FTC investigates market power of one of nation’s largest anesthesia providers

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 anesthesiology groups and rolling them into a consolidated entity that manages hospital contracts, billing, insurance agreements and other functions.

Tony Good, a spokeswoman for the USAP, confirmed the FTC’s investigation and said it was a “relatively common” investigation related to competition in healthcare.

“In particular, the FTC’s focus seems to be on USAP’s acquisition history,” said Mr. Good. “We have grown successfully over the past decade and have been serving patients in multiple states and providing them with high quality care.”

The company is cooperating with the investigation, saying the FTC investigation is not focused on “irregularities in billing or patient care.”

The investigation, which began more than a year ago, is an example of a strict government investigation into private equity involvement in the healthcare industry under FTC Chair Leena Khan, according to people familiar with the matter. Ms Khan has criticized what she calls private equity’s focus on short-term profits, which she said can “encourage practices that can reduce quality of care, increasing costs for patients and payers.” and produce dire patient outcomes.”

USAP has contacted UnitedHealth Group Inc. over its payout rates. Like with the insurers. Two years ago, the company spun off UnitedHealth’s network and sued the insurer in the state courts of Colorado and Texas, alleging that the insurer took unlawful steps to take it out of UnitedHealth’s network and sued hospitals and physicians. Hurt your relationship. The two parties later reached an agreement for USAP to be part of UnitedHealth’s network, and USAP dropped the lawsuit. UnitedHealth said at the time that USAP sought payment that was “nearly double the average rate we pay other anesthesiology groups.”

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

USP’s Mr. Good denied those estimates but declined to provide the company’s market share.

Private-equity firms acquire specialized healthcare providers because their work is often high-volume and high-margin, and smaller groups can be combined to form larger networks that have greater leverage with hospitals and insurers. . According to data provider IBISWorld, the profit margin of the anesthesiology industry was estimated at 12.5% ​​in 2021, down from 14% before the pandemic, which reduced elective surgeries.

Private-equity-owned providers represented about 15% of the Medicare market for anesthesia nationally in 2019, Mr. Adler said. According to researchers from Oregon Health and Science University, the University of Pennsylvania and Johns Hopkins University, anesthesiology was the most common type of medical-specialty practice acquired by private-equity firms from 2013 to 2016.

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

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

According to a paper published in February in the American Medical Journal by researchers at Columbia University and Weill Cornell Medical College, outpatient healthcare facilities, including hospitals, increased the prices paid for anesthesiology by 26% after those owned by private-equity firms. Switched to practices. organization.

According to Amber La Forgia, a Columbia professor and one of the paper’s authors, the larger, private-equity-backed anesthesia groups gain more market share in an area, the more successful they are in negotiating higher prices.

“USAP has a very strong presence in Texas,” said Dr. La Forgia. “So the more facilities they have in Texas, the more they learn about that specific interaction environment with the insurers there, and the more benefits they get because the longer they can really dominate the network. “

Mr Good said the anesthesia market is highly competitive and insurers want USAP to be in-network because it provides quality care and has good patient outcomes.

USAP and other large private-equity-backed physician-staffing firms, including KKR & Co-owned Envision Healthcare Corp and Blackstone Inc-owned TeamHealth Holdings Inc., have previously lobbied on the issue of surprising medical bills, or large Bills that patients received after treatment by out-of-network physicians with their insurance company. Some physician groups have used surprise billing as a negotiating tactic, hoping to get patients to complain to their employers, which in turn would prompt insurers to accept the reimbursement rates that providers were asking for. .

The No Surprise Act, which sought to protect patients from receiving significant medical bills when they are inadvertently treated by an out-of-network doctor, lab or other type of provider, passed Congress in December 2020. The law took effect at the beginning. 2022.

USAP didn’t use surprise billing to gain leverage on insurance companies, Mr. Good said. He said the company lobbied federal law to ensure a fair process for resolving disputes between physicians and insurance companies.