On September 21, 2023, the Federal Trade Commission (“FTC”) filed a complaint in the U.S. District Court for the Southern District of Texas alleging that U.S. Anesthesia Partners, Inc. (“USAP”) and Welsh, Carson, Anderson & Stowe (“WCAS”), its private equity backer, engaged in a years’ long anticompetitive scheme in connection with the market for anesthesiology services in Texas.
First, it’s important to note that anyone who can pay the filing fee can bring suit and the Biden administration’s FTC under its Chair, Lina Khan, has been extremely aggressive in filing them, with pretty shoddy results. In other words, a complaint, even if filed by the FTC, is just that, a complaint; it’s a completely one-sided statement of alleged facts and an alleged application of the law. The Government’s claims, at least at this point, are civil only, and USAP and WCAS are entitled to their day (or months/years) in court.
We’ll look at the case, and its important lessons for you, in greater detail later this week in the September issue of our monthly newsletter. To make sure you’re included, subscribe at www.weisspc.com.
Until then, following are both what you need to know about the basic allegations, and some of the many overall takeaways to incorporate into your own group’s thinking.
What You Need to Know About The Basic Allegations
The FTC alleges that USAP and WCAS engaged in a multiyear scheme to consolidate and monopolize the Texas market for anesthesiology services. According to the complaint:
“USAP’s acquisitions have hit Texans’ wallets hard. With each deal, USAP raised the acquired group’s prices to USAP’s (often much) higher price. As one insurance executive summarized, USAP and Welsh Carson used acquisitions to ‘take the highest rate of all . . . and then peanut butter spread that across the entire state of Texas.’ Welsh Carson and USAP euphemistically referred to this practice—wielding its increasingly dominant market position to net tens of millions of dollars in additional profits—as ‘synergies.’ Before USAP made a single acquisition, Welsh Carson was already bragging to potential financiers about the plan to create a ‘significant synergy opportunity’ at the expense of patients, their employers, and insurers. USAP’s and Welsh Carson’s executives, in plotting their ‘roll up,’ underscored that ‘captur[ing] significant synergies’ was a key part of their scheme. Following one acquisition, a USAP executive put it more bluntly: ‘Cha-ching!”’
The FTC also alleges that the defendants entered into agreements with remaining, independent anesthesia practice to set prices. According to the complaint:
“Second, USAP supported its ‘roll-up’ strategy by entering or maintaining price-setting arrangements with other, independent anesthesia groups that shared key hospitals in Houston and Dallas. Under these price-setting arrangements, USAP charges its own high prices for services in fact provided by those independent groups that had been charging lower prices. Like its acquisitions, USAP’s price-setting arrangements yielded ‘synergies’—or additional revenues—that USAP then split with each independent group. Despite USAP’s own executives recognizing that these price-setting arrangements are ‘odd from a compliance standpoint,’ two of them remain in use today and USAP has signed or pursued multiple others.”
And, the FTC alleges that that USAP and WCAS entered into a market allocation agreement with another competing group. According to the complaint:
“ . . . , USAP and Welsh Cason entered a market allocation with another large anesthesia services provider, . . . [NAME AND RELATED INFORMATION REDACTED] . . . . The Welsh Carson partner who acted as USAP’s chief negotiator made clear that this market allocation agreement was “what we want,” and he later expressed appreciation for . . . [NAME REDACTED] . . . “constructive” attitude towards USAP’s and Welsh Carson’s interest in sidelining a significant rival.”
The FTC seeks both an injunction as to further conduct and “structural relief”, e.g., an ordered break up of USAP.
Some of the Many Takeaways for Your Group
- Although the Biden administration is hot to demonize consolidation, there’s nothing inherently illegal about roll-up strategies. However, roll-up strategies that are schemes to monopolize are another story.
- If the FTC wins its case, USAP could be broken up, creating new opportunities in the market.
- Although the case is civil, not criminal, there’s no guaranty that the government won’t, via the Department of Justice, bring a companion criminal antitrust case against the defendant entities and, potentially, individuals who worked or are working on their behalf. An individual’s culpability for criminal conduct is not shielded by the fact that it was committed on behalf of an employer.
- Some of the specific allegations underlying the grand “schemes” claimed by the FTC, such as the allegation that the defendants entered into agreements with competitors to allocate the market, mean that other groups and individuals might become targets of either or both civil or criminal actions.
- Among the FTC’s specific allegations is that in some cases in which USAP could not convince another group to sell, it would enter into an agreement with the other group in which USAP would bill payors for the anesthesia services rendered by both groups using USAP’s own provider or tax information, which price-setting arrangements made it appear to payors as if USAP were doing the work of the other group’s anesthesia providers. In addition to potential antitrust violations, arrangements such as that raise significant breach of insurance provider agreement issues, significant insurance fraud issues, as well as federal, and state, antikickback statute concerns.
