and Ferinject® (ferric carboxymaltose) (outside of the U.S.). Both drugs are used to treat iron deficiency anemia experienced by non-dialysis CKD (chronic kidney disease) patients as well as dialysis patients. Venofer® is the leading intravenous iron product worldwide. The first agreement concerns all commercialization activities for these intravenous iron products in the field of dialysis and became effective on January 1, 2009. In North America, a controlling interestseparate license agreement effective November 1, 2008 provides our subsidiary Fresenius USA Manufacturing Inc. ("FUSA") with exclusive rights to manufacture and distribute Venofer® to freestanding (non-hospital based) U.S. dialysis facilities and, in Sound. Sound works with physician partners providing care in hospitalsaddition, grants FUSA similar rights for certain new formulations of the drug. The U.S. license agreement has a term of ten years and post-acute care centers acrossincludes FUSA extension options. The international agreement has a term of 20 years.

        In December 2010, we announced the United States. It has pioneered a consistent, patient-centered approach that relies on experienced physician leadership and a web-based workflow platform. On November 21, 2014, Sound acquired Cogent. This acquisition expands our hospitalist services and further positions us to leverage our network of health care centers, renal pharmacy and full service and specialty laboratories to help us better address the full spectrumexpansion of our patients' health care needs. The acquisitionagreements with Galenica by forming a new renal pharmaceutical company, VFMCRP, with the intention to develop and distribute products to treat iron deficiency anemia and bone mineral metabolism for pre-dialysis and dialysis patients. FMC-AG & Co. KGaA owns 45% of Cogent incorporates more than 650 providers who offer hospitalist and intensivist services to more than 80 hospitals throughout the United States. Combined,company which is headquartered in Switzerland. Galenica contributed licenses (or the expanded Sound Physicians organization will now serve over 180 hospitals in 35 states with more than 1,750 providers including physicians and advanced care practitioners focusing on the general medical care of hospitalized patients and the care of critically ill patients, usuallycommercial benefit in the intensive care unit (ICU)U.S.) to its Venofer® and Ferinject® products for use in the caredialysis and pre-dialysis market (CKD stages III to V). Vifor Pharma, the pharmaceutical division of patientsGalenica and its existing key affiliates or partners retain the responsibility for commercialization of both of these products outside the renal field.

Velphoro®

        As part of the agreement to create VFMCRP, Galenica also contributed to the new company the asset (excluding Japan) Velphoro®, a novel iron-based phosphate binder. Fresenius Medical Care North America ("FMCNA") markets the product on behalf of VFMCRP in post-acute centers.the U.S. and commercial sales of Velphoro® commenced in the first quarter of 2014 in the U.S. market. The product for the U.S. market is supplied by an FDA approved, Vifor manufacturing facility in Switzerland and an FDA approved contract

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manufacturer also located in Switzerland. Velphoro has also been approved in Europe via the central approval process and has been commercially launched in Germany, the United Kingdom, Sweden, Denmark, the Netherlands, Belgium and Switzerland. Velphoro has also been approved in France, Italy and Spain. The VFMCRP partner Kissei also received approval from the Ministry of Health, Labour and Welfare in Japan during 2015 for the product which is marketed in Japan under the brand name P-TOL.

Capital ExpendituresOsvaRen® and Phosphosorb®

        We invested,        In June 2015, we further developed our joint venture, VFMCRP, with Galenica. In addition to the iron replacement products Ferinject® and Venofer® for use in nephrology indications as well as the phosphate binder Velphoro® in our shared product portfolio, VFMCRP acquired nephrology medicines commercialized by operating segmentus, including the phosphate binders OsvaRen® and Corporate,Phosphosorb®. The transfer of the gross amounts shown in the table belowmarketing rights was largely completed during the twelve month periods ended December 31, 2014, 2013,fourth quarter of 2015, allowing the joint venture to further develop its sales and 2012.

        For additionalmarketing in key European markets.For more information regarding our capital expenditures,on the transfer please see Item 4. B, "Business Overview – Acquisitions and Investments" and Item 5.B, "Operating and Financial Review and Prospects – Liquidity and Capital Resources"

Acquisitions and Investments

        A significant factor in the growth in our revenue and operating earnings in prior years has been our ability to acquire healthcare businesses, particularly dialysis clinics, on reasonable terms. Worldwide, physicians own many dialysis clinics that are potential acquisition candidates for us. In the U.S., doctors might decide to sell their clinics to obtain relief from day-to-day administrative responsibilities and changing governmental regulations, to focus on patient care and to realize a return on their investment. Outside of the U.S., doctors might determine to sell to us and/or enter into joint ventures or other relationships with us to achieve the same goals and to gain a partner with extensive expertise in dialysis products and services. Privatization of health care in Eastern Europe and Asia could present additional acquisition opportunities. We believe we are also viewed as a valuable strategic health care partner outside the dialysis business due to our experience in managing chronic disease for dialysis patients and our record of improving quality and patient satisfaction and reducing the overall cost of care, and our leadership in advancing innovation and improvement in health care.

        During 2014 and 2013, we had total cash and non-cash acquisitions and investments of $1,987 million and $563 million, respectively. Of the total 2014 acquisitions and investments, we completed investments to become majority shareholder of Sound, which itself acquired Cogent to expand further into hospitalist and intensivist services, and we acquired NCP to expand our services into cardiovascular and endovascular specialty services, (see "– Other Health Care Services" and Note 2 ofin the Notes to the Consolidated Financial Statements, "Acquisitions, Investments"Related Party Transactions," included in this report.

Care Coordination

Laboratory Services

        We provide general testing, clinical anatomic pathology and Purchases of Intangible Assets").molecular testing for health care providers in the New York region.

Pharmacy Services

        We acquired urgent care centersoffer pharmacy services, mainly in the U.S. These services include providing renal medications and continuedsupplies to enhance our presence outsidethe homes of patients or to their dialysis clinic directly from renal pharmacists who are specially trained in treating and counseling patients living with kidney disease.

