Private equity radiology investor reaches agreement with FTC over alleged anticompetitive tactics

A private equity firm that previously financed radiology and anesthesia groups has entered a proposed consent order with the Federal Trade Commission, dictating some of its future physician-related activities. Investors have blasted the order, labeling it as symbolic and political. 

The FTC first sued New York-based Welsh, Carson, Anderson & Stowe in September 2023, claiming it had used a “roll-up scheme” to monopolize the market in anesthesia. Authorities deemed the anticompetitive campaign successful, and Welsh Carson sought to do the same in imaging with its investment in US Radiology Specialists. 

However, a Texas judge dismissed the private equity firm as a defendant in May, asserting that the FTC “has not adequately alleged that Welsh Carson ‘is about to violate antitrust law.’” The agency has now apparently threatened Welsh Carson with a second complaint, forcing the firm to enter the proposed consent order announced Friday. 

“The commission’s latest action underscores that the common corporate tactic of seeking dismissal of a federal case on Section 13(b) grounds may delay—but will not deny—the FTC’s efforts to challenge anticompetitive conduct,” the agency said in a news release issued Jan. 17. “If necessary, the commission will bring suit in administrative court to protect consumers from anticompetitive conduct. The settlement here avoids the commission bringing such an administrative action.”

Commissioners voted 5-0 to accept the proposed consent agreement for public comment. It stipulates that Welsh Carson should limit its ongoing ownership rights and “entanglements” with US Anesthesia Partners by freezing its investment at current levels. The PE firm also must reduce its board representation to a single, nonchair seat and obtain prior approval for any future investments in anesthesia nationwide. 

The FTC is additionally stipulating that Welsh Carson provide 30-day advance notice for transactions involving other hospital-based physician practices. An agency spokeswoman on Friday confirmed that the latter provision applies to radiology and other medical specialties. 

A Welsh Carson spokesperson shared a statement in response to the proposed settlement Friday. 

“In a last-minute effort to claim a political victory, the outgoing FTC leadership threatened to relitigate in its captive administrative court the exact same overreaching claims that were dismissed last year by an independent federal judge unless we agreed to a settlement by Inauguration Day,” the statement reads. “Despite our confidence in prevailing again in any repeat of this case, we made the decision to agree to a benign notice settlement that will not affect our business in any respect and involves no admissions of wrongdoing or monetary penalties. This allows us to put a politically motivated matter behind us and avoid additional expense and distraction. At WCAS we remain most proud of our reputation and legacy of being a private equity firm of the highest integrity.”

An FTC spokeswoman declined to respond to the statement and allegations the settlement was politically motivated. The commission includes three Democrats and two Republicans, with the latter issuing a separate statement Friday. 

“The press release and the chair’s statement both suggest that this case is extraordinary because it involves ‘private equity’ and ‘serial acquisitions,’ and hint at antipathy toward private equity. I write to pierce through this breathless rhetoric to make clear that this case is an ordinary application of the most elementary antitrust principles,” wrote Republican Andrew N. Ferguson, solicitor general of Virginia, with the statement co-signed by fellow commissioner Melissa Holyoak, who holds the same position in Utah. 

“That Welsh Carson is a private equity firm is irrelevant; the antitrust analysis would be the same if Welsh Carson were, for example, an individual or institutional investor,” Ferguson continued. “Section 7 prohibits mergers that may substantially lessen competition or tend to create a monopoly. In most of our Section 7 cases, we are predicting the likely effects of a transaction before it takes place. Here, however, we did not have to predict anything. Welsh Carson made acquisitions. As alleged in the complaint, those acquisitions demonstrably created monopoly power and Welsh Carson wielded that power to raise prices. That is exactly what Section 7 prohibits anyone from doing. There is thus no reason for the commission to single out private equity for special treatment.”

Dallas-based US Anesthesia Partners emphasized Friday that it is not a party in the settlement. Neither is Raleigh, North Carolina-headquartered US Radiology Specialists, which was not named as a defendant in the original complaint. The radiology group also declined comment Friday.

More on alleged scheme

In the original complaint, antitrust regulators alleged Welsh Carson created US Anesthesia Partners to execute a strategy of consolidating and monopolizing the specialty market in Texas. The purported multiyear “anticompetitive scheme” came in three parts: (1) systematically buy up nearly every large practice in the Lone Star State; (2) further drive up prices through rate-setting agreements with other independent providers; and (3) sideline a significant competitor by striking a deal to keep it out of US Anesthesia Partners’ territory.

Welsh Carson founded the practice in 2012. FTC regulators had claimed the PE firm “intentionally repeated” the same tactics in other specialties, moving into emergency medicine in 2015 and imaging two years later.

“In 2017, when preparing to enter the radiology market, Welsh Carson explained that ‘[g]iven our success to date with USAP and [in emergency medicine], we would like to ... deploy a similar strategy to consolidate the market ...,” according to the 2023 FTC complaint. “By all appearances, Welsh Carson did just that. Today, US Radiology Specialists, which describes itself as ‘founded jointly’ by Welsh Carson and ‘one of the nation’s largest’ radiology groups, covers more than 80 hospitals in more than a dozen states. Two of its directors are affiliated with Welsh Carson, and one of them is Brian Regan—the same partner who led Welsh Carson’s investment and involvement in USAP.”

Charlotte Radiology founded the company alongside its private equity partner in 2018. US Radiology Specialists took on $450 million in debt in 2022 to fuel the largest transaction in its history, acquiring South Jersey Radiology Associates and Larchmont Imaging Associates, both in the Garden State. The radiology group now includes 5,000 team members working across 180-plus imaging centers in 13 states and conducts more than 8 million studies annually.

In her statement co-signed by Democrat colleagues, outgoing FTC Chair Lina Khan again shared the same quote from the original complaint about USRS, asserting the alleged scheme went beyond anesthesia. 

“This was not a one-off strategy, but rather a tried-and-true playbook that Welsh Carson had already used to ‘roll up’ independent physician groups across other healthcare markets,” Khan and colleagues said Friday. “Nor is this strategy limited to Welsh Carson,” they added later. “Reporting suggests that markets across the economy have been rolled-up through serial acquisitions and other stealth acquisitions, from car washes to dry cleaners. The incremental rise of consolidation through successive, smaller acquisitions has, however, long been a top concern for legislators and enforcers alike—and especially so for the FTC.”

Further details about the proposed consent order can be found in a corresponding “analysis to aid public comment.” The FTC said it will publish these documents in the Federal Register “shortly,” and it will accept public comments during the 30 days that follow. 

Khan and colleagues noted that the FTC issues such administrative complaints when it has “reason to believe” that the law has been or is being violated, and that a proceeding is in the public interest. 

“When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions,” the news release noted. 

The notice comes ahead of President-elect Donald Trump’s inauguration on Monday, and the agency is expected to see new leadership not long after.