***Private Equity in Healthcare***
Case to pay close attention to:
📢 US Anesthesia Partners Inc., a private equity-owned entity, did not succeed in obtaining a dismissal of the monopolization lawsuit filed by the US Federal Trade Commission (FTC). This lawsuit focuses on the company's strategy of acquiring smaller anesthesiology practices that serve local markets—a tactic known as "roll-up."
A federal judge in Texas denied the motion to dismiss filed by USAP in the US District Court for the Southern District of Texas on Monday, but the court allowed the dismissal of the claims against the private equity owner of the practice. This decision represents the first judicial evaluation of the FTC's effort to address roll-up strategies within the healthcare sector.
In September, the FTC initiated a lawsuit against USAP and its private equity partner, Welsh Carson Anderson & Stowe LP, alleging that they had monopolized the anesthesiology market in Texas. This legal action marks the first FTC challenge against the roll-up strategy employed by private equity. According to the FTC, Welsh Carson systematically acquired a significant number of anesthesiology practices, thereby establishing dominance in the Texas market and increasing patient costs.
Judge Kenneth Hoyt, appointed by President Ronald Reagan, stated in his order that the FTC has reasonably alleged that these acquisitions led to increased consumer prices and involved a scheme of market allocation and price setting. Judge Hoyt emphasized that dismissing these claims at this stage would be premature.
According to a source with knowledge of the matter, Judge Hoyt's ruling is seen as a pivotal development in federal efforts to regulate private equity acquisitions, which typically fall below the threshold for antitrust scrutiny. The FTC and the Department of Justice have updated merger guidelines that reflect a strategic focus on scrutinizing serial acquisitions, a stance reinforced by this decision.
USAP disputes the merits of the FTC’s claims, asserting their lack of foundation. USAP physician and board member Scott Holliday emphasized that the organization will continue prioritizing patient care as the lawsuit progresses.
The role of private equity in healthcare, involving transactions often below the federal antitrust review threshold of $119.5 million, continues to attract significant attention from federal regulators. In March, the FTC, DOJ, and the Department of Health and Human Services initiated an inquiry into smaller acquisitions by private equity firms within the U.S. healthcare sector.
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@blake madden