Vascular, Cardiovascular and Endovascular Specialty Services

        We operate vascular access centers mainly in the U.S. In 2013,Patients receiving hemodialysis need to have a vascular access site implanted before their dialysis therapy starts to enable their blood to exit their bodies to our investments primarily consisted of an investment-type loan granteddialysis machines for cleansing and to a middle market dialysis provider (see Note 8 ofreturn the Notesnewly cleaned blood into their bodies. Additionally, our vascular access services include both cardiovascular and endovascular specialty services. Cardiovascular procedures are similar to the Consolidated Financial Statements, "Other Assets and Notes Receivables"). For further discussion of our 2014 acquisitions and investments, see "Information on the Company – History and Development of the Company – History,"vascular access procedures discussed above and "– Our Strategy and Competitive Strengths – Pillars for Strategic Growth- (1) Continuous Growth and Expansion" above.

Quality Assurance and Quality Management in Dialysis Care

        Our clinics work in conformance with the generally accepted quality standards of the industry, particularly the KDOQI (Kidney Disease Outcomes Quality Initiative) guidelines from the United States, the European ERBP standard (European Renal Best Practice) and increasingly, the KDIGO (Kidney Disease: Improving Global Outcomes), an industry initiative for global clinical practice guidelines. Clinical data management systems are used to routinely collect certain medical parameters, which we evaluate in anonymized form in compliance with these guidelines.

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        To evaluate the quality of our dialysis treatments, we use quality parameters that are generally recognized by the dialysis industry, such as hemoglobin values. In cooperation with responsible nephrologists, we aim to achieve a defined hemoglobin level for our patients. The kt/v value, which represents the volume of fluid completely cleared of urea during a single treatment divided by the volume of water a patient's body contains, gives an indication of the filtering performance of a treatment by establishing the ratio of the length of treatment and the filtration rate of certain toxic molecules. Albumin, a protein, is one quality parameter used to monitor a patient's general nutritional condition. Hospitalization days are another important indicator of the treatment quality, as a reduction of days hospitalized is viewed as an increase in the quality of care.

        In our EMEA region our quality management activities are primarily focused on comprehensive development and implementation of a Healthcare Services Quality Management System as part of an Integrated Management System ("IMS"). Our goals in this area include meeting quality requirements for our dialysis clinics and environmental concerns. This approach results in an IMS structure that closely reflects existing corporate processes. We are also able to use the IMS to fulfill many legal and normative regulations covering service lines. In addition, the IMS standard offers a highly flexible structure that allows us to adapt to future regulations. Our IMS fulfills the ISO-Norm 9001:2008 requirements for quality management systems and links it with the ISO-Norm 14001:2004 for environmental management systems. At the same time, the IMS conforms to the medical devices requirements of ISO-Norm 13485:2003.

        Our dialysis clinics' processes and documentation are regularly inspected by internal auditors and external parties. The underlying quality management system is certified and found to be in compliance with relevant regulations, requirements and company policies. Currently, dialysis clinics in 17 countries within our European region have quality management systems which are certified according to the quality management standard ISO 9001:2008.

        Additionally, we have a comprehensive program, NephroCare Excellence, in our European region. NephroCare is our service that provides complete life-saving treatments for renal failure at the point of care using advanced technologies and listening to and understanding our patients' needs to enable the best therapies, ensure a high-quality of care and empower patients. Our NephroCare Excellence program brings together in one comprehensive program all of our quality and efficiency standards as well as proven best practices from different countries. The program is designed to support more than 30 individual countries in introducing NephroCare's quality standards and tools to all clinics efficiently, systematically and within a defined timeframe. Our goal is to harmonize the routines in our network of clinics, to make sure that clinic employees identify with the values of NephroCare, and to foster awareness of the NephroCare brand and of our commitment to enabling affordable renal replacement therapy for the different healthcare authorities worldwide.

        The UltraCare® program of our North America Segment dialysis services group represents our commitment to deliver excellent care to patients through innovative programs, state-of-the art technology, continuous quality improvement and a focus on superior patient service. It combines our latest product technology with our highly trainedtreatment for heart disease, while endovascular surgical procedures are minimally invasive and skilled staffdesigned to offer our patients what we believe is a superior levelaccess many regions of care. The basis for this form of treatment is the Optiflux® polysulfone single-use dialyzer. Optiflux® single use dialyzers are combined with our 2008™ Hemodialysis Delivery System series, which has advanced online patient monitoringbody via major blood vessels and Ultra Pure Dialysate, all of which we feel improve mortality rates and increase the quality of patient care. The UltraCare® program also utilizes several systems to allow the tailoring of treatment to meet individual patient needs. Among the other capabilities of this system, staff will be alerted if toxin clearance is less than the target prescribed for the patient, and treatment can be adjusted accordingly. The UltraCare® program also includes an annual training program for staff recertification. Additionally, the UltraCare® at Home™ emphasizes patient-centered care: offering the full range of treatment modalities coupled with superior customer service for patients desiring care in the home setting.

        At each of our North America Segment dialysis clinics, a quality assurance committee is responsible for reviewing quality of care data, setting goals for quality enhancement and monitoring the progress of quality assurance initiatives. We believe that we enjoy a reputation of providing high quality care to dialysis patients. In 2014, we continued to develop and implement programs to assist in achieving our quality goals. Our Access Intervention Management Program detects and corrects arteriovenous access failure inboth the maintenance of hemodialysis treatment and the percentage of patients who use catheters, which is the major cause of hospitalization and morbidity.

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        Our principal focus of our research and development activities is the development of new products, technologies and treatment concepts to optimize treatment quality and safety for dialysis patients. See Item 5.C, "Operating and Financial Review and Prospects – Research and Development."

        The Medicare Improvements for Patients and Providers Act of 2008 ("MIPPA") created the ESRD quality incentive program under which dialysis facilities that fail to achieve quality standards established by CMS could have payments reduced by up to 2%. See Item 5, "Operating and Financial Review and Prospects – Overview."

Sources of U.S. Patient Services Net Revenue

        The following table provides information for the years ended December 31, 2014, 2013 and 2012 regarding the percentage of our U.S. patient service net revenues from (a) the Medicare ESRD program, (b) private/alternative payors, such as commercial insurance and private funds, (c) Medicaidaccesses and other government sources and (d) hospitals.

