FTC sues private equity firm, claims it’s trying to build a monopoly in radiology

The Federal Trade Commission sued Welsh, Carson, Anderson & Stowe Thursday, claiming the private equity firm has built an anesthesiology monopoly and wants to do the same in imaging.

Antitrust regulators allege Welsh Carson created US Anesthesia Partners to execute a strategy of consolidating and monopolizing the specialty market in Texas. The purported multi-year “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 Anesthesia Partners’ territory.

Welsh Carson founded the practice in 2012. Now, FTC regulators claim the New York-based private equity 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 FTC complaint, filed Sept. 21 in federal district court. “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.”

Both provider groups emphasized Friday that they are completely separate entities.

“US Radiology is not named as a defendant in this complaint, and none of the allegations are directed at our company,” a spokesman said in a statement shared with Radiology Business.

Charlotte Radiology founded the company alongside its private equity partner in 2018. US Radiology Specialists took on $450 million in debt last year to fuel the largest transaction in its history, acquiring South Jersey Radiology Associates and Larchmont Imaging Associates, both in the Garden State. The Raleigh, North Carolina-based radiology group now includes 4,500 team members, 180-plus imaging centers in 14 states, and conducts 8 million studies annually.

US Anesthesia Partners refuted the claims laid out by the FTC on Thursday, saying it plans to “vigorously defend itself” in court. The practice contends that Texas remains an “extremely competitive environment” in anesthesia and healthcare overall. All USAP practices are clinically independent and locally governed by physicians. Commercially negotiated prices in the state have increased only modestly since 2012, remaining flat when adjusting for inflation.

“The FTC’s actions are especially concerning given this moment in time which the healthcare infrastructure in the United States is facing multiple headwinds such as provider shortages, clinical burnout and turnover, and health disparities,” J. Scott Holliday, DO, MBA, a US Anesthesia Partners physician in Texas and company board member, said in a statement. “While we fight the FTC’s overreach and misguided allegations, we will remain true to our mission of providing high-quality care in the communities we proudly serve.”

Welsh Carson issued its own separate statement, saying it was "profoundly disappointed" that the commission chose to bring forward this "unwarranted case." 

"The FTC’s decision to pursue a civil action against a minority investor of a physician-owned company is unprecedented and disregards well-settled principles of law," a spokesperson for the private equity firm said. "Unfortunately, this is consistent with the series of recent lawsuits that the FTC has filed using litigation to pursue radical policy theories. We are confident we will prevail as the FTC’s claims are without merit in fact or law."

Antitrust regulators claim the practice’s strategy has resulted in market “dominance” that has cost Texans “tens of millions of dollars” more each year for anesthesia services than before the practice launched. Since 2012, USAP has acquired more than a dozen provider groups in Texas. After each transaction, it has allegedly raised the group’s rates to match Anesthesia Partners’ higher charges. This has resulted in a “substantial mark-up for the same doctors as before.”

“The FTC alleges that USAP and Welsh Carson’s conduct amounts to unlawful monopolization, unlawful acquisitions, a conspiracy to monopolize, unfair methods of competition, and unlawful restraints of trade. Such conduct violates the FTC Act and the Clayton Act,” the commission said in its announcement.

Authorities are seeking “equitable relief necessary to remedy the impact” of the Welsh Carson and USAP’s “anticompetitive conduct,” and to prevent the recurrence of it in the future. The commission voted 3-0 to authorize staff to file for a permanent injunction in the case.

The FTC emphasized that such complaints only indicate that it has reason to believe the law has been violated, with a federal court ultimately deciding the outcome.

The Washington Post previously surfaced allegations of the anesthesia group’s alleged anticompetitive practices in a report published June 29. 

Editor's note: This story has been updated to include a comment from Welsh, Carson, Anderson & Stowe.