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FTC’s Anesthesia Lawsuit Targets Private Equity Playbook

Sean Norick Long and Henry J Hauser

FTC’s Anesthesia Lawsuit Targets Private Equity Playbook
Science Photo Library via Getty Images

The Federal Trade Commission recently took a significant step in challenging private equity “roll-up” acquisitions.

On September 21, 2023, the agency sued US Anesthesia Partners, Inc. (USAP) and private equity firm Welsh, Carson, Anderson & Stowe for an alleged decade-long course of conduct that included purchasing small anesthesia practices to consolidate regional markets and hike prices. The same day, FTC Chair Lina Khan published an editorial in the Financial Times promising to prosecute “parent companies and investors” that enable anticompetitive conduct.

Chair Khan argues that “what happened in Texas is happening across the US.” Indeed, the lawsuit comes less than three months after the Washington Post reported that the Colorado Attorney General was also reviewing USAP’s practices. However, despite USAP’s presence in eight states, the FTC lawsuit only challenged conduct in Texas markets.

“Roll-Up” Acquisitions 101


Antitrust enforcement typically focuses on “large deals between large companies,” but the FTC has increasingly scrutinized the impact of roll-ups: a series of smaller acquisitions that have the cumulative effect of reducing competition for important services. Here, the FTC alleges that USAP’s private equity firm deployed a roll-up strategy when entering adjacent healthcare markets such as emergency medicine and radiology. While enforcers have focused on private equity acquisitions in healthcare, Chair Khan points to roll-ups across firms (e.g., technology companies) and markets (e.g., nursing homes and apartment buildings) as potential concerns.

The FTC believes that roll-ups may violate the “spirit” of antitrust laws and has taken three major steps to assert authority in this area:

  1. Policy Statement: In November 2022, the FTC issued a policy statement that previewed how the agency planned to expand the scope of Section 5 of the FTC Act to fill gaps left by the Sherman and Clayton Acts. For example, roll-up acquisitions that eliminate a potential or nascent competitor may “bring about the harms that the antitrust laws were designed to prevent, but individually may not have violated antitrust laws.” In the USAP lawsuit, the FTC’s complaint alleges that Welsh Carson’s roll-up strategy “neutralized” promising competitors, including one independent anesthesia provider with plans to expand in Texas before USAP acquired it in 2019.
  2. Reporting Requirements: In June 2023, the FTC and DOJ announced proposed revisions to the Hart-Scott-Rodino (HSR) filing and notification form that would give antitrust enforcers more information about a firm’s past acquisitions. The proposal would require both the acquired and acquiring parties to provide information going back ten years on all past acquisitions, regardless of the acquired party’s sales or assets. In the USAP lawsuit, the FTC’s complaint highlights acquisitions by USAP since 2013, and in which pre-acquisition market shares were as small as 0.3%.
  3. Draft Merger Guidelines: The draft update to the Merger Guidelines states that the Clayton Act allows antitrust authorities to scrutinize a “pattern or strategy of growth through acquisition.” For example, a firm’s accumulation of power via smaller acquisitions may “convert an industry from one of intense competition” to one of control by a few firms. In the USAP lawsuit, the FTC’s complaint begins with a story that Welsh Carson used its roll-up strategy to convert a market “full of” competition across small physician practices into a dominant anesthesia provider with power to extract high prices.


The Case Against USAP and Welsh Carson


The FTC’s complaint alleges that USAP and Welsh Carson pursued a three-part strategy to consolidate and monopolize the anesthesiology market in Texas. In addition to alleging monopolization and conspiracy to monopolize claims under Section 2 of the Sherman Act, the FTC alleges the following violations:



Summary of Allegation


Clayton Act § 7

FTC Act § 5

Welsh Carson and USAP systematically acquired more than a dozen anesthesia practices, raising each acquired practice’s prices to USAP’s higher levels.


Sherman Act § 1

FTC Act § 5

Some providers remained independent but agreed to raise their reimbursement rates to USAP’s higher rates. The independent provider would bill payors using USAP’s provider information—making it appear as if USAP performed the work at its higher rate—and both parties would split the additional revenue from the mark-up.

Market Allocation

Sherman Act § 1

FTC Act § 5

USAP secured a promise from a significant competitor to stay out of USAP’s market. The large anesthesia provider agreed not to compete with USAP.

Key Takeaways

The FTC will likely seek to show that Welsh Carson controlled USAP despite being a minority owner.

The FTC argues that Welsh Carson created USAP to execute a decade-long consolidation strategy. Welsh Carson may counter that it has been a minority equity owner since 2014, as its equity stake in USAP has decreased from 50.2% at founding to approximately 23%. A key question is whether—despite changes in formal ownership—Welsh Carson controls USAP because the firm holds two board seats and “actively direct[s]” USAP strategy and decision-making on acquisitions.

The FTC is testing a novel enforcement tool while sticking to a traditional price analysis.

When federal antitrust agencies initially requested public comments to the Merger Guidelines in January 2022, stakeholders raised concerns about the impact of private equity-backed consolidation on the quality of healthcare services. Quality concerns included understaffing, use of mid-level practitioners over more experienced clinicians, and worse patient outcomes. By contrast, here the FTC’s complaint keeps a more targeted focus on price, often comparing an acquired firm’s price “before the acquisition” to “six months after the acquisition.” The complaint only notes that post-acquisition price increases occurred “without any clear improvement in quality.”

The parties contest how to measure price increases in the aggregate.

The FTC argues that USAP’s reimbursement rates were nearly double the median rate of other anesthesia providers in Texas. USAP will likely focus on the average rate, and has pointed to “average annual net rate increases” with rates increasing “modestly” over time but that are “essentially flat” after adjusting for inflation. Importantly, the FTC’s complaint cites documents which state that USAP had rates 96% or 110% higher than the median in Texas, but by some measures were only 40% higher than the average. The choice between median and average is especially important as rate increases are adjusted for inflation and scrutinized over a decade time horizon.


This lawsuit offers insights into how federal enforcers may respond to private equity investments across healthcare and other industries. Previously, in June 2022, the FTC put roll-up acquisitions on notice when it challenged a private equity fund’s acquisition in veterinary services; the final settlement included prior approval and notice requirements for all future acquisitions in the relevant market over the next ten years. In a highly critical concurring opinion, Commissioners Noah Joshua Phillips and Christine Wilson took issue with the “invocation of rhetoric unrelated to competition” in the complaint and the “apparent prediction of remedies upon ... the majority’s evident distaste for private equity as a business model, instead of the facts uncovered in the investigation.”

In particular, the two commissioners disagreed with the majority’s reliance on the “growing trend towards consolidation in . . . veterinary services markets across the United States” as a basis for “imposing broad prior approval and prior notice requirements.” According to Commissioners Phillips and Wilson, a national trend toward consolidation is “not an appropriate basis for incremental remedies[,]” such as the decade-long nationwide prior notice requirement imposed here, because the FTC’s investigation revealed that competition for veterinary services occurs at the local level, and not nationally. They further argued that the proposed consent order burdens private equity, as a “disfavored group,” with “heightened legal obligations . . . because of who they are rather than what they have done,” raising rule of law concerns.

The FTC’s lawsuit against USAP and Welsh Carson represents the latest development in enforcers’ effort to scrutinize private equity.