        Under the Medicare ESRD program, Medicare reimburses dialysis providers for the treatment of certain individuals who are diagnosed as having ESRD, regardless of age or financial circumstances. See "Regulatory and Legal Matters – Reimbursement."non-dialysis medical operations.

Patient, Physician and Other Relationships

        We believe that our success in establishing and maintaining health care centers, both in the U.S. and in other countries depends significantly on our ability to obtain the acceptance of and referrals from local physicians, hospitals and managed care plans. In nearly all our dialysis clinics, local doctors, who specialize in the treatment of renal patients (nephrologists) act as practitioners. A dialysis patient generally seeks treatment at a conveniently located clinic at which the patient's nephrologist has staff privileges. Our ability to provide high-quality dialysis care and to fulfill the requirements of patients and doctors depends significantly on our ability to enlist nephrologists for our dialysis clinics and receive referrals from nephrologists, hospitals and general practitioners.

        Medicare ESRD program reimbursement regulations require that a medical director generally supervise treatment at a dialysis clinic. Generally, the medical director must be board certified or board eligible in internal medicine or pediatrics, have completed a board-approved training program in nephrology and have at least twelve months of experience providing care to patients undergoing dialysis. Our medical directors also generally maintain their own private practices. We have entered into written agreements with physicians who serve as medical directors in our clinics. In the North America Segment, these agreements generally have an initial term between five to ten years. The compensation of our medical directors and other contracted physicians is negotiated individually and depends in general on local factors such as competition, the professional qualification of the physicians, the physicians' experience and tasks as well as the size and the offered services of the clinic. The total annual compensation of the medical directors and the other contracted physicians is stipulated at least one year in advance and the medical directors agree to seek to continue to improve efficiency and quality. We believe that the compensation of our medical directors is in line with the market.

        Almost all contracts we enter into with our medical directors in the United States, as well as the typical contracts which we obtain when acquiring existing clinics, contain non-competition clauses concerning certain activities in defined areas for a defined period to time. These clauses do not enjoin the physicians from performing patient services directly at other locations/areas or referring patients to other facilities. We do not require physicians to send patients to us or to specific clinics.

        In addition to the dialysis clinics, a number of our other health care centers employ or contract with physicians to provide professional services. We have financial relationships with these physicians in the

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form of compensation arrangements for the services rendered. These contractual arrangements are designed to comply with federal and state laws applicable to financial relationships with physicians, such as the Stark Law and the Anti-Kickback Statute. In addition to these legal requirements, we face competition from other communities and facilities for these physicians, which continues while the physician is practicing at one of our centers.

        A number of the dialysis clinics and other health care centers we operate are owned, or managed, by joint ventures in which we hold a controlling interest and one or more hospitals, physicians or physician practice groups hold a minority interest. We also have agreements with physicians to provide management and administrative services at health care centers in which physicians or physicians groups hold an ownership interest and agreements with physicians to provide professional services at such health care centers. While we have structured our joint ventures to comply with many of the criteria for safe harbor protection under the U.S. Federal Anti-Kickback Statute, our investments in these joint venture arrangements and administrative service agreements do not satisfy all the elements of such safe harbors.

Competition

        Health Care Services.    Our largest competitors in the North America Segment are DaVita HealthCare Partners, Inc., and US Renal Care, Inc. and, in our International Segment, our largest competitors are Diaverum and Kuratorium für Heimdialyse in Europe and Showai-Kai in Asia-Pacific, and Baxter International Inc. and Diaverum in Latin America. Ownership of dialysis clinics in the U.S. consists of a small number of larger company-owned, multi-clinic providers who own the majority of U.S. clinics, of which the Company and DaVita HealthCare Partners are the largest and a large number of company-owned clinic providers, each owning ten or fewer clinics. Over the last decade the dialysis industry has been characterized by ongoing consolidations. Internationally, the dialysis services market is much more fragmented, with a higher degree of public ownership in many countries.

        Many of our clinics are in urban areas, where there frequently are many competing clinics in proximity to our clinics. We experience direct competition from time to time from former medical directors, former employees or referring physicians who establish their own clinics. Furthermore, other health care providers or product manufacturers, some of which have significant operations, may decide to enter the dialysis business in the future.

        Because in the U.S. government programs are the primary source of reimbursement for services to the majority of patients, competition for patients in the U.S. is based primarily on quality and accessibility of service and the ability to obtain admissions from physicians with privileges at the facilities. However, the extension of periods during which commercial insurers are primarily responsible for reimbursement and the growth of managed care have placed greater emphasis on service costs for patients insured with private insurance.

        In most countries other than the U.S., we compete primarily against individual freestanding clinics and hospital-based clinics. In many of these countries, especially the developed countries, governments directly or indirectly regulate prices and the opening of new clinics. Providers compete in all countries primarily on the basis of quality and availability of service and the development and maintenance of relationships with referring physicians.

        Laboratory Services.    Spectra competes in the U.S. with large nationwide laboratories, dedicated dialysis laboratories and numerous local and regional laboratories, including hospital laboratories. In the laboratory services market, companies compete on the basis of performance, including quality of laboratory testing, timeliness of reporting test results and cost-effectiveness. We believe that our services are competitive in these areas.

Dialysis Products

        Based on internal estimates prepared using our MCS (see "Major Markets and Competitive Position," below), publicly available market data and our data of significant competitors, we are the world's largest manufacturer and distributor of equipment and related products for hemodialysis and the second largest manufacturer and distributer of peritoneal dialysis products, measured by publicly reported revenues. We supply dialysis products to our dialysis clinics and we also sell our dialysis products directly and through distributors in more than 120 countries. Most of our customers are dialysis clinics. For the year 2014,2016, dialysis products accounted for 23%19% of our total revenue.

