The Federal Trade Commission (FTC) has initiated legal action against U.S. Anesthesia Partners, Inc. (USAP), a major provider of anesthesia services in Texas, particularly impacting markets like Dallas, and the private equity firm Welsh, Carson, Anderson & Stowe. The lawsuit alleges a multi-year scheme designed to stifle competition within Texas’s anesthesiology sector. This scheme, according to the FTC, was intended to consolidate practices, inflate the cost of anesthesia services for patients throughout Texas, including in Dallas, and ultimately maximize profits for USAP and Welsh Carson.
According to the official complaint filed in federal district court, the core of the FTC’s case rests on a three-pronged strategy allegedly employed by USAP and Welsh Carson to dominate the anesthesiology market in Texas. This strategy began with a “roll-up” approach, aggressively acquiring nearly every substantial anesthesia practice in Texas. The aim was to create a single, dominant entity capable of dictating higher prices. Beyond acquisitions, USAP and Welsh Carson are accused of implementing price-fixing agreements with the remaining independent practices, further escalating anesthesia costs. Finally, to solidify their market position, USAP allegedly neutralized a significant competitor through a deal designed to exclude them from USAP’s operational areas.
The FTC asserts that USAP’s multifaceted anti-competitive strategy and the resulting market dominance have imposed a heavy financial burden on Texans. It is estimated that residents and businesses in Texas have paid tens of millions of dollars in excess charges for anesthesia services annually compared to pre-USAP market conditions. This impact is felt across the state, including major metropolitan areas like Dallas.
“Private equity firm Welsh Carson conceived and executed a roll-up strategy, establishing USAP as a vehicle to acquire almost all major anesthesiology practices across Texas. Coupled with illegal price-setting and market allocation agreements, these tactics empowered USAP and Welsh Carson to artificially inflate prices for essential anesthesia services,” stated FTC Chair Lina M. Khan. “This conduct directly resulted in tens of millions of dollars in undue profits for these executives, at the expense of Texas patients and businesses, including those in Dallas and surrounding areas. The FTC remains committed to rigorously investigating and challenging serial acquisitions, roll-up schemes, and other concealed consolidation tactics that unlawfully undermine fair competition and inflict harm on the American public.”
The FTC complaint details how New York-based Welsh Carson identified an opportunity in the Texas anesthesiology market in 2012. Prior to USAP’s formation, the market was characterized by numerous smaller, independent practices competing with each other. This competitive landscape allowed insurers to negotiate favorable rates, benefiting their clients and patients. Welsh Carson recognized the potential for substantial profit by eliminating this competitive environment through consolidation.
Since its inception, USAP has acquired over a dozen anesthesiology practices in Texas. Notably, this consolidation has significantly impacted major Texan cities, including Dallas. The FTC alleges that following each acquisition, USAP unilaterally increased the acquired practice’s rates to match USAP’s pre-existing, higher fee schedule. This practice effectively translated to a considerable price hike for the same medical services provided by the same doctors, simply under the USAP umbrella. This roll-up strategy has propelled USAP to become the dominant anesthesia provider in Texas and in key metropolitan areas such as Houston and Dallas, overshadowing its competitors in both size and pricing.
To further amplify prices, the FTC complaint highlights additional anti-competitive actions undertaken by USAP:
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Price-Setting Arrangements in Dallas and Houston: USAP allegedly engaged in or maintained agreements that allowed them to impose their market-leading prices for anesthesia services delivered by nominally independent anesthesia groups at prominent hospitals within both Houston and Dallas. This effectively eliminated price competition even when services appeared to be provided by different entities.
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Market Allocation Agreement: USAP and Welsh Carson reportedly secured an agreement from another large anesthesia services provider to intentionally avoid competing within USAP’s established territory. This further solidified USAP’s dominant position and reduced competitive pressure in markets like Dallas.
The FTC contends that the actions of 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 direct violation of both the FTC Act and the Clayton Act, designed to promote fair competition and protect consumers.
The FTC is pursuing equitable relief to address the consequences of USAP and Welsh Carson’s anti-competitive behavior and to prevent any recurrence of similar actions in the future, aiming to restore fair market conditions for anesthesia services in Texas, including Dallas.
The Commission’s decision to authorize staff to file for a permanent injunction and other equitable relief in the U.S. District Court for the Southern District of Texas was unanimous, with a 3-0 vote.
NOTE: The issuance of a complaint by the Commission indicates that it has “reason to believe” that violations of the law have occurred or are ongoing, and that legal proceedings are deemed to be in the public interest. It is important to note that the allegations in the complaint will be adjudicated by the court.
The Health Care Division of the FTC’s Bureau of Competition is the division responsible for this case.
