FTC Accuses Anesthesia Rollup, Private Equity Firm, of Monopolization

Stat News reports that the Federal Trade Commission has filed suit against private equity firm Welsh Carson and U.S. Anesthesia Partners for acquiring another in a string of Texas anesthesiology practices. The suit alleges the two formed a monopoly in order to drive up prices and boost their profits.

The suit is unusual because the FTC’s standard practice has been to go after the company it believes has violated antitrust law. This suit also names the private equity sponsor that the Commission says originated the scheme.

The private equity model entered health care after the financial crisis of 2008. According to the New York Times, “private equity-funded consolidation led to price increases in gastroenterology, dermatology and other medical specialties.”

The FTC has incriminating emails, including one from a Welsh Carson partner proposing to “consolidate practices with high market share in a few key markets,” and then use “leverage with commercial payers” to raise prices for anesthesia care.

The Washington Post reported in July that USAP has used its market power to command higher prices. According to the lawsuit, Welsh Carson had a roll-up strategy to consolidate small, competing anesthesiology practices in metropolitan Texas, eliminate competition in each market, and raise prices with each acquisition.

The complaint cites internal communications in which Welsh Carson “bragged that it is USAP’s ‘primary architect,’” and states that “Texans pay considerably more for hospital-only anesthesia services as a direct result of Welsh Carson’s conduct.”

The FTC further alleged in the lawsuit that Welsh Carson “masterminded” the plan to buy several competing anesthesiology practices throughout Texas and “remained deeply involved in crafting and executing that plan.”