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        We produce and distribute a wide range of machines and disposables for HD, PD and acute dialysis:

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HD machines and PD cyclers



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Dialyzers, our largest product group



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PD solutions in flexible bags



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HD concentrates, solutions and granulates



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Bloodlines



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Systems for water treatment

        Our product business also includes adsorbers, which are specialized filters used in other extracorporeal therapies. In addition we sell products from other producers, including specific instruments for vascular access as well as other supplies, such as bandages, clamps and injections. We also include our PhosLo®, Phoslyra®, Velphoro® and Venofer® pharmaceuticals and sales of other renal pharmaceutical products as part of our dialysis product revenues. Our Body Composition Monitor is also sold as part of both our peritoneal and hemodialysis products. The Body Composition Monitor is used for home dialysis to determine a patient's body composition (water, body mass and fat) which assesses a patient's hydration state to assist in determining the patient's therapy

        The markets in which we sell our dialysis products are highly competitive. The two largest manufacturers of dialysis products accounted for approximately 63% of the worldwide market in 2014. As the market leader in dialysis products, we had an approximately 34% market share. We estimate that in 2014, we supplied approximately 44% of global dialyzer production and approximately 50% of all HD machines sold worldwide. We estimate that our market share for PD products sold worldwide in 2014 was 21%.

Overview

dialysis. The following table shows the breakdown of our dialysis product revenues into sales of hemodialysisHD products, peritonealPD dialysis products and other dialysis products. The following amounts are exclusive ofexclude intercompany product sales:

Hemodialysis Products

        The reductionOur advanced line of risk factorshemodialysis machines includes three series. We developed the 4008 and 5008 Series for cardiovascular diseases is coreour markets outside of North America and the 2008 Series for the North American market. In 2016, we introduced the series 6008 with the launch of our 6008 CAREsystem (see Item 5.VII, "Operating and Financial Review and Prospects – Research and Development"). Our various models of these machine series utilize our latest research and development efforts to the development of dialysis systems and products at FMC-AG & Co. KGaA. Taking this challenge into account, we offer a comprehensive hemodialysis product line, including HD machines, modular components for dialysis machines, Polysulfone dialyzers, bloodlines, HD solutions and concentrates, needles, connectors, machines for water treatment, data administration systems, dialysis chairs, PhosLo® and Phoslyra® phosphate binders, Venofer® iron products, and other renal drug products. We continually strive to expand and improve the capabilitiesdialysis process for our patients. Examples of our hemodialysis systems to offer an advanced treatment mode at reasonable cost.

        Dialysis Machines.    We sell our 4008, 5008, and 5008S Series HD dialysis machines in EMEALA and AP. In North America, we sell our 2008® Series machines, modeled onthese improvements include the 4008 Series. The 4008/2008 series is the most widely sold machine for hemodialysis treatment. Our 2008T is the only hemodialysis machine currently available with theaddition of Clinical Data eXchange^TM ("CDX") feature. CDXeXchange™ (CDX), which allows machine usersthe clinician to toggle their 2008T monitor view to provide access to their medical information system andMIS (Medical Information System) data directly from the dialysis screen.station. In 2011 in North America,addition, the 2008K@home hemodialysis machine was introduced, which features user interface enhancements and the WetAlert^TMWet Alert option provides a wireless wetness detector for the identification of blood

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leaks. In our International Segment, the 4008S classic machine is a basic dialysis machine for performing conventional HD treatments with limited therapy options for budget-focused customers. Following the successful launch of the 5008 series, we concentrated on the continued improvement of the reliable operation        Other features of our model 5008 dialysis machine in clinical use and under increasingly varied conditions in international applications. These efforts for improvement have taken into account considerable feedback from our own dialysis clinics as well as from other customers while focusing on therapeutic, technical, and economic aspects of the machine. The 5008 series is intended to gradually replace most of the 4008 series in the coming years. The successor 5008 contains a number of newly developed technical components for revised and improved dialysis processes and offers the most efficient therapy modality, ONLINE-Hemodiafiltration ("ONLINE HDF"), as a standard feature. Our latest machine software upgrades the Therapy System product line of the 5008 machines to the CorDiax product line for use with our FX CorDiax dialyzers. Significant advances in the field of electronics enable highly complex treatment procedures to be controlled and monitored safely and clearly through dedicated interfaces. Our dialysis machines offer the following features and advantages:include:

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Volumetric dialysate balancing and ultrafiltration control system. This system provides for safe and more efficient use of highly permeable dialyzers, permitting efficient dialysis with controlled rates of fluid removal;



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Proven hydraulic systems, providing reliable operation and servicing flexibility;



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Compatibility with all manufacturers' dialyzers and a variety of bloodlines and dialysis solutions permitting maximum flexibility in both treatment and disposable products usage;



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Modular design which permits us to offer dialysis clinics a broad range of options to meet specific patient or regional treatment requirements and specialized modules that provide monitoring and response capability for selected biophysical patient parameters, such as body temperature and relative blood volume. Modular design also allows upgrading through module substitution without replacing the entire machine;



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Sophisticated microprocessor controls, touchscreentouch screen interfaces, displays and/or readout panels that are adaptable to local language requirements;requirements



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Auto Flow and Idle mode enable dialysate savings

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Battery backup which continues operationoperations of the blood circuit and all protective systems up to 20 minutes following a power failure;failure



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Online clearance, measurement of dialyzer clearance for quality assurance with On-Line Clearance Monitoring, providing immediate effective clearance information, real time treatment outcome monitoring and therapy adjustment during dialysis without requiring invasive procedures or blood samples;



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Clinical Data eXchange inEliminates the 2008T:



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The 2008T features an industrial grade computer inside the machine, as well as, an external keyboardloss of valuable treatment space allocated to MIS systems and touchpad;carts



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The Medical Information System (MIS) and dialysis screens are accessible onbibag® Online Dry Bicarbonate Concentrate system, which produces bicarbonate concentrate directly in the same monitor by simply pressingmachine eliminating the CDX toggle key; andneed for liquid bicarbonate jugs or a central bicarbonate system



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Clinicians no longer need to leave the patient station to gain access via standalone computers on the treatment floor or at nursing stations;



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Online data collection capabilities and computer interfacing with our Therapy Data Management System (TDMS) and/or Fresenius Medical Information System (FMiS) systems. Ourmedical information systems enable users to:



