FTC sues Texas anesthesiology provider to bust monopoly

The Federal Trade Commission, on Thursday, sued U.S. Anesthesia Partners, Inc. (USAP), the largest anesthesiology provider in Texas, and Welsh, Carson, Anderson & Stowe, a private equity firm alleging that the two parties executed a multi-year anticompetitive scheme with the objective of consolidating anesthesiology practices in Texas, jack up the price of anesthesia services provided to patients in Texas, and enhance their own profits.

The FTC asked a federal judge in Houston, Texas, to bring an end to USAP’s alleged monopoly power and bar the company forever from indulging in anti-competitive practices.

As per the complaint filed by FTC in federal district court, USAP and Welsh Carson, which created USAP, indulged in a three-part strategy to consolidate and monopolize the anesthesiology market in Texas.

From 2013 to 2021, USAP has grown tremendously from a mere 400 anesthesia providers at 45 healthcare facilities to 4,500 providers at 1,100 facilities. FTC, in their complaint, states that USAP has built a monopoly in Houston and Dallas, the two largest cities in Texas, and a dominant position in the state’s capital, Austin.

USAP has become so powerful in Austin, Dallas, and Houston that it can raise prices and at the same time continue to win market share as it is difficult for competitors to enter the market, and patients cannot afford to forego anesthesia, as per the complaint.

The allegation by FTC further states that USAP’s multi-pronged anticompetitive strategy and resulting dominance have led to Texans shelling out additional millions of dollars every year in anesthesia services than prior to the creation of USAP.

The complaint also states that Welsh Carson, the New York-based private equity firm created USAP in 2012 after noticing that anesthesiology in Texas comprised small practices competing with each other that helped insurers to negotiate lower prices for themselves, for their clients, and ultimately for patients. Welsh Carlson sensed an opportunity to make profits by getting rid of this competition.

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Since the inception of USAP, it has acquired over a dozen anesthesiology practices in Texas.  As they acquired each practice, they raised the acquired group’s rates to USAP’s higher rates. It led to a significant mark-up for the same doctors as it used to happen in the past. 

As per the complaint filed by FTC, USAP intended to jack up prices further by entering or maintaining price-setting arrangements and forming a market allocation arrangement.

The independent agency of the United States government alleges that the conduct of these parties amounts to unlawful monopolization, unlawful acquisitions, a conspiracy to monopolize, unfair methods of competition, and unlawful restraints of trade. 

According to FTC Chair Lina M. Khan, the FTC will continue the practice of monitoring and challenging serial acquisitions, roll-ups, and other stealth consolidation schemes that illegally scuttle fair competition and cause harm to the people of America.

While commenting on the complaint filed by FTC, USAP board member Dr. Derek Schoppa said that it was based on flawed legal theories and a lack of medical knowledge regarding anesthesiology.

He further said that FTC’s intended outcome will lead to disruption and restrict patients’ equitable access to quality anesthesia care in Texas. Dr. Derek went on to say that this move will negatively impact the hospitals and health systems in Texas that provide care in underserved communities. 

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