FTC lawsuit targets PE’s harmful healthcare roll-ups
October 15, 2023
In September 2023, the Federal Trade Commission sued private equity firm Welsh Carson Anderson & Stowe and a healthcare provider under its ownership, alleging a coordinated monopoly scheme at Texas patients’ expense. The complaint alleges that Welsh Carson and US Anesthesia Partners, Inc. engaged in a decade-long strategy to consolidate Texas anesthesiology practices, drive up prices for services, and increase company profits.[1]
The case highlights how private equity firms can accumulate outsize market power through serial small-scale acquisitions. The FTC chair has stated that the agency will continue challenging such “stealth consolidation schemes” that harm the public.[2]
US Anesthesia Partners’ strategy and decisions have been actively directed by Welsh Carson, particularly in Texas, the FTC has alleged. Welsh Carson maintains influence over USAP’s directors, and including two guaranteed seats on US Anesthesia Partners’ board.[3] According to the FTC complaint, internal Welsh Carson communications describe the firm as US Anesthesia Partners’ “primary architect.”[4]
Welsh Carson has maintained influence over US Anesthesia Partners’ management and directors despite a reduced ownership stake. When US Anesthesia Partners was founded in 2012, Welsh Carson owned 50.2% of the company. In September 2023, it owned approximately 23% of US Anesthesia Partners.[5]
Welsh Carson and other owners have collected multiple debt-funded dividends from the US Anesthesia Partners. In 2018, US Anesthesia Partners took on debt to fund $369 million in payments to its owners.[6] The company increased its debt again in 2021, in part to pay $400 million to Welsh Carson and other owners.[7]
Welsh Carson founded US Anesthesia Partners as a platform for a provider consolidation strategy in 2012.[8] For over a decade since US Anesthesia Partners’ 2012 founding, according to FTC allegations, the company and its private equity owner illegally pursued an aggressive consolidation strategy.[9]
As of October 2023, the company claims approximately 4,500 clinicians working in more than 700 facilities.[10] In Texas alone, US Anesthesia Partners grew to more than one dozen practices, a thousand doctors, and 750 nurses. U.S. Anesthesia Partners is nearly seven times larger than its biggest Texas competitor[11] and larger than the ten next-largest groups in Texas combined, the FTC alleged.[12]
US Anesthesia Partners and Welsh Carson have profited through the company’s growth. USAP increased the prices for each provider it acquired, according to the FTC’s complaint, bringing in millions of additional dollars at the expense of patients and other payors.[13]
US Anesthesia Partners had other ways to keep prices high: The company allegedly made price-setting arrangements with other anesthesia groups in Houston and Dallas and entered into a territorial agreement not to compete with another large competitor.[14]
The intended effect, claims the FTC, was higher prices for anesthesia services. The agency estimates that the same services cost Texans millions more than before US Anesthesia Partners existed.[15]
The strategy has done well enough for Welsh Carson that the private equity firm has “deploy[ed] a similar strategy to consolidate” other practice specialties including emergency medicine and radiology.[16] In 2015, Welsh Carson established US Acute Care Solutions, an emergency medicine provider.[17] That year, it provided services in 64 hospitals; six years later in 2021, the company was at over 220 sites.[18] Welsh Carson sold its stake in US Acute Care Solutions in February 2021.[19]
In 2017, Welsh Carson established US Radiology Specialists in North Carolina.[20] In February 2022, US Radiology Specialists took on $450 million in debt to fund two acquisitions, bringing the company’s total presence to 180 locations in 15 states.[21] As of October 2023, its board of directors includes two Welsh Carson affiliates,[22] including the partner who led the firm’s investment in US Anesthesia Partners.[23]
More recently, Welsh Carson has been rolling up Texas orthopedic providers into United Musculoskeletal Partners (UMP), a Georgia-based company that the private equity firm founded in late 2021.[24] It appointed a chief executive who had previously helped lead another Welsh Carson company.[25] As of October 2023, United Musculoskeletal Partners’ board includes two Welsh Carson affiliates, including a firm principal who also sits on the board for US Radiology Specialists.[26]