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monitor and assess prescribed therapy;



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connectMonitor and assess prescribed therapy



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Connect a large number of hemodialysis machines and peripheral devices, such as patient scales, blood chemistry analyzers and blood pressure monitors, to a computer network;network



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enterEnter nursing records automatically at bedside;bedside



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adaptAdapt to new data processing devices and trends;trends



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performPerform home hemodialysis with remote monitoring by a staff caregiver; andcaregiver



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recordRecord and analyze trends in medical outcome factors in hemodialysis patients;

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The series 2008k@home, introduced in North America in 2011, a dialysis machine specifically developed for in home use with an intuitively designed user interface and the addition of the wetness detector for increased safety. The use of our most advanced technology and adaptability for in-home use makes this machine highly accessible for patients who would like more flexibility and control throughout their dialysis process; and



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In the series 5008 CorDiax, the most efficient therapy mode ONLINE HDF is standard.patients.

        Dialyzers.Dialyzers

        Dialyzers are specialized filters that remove waste products, toxins and excess water from the blood during dialysis. We estimate that we are the leading worldwide producer of polysulfone dialyzers. We manufacture our F-Series and premium FX class® series of dialyzers and our Optiflux® polysulfone single-use dialyzer using hollow fiber Fresenius Polysulfone® and Helixone® membranes from synthetic materials. We estimate that we are the leading worldwide producer of polysulfone dialyzers. In 2011, we introduced the newOur FX CorDiax dialyzer which contains the Helixone®plus high performance membrane. The Helixone®plus membrane selectively filters out toxins such as phosphates to reduce the risk of cardiovascular disease. It was improved in 2011 with the addition of improved performance characteristics and is characterized by a very high permeability to enable an increased removal of uremic toxins in the middle molecular weight range.

        We believe that Polysulfone offers the following superior performance characteristics compared to other materials used in dialyzers:

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increased biological compatibility, resulting in reduced incidence of adverse reactions to the fibers;



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greater capacity to clear uremic toxins from patient blood during dialysis, permitting more thorough, more rapid dialysis, resulting in shorter treatment time; and



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a complete range of permeability or membrane pore size, which permits dialysis at prescribed rates – high flux and low flux, as well as ultra flux for acute dialysis – and allows tailoring of dialysis therapy to individual patients.

        Other Dialysis Products.    We manufacture and/or distribute arterial, venous, single needle and pediatric bloodlines. We produce both liquid and dry dialysate concentrates. Liquid dialysate concentrate is mixed with purified water by the hemodialysis machine to produce dialysis solution, which removes the toxins and excess water from the patient's blood during dialysis. Dry concentrate, developed more recently, is less labor-intensive to use, requires less storage space and may be less prone to bacterial growth than liquid solutions. We also produce dialysis solutions in bags, including solutions for priming and rinsing hemodialysis bloodlines, as well as connection systems for central concentrate supplies and devices for mixing dialysis solutions and supplying them to hemodialysis machines. Other products include solutions for disinfecting and decalcifying hemodialysis machines, fistula needles, hemodialysis catheters, and products for acute renal treatment.

Peritoneal Dialysis Products

        We offer a full line of peritoneal dialysis systems and solutions which includefor both continuous ambulatory peritoneal dialysis ("CAPD")CAPD and continuous cycling peritoneal dialysis ("CCPD") also called automated peritoneal dialysis ("APD").APD treatments.

        CAPD Therapy: We manufacture both systemsThe stay·safe® system has been specifically designed to help patients with their daily self-care CAPD treatment in a safe and solutions forconvenient way. Our CAPD therapy. Our product range hasproducts have a number of advantages for patients including:

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Fewer possibilities for touch contamination.  Our unique PIN and DISC technology was designed to reduce the number of steps insimplifies the fluid exchange process, which decreasesand minimizes the risk of infection, particularly in the disconnection step in which the stay·safe® patient connector is closed automatically without any direct touch intervention.



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Optimal biocompatibility.  OurOutside of the North America Segment, our PD stay safe Balance·safe® balance and stay safe Bicavera®·safe® bicaVera® solutions are pH neutral and have ultra-low glucose degradation product contents providing greater protectionreducing the advanced glycation end product ("AGE") formation and aiming for better preservation of the peritoneal membrane and allowing for the protection of residual renal function of the PD patients.



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Environmentally friendly material:  In our InternationalOutside of the North America Segment, our stay•stay·safe® system is made of Biofine®, a material developed by Fresenius, which upon combustion is reduced to carbon dioxide and is PVC and plasticizer free. Biofine® requires less energy to manufacture, generates less waste and is easy to recycle.

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        APD Therapy:    We have been at the forefront of the development of automated peritoneal dialysis machines since 1980. APD therapy differs from CAPD in that fluid is infused into the patient's peritoneal cavity while the patient sleeps. The effectiveness of theAPD therapy is dependentdepends on the solution dwell time in the abdomen, the composition of the solution used, the volume of solution and the timeduration of the treatment, usually 8 - 10 hours. APD using our product line, which includes oursleep·safe cycler, sleep·safe harmony cycler and Liberty® cycler, offers a number of benefits to PD patients:

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Improved quality of life.  The patient is treated at night and can lead a more normal life during the day without fluid exchange every few hours.

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Improved adequacy of dialysis.  By adjusting the parameters of treatment, it is possible to provide more dialysis to the patient compared to conventional CAPD therapy. This therapy offers important options to physicians such as improving the delivered dose of dialysis for certain patients.



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Personalized adapted APD.sleep·safe The cycler allowsandsleep·safe harmony cyclers allow patients to be treated using a modified version of APD where short dwell times with small fill volumes are used first to promote ultrafiltration and subsequently longer dwell times and larger fill volumes promote the removal of uremic toxins from the blood.

