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On September 21, 2023, the Federal Trade Commission (FTC) sued Welsh, Carson, Anderson & Stowe (WCAS) and U.S. Anesthesia Partners, Inc. (USAP), in the Southern District of Texas, alleging the two companies “[e]xecuted a multi-year anticompetitive scheme to consolidate anesthesiology practices in Texas, drive up the price of anesthesia services provided to Texas patients, and boost their own profits.”

According to the FTC’s complaint, WCAS founded USAP in 2012 to execute a strategy to consolidate hospital-based anesthesiology services in Texas, including by acquiring large anesthesiology practices, entering into price-setting agreements with independent practices, and agreeing with a competitor to stay out of a USAP territory. Although WCAS owns less than 25% of USAP today, the FTC has sued the private equity investor and alleged that the investor played an instrumental role in developing USAP’s horizontal acquisition strategy, particularly with respect to mergers and acquisitions of anesthesia practices in Texas.

Under the Biden administration, FTC and the Department of Justice, Antitrust Division (DOJ)(together, the Agencies), have been focused on consolidation by private equity, particularly with respect to “roll-ups,” which are serial acquisitions of provider practices in the same or adjacent geographic areas. 

The FTC’s action is consistent with the Agencies’ continued focus on the healthcare industry and is the latest in a string of enforcement actions and substantial changes to federal antitrust enforcement under the Biden Administration. Among other things, the Agencies have withdrawn decades of healthcare antitrust enforcement guidance, sought to ban employee non-competes, and proposed dramatic revisions to the current merger review framework.

Private equity firms or other investors considering a roll-up strategy should consult with counsel to understand and navigate the current antitrust enforcement landscape.