Dive Brief:
- The Federal Trade Commission is suing anesthesia provider U.S. Anesthesia Partners and private equity firm Welsh, Carson, Anderson and Stowe, alleging the two colluded to consolidate anesthesiology practices in Texas, driving up prices to boost their profits.
- Welsh Carson created USAP in 2012 before acquiring over a dozen anesthesia providers over the next decade to create a single dominant provider in the state, regulators allege. The PE firm and USAP also made price-setting agreements with independent anesthesiology practices, while sidelining a potential competitor by striking a deal to keep them out of USAP’s market, the FTC said.
- The complaint filed Thursday in federal district court says the actions have cost Texans “tens of millions of dollars” more each year in anesthesiology services.
Dive Insight:
New York-based Welsh Carson started USAP in Texas more than a decade ago. The anesthesiology provider has grown steadily to encompass practices in 12 states and Washington, D.C. by steadily acquiring multiple small businesses to build one entity with large market heft, in an M&A strategy called “roll-ups,” regulators allege.
In Texas, after executing its roll-up strategy, USAP raised the acquired provider’s rates to USAP’s already-high rates, resulting in “a substantial mark-up for the same doctors as before,” the FTC said in a release on the suit.
“This roll-up strategy has made it the dominant provider of anesthesia services in Texas and in many of the state’s metropolitan areas, including Houston and Dallas,” the FTC said. “USAP’s size and prices now dwarf those of its rivals.”
USAP board member Derek Schoppa said the FTC’s civil complaint is “based on flawed legal theories and a lack of medical understanding about anesthesia, our patient-oriented business model, and our level of care for patients in Texas” in a statement to Healthcare Dive.
Welsh Carson could not immediately be reached for comment.
Earlier this summer, the Washington Post reported on USAP’s market consolidation in Colorado. The Post found that USAP, after building the largest anesthesiology group in the state, continually raised prices for its services, boosting patient bills and insurance rates.
Regulators have looked into USAP’s acquisition practices at least three separate times without enforcement action, according to the Post, making Thursday’s suit the first regulatory challenge of the provider.
USAP’s pricing practices have also attracted ire from payers. UnitedHealth, the largest private insurer in the U.S., cut USAP out of its networks in 2020, citing sky-high rate demands. USAP sued UnitedHealth over the exclusion in 2021.
PE firms have acquired hundreds of physician practices across the U.S. in recent years, despite controversy over negative effects on medical quality and cost. One study from 2022 found when PE-backed anesthesiology companies took over a hospital outpatient or surgery center, they raised prices by 20% on average.
In certain markets, some firms currently own more than 30% of practices in a given specialty, according to the American Antitrust Institute.
Roll-ups have historically been a difficult type of M&A for regulators to tackle. However, new merger guidelines released by the FTC earlier this summer could give regulators more leverage to challenge the deals, potentially cooling roll-up activity.