        Our automated peritoneal dialysis equipment incorporates microprocessor technology. This offers physicians the opportunity to program specific prescriptions for individual patients. Our APD equipment product line includes:

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sleep•safe:  The sleep•safe machine has been used since 1999. It has automated connection technology thus further reducing the risk of touch contamination. Another key safety feature is a barcode recognition system for the various types of solution bags used. This improves compliance and ensures that the prescribed dosage is administered to the patient. There is also a pediatric option for the treatment of infants. The sleep•safe machine allows for innovative and simple ways of individualizing APD prescriptions to achieve better treatment results, including personalized adapted APD therapy.



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sleep•safe harmony:  In 2014 a new cycler that delivers a PD therapy tailored to individual patients' needs has been launched. Adapted APD therapy with sleep•safe harmony enables physicians and nurses to combine sequences of short dwells and small fill volumes with long dwells and large fill volumes and varying glucose concentrations. Adapted APD is a new way of prescribing PD that optimizes ultrafiltration and clearance within one PD session. Sleep•safe harmony enables complete individualization for a fully personalized treatment, as well as guided prescription on the cycler or via PatientOnLine software.



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North American cycler portfolio:  This includes: (a) the Liberty® cycler introduced in 2008 incorporating many new operational and safety features with an innovative piston driven pumping cassette design, and user interface enhancements such as a color touch screen which guides the patient through the setup and treatment, (b) the Freedom® cyclers for low volume applications and acute markets, and (c) the Newton IQ® Cycler, which offers gentle gravity fills and drains as well as the option of pumping waste dialysate directly into the receptacle. The IQdrive® USB stick can provide actual treatment details and results to the physician for compliance monitoring and, when used with our North American PD cyclers, can upload the patient's prescription into the machine.



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Patient Management Software:  We have developed specific patient management software tools to support both CAPD and APD therapies in the different regions of the world. These include: PatientOnLine, IQsystem®, and Pack-PD® and FITTness™. These tools can be used by physicians and nurses to design and monitor treatment protocols thus ensuring that therapy is optimized and that patient care is maximized. These different approaches aim to support physicians and nurses in better formulating treatments for a patient's individual needs; improving a patient's quality of life while safely extending their time on PD.

Renal Pharmaceuticals

        Excess serum phosphorus levels,We continue to develop, acquire and in-license renal pharmaceuticals to improve dialysis treatment for our patients. Below are the primary renal pharmaceuticals we have developed or for which are ordinarily controlled by healthy kidneys, can cause bone and heart problems. Through various mechanisms of action, phosphate binders reduce phosphate absorption in chronic kidney disease ("CKD") patients on dialysis. Wewe have obtained licenses for use:

PhosLo®

        In November 2006, we acquired the rights to PhosLo®, a calcium-based phosphate binder, in November 2006.binder. We have received approval of PhosLo® in selected European

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countries. In October 2008, a competitive generic phosphate binder was introduced in the U.S. market, which reduced our PhosLo® sales in 2009. In October 2009, we launched an authorized generic version of PhosLo® to compete in the generic calcium acetate market. In April 2014,2011, the FDA approved our New Drug Application (NDA) for Phoslyra®, a liquid formulation of PhosLo®, and we continue to commercialize this product in the U.S. market.

Venofer® and Ferinject®

        In 2008, we entered into two separate and independent license and distribution agreements, one for certain countries in Europe and the Middle East (with Galenica AG and Vifor (International) AG) and one for the U.S. (with Luitpold Pharmaceuticals Inc. and American Regent, Inc.), to market and distribute intravenous iron products, such as Venofer® (iron sucrose) and Ferinject® (ferric carboxymaltose) (outside of the U.S.). Both drugs are used to treat iron deficiency anemia experienced by non-dialysis CKD (chronic kidney disease) patients as well as dialysis patients. Venofer® is the leading intravenous iron product worldwide. The first agreement concerns all commercialization activities for these intravenous iron products in the field of dialysis and became effective on January 1, 2009. In North America, a separate license agreement effective November 1, 2008 provides our subsidiary Fresenius USA Manufacturing Inc. ("FUSA") with exclusive rights to manufacture and distribute Venofer® to freestanding (non-hospital based) U.S. dialysis facilities and, in addition, grants FUSA similar rights for certain new formulations of the drug. The U.S. license agreement has a term of ten years and includes FUSA extension options. The international agreement has a term of 20 years. In 2012, FUSA renegotiated and further amended the contract originally signed in 2008 with Luitpold Pharmaceuticals, Inc. The original term length of the agreement remained the same.

        In 2009, we entered into separate agreements with AMGEN International to purchase Aranesp and Mimpara and to jointly communicate selected scientific and promotional topics to the physician community. Our current non-exclusive ESA sourcing and supply contract with Amgen covers the period from January 1, 2015 to December 31, 2018. Together with Amgen, we are working to foster new scientific understanding of CKD through the evaluation of our research database with the help of renowned academic advisory committees.

        In December 2010, we announced the expansion of our agreements with Galenica by forming a new renal pharmaceutical company, Vifor Fresenius Medical Care Renal Pharma, ("VFMCRP"),VFMCRP, with the intention to develop and distribute products to treat iron deficiency anemia and bone mineral metabolism for pre-dialysis and dialysis patients. FMC-AG & Co. KGaA owns 45% of the company which is headquartered in Switzerland. Galenica contributed licenses (or the commercial benefit in the U.S.) to its Venofer® and Ferinject® products for use in the dialysis and pre-dialysis market (CKD stages III to V). Commercialization of both of these products outside the renal field will remain fully the responsibility of Vifor Pharma, the pharmaceutical division of Galenica and its existing key affiliates or partners.partners retain the responsibility for commercialization of both of these products outside the renal field.

Velphoro®

        As part of the agreement to create VFMCRP, Galenica also contributed to the new company exclusive worldwide rightsthe asset (excluding Japan) for Velphoro®, a novel iron-based phosphate binder. Fresenius Medical Care North America ("FMCNA") markets the product on behalf of VFMCRP in the U.S. and commercial sales of Velphoro® commenced in the first quarter of 2014 in the USU.S. market. The product for the U.S. market is supplied by an FDA approved, Vifor manufacturing facility in Switzerland and an FDA approved contract

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manufacturer also located in Switzerland. Velphoro has also been approved in Europe via the central approval process and has been commercially launched in Germany, the United Kingdom, Sweden, Denmark, the Netherlands, Belgium and Switzerland. Velphoro has also been approved in France, Italy and Spain. The expansionVFMCRP partner Kissei also received approval from the Ministry of Health, Labour and Welfare in Japan during 2015 for the product which is marketed in Japan under the brand name P-TOL.