By July 2022, Welsh Carson’s United Musculoskeletal Partners had grown to 320 providers across three states. Its first Texas holdings were consolidated from what had previously been five separate orthopedic companies.[27] In February 2023, the company bought two more Texas practices, bringing its total to 69 physicians and 110 providers at 27 locations in the Dallas-Fort Worth area.[28]
In early March 2023, United Musculoskeletal Partners selected a new chief executive for its Texas market.[29] The appointee joined UMP from another private equity-owned healthcare company.[30] Later in March, United Musculoskeletal Partners bought another Texas orthopedic group, growing to 80 physicians and 126 providers at 29 locations around Dallas-Fort Worth.[31]
In addition to anesthesia services, the FTC should investigate whether Welsh Carson has accumulated outsize market power through serial small-scale acquisitions in other provider specialties, including emergency medicine, radiology, and orthopedics, as potential “stealth consolidation schemes” harmful the public.[32]
This long-due scrutiny has already drawn a reaction from industry interests. The private equity industry’s lead lobbyist describes a “radical new antitrust theory” and “power grab” authored by a federal administration that “threatens this system”—under which private equity is imagined to play a vital productive role.[33]
But if the FTC allegations are true (about roll-ups, price-setting, and a territorial agreement) then it may actually show that private equity is a threat to accessible and affordable healthcare. For example, the FTC estimates that the same services cost Texans millions more now than before the existence of private equity-backed US Anesthesia Partners.[34]
Private equity firm Welsh Carson Anderson & Stowe’s presence in healthcare is characterized by rolled-up provider practices across multiple specialties. The firm has identified a strategy that allows it to extract profits while being relatively unseen. The FTC’s decision to target cumulative roll-ups addresses a particularly harmful private equity practice and signals to the industry that future roll-ups should appropriately undergo scrutiny.
[1] Federal Trade Commission. “FTC Challenges Private Equity Firm’s Scheme to Suppress Competition in Anesthesiology Practices Across Texas,” September 21, 2023. https://www.ftc.gov/news-events/news/press-releases/2023/09/ftc-challenges-private-equity-firms-scheme-suppress-competition-anesthesiology-practices-across.
[2] Federal Trade Commission. “FTC Challenges Private Equity Firm’s Scheme to Suppress Competition in Anesthesiology Practices Across Texas,” September 21, 2023. https://www.ftc.gov/news-events/news/press-releases/2023/09/ftc-challenges-private-equity-firms-scheme-suppress-competition-anesthesiology-practices-across.
[3] Federal Trade Commission. “Complaint for Injunctive and Other Equitable Relief,” p. 16. FTC v. U.S. Anesthesia Partners, Inc., et al., September 21, 2023. https://www.ftc.gov/system/files/ftc_gov/pdf/2010031usapcomplaintpublic.pdf.
[4] Federal Trade Commission. “Complaint for Injunctive and Other Equitable Relief,” p. 93. FTC v. U.S. Anesthesia Partners, Inc., et al., September 21, 2023. https://www.ftc.gov/system/files/ftc_gov/pdf/2010031usapcomplaintpublic.pdf.
[5] Federal Trade Commission. “Complaint for Injunctive and Other Equitable Relief,” p. 15-16. FTC v. U.S. Anesthesia Partners, Inc., et al., September 21, 2023. https://www.ftc.gov/system/files/ftc_gov/pdf/2010031usapcomplaintpublic.pdf.
[6] Moody’s Investors Service. “Moody’s: U.S. Anesthesia Partners, Inc.’s Debt-Funded Dividend Is Credit Negative | Announcement,” October 23, 2018. https://www.moodys.com/research/Moodys-US-Anesthesia-Partners-Incs-debt-funded-dividend-is-credit-negative-Announcement–PR_390715.
[7] Moody’s Investors Service. “Moody’s Affirms U.S. Anesthesia Partners’ B3 CFR, Assigns Ratings to Refinanced Debt; Outlook Stable | Rating Action,” September 13, 2021. https://www.moodys.com/research/Moodys-affirms-US-Anesthesia-Partners-B3-CFR-assigns-ratings-to-Rating-Action–PR_453844?cid=7QFRKQSZE021.
