On September 21, 2023, the Federal Trade Commission (FTC) filed a lawsuit against U.S. Anesthesia Partners, Inc. (USAP) and private equity firm Welsh, Carson, Anderson & Stowe, alleging that they engaged in anticompetitive practices in the anesthesia services market in Texas. According to the FTC’s complaint, USAP and Welsh Carson executed a multi-year strategy to consolidate anesthesiology practices in Texas, raise the prices of anesthesia services, and increase their own profits.

The key allegations and points from the lawsuit include:

  1. Roll-up Scheme: According to the complaint, USAP and Welsh Carson systematically acquired numerous large anesthesia practices in Texas, effectively consolidating them into a single dominant provider. This consolidation allowed them to gain significant market power and the ability to demand higher prices for anesthesia services.
  2. Price-Setting Agreements: USAP and Welsh Carson allegedly entered into price-setting agreements with remaining independent anesthesia practices, further driving up the prices of anesthesia services in Texas. The FTC alleges these agreements would have contributed to higher costs for patients and healthcare providers.
  3. Exclusion of Competitor: USAP is accused of striking a deal to prevent a significant competitor from entering its territory, eliminating competition and allowing USAP to maintain its dominance in the market.
  4. Increased Costs to Texans: The FTC claims that USAP’s anticompetitive practices resulted in Texans paying tens of millions of dollars more each year for anesthesia services than they did before USAP’s creation.
  5. Motivation for Consolidation: Welsh Carson allegedly created USAP in 2012 because it saw an opportunity to profit by eliminating competition among small anesthesiology practices in Texas. The competition among these smaller practices allowed insurers to negotiate lower prices for their clients and patients.
  6. Violation of Antitrust Laws: The FTC alleges that USAP and Welsh Carson’s conduct violates various antitrust laws, including unlawful monopolization, unlawful acquisitions, conspiracy to monopolize, unfair competition, and unlawful restraints of trade. These actions are said to contravene the FTC Act and the Clayton Act.
  7. FTC’s Response: The FTC is seeking equitable relief to address the impact of USAP and Welsh Carson’s anticompetitive practices and to prevent such practices from happening again in the future.

The FTC’s lawsuit underscores the agency’s commitment to ensuring fair competition in healthcare markets and preventing anticompetitive behavior that can lead to higher costs for consumers. It also illustrates the agency’s continuing concerns with serial acquisitions, roll-ups, and other “stealth consolidation” strategies, particularly those involving private equity. These concerns were recently emphasized in the agency’s draft merger guidelines which state, in part, that the mere existence of serial acquisitions by a transacting party, or others in the industry, could invite additional scrutiny of a particular transaction, as well as a party’s prior transactions.