OsvaRen® and Phosphosorb®

        In June 2015, we further developed our joint venture, VFMCRP, with Galenica. In addition to the iron replacement products Ferinject® and Venofer® for use in nephrology indications as well as the phosphate binder Velphoro® in our shared product portfolio, VFMCRP acquired nephrology medicines commercialized by us, including the phosphate binders OsvaRen® and Phosphosorb®. The transfer of the marketing rights was largely completed during the fourth quarter of 2015, allowing the joint venture to further develop its sales and marketing in key European markets.For more information on the transfer please see Note 2 in the Notes to the Consolidated Financial Statements, "Related Party Transactions," included in this report.

Care Coordination

Laboratory Services

        We provide general testing, clinical anatomic pathology and molecular testing for health care providers in the New York region.

Pharmacy Services

        We offer pharmacy services, mainly in the U.S. These services include providing renal medications and supplies to the homes of patients or to their dialysis clinic directly from renal pharmacists who are specially trained in treating and counseling patients living with kidney disease.

Vascular, Cardiovascular and Endovascular Specialty Services

        We operate vascular access centers mainly in the U.S. Patients receiving hemodialysis need to have a vascular access site implanted before their dialysis therapy starts to enable their blood to exit their bodies to our dialysis machines for cleansing and to return the newly cleaned blood into their bodies. Additionally, our vascular access services include both cardiovascular and endovascular specialty services. Cardiovascular procedures are similar to the vascular access procedures discussed above with a focus on treatment for heart disease, while endovascular surgical procedures are minimally invasive and designed to access many regions of the body via major blood vessels and assist in both the maintenance of hemodialysis accesses and other non-dialysis medical operations.

Hospitalist and Intensivist Services

        We employ physicians providing care in hospitals and post-acute care centers across the United States. Our hospitalist services utilize a consistent, patient-centered approach that relies on experienced physician leadership and a web-based workflow platform. We also provide intensivist services, which focus on the general medical care of hospitalized patients and the care of critically ill patients, usually in the intensive care unit (ICU), and the care of patients in post-acute centers.

Medical Cost Management

        We are continuing to expand our activities in value-based healthcare contracting. Value based contracting includes shared savings arrangements in which private payors or government programs share the savings from reductions in the overall medical spend of a population under management assuming that certain quality thresholds are also met. Such contacting also includes capitated arrangements in which private payors or government programs pay us a fixed amount per member under management to fund beneficiary medical expenses. Since capitation arrangements often can be recognized as premium revenue and the full medical premium for ESRD beneficiaries generally is very large, capitation programs can drive significant revenue and, when costs are effectively managed, profit opportunities.

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Major Markets and Competitive Position

        To obtain and manage information on the status and development of global, regional and national markets we have developed our Market & Competitor Survey, or MCS. We use the MCS within the Company as a tool to collect, analyze and communicate current and essential information on the dialysis market, developing trends, our market position those of our agreement in December 2010 allowed Galenicacompetitors. Country – by – country surveys are performed at the end of each calendar year which focus on the total number of patients treated for ESRD, the treatment modality selected, products used, treatment location and the Companystructure of ESRD patient care providers. The survey has been refined since inception to work togetherfacilitate access to more detailed information and to reflect changes in the development of therapies and commercializationproducts as well as changes to the structure of renal pharmaceuticalsour competitive environment. The questionnaires are distributed to professionals in the field of dialysis who are in a position to provide ESRD-relevant country specific information themselves or who can coordinate appropriate input from contacts with the relevant know-how in each country. The surveys are then centrally validated and checked for CKD stages IIIconsistency by cross-referencing them with the most recent sources of national ESRD information (e.g. registry data or publications if available) and with the results of surveys performed in previous years. All information received is consolidated at a global and regional level and analyzed and reported together with publicly available information published by our competitors. While we believe the information contained in our surveys and competitor publications to Vbe reliable, we have not independently verified the data or any assumptions from which our MCS is derived or on which the estimates they contain are based, and we do not make any representation as to the accuracy of such information. Except as otherwise specified herein, all patient and market data in this report have been derived using our MCS.

        We estimate that the volume of the global dialysis market was $76 billion in 2016 comprising approximately $14 billion of dialysis products and approximately $62 billion of dialysis services (including administration of dialysis drugs). The currency-adjusted growth rate amounted to 4% during the last year.

        We are the world's leading provider of dialysis services with a market share of about 10% based on the number of treated patients. In addition to providing services to the largest number of dialysis patients of any health care company, we also operate more dialysis clinics than any of our competitors: at the end of 2016, we had 3,624 (2015: 3,418) clinics worldwide. We treated 61% of our patients in North America, 19% in Europe, 10% in Latin America and 10% in the Asia-Pacific region.

        We are also the market leader in dialysis products with a 35% worldwide dialysis product market share. Dialyzers represent the largest product group in the worldwide dialysis market. In 2016, the worldwide dialyzer market had a sales volume of more than 280 million units including approximately 120 million units which we produced. Dialysis machines also represent a substantial dialysis product market. In 2016, we produced more than half of the 87,000 machines sold worldwide. The U.S. is our largest sales market for dialysis machines. In 2016, we manufactured more than 93% of the dialysis machines sold in the U.S. Our 2008 machine series is the leading dialysis system in the U.S. with more than 122,000 units in use. In 2015, we also held approximately 34% of the worldwide dialysis product market. Our share of the global dialyzer market was approximately 44% and our share of the dialysis machines market was approximately 50%.