[8] Welsh, Carson, Anderson & Stowe. “WCAS and Healthcare Industry Veterans Announce Formation of U.S. Anesthesia Partners, Inc.,” November 19, 2012. https://www.wcas.com/system/uploads/fae/file/asset/17/WCAS_and_Healthcare_Industry_Veterans_Announce_Formation_of_U.S._Anesthesia_Partners.pdf. See also, Federal Trade Commission. “Complaint for Injunctive and Other Equitable Relief,” p. 26-27. FTC v. U.S. Anesthesia Partners, Inc., et al., September 21, 2023. https://www.ftc.gov/system/files/ftc_gov/pdf/2010031usapcomplaintpublic.pdf.
[9] Federal Trade Commission. “Complaint for Injunctive and Other Equitable Relief,” p. 4. FTC v. U.S. Anesthesia Partners, Inc., et al., September 21, 2023. https://www.ftc.gov/system/files/ftc_gov/pdf/2010031usapcomplaintpublic.pdf.
[10] U.S. Anesthesia Partners. “Who We Are.” Accessed October 4, 2023. https://www.usap.com/about/who-we-are.
[11] Federal Trade Commission. “Complaint for Injunctive and Other Equitable Relief,” p. 4, p. 84. FTC v. U.S. Anesthesia Partners, Inc., et al., September 21, 2023. https://www.ftc.gov/system/files/ftc_gov/pdf/2010031usapcomplaintpublic.pdf.
[12] Federal Trade Commission. “Complaint for Injunctive and Other Equitable Relief,” p. 3-4, p. 84. FTC v. U.S. Anesthesia Partners, Inc., et al., September 21, 2023. https://www.ftc.gov/system/files/ftc_gov/pdf/2010031usapcomplaintpublic.pdf.
[13] Federal Trade Commission. “Complaint for Injunctive and Other Equitable Relief,” p. 3, 32-33. FTC v. U.S. Anesthesia Partners, Inc., et al., September 21, 2023. https://www.ftc.gov/system/files/ftc_gov/pdf/2010031usapcomplaintpublic.pdf.
[14] Federal Trade Commission. “Complaint for Injunctive and Other Equitable Relief,” p. 3-4, 52-61. FTC v. U.S. Anesthesia Partners, Inc., et al., September 21, 2023. https://www.ftc.gov/system/files/ftc_gov/pdf/2010031usapcomplaintpublic.pdf.
[15] Federal Trade Commission. “Complaint for Injunctive and Other Equitable Relief,” p. 5. FTC v. U.S. Anesthesia Partners, Inc., et al., September 21, 2023. https://www.ftc.gov/system/files/ftc_gov/pdf/2010031usapcomplaintpublic.pdf.
[16] Federal Trade Commission. “Complaint for Injunctive and Other Equitable Relief,” p. 5, 94. FTC v. U.S. Anesthesia Partners, Inc., et al., September 21, 2023. https://www.ftc.gov/system/files/ftc_gov/pdf/2010031usapcomplaintpublic.pdf.
[17] Business Wire. “Emergency Medicine Physicians and Welsh, Carson, Anderson & Stowe Announce Formation of US Acute Care Solutions,” April 13, 2015. https://www.businesswire.com/news/home/20150413005295/en/Emergency-Medicine-Physicians-and-Welsh-Carson-Anderson-Stowe-Announce-Formation-of-US-Acute-Care-Solutions.
[18] Sarah Pringle. “US Acute Care Solutions, Backed by WCAS, Seeks $1bn-plus Recap.” PE Hub, January 20, 2021. https://www.pehub.com/us-acute-care-solutions-backed-by-wcas-seeks-1bn-plus-recap/.
[19] U.S. Acute Care Solutions. “USACS Physician-Owners Buy Out Private Equity Partner WCAS,” February 9, 2021. https://www.usacs.com/resources/news/usacs-wcas.
