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Class-action lawsuit against Welsh Carson

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Illustration: Sarah Grillo/Axios

On the heels of the FTC suing private equity firm Welsh Carson Anderson & Stowe accusing it of suppressing market competition in Texas, WCAS now faces a related class-action lawsuit.

Driving the news: Union health plans that represent electricians and plumbers in Texas have filed a class-action lawsuit against WCAS-backed physician group U.S. Anesthesia Partners, according to STAT news.

Details: Per STAT, the suit builds on the FTC's September complaint, which argued that WCAS and USAP bought up anesthesia practices across Texas to concentrate market power and gain leverage in health insurance negotiations.

  • The unions claim USAP had price-fixing agreements with anesthesia groups that wasn't able to acquire, therefore maintaining a competitive advantage.
  • Within those agreements, anesthesia groups allowed USAP to bill insurers for their anesthesia services, and USAP leveraged that to charge insurers higher prices.

Reality check: A roll-up strategy is the oldest play in the PE playbook and it may be difficult to regulate this tactic, experts say.

  • "It's noteworthy that it's anesthesia," PitchBook analyst Rebecca Springer says of the FTC suit. "This is already a space that's a bit more consolidated. It's not as fragmented as some of the other areas of private equity plays in a space where elevated costs have obviously been the source of some contention."
  • "In some ways, this is a potentially was an easier case for the FTC to make if they wanted to set a precedent for going after PE roll-ups," she adds. "It would be much harder to implement this if you were looking at home health agencies or dental offices or even veterinary offices."

The other side: USAP and Welsh Carson had no comment on the class-action lawsuit, per STAT.

  • The companies last week filed a motion to dismiss the FTC's complaint, arguing, "the FTC has inaccurately represented the anesthesia market in Texas and has failed to properly allege that USAP has monopoly power by charging more than a competitive price."

WCAS did not immediately respond to Axios' request for comment.

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