Our competitive environment is described in more detail below:

        Health Care Services:    Over the last decade the dialysis industry has been characterized by ongoing consolidations. Internationally, the dialysis services market is much more fragmented, with a higher degree of public ownership in many countries. Our largest competitors are DaVita HealthCare Partners, Inc. and U.S. Renal Care, Inc. in the North America Segment, Diaverum S.à r.l. and Kuratorium für Heimdialyse in the EMEA Segment, B. Braun and Showa-Kai in the Asia-Pacific Segment, and Baxter International Inc. and DaVita in the Latin America Segment.

        U.S. government programs are the primary source of reimbursement for services to the majority of patients and, as such, competition for patients in the U.S. is based primarily on quality and accessibility of service and the ability to obtain admissions from physicians with privileges at the facilities. However, the extension of periods during which commercial insurers are primarily responsible for reimbursement and the growth of managed care have placed greater emphasis on service costs for patients insured with private insurance.

        In most countries other than the U.S., we compete primarily against individual freestanding clinics and hospital-based clinics. In many of these countries, especially the developed countries, governments directly or indirectly regulate prices and the opening of new clinics. Providers compete in all countries primarily on the basis of quality and availability of service and the development and maintenance of relationships with referring physicians.

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        Laboratory Services:    Spectra, our dialysis laboratory subsidiary, competes in the U.S. with large nationwide laboratories, dedicated dialysis laboratories and numerous local and regional laboratories, including hospital laboratories. In the laboratory services market, companies compete on the basis of performance, including quality of laboratory testing, timeliness of reporting test results and cost-effectiveness. We believe that our services are competitive in these areas.

        Products:    We compete globally in the product market which is largely segmented between hemodialysis and peritoneal dialysis. Our competitors include Baxter International Inc., Asahi Kasei Medical Co. Ltd., Medtronic Plc., B. Braun Melsungen AG, Nipro Corporation, Nikkiso Co., Ltd., NxStage Medical, Inc., Terumo Corporation, Kawasumi Laboratories Inc., Fuso Pharmaceuticals Industries Ltd., and Toray Industries, Inc. We have invested significantly in developing proprietary processes, technologies and manufacturing equipment which we believe provide a competitive advantage in manufacturing our products.

Our Strategy and Competitive Strengths

Company Strategy

        We focus our business activities on our patients' health through the quality of both our treatments and products with the objective of improving their quality of life and raising their life expectancy. Our aim is to maintain our position as the world's leading provider of dialysis treatment and products and to use that position as a basis for sustainable, profitable growth. Moreover, we are expanding our range of dialysis-related medical services within our Care Coordination division to continuously increase our enterprise value and create added value for patients, health care systems, employees, and investors worldwide. Our financial stability enables us to benefit from corporate financing on attractive terms and a degree of flexibility that we intend to uphold. Over the next few years, we will continue to pursue our aim of strengthening our leading position in a financially responsible manner.

        Our strategy takes into account concrete, measurable growth targets as well as long-term trend forecasts in the dialysis market. The Management Board uses a number of different tools and indicators to evaluate our business performance, develop our strategy and make investment decisions. See Item 5, "Operating and Financial Review and Prospects." We expect not only the number of dialysis patients to increase, but also the quality of services provided and the products available to become even more important in the future with improved access to medical care. We believe comprehensive care, a more holistic approach to address the needs of our kidney patients, is another area that will continue to grow in the future. In response to these trends, we will not only focus our business on individual services or dialysis products, but also on combining the different areas of application related to dialysis, such as combining treatment concepts with dialysis pharmaceuticals.

        Our strategy is based on an in-depth analysis of the major trends affecting Fresenius Medical Care:

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Demographic change: Due to the rise in the average life expectancy, the share of older people in the population is growing. As kidney function deteriorates with age, demographic development is a key indicator for the future number of dialysis patients which is expected to rise from around 3.0 million worldwide last year to 3.7 million in 2020.



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Increase in lifestyle diseases: Diseases such as high blood pressure and diabetes are on the rise. They can cause damage to the entire body and also specifically impair kidney function in the long-term.



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Improved access to medical care: Due to ongoing efforts to establish and expand balanced and sustainable health care systems in certain countries, a large number of patients now have access to suitable dialysis treatments. We expect this trend to continue and drive demand for high-quality products and treatments.



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Changes in the health care industry: We believe that demand for holistic care of patients will continue to rise. In the future, the focus will expand from offering individual health care products or services to more effectively combining all fields of application related to dialysis and Care Coordination.

        Our corporate strategy in the coming years will pursue the following four strategic objectives:

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growing continuously and expanding our global presence;



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tapping into new business areas;

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enhancing products and treatments; and



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expanding operational excellence and flexibility.

(1)    Growing continuously and Expanding our Global Presence

        We are committed to actively shaping the development of the industry while benefiting from the global growth of the market. This will be achieved by enabling more and more people to access life-saving dialysis treatment and developing innovative products and therapies that improve our patients' quality of life.

        To strengthen our market position, we have developed various approaches ranging from organic growth to continuously assessing suitable acquisitions. A further requirement for lasting, profitable growth is aligning our business activities to attractive future markets. One option for tapping into new markets is through public-private partnerships in the dialysis business. The public sector benefits from a high-quality dialysis infrastructure, which allows it to care for patients more effectively and at a lower cost. In the Care Coordination market, we believe there is growth potential through acquisitions in the U.S. and international markets.

(2)    Tapping into new business areas

        We consider our main focus to continue their collaborationbe the holistic care of dialysis patients and dialysis-related treatments. In addition to our products and dialysis treatment, we are increasingly offering additional services for patient care. In the past years, we have expanded our laboratory testing services and services related to vascular access which are essential aspects of dialysis treatments for our patients. In many regions, in CKD stage V in selected other countries. European antitrust authorities granted approval in October 2011, which allowed VFMCRPaddition to proceedour products and dialysis treatments, we offer an increasing range of additional health care services through our Care Coordination business. Care Coordination will also allow us to expand into new business areas and meet the growing overall demand for quality health care services. It also enables us to integrate the individual treatment steps more effectively with the targeted expansionaim of itsfurther improving the quality of care for our patients in a cost-effective manner that can ease the strain on health care systems. See "Business Overview – Our Services, Products and Business Processes."

(3)    Enhancing products and treatments