The Federal Trade Commission (FTC) has initiated legal action against U.S. Anesthesia Partners, Inc. (USAP) and private equity firm Welsh, Carson, Anderson & Stowe, accusing them of orchestrating an anti-competitive scheme to dominate the anesthesiology services market in Texas. The FTC alleges that this strategy led to inflated prices for anesthesia services, directly impacting Texas patients and boosting the profits of USAP and Welsh Carson.
According to the FTC’s complaint, filed in federal district court, USAP and Welsh Carson embarked on a deliberate three-pronged approach to consolidate and monopolize the Texas anesthesiology sector. This strategy, as detailed in the complaint, involved: a systematic roll-up of anesthesia practices, price-setting agreements with independent groups, and a market allocation deal to sideline a competitor.
The FTC contends that USAP’s aggressive anti-competitive tactics and subsequent market dominance have imposed significant financial burdens on Texans, costing them tens of millions of dollars annually in inflated anesthesia service fees compared to pre-USAP market conditions.
“Welsh Carson, a private equity firm, spearheaded a roll-up strategy and established USAP with the express purpose of acquiring almost every major anesthesiology practice in Texas,” stated FTC Chair Lina M. Khan. “Coupled with unlawful price-fixing and market allocation agreements, these tactics empowered USAP and Welsh Carson to escalate prices for anesthesia services – generating substantial excess profits for their executives at the expense of Texas patients and businesses.” Chair Khan emphasized the FTC’s commitment to rigorously investigate and challenge serial acquisitions, roll-up schemes, and other concealed consolidation strategies that illegally undermine fair competition and harm the American public.
The FTC’s complaint highlights that Welsh Carson, based in New York, conceived USAP in 2012 after observing a fragmented anesthesiology landscape in Texas, characterized by numerous small practices competing, thus enabling insurers to negotiate favorable rates for clients and patients. Welsh Carson identified an opportunity to capitalize on consolidating this market to reduce competition and increase prices.
Since its inception, USAP has acquired over a dozen anesthesiology practices across Texas. Following each acquisition, the FTC asserts that USAP unilaterally increased the acquired practice’s rates to match USAP’s premium pricing structure. This roll-up strategy has propelled USAP to become the leading anesthesia services provider in Texas and numerous major metropolitan areas within the state, including Houston and Dallas. USAP now operates at a scale and price point that significantly surpasses its competitors.
The FTC further alleges that USAP pursued additional measures to inflate prices, specifically by:
- Implementing and Maintaining Price-Setting Arrangements: USAP reportedly established and upheld agreements that allowed them to impose their market-leading prices for services delivered by independent anesthesia groups at prominent hospitals in both Houston and Dallas.
- Establishing a Market Allocation Arrangement: USAP and Welsh Carson allegedly secured an agreement from another substantial anesthesia services provider to abstain from competing within USAP’s designated territory.
The FTC argues that the actions undertaken by USAP and Welsh Carson constitute unlawful monopolization, illegal acquisitions, conspiracy to monopolize, unfair methods of competition, and unlawful restraints of trade. These actions are alleged to be in violation of both the FTC Act and the Clayton Act.
The FTC is seeking equitable relief to rectify the consequences of USAP and Welsh Carson’s anti-competitive behavior and to prevent any future recurrence of similar conduct.
The Commission’s vote to authorize the filing of a permanent injunction and other equitable relief in the U.S. District Court for the Southern District of Texas was unanimously approved 3-0.
NOTE: The Commission issues a complaint when it possesses “reason to believe” that a law has been or is being violated and deems a proceeding to be in the public interest. The ultimate decision in this case will be determined by the court.
The Health Care Division of the FTC’s Bureau of Competition is overseeing this matter.
