In healthcare, for example, private equity buyouts of individual practices and the consolidation of for-profit hospitals across the U.S. have sparked concern. Studies indicate that private equity ownership contributes to hefty debt-servicing obligations for healthcare providers and frequent management changes, often leading to higher medical costs for consumers and reduction in the patient-care quality. Additionally, private equity acquisitions have been linked to an increase the risk of hospital bankruptcies. Such bankruptcies threaten access to healthcare on a broader scale through limiting the availability of clinicians and diagnostic testing to underserved communities.
The DOJ and FTC new merger guidelines have sparked significant controversy and debate. Critics have argued that the agencies’ new regulatory approach contorts established antitrust law principles and are unlikely to spur meaningful change for merger challenges in the courtroom. A prime example is the case of Fed. Trade Comm'n v. U.S. Anesthesia Partners, Inc. In September 2023, the FTC sued Welsh, Carson, Anderson & Stowe ("Welsh Carson"), a private equity firm accused of a decades-long strategy of acquiring smaller anesthesia practices, thus consolidating the anesthesia market in Texas. The FTC alleged that Welsh Carson’s acquisition of U.S. Anesthesia Partners (“USAP”), a leading anesthesia services provider in Texas, enabled them to raise prices and share a portion of the profits with Welsh Carson. Also, the FTC contended that USAP, essentially at the direction of Welsh Carson, entered into market allocation agreements with competing anesthesia providers so that USAP could have dominance in major Texas anesthesia markets. Welsh Carson countered that its acquisition practices did not violate antitrust laws by filing a motion to dismiss. Welsh Carson argued that it did not control USAP's pricing decisions, as USAP was a separate corporation. Additionally, Welsh Carson claimed it could not be considered a monopolist in the anesthesia market because their primary business was private equity, not healthcare. Judge Kenneth Hoyt sided with Welsh Carson and dismissed the FTC’s complaint. He noted that Welsh Carson’s acquisition of USAP did not constitute an antitrust violation, as there was insufficient overlapping ownership between USAP and Welsh Carson to prove such a violation. Furthermore, Judge Hoyt held that Welsh Carson’s intent to consolidate the anesthesia market did not indicate an impending antitrust violation.
While Fed. Trade Comm'n v. U.S. Anesthesia Partners, Inc. could be read as a decision that private equity firms’ operating methods will remain unaffected, it is important to consider the following two critical points. First, the original complaint was filed under Section 13(b) of the FTC Act, whereas the Merger Guidelines are intended to serve as persuasive authority for cases primarily brought under the Sherman Act and Clayton Act. Second, this case was initiated three months before the new guidelines took effect, making it premature to assert that it will determine the scrutiny of all private equity transactions. Antitrust regulators have emphasized their commitment to using their full regulatory power to protect competition in the healthcare sector from private equity firms. With the introduction of new merger guidelines, courts may reach varying conclusions when evaluating roll-up acquisitions. All in all, while the U.S. Anesthesia Partners decision might appear to be a setback, this decision should not be viewed as indicative of the fate of future cases.
