FTC Probes Market Power of One of Country’s Biggest Anesthesia Providers

WASHINGTON — The Federal Trade Commission is investigating one of the nation’s largest providers of anesthesia, American Anesthesia Company Partners, over whether it has gained too much power in some regional markets through acquisitions, according to people familiar with the matter.

USAP has 4,500 anesthesia providers in nine states, including Texas, Colorado, and Florida. The company, founded in 2012 by private equity firm Welsh, Carson, Anderson & Stowe, has grown by acquiring smaller anesthesia groups and compiling them into a consolidated entity that manages hospital contracts, billing, insurance agreements and other functions.

USAP spokesman Tony Judd confirmed the FTC’s investigation and said it was a “relatively common” investigation of health care competition.

“Specifically, the focus of the FTC appears to be on the history of the USAP acquisition,” Mr. Judd said. “We have had successful growth over the past decade, serving patients across multiple states and providing them with high-quality care.”

He said the company is cooperating with the investigation, adding that the FTC investigation is not focused on “irregularities in billing or patient care.”

The investigation, which began more than a year ago, according to people familiar with the matter, is an example of tougher government scrutiny of private equity involvement in the healthcare industry under the leadership of Federal Trade Commission Chair Lina Khan. Ms Khan has criticized what she calls the focus of private equity on short-term profits, which she said “can spur practices that may reduce quality of care, increase costs for patients and payers, and generate horrific outcomes for patients”.

USAP has fought with insurance companies such as UnitedHealth Group a company

on payment rates. Two years ago, the company left UnitedHealth and sued the insurance company in Colorado and Texas courts, alleging that the insurance company took illegal steps to force it out of the UnitedHealth network and damage its relationship with hospitals and doctors. The two sides later reached an agreement that the USAP would be part of the UnitedHealth network, and the USAP dropped the lawsuit. UnitedHealth said at the time that the USAP sought payments “approximately double the average price we pay for other anesthesia kits.”

In 2019, USAP was the largest provider of anesthesia services for Medicare beneficiaries in the Houston and Denver markets, according to research by Lauren Adler of the USC-Brookings Schaeffer Health Policy Initiative. After that, the USAP controlled about 35% of the anesthesia market in Texas and 30% in Colorado, according to Mr. Adler.

USAP’s Mr. Judd disputed these estimates but refused to provide the company’s market share.

Private equity firms have acquired specialized healthcare providers because their business is often large and high-margin, and smaller groups can be combined to form larger networks with greater influence with hospitals and insurance companies. Anesthesia industry profit margin was estimated at 12.5% ​​in 2021, down from 14% before the pandemic, which reduced elective surgeries, according to data provider IBISWorld.

Mr. Adler said private equity-owned providers accounted for about 15% of the medical care market for anesthesia nationally in 2019. Anesthesia was the most common type of medical specialty practice that private equity firms acquired from 2013 to 2016, according to researchers at the University of Oregon. Health and Science, University of Pennsylvania, and Johns Hopkins University.

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Welch Carson, a private equity firm with offices in New York and San Francisco, manages nearly $15 billion in assets and invests in companies focused on technology and healthcare, according to regulatory disclosures. Welch Carson joined Greater Houston University of Anesthesiology in 2013 to form USAP. USAP owners also include Boston private equity firm Berkshire Partners and Singapore’s sovereign wealth fund GIC Pte. To also have 1,500 anesthesiologists in the company who own part of the company.

Berkshire declined to comment, and GIC did not respond to a request for comment.

Prices paid for anesthesia rose 26% after outpatient health care facilities, including hospitals, switched to private equity-owned practices, according to a paper published in February by researchers from Columbia University and Weill Cornell Medical College in The American Medical Journal. organisation.

As large private equity-backed anesthetic groups gain more market share in an area, they tend to be successful in negotiating higher prices, according to Ambar La Forgia, a professor at Columbia University and one of the paper’s authors.

“USAP has a very strong presence in Texas,” said Dr. La Forgia. “So the more facilities they have in Texas, the more they know about the specific negotiating environment with the insurance companies there, the more leverage they gain because now they can really control the network.”

Mr. Good said the anesthesia market is very competitive and insurance companies want USAP to be within the network because it provides high-quality care and has good patient outcomes.

USAP and other large private equity-backed physician-backed firms, including Envision Healthcare Corp. , owned by KKR & Co. , and TeamHealth Holdings Inc. , owned by Blackstone Corporation a company ,

I lobbied previously about the issue of sudden medical bills, or large bills patients receive after treatment by doctors who were out of network with their insurance company. Some groups of physicians have used surprise billing as a negotiating tactic, hoping to get patients to file a complaint with their employers, who in turn will push insurance companies to accept the reimbursement rates requested by providers.

The No Surprises Act, which sought to protect patients from receiving large medical bills when they were inadvertently treated by an out-of-network physician, laboratory, or other type of provider, passed Congress in December 2020. The law went into effect at the beginning of 2022.

Judd said the USAP did not use surprise billing to gain leverage over insurance companies. He said the company lobbied federal legislation to ensure a fair process for resolving disputes between doctors and insurers was created.

Laura Cooper and Miriam Gottfried contributed to this article.

Write to Dave Michaels at [email protected]

Corrections and amplifications
Insurers paid more for anesthesia services after outpatient health care facilities switched to private equity-owned practices, according to a paper published in February. An earlier version of this article incorrectly stated that it is the outpatient health care facilities that pay. (corrected 1 October)

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