[20] Welsh, Carson, Anderson & Stowe. “Charlotte Radiology And Welsh, Carson, Anderson & Stowe Announce The Formation Of Us Radiology Specialists, Appoint New CEO,” April 4, 2018. https://www.wcas.com/firm/news/charlotte-radiology-and-welsh-carson-anderson-stowe-announce-the-formation-of-us-radiology-specialists-appoint-new-ceo.
[21] Marty Stempniak. “US Radiology Specialists Takes on $450M in Debt to Fuel Largest Transaction in Its History.” Radiology Business, February 11, 2022. https://radiologybusiness.com/topics/healthcare-management/healthcare-economics/us-radiology-specialists-debt-acquisition-moodys.
[22] US Radiology Specialists. “Board of Directors,” February 14, 2020. https://www.usradiology.com/board.
[23] Federal Trade Commission. “Complaint for Injunctive and Other Equitable Relief,” p. 4. FTC v. U.S. Anesthesia Partners, Inc., et al., September 21, 2023. https://www.ftc.gov/system/files/ftc_gov/pdf/2010031usapcomplaintpublic.pdf.
[24] Welsh, Carson, Anderson & Stowe. “Welsh, Carson, Anderson & Stowe And Resurgens Orthopaedics Form Partnership To Build The Premier Orthopaedic Practice In The Nation,” December 9, 2021. https://www.wcas.com/firm/news/welsh-carson-anderson-stowe-and-resurgens-orthopaedics-form-partnership-to-build-the-premier-orthopaedic-practice-in-the-nation.
[25] United Musculoskeletal Partners. “Name Announcement.” archived at Wayback Machine, March 21, 2022. https://web.archive.org/web/20230608114022/https://www.umpartners.com/blog/name-announcement.
[26] United Musculoskeletal Partners. “Our Team.” Accessed October 4, 2023. https://www.umpartners.com/our-team.
[27] United Musculoskeletal Partners. “UMP Announces Novum Merger |.” archived at Wayback Machine, July 20, 2022. https://web.archive.org/web/20230608105452/https://www.umpartners.com/blog/united-musculoskeletal-partners-announces-merger-with-novum-orthopedic-partners-and.
[28] United Musculoskeletal Partners. “United Musculoskeletal Partners Strategic Partnership,” February 9, 2023. https://www.umpartners.com/blog/united-musculoskeletal-partners-announces-strategic-partnership-with-two-multi-location.
[29] United Musculoskeletal Partners. “Brian Cormican to Lead Texas Market for UMP,” March 7, 2023. https://www.umpartners.com/blog/brian-cormican-joins-united-musculoskeletal-partners-as-ceo-of-the-texas-market.
[30] Paragon Healthcare. “Peak Rock Capital Partnership | Press Release,” September 15, 2020. https://paragonhealthcare.com/peak-rock-capital-partnership/.
[31] United Musculoskeletal Partners. “Sixth Texas-Based Practice Joins the United Musculoskeletal Partners Platform,” March 28, 2023. https://www.umpartners.com/blog/sixth-texas-based-practice-joins-the-united-musculoskeletal-partners-platform.
[32] Federal Trade Commission. “FTC Challenges Private Equity Firm’s Scheme to Suppress Competition in Anesthesiology Practices Across Texas,” September 21, 2023. https://www.ftc.gov/news-events/news/press-releases/2023/09/ftc-challenges-private-equity-firms-scheme-suppress-competition-anesthesiology-practices-across.
[33] Drew Maloney. “Maloney Op-Ed in Financial Times: ‘A Power Grab against Private Equity Threatens the US Economy.’” American Investment Council, September 28, 2023. https://www.investmentcouncil.org/maloney-op-ed-in-financial-times-a-power-grab-against-private-equity-threatens-the-us-economy/.
[34] Federal Trade Commission. “Complaint for Injunctive and Other Equitable Relief,” p. 5. FTC v. U.S. Anesthesia Partners, Inc., et al., September 21, 2023. https://www.ftc.gov/system/files/ftc_gov/pdf/2010031usapcomplaintpublic.pdf.
