Sep 21, 2023 - Economy

FTC sues private equity firm Welsh Carson for medical price-fixing

Illustration of a gavel hovering over a block with an image of a red cross.

Illustration: Gabriella Turrisi/Axios

The Federal Trade Commission on Thursday filed suit against private equity firm Welsh Carson Anderson & Stowe (WCAS), accusing it of suppressing competition and driving up prices for anesthesiology services in Texas.

Why it matters: This could be the tip of an antitrust spear aimed at private equity, after decades of avoidance.

Backstory: WCAS in 2012 announced the formation of U.S. Anesthesia Partners (USAP), a platform that would acquire anesthesia services groups.

  • Today it reports having over 700 facility partners in eight states that serve over two million patients annually,
  • Much of its focus has been on Texas, which USAP breaks out into four separate regions on its website.

Lawsuit: The FTC alleges that WCAS and USAP were involved in a "multi-year anticompetitive scheme" that hurt patient pocketbooks for the sake of profits.

  • Specifically, it claims that WCAS and USAP first bought up "nearly every large anesthesia practice in Texas," in order to form a dominant provider, and then forged price-setting agreements with providers that had remained independent.
  • It also accuses the defendants of "striking a deal" to keep a major competitor out of Texas.
  • The FTC doesn't allege wrongdoing by WCAS or USAP in markets outside of Texas.
  • WCAS currently holds a minority stake in USAP, but the FTC argues that it remains in control.

What they're saying: Welsh Carson said in an emailed statement that the case is "unwarranted" and that the complaint will "harm clinicians and patients."

  • It adds: "The FTC is ignoring that USAP's commercial rates have not exceeded the rate of medical cost inflation for close to ten years. The FTC's decision to pursue a civil action against a minority investor of a physician-owned company is unprecedented and disregards well-settled principles of law. Unfortunately, this is consistent with the series of recent lawsuits that the FTC has filed using litigation to pursue radical policy theories."

The bottom line: Rollups are a very common private equity strategy, particularly in health care.

  • The FTC previously went after a rollup in the veterinary care space, but it was settled and never litigated.
  • If the FTC is successful on this new case, it could create a blueprint for future actions.

Read the complaint:

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